Public Service Elec. and Gas Co. v. F.E.R.C.

• Decision Date: 13 April 2007
• Docket Number: No. 05-1325.,05-1325.
• Citation: 485 F.3d 1164
• Parties: PUBLIC SERVICE ELECTRIC AND GAS COMPANY, Petitioner v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent Neptune Regional Transmission System, LLC, et al., Intervenors.
• Court: U.S. Court of Appeals — District of Columbia Circuit

485 F.3d 1164

PUBLIC SERVICE ELECTRIC AND GAS COMPANY, Petitioner v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent

Neptune Regional Transmission System, LLC, et al., Intervenors.

No. 05-1325.

United States Court of Appeals, District of Columbia Circuit.

Argued March 20, 2007.

Decided April 13, 2007.

On Petitions for Review of Orders of the Federal Energy Regulatory Commission.

Michael E. Ward and John A. Levin argued the cause for petitioners. With them on the briefs were James H. McGrew, Peter K. Matt, David E. Goroff, Jodi L. Moskowitz, and Kenneth G. Jaffe.

Robert A. Weishaar, Jr., Vasiliki Karandrikas, Judith B. Appel, Attorney, New Jersey Division of the Ratepayer Advocate, and Helene S. Wallenstein, Senior Deputy Attorney General, Attorney General's Office of State of New Jersey, were on the brief for intervenor Gerdau Ameristeel Corp. and amici curiae New Jersey Division of the Ratepayer Advocate and New Jersey Board of Public Utilities in support of petitioners.

Michael E. Kaufmann, Attorney, Federal Energy Regulatory Commission, argued the cause for respondent. With him on the brief were John S. Moot, General Counsel, and Robert H. Solomon, Solicitor. Patrick Y. Lee, Attorney, Federal Energy Regulatory Commission, entered an appearance.

John N. Estes, III argued the cause for intervenor Neptune Regional Transmission System, LLC. With him on the brief was Donna M. Francescani.

Before: RANDOLPH and KAVANAUGH, Circuit Judges, and WILLIAMS, Senior Circuit Judge.

Opinion for the Court filed by Senior Circuit Judge WILLIAMS.

WILLIAMS, Senior Circuit Judge:

PJM Interconnection LLC is a regional transmission organization ("RTO") that coordinates the movement of wholesale electricity in all or part of thirteen eastern states and the District of Columbia. Its more than 450 members include power generators, transmission owners, electricity distributors, power marketers, and large consumers. An open access tariff, filed with and approved by the Federal Energy Regulatory Commission, provides the terms and conditions for new interconnections. When a firm submits an interconnection request, the RTO undertakes in sequence three types of studies estimating the cost of effecting the interconnection. The process culminates in an interconnection service agreement. This case addresses the circumstances under which PJM is permitted to repeat its interconnection studies, thereby changing the amount the interconnecting firm must pay.

Petitioners (transmission owning members of PJM, state agencies and an industrial user) argue that the tariff permits unlimited restudy prior to the completion of the interconnection service agreement. On this view, the charge for interconnection would take account of the impact of all events transpiring up to that moment. FERC found that the tariff was ambiguous on the subject, that unlimited restudy would be unreasonable, and that a better reading of the tariff would permit restudy in only a limited set of circumstances. We find FERC's reading amply worthy of deference.

* * *

Neptune is a firm sponsoring a merchant transmission project that will deliver 660 MW of capacity from New Jersey to Long Island via a high-voltage, direct-current, underwater transmission cable. Projects such as Neptune's add additional capacity to an electric grid, enhancing market integration and competition by expanding transmission and trading opportunities between regions. Neptune initiated its interconnection request with PJM in December 2000, and established its place in PJM's first-come, first-served interconnection queue in March 2001.

Interconnection provisions added to PJM's tariff in 1999 require it to undertake three studies of each queued project. The first is a "feasibility study" that preliminarily determines both what system upgrades are necessary to accommodate a new interconnection and the requesting party's responsibility for those upgrade costs. Tariff Section 36.2. Next, PJM must conduct a "system impact study," which refines cost responsibility estimates for necessary system upgrades. Tariff Section 36.4.1. Customers may terminate or withdraw their interconnection requests based on the impact study's findings. PJM then conducts a final "facilities study" and makes its ultimate good faith estimate of the cost to be charged the interconnecting customer. Tariff Section 36.7.

By October 2003 PJM completed its initial second-phase study ("system impact"), estimating the cost of network upgrades due to Neptune's interconnection at $3.7 million. It soon revised that study because of the withdrawal of a higher-queued interconnection project; this revision, undisputed by Neptune, yielded a new estimate of $4.4 million. In March 2004, however, PJM informed Neptune that its system interconnection costs had to be restudied yet again on account of several generator retirements in the PJM system. PJM thus undertook a third restudy—and then a fourth. By June 2004 the estimate has risen to $26.3 million. (It appears undisputed that the withdrawal of generators may imply additional upgrade costs associated with an interconnection.) In September 2004, on account of further generator retirements, PJM informed Neptune of the need for a fifth system impact study. Neptune objected to the third, fourth, and fifth studies, but PJM refused to conduct a facility study (the third and final interconnection study step) or enter into an interconnection service agreement until it completed its fifth system impact study.

In December 2004, Neptune filed a complaint with FERC under § 206 of the Federal Power Act, 16 U.S.C. § 824e, asking it to compel PJM to move forward toward an interconnection service agreement based on the second system impact study. Without an interconnection service agreement, Neptune was unable to secure construction financing in time to build needed facilities and meet a commitment to be operational by June 2007. Neptune sought expedited consideration.

In February 2005 the Commission granted Neptune's complaint, finding that PJM's final three restudies were not performed in accordance with its tariff. Neptune Regional Transmission System, LLC v. PJM Interconnection, LLC, 110 FERC ¶ 61,098 (2005) ("Complaint Order"). Noting that the PJM tariff was silent as to some aspects of the restudy issue and ambiguous as to others, id. at 61,404 P21, the Commission interpreted the tariff to generally preclude restudies based on most events post-dating an interconnector's establishment of its place in the queue. It stressed the role of queue position in creating a coherent system for assigning interconnection costs and facilitating interconnection:

[T]he queue position provides a potential customer a reasonable degree of certainty as to its financial costs. If an interconnection customer were to be held financially responsible for the costs of events occurring after its System Impact Study is completed it would be impossible for the customer to make reasoned business decisions. Instead, the customer would be susceptible to constant changes within the provider's system. . . . In fact, as in this case, there could be a never-ending series of changes, creating havoc for interconnection providers and customers alike.

Id. at 61,405 P 23. The Commission concluded that "cost allocations due to the announcements of generator retirements should have no bearing on the Facility Study [the third type of study]," and that "PJM should have provided to Neptune a Facility Study immediately upon the completion of its second System Impact Study." Id. at 61,406 P 29.

In reaching its decision, the Commission explicitly drew on "the principles of Order No. 2003," id. at 61,406 P 27, which it had adopted in 2003, well after its approval of the relevant language in PJM's tariff. See Standardization of Generator Interconnection Agreements and Procedures, Order No. 2003, 68 Fed.Reg. 49,846 (2003); see also Notice Clarifying Compliance Procedures, 106 FERC ¶ 61,009 (2004). The 2003 order limits restudy to three circumstances: (1) when a higher-queued project drops out of the queue, (2) when the modification of a higher-queued project is required, or (3) when the point of interconnection is re-designated. The restudies to which Neptune objected fell completely outside these exceptions. Order No. 2003's reasons for limiting restudy (and thus making queue position critical) were essentially the same practical considerations as the ones the Commission invoked here. See Complaint Order, 110 FERC at 61,404-405 P 22.

FERC deferred issues of classification and recovery of any costs above the $4.4 million interconnection costs to a later date, when transmission service was requested. Id. at 61,406 P 31. On petition for rehearing and clarification, the Commission "reaffirm[ed] that a project's queue position forms the basis for the determination of an interconnection customer's cost responsibilities," but said that costs above the $4.4 million appropriately charged to Neptune for interconnection "are solely reliability upgrade costs [and should be] allocated to Transmission Owners and then assigned to transmission customers" as specified in the PJM tariff. Neptune Regional Transmission System, LLC v. PJM Interconnection, LLC, 111 FERC ¶ 61,455 at 63,008 P 19 & 63,009 P 25 (2005) ("Rehearing Order"). Petitioners brought a timely challenge to the orders.

* * *

The Commission raises two preliminary objections to petitioners' challenge. First, it questions their standing, denying that they have suffered or are in imminent peril of suffering injury in fact— a concrete and particularized injury that is actual or imminent. See Lujan v. Defenders of Wildlife, 504 U.S. 555, 560, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992) (citations omitted). Second, FERC argues that petitioners' claims are unripe, asking us to evaluate "(1) whether delayed review would cause hardship to the plaintiffs; (2) whether judicial intervention would...