Alcoa Inc. v. F.E.R.C.

• Decision Date: 08 May 2009
• Docket Number: No. 06-1426.,06-1426.
• Parties: ALCOA INC., Petitioner v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent.
• Court: U.S. Court of Appeals — District of Columbia Circuit

564 F.3d 1342

ALCOA INC., Petitioner v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent.

No. 06-1426.

United States Court of Appeals, District of Columbia Circuit.

Argued March 20, 2009.

Decided May 8, 2009.

David R. Poe argued the cause for petitioner. With him on the briefs were Sonia C. Mendonca and Brett A. Snyder.

Samuel Soopper, Attorney, Federal Energy Regulatory Commission, argued the cause for respondent. With him on the brief were Cynthia A. Marlette, General Counsel, and Robert H. Solomon, Solicitor.

Before SENTELLE, Chief Judge, TATEL and GRIFFITH, Circuit Judges.

Opinion for the Court filed by Circuit Judge GRIFFITH.

GRIFFITH, Circuit Judge.

The newly created Electric Reliability Organization proposed that its costs be allocated according to a method of computation called net energy for load. Alcoa asks us to review the decision of the Federal Energy Regulatory Commission that approved the proposal. We find the decision reasonable and thus deny the petition for review.

I.

Until recently, the reliability of the nation's bulk-power system depended on participants' voluntary compliance with industry standards. In 2005, Congress decided this arrangement was no longer acceptable and enacted legislation requiring the development of mandatory, FERC-approved electric reliability standards. See Energy Policy Act of 2005, Pub.L. No. 109-58, § 1211(b), 119 Stat. 594, 942; Mandatory Reliability Standards for the Bulk-Power System, 72 Fed.Reg. 16,416, 16,419 (Apr. 4, 2007). To carry out this change, Congress added section 215 to the Federal Power Act (FPA), which provides for the creation of a national Electric Reliability Organization charged with establishing and enforcing such standards. 16 U.S.C. § 824o(a)(2) (2006). Any entity may apply, but FERC can certify only one Electric Reliability Organization. Before doing so, the Commission must determine that the applicant meets certain criteria. See id. § 824o(c). Relevant here is the requirement that the entity certified, in order to fund its activities, have rules in place that "allocate equitably reasonable dues, fees, and other charges among end users [of the bulk-power system]." Id. § 824o(c)(2)(B).

On February 17, 2006, FERC issued Order No. 672 to implement section 215. Among other things, the order clarifies what an entity must do to qualify as the national Electric Reliability Organization and the methods it may employ to distribute its costs among customers of electric energy. Rules Concerning Certification of the Electric Reliability Organization (Order No. 672), 71 Fed.Reg. 8662 (Feb. 17, 2006). With regard to cost allocation, the preamble to Order No. 672 focuses on "net energy for load." Net energy for load allocates costs on the basis of energy consumption alone, and the Commission agreed with the majority of commenters that this "is one fair, reasonable and uncomplicated method," id. at 8665; see also id. at 8682. The Commission declined, however, to "rule out other apportionment methods that can be shown to be just and reasonable." Id. at 8665. It did not require any particular formula but instead allowed the applicant "flexibility" in deciding which cost allocation method to propose. Id. at 8682. The actual regulations that resulted from this rulemaking provide that "[a]ny person who submits an application for certification as the Electric Reliability Organization shall include in its application a formula or method for the allocation and assessment of [its] dues, fees and charges." 18 C.F.R. § 39.4(a) (2008).

On April 4, 2006, the North American Electric Reliability Corporation (NERC) sought certification as the nation's Electric Reliability Organization. It was the sole applicant. Historically, NERC had operated as a voluntary reliability organization that issued nonbinding guidelines and operational standards for the bulk-power system. It had been funded by assessments to its members based on net energy for load, and its application proposed to use this method for apportioning the costs of its services as the Electric Reliability Organization. See J.A. at 81 (Request for Certification). Alcoa intervened and objected to NERC's use of the net energy for load method, arguing that the method departs from FERC's ratemaking precedent and would inequitably distribute NERC's costs among electric energy customers. Alcoa proposed that NERC employ a cost allocation method that, like FERC's traditional transmission rate structure, accounts for capacity-related costs in addition to operating costs. See J.A. at 117-20 (Motion to Intervene).

FERC disagreed. It determined that NERC's proposal to allocate costs on the basis of net energy for load satisfied the requirement that the applicant have rules in place that equitably allocate its costs among electric energy users. See Order Certifying North American Electric Reliability Corporation as the Electric Reliability Organization (Certification Order), 116 F.E.R.C. ¶ 61,062, at 61,318 (2006). The Commission saw Alcoa's challenge to the net energy for load method as "an impermissible collateral attack on Order No. 672." Id. Alcoa's challenge, FERC reasoned, should have been directed at Order No. 672 and was therefore untimely at the certification stage. Accordingly, FERC declined to revisit its earlier conclusion that net energy for load is fair and reasonable. Id. Finding that the application met all other statutory requirements, FERC certified NERC as the nation's first Electric Reliability Organization.

Alcoa sought rehearing, repeating its argument that acceptance of the net energy for load method would represent an unjustified departure from established ratemaking precedent. J.A. at 227-32 (Request for Rehearing). FERC, however, was unmoved from its position that Alcoa's argument was an untimely collateral attack, explaining that Order No. 672 "ruled that if the ... Applicant proposed to allocate funding based on net energy for load it would be a fair and reasonable method." Order on Petitions for Rehearing and Clarification (Rehearing Order), 117 F.E.R.C. ¶ 61,126, at 61,665 (2006). According to FERC, its decision not to select the net energy for load method as the exclusive means to allocate costs was merely intended to allow applicants the ability to propose different methods. Despite ruling the challenge untimely, FERC nonetheless went on to reject Alcoa's request that NERC abandon the net energy for load method and employ a demand-based approach. FERC determined that Alcoa had failed to demonstrate how the latter could be applied to allocate costs "on a continent-wide basis for NERC funding purposes." Id. Alcoa now seeks review in this court.

II.

We must first decide whether Alcoa's challenge to the net energy for load method is an untimely collateral attack on Order No. 672 which we lack jurisdiction to consider. Section 313 of the FPA establishes a thirty-day limitations period for "[a]ny person ... aggrieved by an order issued by the Commission" to apply for rehearing, 16 U.S.C. § 825l(a), and a sixty-day limitations period beginning after rehearing to petition for judicial review of the aggrieving order, id. § 825l(b). A party is aggrieved and may petition for judicial review "if it can establish both the constitutional and prudential requirements for standing," Pub. Util. Dist. No. 1 v. FERC, 272 F.3d 607, 613 (D.C.Cir.2001), including an "actual or imminent, not `conjectural' or `hypothetical,'" injury in fact, Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992) (quoting Whitmore v. Arkansas, 495 U.S. 149, 155, 110 S.Ct. 1717, 109 L.Ed.2d 135 (1990)).

Alcoa did not seek rehearing of Order No. 672 and instead challenged the Commission's subsequent order certifying NERC as the Electric Reliability Organization. The jurisdictional issue—whether this challenge came too late—turns on whether Alcoa was "aggrieved" by Order No. 672. In FERC's view, Order No. 672's endorsement of the net energy for load method aggrieved Alcoa, and its failure to mount any challenge to that order, let alone a timely one, bars its petition. According to FERC, the Certification Order, which Alcoa did challenge, merely implemented the Commission's previous determination. See Br. of Resp't 11-13. Alcoa disagrees. It maintains that it was not "aggrieved" by Order No. 672, which did not actually set a particular cost allocation method for the Electric Reliability Organization. See Br. of Pet'r 21; Reply Br. of Pet'r 4-8. In other words, because Order No. 672 did not require the use of net energy for load, the issue of cost allocation on that basis was not yet ripe for review.

We agree with Alcoa. Order No. 672 expressly left open the possibility that the applicant would propose a cost allocation method other than net energy for load. See Order No. 672, 71 Fed.Reg. at 8682 ("[O]ur regulations provide[] the ERO applicant the flexibility to propose a formula or method for the allocation and assessment of ERO costs...."); see also 18 C.F.R. § 39.4(a). In its wake, Alcoa had reason to think that the applicant might still choose its preferred method of cost allocation. We fail to see how Alcoa was imminently aggrieved by a determination that net energy for load is one of potentially many acceptable methods of cost allocation inasmuch as the order did not foreclose Alcoa's hoped-for outcome. It was only when an applicant actually proposed, and FERC accepted, cost allocation based on net energy for load that Alcoa suffered its alleged harm. That did not occur until the Certification Order. Accordingly, we hold that Alcoa did not suffer any actual or imminent injury as a result of Order No. 672 for which it could have sought review. Cf. DTE Energy Co. v. FERC, 394 F.3d 954, 960-61 (D.C.Cir.2005) (holding that a party cannot seek review of a conditional order that is subject to a further compliance filing because that order has no binding effect and causes no actual...