Ameren Services Co. v. F.E.R.C.

• Decision Date: 06 June 2003
• Docket Number: No. 02-1034.,02-1034.
• Citation: 330 F.3d 494
• Parties: AMEREN SERVICES COMPANY, Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent. Rolla Municipal Utilities, Intervenor.
• Court: U.S. Court of Appeals — District of Columbia Circuit

330 F.3d 494

AMEREN SERVICES COMPANY, Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent.

Rolla Municipal Utilities, Intervenor.

No. 02-1034.

United States Court of Appeals, District of Columbia Circuit.

Argued February 25, 2003.

Decided June 6, 2003.

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

Douglas O. Waikart argued the cause for the petitioner. Alan J. Statman and Amanda M. Riggs were on brief.

David H. Coffman, Attorney, Federal Energy Regulatory Commission, argued the cause for the respondent. Cynthia A. Marlette, General Counsel, and Dennis Lane, Solicitor, Federal Energy Regulatory Commission, were on brief.

Margaret A. McGoldrick was on brief for the intervenor. Cynthia S. Bogorad entered an appearance.

Before: GINSBURG, Chief Judge, and HENDERSON and RANDOLPH, Circuit Judges.

Opinion for the court filed by Circuit Judge KAREN LeCRAFT HENDERSON.

KAREN LeCRAFT HENDERSON, Circuit Judge:

Petitioner Ameren Services Company (Ameren) challenges the Federal Energy Regulatory Commission's (FERC or Commission) interpretation of a settlement agreement entered into in 1997 between Ameren and Intervenor Rolla Municipal Utilities (Rolla). On August 24, 2001, Ameren filed with FERC an unexecuted Network Integration Transmission Service Agreement (SA) governing its unbundled transmission service to Rolla. The Commission accepted the unexecuted SA for filing but — relying on the aforementioned settlement agreement — rejected Ameren's calculation of the "distribution charge" to be paid by Rolla for Rolla's use of certain facilities owned and operated by Ameren's public utility affiliates. Ameren Servs. Co., 97 F.E.R.C. ¶ 61,067, 2001 WL 1282891 (2001) (Order Accepting SA). Ameren filed a request for rehearing, which the Commission denied, relying once again on the language of the settlement agreement. Ameren Servs. Co., 97 F.E.R.C. ¶ 61,343, 2001 WL 1638783 (2001) (Order Denying Rehearing).

On review, Ameren argues that the Commission erred in finding that the settlement agreement between Ameren and Rolla unambiguously prohibits Ameren from adjusting Rolla's distribution charge in order to take into account costs that Ameren incurred before the effective date of their agreement. Ameren further argues that the Commission improperly ignored extrinsic evidence and, in addition, impermissibly changed its rationale. We disagree and, accordingly, deny the petition for review.

I.

Ameren acts as the transmission provider and agent for two public utility affiliates: Central Illinois Public Service Company and Union Electric Company. On October 15, 1997, the Commission approved a settlement agreement between Union Electric Company and certain of its municipal customers — including Rolla — to effectuate the transition of those customers from "bundled" to "unbundled" transmission service.¹ Union Elec. Co., 81 F.E.R.C. ¶ 61,011, 1997 WL 644729 (1997). Pursuant to that agreement, Ameren filed with the Commission on October 26, 1999 a document entitled "Principles Governing Charges and Loss Factors for Wholesale Direct Assignment Facilities" (Principles Document). The Principles Document memorialized the agreement among the parties on the methodology for calculating each municipal customer's "distribution charge" — i.e., the charge for using the Wholesale Direct Assignment Facilities owned and operated by Ameren's public utility affiliates. See Principles Document §§ A.1-A.4. A customer's distribution charge takes effect once the customer begins to receive unbundled transmission service from Ameren.

Section A.1 of the Principles Document provides that a municipal customer's distribution charge "shall be calculated by applying an annual carrying charge of 16.42% to the original installed cost of Wholesale Direct Assignment Facilities applicable to such customer ... as shown on the list attached to this Agreement as Attachment A." Id. § A.1. It further states that "[t]he resultant charges for Wholesale Direct Assignment Facilities (absent adjustment as provided for below) are also set forth in Attachment A." Id. Attachment A lists Rolla's preliminary annual distribution charge as $309,374 and its adjusted annual distribution charge as $288,811.² Id. at Attachment A.

The distribution charge "adjustment[s]" referred to in Section A.1 are explained in the three subsequent provisions, only one of which (Section A.2) is relevant here.³ Allowing for the adjustment of a customer's distribution charge in certain limited circumstances, Section A.2 provides, in pertinent part, as follows:

If the Transmission Provider [Ameren] makes significant modifications to Wholesale Direct Assignment Facilities... or if there is a change in ownership or reclassification of Wholesale Direct Assignment Facilities, then the 16.42% annual carrying charge would be applied to the original installed cost adjusted to take account of the change in the Wholesale Direct Assignment Facilities.

Principles Document § A.2 (footnote omitted). Section A.2 also prohibits an adjustment for specific types of facility modifications, namely: (1) any adjustment "to take account of changes in the Wholesale Direct Assignment Facilities that would properly be recorded as an operating and maintenance charge under the Uniform System of Accounts" and (2) any adjustment that would change the distribution charge by less than the "deadband" of $1,000 per month. Id. Lastly, Section A.2 requires Ameren to consult with affected customers before proceeding with "significant" facility modifications — i.e., those exceeding the deadband. Id.

On January 1, 2001, Rolla began taking unbundled transmission service from Ameren's public utility affiliates. Shortly thereafter, on January 31, 2001, Ameren filed an unexecuted SA with the Commission governing Rolla's transmission service, requesting an effective date of January 1, 2001. After resolving some of the disputed issues with Rolla, Ameren filed a revised, unexecuted SA with the Commission on August 24, 2001. The unexecuted SA included an annual distribution charge of $446,664 rather than the adjusted annual distribution charge of $288,811 set forth in Attachment A. Ameren calculated a higher distribution charge because its measure of the Wholesale Direct Assignment Facilities serving Rolla — unlike the measure in Attachment A — included the additional costs of (1) upgrading Ameren's Phelps substation in mid-1997 and (2) modifying that substation's control panel in December 2000. As a result of the increased charge, Rolla filed a protest with the Commission on September 14, 2001, challenging Ameren's calculation of its distribution charge.

The Commission issued its initial order on October 23, 2001, accepting the unexecuted SA for filing, but rejecting, inter alia, Ameren's calculation of Rolla's distribution charge. Order Accepting SA, 97 F.E.R.C. at 61,360. Although Ameren maintained that the charges set forth in Attachment A were "merely illustrative," the Commission concluded that the plain language of the Principles Document indicated otherwise: "`[t]he resultant charges for Wholesale Direct Assignment Facilities [are] set forth in Attachment A.'" Id. (quoting Principles Document § A.1). The Commission further concluded that, "even assuming that the Attachment A costs were illustrative only," the Principles Document "precluded [Ameren] from collecting its proposed charge by operation of the four-year moratorium agreed to by the parties."⁴ Id. Accordingly, the Commission ordered Ameren to revise the unexecuted SA to provide for an annual distribution charge of $288,811. See id.

On December 21, 2001, the Commission denied Ameren's request for rehearing. Order Denying Rehearing, 97 F.E.R.C. at 62,597. In that order, the Commission specifically rejected Ameren's assertion that Section A.2 of the Principles Document "entitle[d] Ameren to recover presettlement costs ... that were known to exist at the time [of its agreement with Rolla]" but not included in the agreement itself. Id. The Commission interpreted Section A.2 to permit adjustments to the distribution charge only "(1) where Ameren `makes significant modifications to Wholesale Direct Assignment Facilities[ ]' or (2) `if there is a change of ownership or reclassification of Wholesale Direct Assignment Facilities.'" Id. (quoting Principles Document § A.2). Relying on the words "makes" and "change," the Commission reasoned that "[b]oth conditions expressly contemplate actions or events occurring after the date of the settlement." Id. (emphasis in original). Because the modifications at issue were made before the filing of the Principles Document,⁵ the Commission concluded that Section A.2 did not authorize Ameren to include the costs of the modifications in Rolla's distribution charge. Id. The Commission also rejected Ameren's interpretation of the moratorium provision and instead concluded that the Principles Document precluded Ameren from seeking an adjustment of Rolla's distribution charge not otherwise sanctioned by Section A.2. Id.

II.

Ameren argues on review that the Commission erred in concluding that the Principles Document unambiguously prohibits Ameren from adjusting Rolla's distribution charge as set forth in the unexecuted SA. When read as a whole, Ameren maintains, the Principles Document demonstrates that the distribution charge for each customer is to be determined by applying the 16.42% annual carrying charge to the cost of the Wholesale Direct Assignment Facilities applicable to each customer at the time that customer commences unbundled service. Thus, under Ameren's reading of the Principles Document, the distribution charges set forth in Attachment A "merely... illustrate the charges that would result from application of the agreed upon settlement methodology." Br. for Pet'r at 27. Asserting that the Commission's orders turn on an erroneous finding that the plain language of the Principles Document...