Constellation Mystic Power, LLC v. Fed. Energy Regulatory Comm'n
| Decision Date | 23 August 2022 |
| Docket Number | 20-1343,C/w 20-1361, 20-1362, 20-1365, 20-1368, 21-1067, 21-1070 |
| Citation | 45 F.4th 1028 |
| Parties | CONSTELLATION MYSTIC POWER, LLC, Petitioner v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent Braintree Electric Light Department, et al., Intervenors |
| Court | U.S. Court of Appeals — District of Columbia Circuit |
Matthew A. Fitzgerald argued the cause for petitioner Constellation Mystic Power, LLC. With him on the briefs were Noel H. Symons and Katlyn A. Farrell.
Jeffrey A. Schwarz argued that cause for State petitioners. With him on the briefs were Seth A. Hollander, Assistant Attorney General - Special Litigation, Office of the Attorney General for the State of Connecticut, Scott H. Strauss, Amber L. Martin Stone, Kirsten S. P. Rigney, Robert Snook, Assistant Attorney General - Environment, Office of the Attorney General for the State of Connecticut, Andrew Minikowski and Julie Datres, Staff Attorneys, Ashley M. Bond, Maura Healy, Attorney General, Office of the Attorney General for the Commonwealth of Massachusetts, Christina Belew, Assistant Attorney General, Jason Marshall, and Phyllis G. Kimmel.
Scott H. Strauss, Jeffrey A. Schwarz, Amber L. Martin Stone, and John P. Coyle were on the briefs for intervenors Braintree Electric Light Department, et al. in support of State petitioners.
Robert M. Kennedy and Carol J. Banta, Senior Attorneys, Federal Energy Regulatory Commission, argued the causes for respondent. With them on the brief were Matthew R. Christiansen, General Counsel, and Robert H. Solomon, Solicitor.
John P. Coyle argued the cause for intervenors Braintree Electric Light Department, et al. in support of respondent. With him on the brief were Scott H. Strauss, Jeffrey A. Schwarz, and Amber L. Martin Stone.
Michael J. Thompson, Ryan J. Collins, and Maria Gulluni were on the brief for intervenor ISO New England, Inc. in support of respondent.
Before: Srinivasan, Chief Judge, Henderson and Rao, Circuit Judges.
Per Curiam In March 2018, Constellation Mystic Power, LLC (Mystic)—a subsidiary of Exelon Generation Company, LLC (ExGen), which itself is a subsidiary of Exelon Corporation (Exelon)1 —announced its intention to retire the Mystic Generating Station (Mystic Station), a natural gas-fired generator serving the greater Boston metropolitan area, after the facility's existing capacity obligations expired in May 2022. The region's independent system operator, ISO New England, concluded that Mystic Station's loss would exacerbate anticipated stresses on the region's electricity network during winter months and increase the risk of rolling blackouts. ISO New England also found that Mystic Station's retirement risked the closure of its sole fuel source, the Everett Marine Terminal (Everett)—a liquified natural gas (LNG) import and regasification facility currently owned and operated by an ExGen subsidiary—adding to the risk of blackouts in the region.
In light of these findings, ISO New England entered into a cost-of-service agreement with Mystic and ExGen to keep two of Mystic Station's generating units, referred to as Mystic 8 and 9, in service between June 2022 and May 2024. The parties filed the proposed agreement (Mystic Agreement) with the Federal Energy Regulatory Commission (Commission or FERC). The Commission ultimately approved the terms of the Mystic Agreement, albeit with significant modifications.
At issue are six Commission orders related to its approval of the Mystic Agreement. See Constellation Mystic Power, LLC , 164 FERC ¶ 61,022 (July 13, 2018) (July 2018 Order); Constellation Mystic Power, LLC , 165 FERC ¶ 61,267 (Dec. 20, 2018) (December 2018 Order); Constellation Mystic Power, LLC , 172 FERC ¶ 61,043 (July 17, 2020) (First July 2020 Rehearing Order); Constellation Mystic Power, LLC , 172 FERC ¶ 61,044 (July 17, 2020) (Second July 2020 Rehearing Order); Constellation Mystic Power, LLC , 172 FERC ¶ 61,045 (July 17, 2020) (Compliance Order); Constellation Mystic Power, LLC , 173 FERC ¶ 61,261 (Dec. 21, 2020) (December 2020 Rehearing Order). Two groups of petitioners now seek review of those orders: Mystic and a group of New England state regulators (State Petitioners).2 As detailed infra , we dismiss Mystic's petition for review in part and deny it in part; we grant the State Petitioners’ petitions.
Section 201(b) of the Federal Power Act (FPA) grants the Commission jurisdiction of the transmission and wholesale sale of electric energy in interstate commerce. 16 U.S.C. § 824(b) ; see New York v. FERC , 535 U.S. 1, 6–7, 122 S.Ct. 1012, 152 L.Ed.2d 47 (2002). The FPA provides that "[a]ll rates for or in connection with jurisdictional sales and transmission service are subject to review by FERC to ensure that the rates are just and reasonable and not unduly discriminatory or preferential." New England Power Generators Ass'n v. FERC (NEPGA ), 881 F.3d 202, 205 (D.C. Cir. 2018) ; see 16 U.S.C. §§ 824d(a), (e), 824e(a). Section 205 requires that all public utilities "file with the Commission ... all rates and charges for any transmission or sale subject to the jurisdiction of the Commission," 16 U.S.C. § 824d(c), with the utility bearing the burden to show that its proposed rate is lawful, id. § 824d(e). See NEPGA , 881 F.3d at 205. If the Commission determines that a rate is "unjust, unreasonable, unduly discriminatory or preferential," it must set aside the rate and replace it with one that is just and reasonable. 16 U.S.C. § 824e(a) – (b). A negatively affected party may challenge a Commission-approved rate by filing a complaint with the Agency, and it carries the burden of demonstrating that the rate is unjust or unreasonable. See id. § 824e(a) – (b). The reasonableness of a rate is assessed in light of the FPA's goals of promoting reliable service at reasonable rates and developing plentiful energy supplies. See Consol. Edison Co. v. FERC , 510 F.3d 333, 342 (D.C. Cir. 2007) ; see also NAACP v. FPC , 425 U.S. 662, 669–70, 96 S.Ct. 1806, 48 L.Ed.2d 284 (1976).
ISO New England is the independent system operator3 that operates the transmission facilities and administers the wholesale electricity markets across six states—Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island and Vermont. The wholesale markets facilitate the sale of electricity by generators to electric utilities and electricity traders before its eventual sale to end-use consumers. The rates charged by ISO New England for access to its transmission system and the rules governing the wholesale markets under its purview are set out in a grid-wide tariff.
In addition to ensuring adequate supply to meet present-day electricity demands, ISO New England must also ensure sufficient supplies to meet future needs. This is accomplished via a forward-capacity market, in which load serving entities—i.e., the utilities delivering electricity to end users—purchase capacity, which "is not electricity itself but the ability to produce it when necessary," from generators. Pub. Citizen, Inc. v. FERC , 839 F.3d 1165, 1167–68 (D.C. Cir. 2016) (quoting Conn. Dep't of Pub. Util. Control v. FERC , 569 F.3d 477, 479 (D.C. Cir. 2009) ). The forward-capacity market is conducted via an auction held three years in advance of a particular capacity commitment period. Generators submit bids reflecting the lowest price they will accept before exiting the market. During the "descending clock" auction, the capacity price is steadily lowered, causing bidding generators to exit. Once the amount of capacity offered reaches ISO New England's projected capacity requirement for the commitment period, the auction stops, and those generators remaining in the market are paid the clearing price, regardless of their initial bids. See generally id. ( forward-capacity auction).
Once a generator participates in a forward-capacity auction, it is automatically re-entered into every subsequent auction unless it affirmatively seeks to remove its capacity from the market for that commitment period or permanently, with the latter option constituting "retirement." If a generator seeks to retire from the market, it must submit a Retirement De-List Bid eleven months before the auction corresponding to the period for which it intends to retire, which signals the generator's intent to exit the market if the clearing price falls below its bid price and gives ISO New England an opportunity to determine if the generator's proposed retirement presents a service risk to the region. If ISO New England so concludes, it may ask the generator to remain in operation; if the generator accepts, it can then elect to receive either its initial bid price or a cost-of-service rate.
Mystic 8 and 9 are combined-cycle natural gas-fired generating units with a combined summer capacity of about 1,400 megawatts.4 The two units run on revaporized LNG imported via marine terminal, making them unique among other natural gas-fired units in the region, which run on vapor natural gas imported through regional pipelines.
Following the restructuring of the Massachusetts energy market in the 1990s, Mystic Station was acquired from the Boston Edison Company by Sithe Energies, Inc. in 1999. Sithe shortly thereafter began construction of Mystic 8 and 9, with the two units beginning commercial operation as merchant generators in 2003; according to Mystic, the two units were constructed at a cost of just under $1 billion. In 2002, ExGen acquired Sithe but subsequently ran into financial troubles in connection with the construction of Mystic 8 and 9. In May 2004, ExGen reached a settlement with its lenders, transferring Mystic Station to a special purpose entity owned by a consortium of lenders in exchange for the cancellation of debts. According to Mystic, as a result of this transaction, Mystic 8 and 9 were valued at approximately $547 million.
In 2010, after the special purpose entity...
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