Enron Power Marketing, Inc. v. F.E.R.C.

• Citation: 296 F.3d 1148
• Decision Date: 26 July 2002
• Docket Number: No. 00-1421.,00-1421.
• Parties: ENRON POWER MARKETING, INC. and Virginia Electric and Power Company, Petitioners, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent. Entergy Services, Inc., et al., Intervenors.
• Court: United States Courts of Appeals. United States Court of Appeals (District of Columbia)

296 F.3d 1148

ENRON POWER MARKETING, INC. and Virginia Electric and Power Company, Petitioners, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent.

Entergy Services, Inc., et al., Intervenors.

No. 00-1421.

United States Court of Appeals, District of Columbia Circuit.

Argued November 7, 2001.

Decided July 26, 2002.

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

Jeffery D. Watkiss argued the cause and filed the briefs for petitioners.

Beth G. Pacella, Attorney, Federal Energy Regulatory Commission, argued the cause for respondent. With her on the brief was Dennis Lane, Solicitor.

Robert C. Glinski, Thomas C. Doolan and Floyd L. Norton IV were on the brief for intervenors Entergy Services, Inc. and Tennessee Valley Authority. Edward S. James E. Fox entered appearances.

Before: SENTELLE, TATEL and GARLAND, Circuit Judges.

Opinion for the Court filed by Circuit Judge SENTELLE.

SENTELLE, Circuit Judge:

Petitioners Enron Power Marketing, Inc. and Virginia Electric and Power Company petition for review of a Federal Energy Regulatory Commission ("FERC") order accepting for filing from Entergy Services, Inc., an attachment revising its open access transmission tariff, and a subsequent order denying rehearing. Entergy Services, Inc., 91 F.E.R.C. ¶ 61,151, 2000 WL 641226, reh'g denied, 92 F.E.R.C. ¶ 61,108, 2000 WL 1197819 (2000). We deny the petition for review for the reasons that follow.

I. BACKGROUND

In its Order No. 888 series, FERC required that the wholesale transmission function be unbundled from the sale of electric power and required electric utilities to provide open access to their transmission lines in a nondiscriminatory fashion. Promoting Wholesale Competition Through Open Access Non-Discriminatory Transmission Services by Public Utilities, Order No. 888, FERC Stats. & Regs ¶ 31,036, 61 Fed. Reg. 21,540 (May 10, 1996), clarified, 76 F.E.R.C. ¶ 61,009, 1996 WL 363765, and 76 F.E.R.C. ¶ 61,347, 1996 WL 799257 (1996), on reh'g, Order No. 888-A, FERC Stats. & Regs. ¶ 31,048, 62 Fed. Reg. 12,274 (Mar. 14, 1997), clarified, 79 F.E.R.C. ¶ 61,182, 1997 WL 257595 (1997), on reh'g, Order No. 888-B, 81 F.E.R.C. ¶ 61,248, 62 Fed.Reg. 64,688, 1997 WL 833250 (1997), on reh'g, Order No. 888-C, 82 F.E.R.C. ¶ 61,046, 1998 WL 18148 (1998), aff'd, Transmission Access Policy Study Group v. FERC, 225 F.3d 667 (D.C.Cir.2000), aff'd sub nom. New York v. FERC, ___ U.S. ___, 122 S.Ct. 1012, 152 L.Ed.2d 47 (2002) (hereinafter "Order 888"). To this end, FERC prescribed a pro forma open access transmission tariff ("OATT") and required transmission owners to file tariffs consistent with or superior to the pro forma. The pro forma OATT provides for both network integration transmission service ("NITS") and point-to-point transmission service. FERC also ordered transmission owners and operators to provide timely capacity, reservation, and scheduling information for OATT customers and transmission owners via an open-access same-time information system known by the acronym OASIS.

Entergy Services, Inc. ("ESI") filed such an OATT tariff as agent for five affiliated operating companies: Entergy Arkansas Inc., Entergy Gulf States, Inc., Entergy Louisiana, Inc., Entergy Mississippi, Inc. and Entergy New Orleans, Inc. (collectively with ESI, "Entergy"). On March 21, 2000, ESI filed a proposed new Attachment M to that OATT. In pertinent part, Attachment M provided that

all transmission customers desiring point-to-point transmission service under Entergy's OATT must submit to Entergy OASIS reservations and transmission schedules that designate specific and valid sources and sinks. For a source and sink located on the Entergy transmission system, Entergy explains that the source must be a specific generator, and the sink must be a specific load. For a source and sink off the Entergy transmission system, Entergy states that the source can be the control area where the generator unit is located, and the sink can be the control area where the load is located. However, Attachment M specifies that neither a generator, nor a generation-only control area will be accepted as a valid sink. Similarly, loads and load-only control areas will not be accepted as valid sources. In Attachment M, Entergy also outlines the procedures to be used in the event that the source and sink identified on the OASIS reservation is different from the source and sink provided in the transmission schedule. In addition, Entergy proposes to limit the scheduled amount for any point-to-point transmission schedule on Entergy's system to the rated capacity of the generator or the maximum load. Entergy asserts that Attachment M is intended to improve reliability and congestion management.

91 F.E.R.C. at 61,563 (emphasis added). The required notice of this filing in the Federal Register drew objections from, among others, petitioners Enron and Virginia Power, who argued that Attachment M was in fact not necessary on reliability grounds and that it discriminated between Entergy and petitioners. FERC rejected all objections and approved Attachment M. Entergy Services, Inc., 91 F.E.R.C. ¶ 61,151, 2000 WL 641226, reh'g denied, 92 F.E.R.C. ¶ 61,108, 2000 WL 1197819 (2000). Enron and Virginia Power petitioned this court to review FERC's decision approving Attachment M under the standards of the Administrative Procedure Act and to set it aside as arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law. 5 U.S.C. § 706(2)(A).

II. DISCUSSION

The petitioners have raised two issues: the "discrimination" or "comparability" issue and the "reliability-deference" issue. We hold with FERC on each.

A. Comparability Issue

The standard by which FERC reviews OATT filings, both original and revised, is whether they are consistent with or superior to the Order 888 pro forma OATT. Order No. 888, FERC Stats. & Regs. at 31,770. The pro forma tariff is set out in Appendix B to Order 888-A at 30,503-543. Order 888 requires transmission owners to provide transmission services to others and for such owners and their affiliates to take transmission on their own facilities on the same terms and conditions as those facilities are available to others. This requirement of nondiscrimination or comparability is one of the foundations of Order 888.

Petitioners submit that the new requirements of Attachment M violate this principle of comparability. Entergy's Attachment M requires that both a reservation of point-to-point ("PTP") transmission capacity and the follow-on scheduling of that transmission specify both the electrical source from which the transmission arises and the electrical sink (or destination) into which the transmission will sink or disappear. Control areas, which are electric zones over whose boundaries with other such control areas the flow of electricity is measured and regulated, can be substituted for both sources and sinks, but a control area substituted for a source must have generation capacity and a control area substituted for a sink must have electrical demand located therein, or "native load." Entergy will not accept a reservation or schedule that identifies a generation-only control area as the sink. Because Entergy has both native load and generation capacity within its control areas, this is no limitation on Entergy, and petitioners assert that Entergy does reserve and schedule into and out of its control area. However, because Enron and Virginia Power's Batesville, Mississippi, control area is generation only, and is a control-area island in an Entergy sea, Entergy will not accept Batesville as a sink when Enron or Virginia Power attempt to reserve and schedule transmissions on Entergy facilities. Per petitioners, this interferes with their ability to set up hub transactions that pass through Batesville, at least on paper, and other techniques of energy traders in a manner that Entergy, with both generation capacity and customer load native to its control areas, does not suffer.

In FERC's view, however, comparability of an OATT is tested on the basis of terms and conditions offered to customers, not on the usefulness of those terms and conditions to a particular customer because of that customer's capacities and needs. Arguably, this rationale alone may be sufficient to sustain FERC's decision on this point, but in any event, the question under review is whether FERC's interpretation of its own orders survives the arbitrary and capricious standard imposed by the Administrative Procedure Act. FERC's decision easily passes that test. See, e.g., Sithe/Independence Power Partners v. FERC, 165 F.3d 944, 948 (D.C.Cir.1999). At base, FERC's decision was that Attachment M is consistent with or superior to the pro forma tariff. It is neither arbitrary nor capricious for FERC to forbid the fictitious designation of a control area as a sink (ultimate user) site when the control area is...