MISO Transmission Owners v. Fed. Energy Regulatory Comm'n
| Decision Date | 21 June 2017 |
| Docket Number | No. 16-3791,16-3791 |
| Citation | 860 F.3d 837 |
| Parties | MISO TRANSMISSION OWNERS, Petitioner, Midcontinent Independent System Operator, Inc., Intervenor, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent, Duke Energy Ohio, Inc. and Duke Energy Kentucky, Inc.; FirstEnergy Service Company, Intervenors. |
| Court | U.S. Court of Appeals — Sixth Circuit |
ON BRIEF: Michael J. Thompson, Wendy N. Reed, Patrick L. Morand, WRIGHT & TALISMAN, P.C., Washington, D.C., for Petitioners. Carol J. Banta, FEDERAL ENERGY REGULATORY COMMISSION, Washington, D.C., for Respondent. Noel Symons, MCGUIRE WOODS LLP, Washington, D.C., Matthew Allen Fitzgerald, MCGUIRE WOODS LLP, Richmond, Virginia, for Duke Intervenors. Morgan E. Parke, Stacey Burbure, Karen Anita Sealy, FIRSTENERGY CORPORATION, Akron, Ohio, John Lee Shepherd, Jr., Timothy T. Mastrogiacomo, James P. Danly, SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP, Washington, D.C., for Intervenor FirstEnergy.
Before: KEITH, BATCHELDER, and SUTTON, Circuit Judges.
Midcontinent Independent System Operator, Inc., is a non-profit association of utilities that manages electrical transmission facilities on behalf of its members. Under its well-earned acronym, MISO approves infrastructure projects and allocates the costs among its member utilities in order to maintain the electrical grid and increase its capacity. Duke Energy and American Transmission Systems own utilities in Ohio and Kentucky, and they withdrew from MISO in 2011. At stake is whether the utilities must pay for projects that MISO approved after they announced their departure but before they left. The Federal Energy Regulatory Commission ruled in favor of the utilities. Because the Commission correctly interpreted the terms of MISO's Tariff, we deny the petition for review of its order.
MISO is a regional "association[ ] of utilities that own electrical transmission lines interconnected to form a regional grid and that agree to delegate operational control of the grid to the association." Ill. Commerce Comm'n v. FERC , 721 F.3d 764, 769 (7th Cir. 2013). It oversees the electrical grid in all or part of fifteen states in the Midwest and South, including Michigan and Kentucky, as well as the Canadian province of Manitoba. Id. at 769–70. Beginning in 2006, the Federal Energy Regulatory Commission approved changes to MISO's Tariff that enabled it to authorize network expansion projects and divide the costs among the member utilities. See Pub. Serv. Comm'n of Wis. v. FERC , 545 F.3d 1058, 1059 (D.C. Cir. 2008). The Tariff initially had just two project categories: Baseline Reliability Projects and Market Efficiency Projects.
In July 2009, American Transmission Systems gave notice that it planned to withdraw from MISO and integrate its Ohio facilities with PJM Interconnection, a neighboring transmission organization. Duke Energy's Ohio and Kentucky utilities followed suit in May 2010. Under the Tariff, a utility cannot withdraw from MISO any earlier than the last day of the year following the year it gives notice. Art. Five, § 1, App'x 635.
Two months after Duke announced its intention to withdraw, MISO proposed a new category of more expensive expansion projects—Multi-Value Projects—most of which would carry wind power to urban markets. Ill. Commerce Comm'n , 721 F.3d at 771. The Commission approved this revision to the Tariff. Midwest Indep. Transmission Sys. Operator, Inc. , 133 FERC ¶ 61,221 (2010). In August 2010, MISO authorized the first Multi-Value Project.
American Transmission withdrew from MISO in May 2011 before it approved any more Multi-Value Projects. But in early December 2011, just weeks before Duke's scheduled departure, MISO approved a portfolio of sixteen projects, estimated to cost billions of dollars in total. MISO proposed adding a provision to the Tariff, given the harmless-sounding label of Schedule 39, which provided that ex-members could be charged for the costs of Multi-Value Projects approved before their departure.
The Commission approved Schedule 39, but only prospectively. Midwest Indep. Transmission Sys. Operator, Inc. , 138 FERC ¶ 61,140 (2012). The Commission determined that MISO could apply Schedule 39 to Duke and American Transmission only to the extent it was consistent with their preexisting obligations under the Tariff. Id. at P 74. In a separate proceeding, the Commission ruled that Schedule 39 imposed new obligations on withdrawing members. Midwest Indep. Transmission Sys. Operator, Inc. , 153 FERC ¶ 61,101 P. 40 (2015). That meant the filed-rate doctrine and the rule against retroactive ratemaking prevented MISO from applying Schedule 39 to Duke and American Transmission and charging them for the Multi-Value Projects. A group of other MISO Transmission Owners appealed, claiming that the Commission incorrectly interpreted the Tariff and departed from the reasoning of its prior orders. Duke and American Transmission intervened to support the Commission's order.
Venue . In earlier litigation over the MISO Tariff, the parties filed their appeals in the Seventh Circuit, in which MISO has its headquarters, or the D.C. Circuit. That's in keeping with the Federal Power Act's judicial review provision, which provides for venue in "any circuit wherein the licensee or public utility to which the [Commission's] order relates is located or has its principal place of business, or in the [D.C. Circuit]." 16 U.S.C. § 825l (b).
But is venue appropriate in our circuit? An initial answer is that no one has challenged venue here. The Commission, it is true, hinted in that direction, asking the utilities "to explain why the instant dispute ... is properly before this Court." Respondent Br. 5. But the Commission did not move to dismiss or transfer the appeal. The Supreme Court has held that an identical provision in the Natural Gas Act, also administrated by FERC, "invest[s] all intermediate federal courts with the power to review orders of the Commission, provided [that] the parties may object that the particular circuit lacks the specified qualifications." Panhandle E. Pipe Line Co. v. Fed. Power Comm'n , 324 U.S. 635, 638–39, 65 S.Ct. 821, 89 L.Ed. 1241 (1945). Absent such an objection, the Transmission Owners have no obligation to prove that the Sixth Circuit is an appropriate venue for their appeal.
We may transfer the appeal on our own initiative, it is true. See Brentwood at Hobart v. NLRB , 675 F.3d 999, 1005 (6th Cir. 2012). But we see no good reason to do so here. Venue lies in the Sixth Circuit because all of MISO's members are "public utilit[ies] to which the order relates," and at least one of them has its principal place of business in this circuit. Even though the Commission's order concerned MISO's Tariff, the petitioners are MISO's members, not MISO itself. That's important because "[v]enue relates to the convenience of litigants." Panhandle , 324 U.S. at 639, 65 S.Ct. 821. The case also has legitimate ties to the circuit, as the spark that lit the controversy was the withdrawal from MISO of Ohio and Kentucky utilities. Judicial efficiency weighs against transferring the case as well. The appeal has been pending since June 2016, and has been fully briefed. The MISO Transmission Owners, Duke, and American Transmission all support proceeding with the case here.
It's possible, we suppose, that the Transmission Owners filed this appeal in the Sixth Circuit to take advantage of our less deferential review of the Commission's tariff interpretations. But we need not worry about rewarding circuit shopping because that issue does not affect the outcome of this case, as we next suggest and eventually show.
Standard of Review . We generally review the Commission's orders under the arbitrary-and-capricious standard, but we give fresh review to questions of law, such as the interpretation of tariffs and other contracts. See FERC v. Elec. Power Supply Ass'n , ––– U.S. ––––, 136 S.Ct. 760, 782, 193 L.Ed.2d 661 (2016) ; Cincinnati Gas & Elec. Co. v. FERC , 724 F.2d 550, 554 (6th Cir. 1984). Unlike the D.C. and Seventh Circuits, we do not automatically give deference to the Commission's interpretations of tariffs. Compare Cincinnati Gas & Elec. , 724 F.2d at 554, with Koch Gateway Pipeline Co. v. FERC , 136 F.3d 810, 814–15 (D.C. Cir. 1998) ; City of Kaukauna v. FERC , 214 F.3d 888, 895 (7th Cir. 2000). We instead defer only when the Commission bases its interpretation on its "factual findings or technical expertise." Cincinnati Gas & Elec. Co. , 724 F.2d at 554.
The Commission and the MISO Transmission Owners offer competing accounts of whether the Commission based its interpretation of the Tariff on its technical expertise in ratemaking. But we need not take sides. Either way, we would affirm the Commission's interpretation, whether under fresh review or deferential review.
Pre-Schedule 39 Tariff . The filed-rate doctrine prohibits MISO from charging Duke and American Transmission higher rates than those included in its filed Tariff, and the rule against retroactive ratemaking prohibits the Commission from ordering utilities to pay such a rate. See Ark. La. Gas Co. v. Hall , 453 U.S. 571, 573, 578–79, 101 S.Ct. 2925, 69 L.Ed.2d 856 (1981). That means MISO can bill Duke and American Transmission for a share of the Multi-Value Projects only if the pre-Schedule 39 Tariff authorized those charges.
When the two utilities announced their withdrawal from MISO, the Tariff stated that "a Party that withdraws from [MISO] shall remain responsible for all financial obligations incurred pursuant to [the Tariff] while a Member." Attachment FF, § III.A.2.j, App'x 840. The pre-Schedule 39 Tariff thus authorizes this charge only if the utilities "incurred" a financial obligation to contribute to the Multi-Value Projects before they withdrew. They did not.
In setting out the framework for network expansion projects, the Tariff says that transmission owners "will bear cost responsibility for [expansion...
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