Public Service Com'n of Wisconsin v. F.E.R.C.
| Decision Date | 31 October 2008 |
| Docket Number | No. 06-1408.,No. 07-1016.,06-1408.,07-1016. |
| Citation | 545 F.3d 1058 |
| Parties | PUBLIC SERVICE COMMISSION OF WISCONSIN, Petitioner v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent American Transmission Company, LLC et al., Intervenors American Transmission Company, LLC et al., Petitioner v. Federal Energy Regulatory Commission, Respondent Public Service Commission of Wisconsin et al., Intervenors. |
| Court | U.S. Court of Appeals — District of Columbia Circuit |
Channing D. Strother, Jr. argued the cause for petitioner Public Service Commission of Wisconsin.
Kira E. Loehr argued the cause for petitioner American Transmission Company, LLC and the intervenors in support of the petitioners. William Lee Cullen and Daniel L. Sanford were on brief. Curt F. Pawlisch entered an appearance.
Judith A. Albert, Attorney, Federal Energy Regulatory Commission, argued the cause for the respondent. Cynthia A. Marlette, General Counsel, and Robert H. Solomon, Solicitor, were on brief.
Stephen L. Teichler, Ilia Levitine, William Raymond Derasmo, Wendy N. Reed, Andrew T. Swers and Amanda M. Riggs were on brief for intervenors Midwest ISO Transmission Owners et al. Jeffrey M. Jakubiak entered an appearance.
Before: SENTELLE, Chief Judge, and HENDERSON and KAVANAUGH, Circuit Judges.
Opinion for the Court filed by Circuit Judge HENDERSON.
The petitioners, the Public Service Commission of Wisconsin (PSCW) and American Transmission Company LLC (ATC),1 challenge two orders of the Federal Energy Regulatory Commission (FERC or Commission) approving a proposed tariff revision filed by the Midwest Independent Transmission System Operator, Inc. (MISO), a regional transmission organization (RTO).2 Midwest Indep. Transmission Sys. Operator, Inc., 114 F.E.R.C. ¶ 61,106 (Feb. 3, 2006) ("Order Conditionally Accepting and Suspending Proposed Tariff Revisions and Establishing Technical Conference") (FERC Tariff Ord.); Midwest Indep. Transmission Sys. Operator, Inc., 117 F.E.R.C. ¶ 61,241 (Nov. 29, 2006) ("Order on Technical Conference, Rehearing, Clarification, and Compliance") (FERC Reh'g Ord.). The proposed revision included a provision to allocate among MISO transmission customers3 region-wide a portion of the costs of qualifying transmission upgrades built by individual MISO transmission providers but to exclude from such cost sharing any upgrade project that was already "planned" as of the date the proposed revision was filed. The petitioners contend the cost allocation policy is arbitrary and discriminatory insofar as it excludes updates planned before the filing. Applying our deferential standard of review to FERC's ratemaking orders, we conclude that FERC did not err in approving the cost allocation policy MISO proposed.
On December 20, 2001, FERC granted MISO RTO status in order to provide open access to MISO's electricity transmission system to all member utilities in fifteen midwestern states and one Canadian province. Midwest Indep. Transmission Sys. Operator, Inc., 122 F.E.R.C. ¶ 61,283, ¶ 57 (2008). Accordingly, since early 2002 MISO has provided transmission service under a single open access transmission tariff.
In March 2004, MISO stakeholders4 formed a Regional Expansion Criteria and Benefits (RECB) Task Force "charged with developing criteria for including transmission projects in the Midwest ISO Transmission Expansion Plan (`MTEP') and developing methods for allocating and recovering costs of the projects included in the MTEP." Aff. of Martin Blake 7. Formation of the RECB Task Force was "precipitated" by disagreement among stakeholders over "treatment of generator upgrades," specifically whether and to what extent the costs of such upgrades should be spread among MISO's transmission customers. Letter from Stephen G Kozey, Vice President, General Counsel and Secretary, MISO, to Hon. Magalie R. Salas, Secretary, FERC 14 (filed Oct. 7, 2005) (Cost Allocation Policy Letter).
In an order issued July 8, 2004 addressing proposed revisions to MISO's tariff, FERC approved MISO's "general proposal to implement the `default' pricing proposal of [FERC] Order No. 2003"5 pending MISO's filing of its own proposal. Midwest Indep. Transmission Sys. Operator, Inc., 108 F.E.R.C. ¶ 61,027, at 61,147 (2004). FERC's order further advised:
We note that Midwest ISO states its intent that the default pricing proposal will remain in effect only until a pricing policy based on the ... principle of payment for upgrades by those that cause and benefit from the upgrades can be established by Midwest ISO and its stakeholders. This is a goal supported by many intervenors in this proceeding, and we encourage Midwest ISO to continue to work with stakeholders in considering such a pricing policy. Midwest ISO outlines the actions it is taking to develop such a proposal, and while we will not impose a deadline for filing the proposal at this time, we expect Midwest ISO to work with stakeholders to meet its goal of having a permanent pricing policy in effect by December 1, 2004.
Id. (footnotes omitted), order on reh'g, 109 F.E.R.C. ¶ 61,085 (2004).
In June 2005, MISO published the "Midwest ISO Transmission Expansion Plan 2005" (MTEP 05), which, inter alia, contained a list of upgrade projects contemplated by each MISO transmission provider. The list identified each provider's projects as either "planned" or "proposed" based on the provider's characterization thereof. A "planned" project was defined as "the preferred solution to an identified issue" and a "proposed" project as "a tentative solution to an identified issue." MTEP 05 app. A.
On September 16, 2005, the RECB Task Force adopted a policy for allocating costs of new electrical generation projects, which the MISO Board of Directors approved. Cost Allocation Policy Letter 11-12; FERC Tariff Ord. at 61,349. Accordingly, on October 7, 2005, MISO filed with FERC proposed tariff revisions to implement the policy. The filing included a letter from MISO Vice President, General Counsel and Secretary Stephen G. Kozey to FERC's Secretary setting out the substance of the proposed policy and explaining the process leading to its adoption, along with two attachments.6 Attachment FF (titled "Transmission Expansion Planning Protocol") included a cost allocation provision which proposed that twenty per cent of the costs of "Baseline Reliability Projects" (i.e., upgrade projects "needed to maintain reliability while accommodating the ongoing needs of existing Market Participants and Transmission Customers"),7 involving voltage of 345 kV and above "be allocated on a system-wide basis to all Transmission Customers and recovered through a system-wide rate," with the remaining eighty per cent of the costs to be "allocated on a sub-regional basis to all Transmission Customers in designated pricing zones." Attachment FF ¶¶ II(A)(1), III(A)(2)(c)(ii). Attachment FF also included a "Grandfathered Projects" clause which provided:
The cost allocation provisions of this Attachment FF shall not be applicable to transmission projects identified in Attachment FF-1, which is based on the list of projects designated as Planned Projects in [MTEP 05]. ...
Attachment FF ¶ III(A)(2)(b). Attachment FF-1, in turn, contained a "List of Planned Projects to be Excluded from Regional Cost Allocation," which, without explanation, included 36 projects that had been listed as "proposed" (rather than "planned") in MTEP 05. In an order issued February 3, 2006, FERC conditionally accepted the proposed tariff revisions, effective February 5, 2006, "subject to further modifications," including a directive that MISO "correct language in section 3.A.2.b. on Sheet No. 1841 which describes the Excluded Projects List as based on the planned projects of the MTEP 05" because "the actual list is based on the planned project list with some additions of proposed projects that the Midwest ISO has determined to be in advanced stages of planning." FERC Tariff Ord. at 61,348, 61,364.8 The Commission concluded that MISO's proposed cost allocation policy was "a reasonable compromise position from which this independent transmission provider, with significant stakeholder input, may start to apply regional cost sharing of transmission expansion projects" and that it did not "place[] any undue disadvantage on any one party." Id. at 61,363-64.
On April 4, 2006, MISO issued a new version of Attachment FF, which revised the Grandfathered Projects clause to read:
The cost allocation provisions of this Attachment FF shall not be applicable to transmission projects identified in Attachment FF-1, which is based on the list of projects designated as Planned Projects in [MTEP 05] and some additions of proposed projects that the Transmission Provider has determined to [be] in the advanced stages of planning.
Revised Attachment FF ¶¶ III(A)(2)(b) (issued April 4, 2006) (underlining of revised language in original) (alteration added).
ATC and PSCW filed requests for rehearing, which the Commission denied in an order issued November 29, 2006, iterating that MISO's cost allocation policy reflected "a reasonable compromise" and was "not unduly discriminatory." FERC Reh'g Ord. ¶¶ 94, 98.
ATC and PSCW each filed a petition for review of the Commission's two orders upholding the cost allocation policy. We consolidated the two petitions. Pub. Serv. Comm'n of Wis. v. FERC, No. 06-1408 (filed Mar. 16, 2007).
"We review FERC's orders by applying the Administrative Procedure Act's `arbitrary and capricious' standard." Wis. Pub. Power, Inc. v. FERC, 493 F.3d 239, 256 (D.C.Cir.2007) (citing 5 U.S.C. § 706(2)(A); Midwest ISO Transmission Owners v. FERC, 373 F.3d 1361, 1368 (D.C.Cir.2004)). As to the facts, the Commission's findings are "conclusive" if "supported by substantial evidence." 16 U.S.C. § 825l (b). "[W]e are `particularly...
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