954 F.3d 279
D.C. Cir.2020Background
- In December 2016 Baltimore Gas & Electric (BGE) filed a § 205 rate proposal seeking about $38 million from future ratepayers for amounts dating to 2005 tied to timing differences between tax and ratemaking (tracked under FAS 109).
- FERC denied recovery, concluding BGE violated Order No. 144 by failing to seek recovery in its “next rate case” after amounts became subject to normalization and by not complying with the Order’s settlement/“reasonable period” framework.
- BGE relied on a 2006 settlement (and some earlier “black box” settlements) and argued the settlement preserved its right to recover the FAS 109 amounts later.
- BGE also argued FERC had treated four other utilities more permissively (including three staff letter orders and one Commission order), so FERC’s treatment of BGE was arbitrary and capricious.
- The D.C. Circuit deferred to FERC on interpretation of the 2006 settlement and Order No. 144, rejected BGE’s core claims, and denied the petition for review; Judge Williams dissented as to the majority’s analysis of disparate-treatment duties (Part III).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the 2006 settlement preserved BGE’s right to recover deferred FAS 109 amounts | Settlement language and attached spreadsheets show parties intended deferred tax amounts to be recoverable later | Settlement was silent on reserving deferred-tax issues and did not expressly preserve later recovery; Order No. 144 requires clearer reservation | Court upheld FERC: settlement silence was not a reservation; FERC’s interpretation was reasonable (Chevron deference) |
| Whether FERC arbitrarily applied Order No. 144’s “next rate case” and “reasonable period of time” requirements | BGE: FERC misapplied the “next rate case” and linked “reasonable period” too rigidly to that requirement | FERC: Order No. 144 requires seeking recovery in the next rate case after applicability; BGE did not comply | Court held FERC’s application was not arbitrary or capricious and denied review |
| Whether prior “black box” settlements (1996–1997) satisfied Order No. 144’s next-rate-case requirement for amounts allocable to 2005–2016 | BGE: earlier settlements should be presumed to have addressed FAS 109 and thus satisfy the requirement | FERC: BGE never raised this argument on rehearing before the Commission, so it’s not properly before the court | Court declined to address the argument for failing to exhaust/rehear before FERC |
| Whether FERC must justify disparate treatment vis-à-vis four allegedly similarly situated utilities | BGE: FERC treated four utilities more favorably and failed to explain the disparate outcomes | FERC: three prior favorable actions were staff letter orders (not binding Commission precedent) and none squarely presented or necessarily resolved the same issues; in any event FERC provided distinguishing reasons | Court: BGE made threshold showing of similarity, but FERC offered adequate explanations (delay length and factual/accounting differences); denial survives arbitrary-and-capricious review. A narrower dissent argued uncontested prior orders need not require explanation |
Key Cases Cited
- ANR Storage Co. v. FERC, 904 F.3d 1020 (D.C. Cir. 2018) (agency must provide reasonable justification when treating similarly situated regulated parties differently)
- San Diego Gas & Elec. Co. v. FERC, 913 F.3d 127 (D.C. Cir. 2019) (prior uncontested orders may not constitute binding precedent requiring explanation)
- West Deptford Energy, LLC v. FERC, 766 F.3d 10 (D.C. Cir. 2014) (agency must explain departures from prior precedent)
- FCC v. Fox Television Stations, Inc., 556 U.S. 502 (U.S. 2009) (standard for an agency changing policy requires awareness of change and reasoned justification)
- Pub. Citizen, Inc. v. FERC, 839 F.3d 1165 (D.C. Cir. 2016) (agency action includes staff actions taken under delegated authority and may be reviewable)
- Nat’l Fuel Gas Supply Corp. v. FERC, 811 F.2d 1563 (D.C. Cir. 1987) (deference to FERC’s reasonable interpretations of settlements it approves)
- Point Park Univ. v. NLRB, 457 F.3d 42 (D.C. Cir. 2006) (agency must supply a clear presentation of reasoning so courts can perform review)