Black Oak Energy, LLC v. Federal Energy Regulatory Commission
406 U.S. App. D.C. 357
| D.C. Cir. | 2013Background
- PJM Interconnection operates Day-Ahead and Real-Time electricity markets under FERC oversight.
- PJM used marginal loss pricing (MLP) to allocate transmission losses; this created a large surplus otherwise allocated.
- FERC ordered PJM to implement marginal loss pricing and to allocate the surplus via a specific tariff to market participants.
- Virtual marketers trade electricity financially without taking or delivering physical power; they pay fixed grid costs only indirectly.
- PJM’s surplus-distribution plan gave virtually none of the surplus to virtual marketers, prompting petitions for review.
- Separately, FERC later ordered refunds to virtual marketers, then reconsidered and ordered recoupment, leading to the contested Recoupment Orders.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Surplus Orders violate 824d(a)/(b) and the APA | Virtual marketers: unlawful, unduly discriminatory, and not just and reasonable. | FERC's rationale tied to cost-causation and market integrity justifies disparity. | Surplus Orders upheld; not unduly discriminatory or unreasonable. |
| Whether cost-causation supports the zero-share treatment of virtual marketers | Sacramento forbids treating virtual traders as marginal, since they don’t cause physical losses. | Virtual marketers’ trades affect prices and losses; they are marginal participants deserving no surplus share. | Disparity consistent with cost-causation; virtual marketers treated as marginal participants. |
| Whether the Recoupment Orders were arbitrarily issued due to inadequate justification | FERC failed to justify recoupment and misrepresented refunds as denial. | Recoupment aligns with precedent to recoup refunds when refunds were not warranted on reconsideration. | Recoupment orders were arbitrary and remanded for explanation; not vacated. |
| Whether adequate notice was given that refunds could be reconsidered | Virtual marketers lacked reasonable notice. | April 2010 Order and related docket actions provided notice of potential reconsideration. | Reasonable notice found; but remand required for explanatory justification of recoupment. |
Key Cases Cited
- Sacramento Mun. Util. Dist. v. Cal. Indep. Sys. Operator Corp., 616 F.3d 520 (D.C. Cir. 2010) (cost-causation under LMP reviewed; guidance on marginal vs average loss pricing)
- Sithe/Independence Power Partners, L.P. v. FERC, 285 F.3d 1 (D.C. Cir. 2002) (tariff surplus allocations; cost-causation principles applied)
- Wis. Pub. Power, Inc. v. FERC, 493 F.3d 239 (D.C. Cir. 2007) (marginal vs average loss pricing; regulatory pricing challenges)
- Edison Mission Energy, Inc. v. FERC, 394 F.3d 964 (D.C. Cir. 2005) (LMP framework and price formation in energy markets)
- Alabama Elec. Coop. v. FERC, 684 F.2d 20 (D.C. Cir. 1982) (monopoly-era cost-based rate principles informing cost causation)
- Nat’l Ass’n of Regulatory Utils. Comm’rs v. FERC, 475 F.3d 1277 (D.C. Cir. 2007) (cost-causation and rate design under FERC review)