24 F.4th 652
D.C. Cir.2022Background
- San Francisco Public Utilities Commission (SFPUC) owns generation/transmission (Hetch Hetchy) but not distribution; it purchases distribution under PG&E’s open‑access Tariff and historically received most service at secondary voltage.
- In 2015 SF shifted to Tariff service; PG&E has been denying many new interconnection requests for secondary‑voltage service above ~75 kW, instead requiring primary service; PG&E provides secondary to some retail and certain wholesale customers and sometimes grants variances.
- SF filed a §206 complaint (No. 20‑1313) alleging PG&E’s denial of secondary service was unjust, unreasonable, unduly discriminatory, and violated the Tariff; FERC denied the complaint, deferring to PG&E’s discretion to protect safety/reliability and calling the 75 kW figure a guidepost.
- Separately SF challenged (No. 20‑1084) FERC’s and PG&E’s interpretation of Tariff §14.2 (grandfathering): SF argued Tariff incorporates FPA §212(h)(2) and thus grandfathers the class of municipal customers served in 1992 regardless of delivery point; FERC adopted PG&E’s narrower, point‑of‑delivery approach and accepted PG&E’s definition of “municipal load.”
- The D.C. Circuit granted SF’s petitions, holding FERC’s Voltage Orders arbitrary and capricious in key respects and that FERC improperly interpreted the Tariff’s grandfathering clause; the court vacated the orders and remanded for further proceedings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether FERC acted arbitrarily in upholding PG&E’s refusals to provide secondary‑voltage service | FERC failed to identify concrete safety/reliability risks; PG&E applies a de facto 75 kW categorical rule; practice is discriminatory versus PG&E retail and some wholesale customers | PG&E needs discretion to ensure safety/reliability; industry norm is primary for utility‑to‑utility interconnections; denials supported by technical/operational concerns | Court: FERC’s reasons were conclusory and insufficiently explained; vacated Voltage Orders and remanded for reasoned analysis |
| Whether PG&E’s ~75 kW guidepost must be filed (filed‑rate doctrine / rule of reason) | The numerical threshold affects rates/service and is the sort of specification the rule of reason requires be on file | The 75 kW number is only a nonbinding guidepost; Commission may defer to case‑by‑case utility judgment | Court: Numeric thresholds are “realistically susceptible of specification” and materially affect service; Commission failed to justify omitting it from the filed Tariff; vacated |
| Scope of Tariff §14.2 grandfathering — does it incorporate FPA §212(h)(2) to grandfather the class of customers served in 1992 regardless of delivery point | Tariff explicitly references §212(h)(2); Commission precedent (class‑based approach) supports grandfathering eligible customer class even if delivery points change | Tariff references ‘‘points of delivery’’ and thus grandfathering should operate on a location‑by‑location (delivery point) basis; PG&E’s formulation limits scope | Court: Tariff text unambiguously incorporates §212(h)(2); FERC’s decision relied on other grounds and declined to interpret the statute, so deference is not owed; vacated and remanded |
| Whether PG&E’s definition of “municipal load” improperly excludes customers SF served in 1992 | PG&E’s definition excludes some entities actually served in 1992 (e.g., certain parking garages, airport tenants, arts spaces), conflicting with §212(h)(2) precedent | PG&E’s definition distinguishes municipal loads and reflects new contract terms; Commission accepted it as defining the class | Court: Commission failed to reconcile PG&E’s definition with §212(h)(2) and its precedent; acceptance was arbitrary and capricious; vacated |
Key Cases Cited
- Already, LLC v. Nike, Inc., 568 U.S. 85 (2013) (mootness requires an active controversy)
- Motor Vehicle Mfrs. Ass’n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29 (1983) (arbitrary and capricious review demands reasoned explanation)
- FERC v. Elec. Power Supply Ass’n, 577 U.S. 260 (2016) (Commission must ensure rules affecting wholesale rates are just and reasonable)
- Consolidated Edison Co. of N.Y. v. FERC, 347 F.3d 964 (D.C. Cir. 2003) (Commission’s tariff interpretation receives Chevron‑like deference)
- Keyspan‑Ravenswood, LLC v. FERC, 474 F.3d 804 (D.C. Cir. 2007) (filed‑rate doctrine and the rule‑of‑reason for reporting practices affecting rates/service)
- West Deptford Energy LLC v. FERC, 766 F.3d 10 (D.C. Cir. 2014) (filed‑rate doctrine principles)
- New England Power Generators Ass’n v. FERC, 881 F.3d 202 (D.C. Cir. 2018) (undue discrimination requires court to explain how parties are not similarly situated)
- Mo. Pub. Serv. Comm’n v. FERC, 234 F.3d 36 (D.C. Cir. 2000) (agency must articulate concrete reasons, not passing references)
- ESI Energy, LLC v. FERC, 892 F.3d 321 (D.C. Cir. 2018) (agency must explain deliberate departures from precedent)
- Papago Tribal Utility Authority v. FERC, 628 F.2d 235 (D.C. Cir. 1980) (Commission acceptance of a filing is interlocutory and not a merits decision)