45 F.4th 1004
D.C. Cir.2022Background
- LS Power (and two consumer groups) challenged MISO’s rule that 100% of Baseline Reliability Project costs are allocated to the local pricing zone, which makes those projects ineligible for regional cost-sharing and competitive bidding (leaving incumbents with de facto rights of first refusal).
- FERC approved MISO’s location-based allocation in a 2013 order; the Seventh Circuit affirmed that decision in 2016.
- Petitioners filed a Section 206 complaint in 2020 relying mainly on a Pterra line-outage analysis of 29 projects (identifying 12 with significant cross-zone benefit “spillovers”) and on the low number of Market Efficiency and Multi-Value projects that otherwise might be regionally allocated and competitively bid.
- FERC denied the complaint in 2020, finding the new evidence unpersuasive to overturn the categorical local-allocation rule; it credited MISO’s explanations and forecasted regulatory/market changes that could produce more regionally allocated projects.
- The D.C. Circuit held LS Power has Article III standing (it is qualified, has competed successfully when a solicitation was held, and is categorically excluded from competing for the hundreds of Baseline projects) but denied the petition on the merits: Petitioners’ evidence showed misallocation for some projects but was too limited to require vacating the entire location-based allocation regime; as-applied challenges remain viable.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing | LS Power: "ready, willing, able" to compete and excluded from >500 Baseline projects, so injury-in-fact | FERC: injury speculative; no specific project identified | Court: LS Power has standing—its qualifications, past bidding, and exclusion from the category suffice |
| Whether new evidence makes location-based allocation unjust & unreasonable for all Baseline Projects | Pterra report shows at least 12 projects with large cross-zone benefits; misallocation >$275M; Market/Multi-Value projects didn’t appear as predicted | FERC/MISO: Pterra is selective/erroneous; many Baseline projects are primarily local; industry factors explain few Market/Multi-Value projects | Court: Petitioners proved misallocation for some projects but evidence is too narrow to invalidate the categorical local-allocation rule; denial of complaint upheld |
| Compliance with Order No. 1000 (cannot fully preclude regional allocation for a type) | Petitioners: MISO’s rule effectively exempts all reliability projects from regional cost-sharing, violating Order No. 1000 | FERC: Multi-Value & Market Efficiency categories remain available; industry/threshold changes may produce regional projects | Court: FERC provided reasonable, expert-based explanations; no basis to find a current Order No. 1000 violation |
| Rehearing response adequacy | Petitioners: Commission failed to address five rehearing points substantively | FERC: rehearing merely repeated earlier arguments already addressed; denial by operation of law is adequate | Court: No APA violation; earlier decision addressed the points and enabled court review |
Key Cases Cited
- FERC v. Elec. Power Supply Ass'n, 577 U.S. 260 (U.S. 2016) (deference to agency ratemaking and narrow review of policy choices)
- Motor Vehicle Mfrs. Ass'n v. State Farm, 463 U.S. 29 (U.S. 1983) (arbitrary-and-capricious review standard)
- South Carolina Pub. Serv. Auth. v. FERC, 762 F.3d 41 (D.C. Cir. 2014) (cost-causation principle requires rough commensurability of costs and benefits)
- Old Dominion Elec. Coop. v. FERC, 898 F.3d 1254 (D.C. Cir. 2018) (significant benefit spillovers can constitute a wholesale departure from cost-causation)
- Midwest ISO Transmission Owners v. FERC, 373 F.3d 1361 (D.C. Cir. 2004) (cost-causation need not be exacting precision; compare burdens to benefits)
- MISO Transmission Owners v. FERC, 819 F.3d 329 (7th Cir. 2016) (affirming FERC’s 2013 approval of location-based allocation for Baseline projects)
- Public Serv. Elec. & Gas Co. v. FERC, 989 F.3d 10 (D.C. Cir. 2021) (agency can require project-specific allocation where flows don’t reflect beneficiaries)
- K N Energy, Inc. v. FERC, 968 F.2d 1295 (D.C. Cir. 1992) (background on cost-causation doctrine)
- SEC v. Chenery Corp., 332 U.S. 194 (U.S. 1947) (courts may not uphold agency action on grounds not relied upon by the agency)
- Sithe/Independence Power Partners v. FERC, 285 F.3d 1 (D.C. Cir. 2002) (agencies need not achieve exact precision to meet cost-causation)