Entergy Services, Inc. v. FERC
17-1251
| D.C. Cir. | Jul 13, 2021Background
- Entergy Arkansas, a member of the Entergy System (a multi-state cost- and capacity-sharing arrangement), made off-system "opportunity sales" from about 2000–2009. Louisiana filed a FERC complaint in 2009 alleging misallocation under the Entergy System Agreement.
- The System Agreement allocated energy under two central provisions: §30.03 (priority to a company’s "loads") and §30.04 ("sales to others" reimbursed at unit fuel cost plus an adder); it also included a bandwidth remedy (11% equalization band) and a monthly Intra‑System Bill using a "Responsibility Ratio" allocator.
- FERC phased the proceedings: Phase I found Entergy Arkansas misallocated opportunity sales (treating them as loads rather than sales to others); Phase II ordered re‑running the Intra‑System Bill and adjustments; Phase III refused to cap bandwidth offsets and calculated total refunds of ~$135 million (principal + interest).
- Entergy challenged FERC’s contract interpretation and entitlement to refunds; Louisiana and Arkansas challenged FERC’s damage calculation, allocation of adjustments (bandwidth, responsibility ratio, negative margins), burden of proof, and whether ratepayer/shareholder credits should be decided.
- The D.C. Circuit reviewed de novo whether orders were final for jurisdiction and applied Chevron‑like deference to FERC’s reasonable interpretation of ambiguous contract language; the court denied the petitions.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Jurisdiction/timeliness | Petitions were premature because only Phase III denial of rehearing was final | Phases I and II produced reviewable final agency action imposing obligations | Court: Phases I & II were final and reviewable under Supreme Court and circuit precedent |
| Contract interpretation (30.03 "loads" v. 30.04 "sales to others") | Entergy: opportunity sales are like wholesale requirement/off‑system sales traditionally treated as loads under §30.03 | FERC: term "loads" ambiguous; opportunity sales better fit §30.04 "sales to others" and §4.05 support | Court: FERC reasonably interpreted ambiguous Agreement to treat opportunity sales as §30.04 "sales to others" |
| Remedy entitlement (refund + interest) | Entergy: no refund warranted because sales were made in good faith and provision ambiguous; interest excessive/due to delay not its fault | FERC: misallocation caused overcollection/windfall to Entergy Arkansas; refund and statutory interest appropriate | Court: Refund and interest were reasonable; long delay justifies interest; good faith does not bar refund where violator would retain windfall |
| Calculation adjustments (bandwidth & responsibility ratio; negative margins) | Louisiana/Entergy: bandwidth and responsibility adjustments inappropriate or must be capped; negative margins should reduce refunds or be shared | FERC: re‑run Intra‑System Bill, deduct excess bandwidth payments and adjust responsibility ratio; negative margins remain with company making sales | Court: FERC did not abuse discretion; bandwidth and responsibility adjustments rational; treating negative margins as Entergy Arkansas’s burden was reasonable |
| Burden of proof in Phase II | Louisiana: burden should not have been shifted to complainant for damages phase; Entergy should prove offsets | FERC: Phase II was part of initial damage calculation; complainant retains burden | Court: FERC reasonably assigned burden to Louisiana and Louisiana failed to show prejudice |
| Ratepayer vs. shareholder distribution of bandwidth credit | Arkansas: bandwidth reduction should be credited to Entergy Arkansas ratepayers (they paid earlier) | FERC: distribution between ratepayers/shareholders is outside scope of these proceedings; state commissions may address retail rates | Court: FERC reasonably declined to decide allocation here; issue may be litigated in appropriate forum |
Key Cases Cited
- Smith v. Berryhill, 139 S. Ct. 1765 (defining final agency action for reviewability)
- Pub. Utils. Comm'n of Cal. v. FERC, 894 F.2d 1372 (D.C. Cir.) (orders adjudging liability but remanding for remedy can be final)
- City of Oswego v. FERC, 97 F.3d 1490 (D.C. Cir.) (order fixing legal obligation reviewable even if remedy amount deferred)
- Entergy Servs., Inc. v. FERC, 568 F.3d 978 (D.C. Cir.) (Chevron‑like deference to FERC contract interpretations)
- Transmission Agency of N. Cal. v. FERC, 628 F.3d 538 (D.C. Cir.) (ambiguity standard for agreements under FERC jurisdiction)
- Consol. Edison Co. of N.Y. v. FERC, 347 F.3d 964 (D.C. Cir.) (FERC policy favoring refunds for overcollection)
- Gulf Power Co. v. FERC, 983 F.2d 1095 (D.C. Cir.) (good faith violation may counsel against refund when no windfall)
- Anadarko Petroleum Corp. v. FERC, 196 F.3d 1264 (D.C. Cir.) (interest routinely awarded to ensure full compensation)
- Columbia Gas Transmission Corp. v. FERC, 750 F.2d 105 (D.C. Cir.) (deference to agency remedial judgments with rational basis)
- S. Cal. Edison Co. v. FERC, 805 F.2d 1068 (D.C. Cir.) (party who keeps profits must bear losses: "bitter with the sweet")