Firstenergy Service Co. v. Federal Energy Regulatory Commission
411 U.S. App. D.C. 155
D.C. Cir.2014Background
- FirstEnergy petitioned review after FERC denied a legacy-cost exemption and sustained PJM’s Schedule 12 allocations following FirstEnergy’s move from MISO to PJM.
- FirstEnergy transferred ATSI from MISO to PJM in 2011 and sought to terminate MISO participation while joining PJM.
- MISO and PJM socialize transmission-project costs differently; MISO uses project-by-project allocations, PJM uses annual reallocation under Schedule 12.
- ATSI would pay for pre-2011 MISO regional facilities and also its share of PJM legacy costs for projects approved before joining PJM.
- FERC denied the legacy-cost exemption under section 206, finding no unjust or unreasonable allocation; FirstEnergy sought rehearing and then review in this court.
- The court deferentially reviews FERC’s findings under the arbitrary-and-capricious standard and affirms that Schedule 12 was not unjust or unreasonable as applied to ATSI.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether FERC erred under § 206 by upholding Schedule 12 as just and reasonable for ATSI. | FirstEnergy; argue cost causation and sunk costs invalid. | FERC; Schedule 12 justified by ‘costs to serve’ and benefits to ATSI. | No reversible error; Schedule 12 not unjust or unreasonable. |
| Whether FERC properly treated FirstEnergy’s § 206 complaint given prior 205 finding. | Petitioner asserts improper dismissal and mechanistic reliance on earlier 205 finding. | FERC addressed the complaint on the merits; not barred by prior 205 finding. | FERC’s treatment not predicated on improper dismissal; merits review upheld. |
| Whether cost-causation and sunk-cost reallocations are permissible here. | Reallocation of sunk costs is unjust under cost-causation principles. | Cost-causation includes benefits to the customer; sunk costs may be socialized. | Permissible under the Commission’s reasoning; not unjust or unreasonable. |
| Whether waiver or modification of tariff provisions was required or appropriate. | FirstEnergy sought exemption; argues tariff could be modified or waived. | Waiver for auction procedures distinguished from exemption for legacy costs; no basis to modify here. | No modification or exemption; tariff controls were reasonable and not unjust. |
Key Cases Cited
- Ala. Power Co. v. FERC, 993 F.2d 1571 (D.C. Cir. 1993) (section 206 burdens and standard align with section 205 standard)
- Sithe/Independence Power Partners, L.P. v. FERC, 165 F.3d 944 (D.C. Cir. 1999) (section 206 burden-shifting and just-and-reasonable standard)
- Md. Pub. Serv. Comm’n v. FERC, 632 F.3d 1283 (D.C. Cir. 2011) (dual burdens under § 206 and § 205 clarified by circuit court)
- Ill. Commerce Comm’n v. FERC, 576 F.3d 470 (7th Cir. 2009) (seventh circuit on Schedule 12 cost causation and commensurate benefits)
- Boston Edison Co. v. FERC, 233 F.3d 60 (1st Cir. 2000) (context on justness and reasonableness of rates under FPA)