Illinois Commerce Commission v. Federal Energy Regulatory Commission
756 F.3d 556
7th Cir.2014Background
- This appeal concerns PJM's allocation of costs for new 500-kV transmission lines largely located in the eastern PJM region.
- Western-region utilities challenge the region-wide postage-stamp cost allocation used by FERC on remand, arguing it overcharges them for benefits they receive only incidentally.
- The court had previously remanded five years earlier for a quantified, benefit-based allocation, finding the prior method crude and unexplained.
- On remand, FERC reaffirmed a postage-stamp approach without adequate empirical justification or a credible cost-benefit analysis.
- The majority concludes the proposed allocation fails to demonstrate proportional benefits to western utilities and should be reconsidered on remand.
- The petitions for review are granted and the matter is remanded again for new proceedings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether postage-stamp pricing is appropriate for 500-kV lines with uneven regional benefits | Western utilities contend benefits are not roughly commensurate. | FERC relies on region-wide benefits and efficiency gains to justify the postage-stamp approach. | Remanded for new proceedings with a required justification. |
| Whether the Commission adequately quantified or justified benefits to western utilities | Benefits to the west cannot be meaningfully quantified; the approach is arbitrary. | Benefits radiate region-wide; precise quantification is difficult but not required. | Remanded to require an articulation or alternative justification. |
| Whether cost-benefit analysis is feasible and required for the allocation | Cost-benefit analysis should be used to value benefits and justify costs. | FERC should not be compelled to use cost-benefit analysis in this context. | Remanded with instruction to explain feasibility or pursue alternatives. |
| Whether DFAX or other targeted allocation should replace postage-stamp here | Western utilities advocate DFAX to cap their contributions to actual benefits. | Postage-stamp reflects backbone-grid benefits and is appropriate. | Remanded for consideration of alternatives with empirical support. |
| Whether the remand orders properly directed quantification and adjustment over time | The remand orders require a reasoned, adjustable analysis; the current approach is static. | Remand orders permit consideration but do not mandate exact numbers. | Remanded for a reasoned, adjustable methodology. |
Key Cases Cited
- Illinois Commerce Commission v. FERC, 576 F.3d 470 (7th Cir. 2009) (remand for proper cost allocation and benefit quantification)
- Illinois Commerce Comm’n v. FERC, 721 F.3d 764 (7th Cir. 2013) (wind-power decision; rejects unsupported benefits parity)
- Entergy Servs., Inc. v. FERC, 319 F.3d 536 (D.C. Cir. 2003) (upholds that grid reliability upgrades confer system-wide benefits)