918 F.3d 954
D.C. Cir.2019Background
- Missouri River Energy Services (an association of 61 municipal utilities) used transmission rights under a 1977 contract with Nebraska Public Power District to move power from Laramie River Station for decades.
- In 2008 Nebraska Power joined Southwest Power Pool (SPP); the 1977 Contract was listed as a Grandfathered Agreement (GFA) in SPP’s Tariff and continued in effect.
- SPP later created an Integrated Marketplace and proposed congestion and marginal-loss charges; a 2012–2013 Carve-Out Settlement identified an exclusive list of GFAs eligible for exemption from those charges, and the 1977 Contract reservation for Missouri River was not listed.
- Missouri River joined SPP in 2015; it sought carve-out treatment for its 1977 reservation but settlement negotiations failed and the parties submitted stipulated facts to FERC for a shortened hearing.
- FERC concluded the Tariff was ambiguous about carve-out eligibility, relied on the concurrently filed Carve-Out Settlement (Schedule 1) as extrinsic evidence to deny Missouri River carve-out treatment, and rejected Missouri River’s claims of undue discrimination, contract modification, and equitable estoppel.
Issues
| Issue | Plaintiff's Argument (Missouri River) | Defendant's Argument (SPP/FERC) | Held |
|---|---|---|---|
| Whether Tariff unambiguously entitles Missouri River to carve-out | Tariff lists the 1977 Contract as a GFA and §2.16 allows parties to elect carve-out, so eligibility is unambiguous | §2.16 limits relief to GFAs “eligible for GFA Carve Out”; Tariff does not define eligibility, so ambiguous | Tariff ambiguous; court affirms FERC’s finding of ambiguity |
| Whether FERC improperly relied on extrinsic evidence instead of contra proferentem | Ambiguity should be resolved against the drafter (contra proferentem); FERC has a policy favoring that canon | FERC routinely uses extrinsic evidence when available; no settled policy requiring contra proferentem over extrinsic evidence | FERC permissibly relied on the Carve-Out Settlement as extrinsic evidence |
| Whether excluding Missouri River is undue discrimination under the Federal Power Act | Exclusion is discriminatory because Lincoln Electric (under same 1977 Contract) received carve-out | Lincoln Electric and Missouri River are not similarly situated: Lincoln was an existing member when charges were adopted; Missouri River joined after | No undue discrimination; differential treatment justified by member timing |
| Whether imposing charges modifies the 1977 Contract | Applying congestion and loss charges unlawfully modifies/abrogates the GFA | Charges pay for new services (Integrated Marketplace, hedging) not provided under the 1977 Contract, so they do not modify it | Not a contract modification; charges cover new services and are permissible |
| Whether SPP is equitably estopped from denying carve-out | SPP told Missouri River in 2013 it would not be assessed congestion/marginal-loss charges, so SPP is estopped | The 2013 statement was limited (based on footprint) and reliance was unreasonable once Missouri River entered the footprint | Estoppel claim forfeited/meritless; reliance was unreasonable |
Key Cases Cited
- Okla. Gas & Elec. Co. v. FERC, 827 F.3d 75 (D.C. Cir. 2016) (describing RTO functions and SPP footprint)
- Morgan Stanley Cap. Grp. v. Pub. Util. Dist. No. 1, 554 U.S. 527 (2008) (overview of RTO role and tariff governance)
- Alcoa Inc. v. FERC, 564 F.3d 1342 (D.C. Cir. 2009) (arbitrary-and-capricious standard for reviewing FERC orders)
- State Corp. Comm’n v. FERC, 876 F.3d 332 (D.C. Cir. 2017) (similar-situation requirement for undue discrimination claims)
- Transmission Access Policy Study Grp. v. FERC, 225 F.3d 667 (D.C. Cir. 2000) (undue discrimination standard under the Federal Power Act)
- Wis. Pub. Power, Inc. v. FERC, 493 F.3d 239 (D.C. Cir. 2007) (when tariff changes substantially alter GFA service, exclusion may modify contract)
- E. Ky. Power Coop., Inc. v. FERC, 489 F.3d 1299 (D.C. Cir. 2007) (FERC may impose costs for services and benefits not provided under GFAs)
- SEC v. Banner Fund Int’l, 211 F.3d 602 (D.C. Cir. 2000) (argument forfeiture and failure to develop claims)
- ATC Petrol., Inc. v. Sanders, 860 F.2d 1104 (D.C. Cir. 1988) (elements of equitable estoppel)