NextEra Desert Center Blythe, LLLC v. Federal Energy Regulatory Commission
2017 U.S. App. LEXIS 5758
| D.C. Cir. | 2017Background
- NextEra Desert Center Blythe, LLC (NextEra) developed two large solar plants (Genesis and McCoy) and signed an Interconnection Agreement with CAISO and Southern California Edison to connect them to the CAISO grid; completion required West of Devers permanent upgrades.
- To meet near-term obligations, CAISO and Edison agreed on a temporary "Interim Project" (Edison builds, NextEra pays); the parties amended the Interconnection Agreement to reflect this.
- CAISO announced it would release Congestion Revenue Rights (CRRs); NextEra sought CRRs tied to the Interim Project under CAISO tariff §36.11 (CRRs to "Project Sponsors of Merchant Transmission Facilities").
- CAISO and Edison denied NextEra’s entitlement; NextEra filed a complaint at FERC. FERC denied the complaint and rehearing, concluding the Interconnection Agreement unambiguously foreclosed NextEra’s claim (NextEra could not receive CRRs under the agreement).
- NextEra petitioned this Court for review; CAISO and Edison intervened. The Court found the Interconnection Agreement ambiguous where FERC found it unambiguous and remanded for further proceedings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Interconnection Agreement bars CRRs for the Interim Project | NextEra: Article 11.4 allows CRRs under CAISO tariff §36.11 even if the Interim Project is not a Network Upgrade | FERC/Intervenors: Agreement and tariff language limit CRRs to situations tied to Network Upgrade refunds or where applicant obtained Project Sponsor status under tariff §24 | Court: FERC misread Article 11.4; language is ambiguous regarding whether CRRs may be obtained by a route other than Network Upgrade refunds; remand required |
| Whether Article 11.4 unambiguously conditions CRRs on Network Upgrade refunds | NextEra: "in lieu of" prevents double recovery but does not limit CRR eligibility solely to Network Upgrade refunds | FERC: "in lieu of a refund of the cost of Network Upgrades" means CRRs are available only as an alternative to a Network Upgrade refund | Court: The phrase only unambiguously prevents receipt of both remedies; it does not unambiguously foreclose other routes to CRRs |
| Whether the Court may affirm on alternative reasons (e.g., failure to apply as Project Sponsor) not relied on by FERC | NextEra: Court should remand because FERC’s stated basis was erroneous | Intervenors: Court may affirm on alternative tariff-based grounds (no Project Sponsor application) | Court: May not affirm on grounds not articulated by FERC; agency must explain and address the issues first; remand required |
| Whether FERC engaged in sufficient Chevron step 2 analysis or relied properly on extrinsic tariff provisions | FERC: Claimed alternative analysis based on tariff appendices would give same result | NextEra: FERC failed to show it recognized or reasonably resolved ambiguity | Court: FERC’s purported step 2 reasoning was cryptic and insufficient; remand required for reasoned explanation |
Key Cases Cited
- Cajun Elec. Power Coop. v. FERC, 924 F.2d 1132 (D.C. Cir. 1991) (remand required when agency wrongly deems contract language unambiguous)
- Sacramento Mun. Util. Dist. v. FERC, 616 F.3d 520 (D.C. Cir. 2010) (explaining CAISO congestion pricing and CRRs)
- Ameren Servs. Co. v. FERC, 330 F.3d 494 (D.C. Cir. 2003) (de novo review of whether contract language is unambiguous)
- Old Dominion Elec. Coop. v. FERC, 518 F.3d 43 (D.C. Cir. 2008) (deference when agency recognizes ambiguity and resolves it reasonably)
- Philadelphia Gas Works v. FERC, 989 F.2d 1246 (D.C. Cir. 1993) (courts may only affirm agency orders on grounds the agency relied upon)
- SEC v. Chenery Corp., 318 U.S. 80 (1943) (agency must articulate its reasons; courts cannot supply post hoc justifications)
- FPL Energy Marcus Hook, L.P. v. FERC, 430 F.3d 441 (D.C. Cir. 2005) (agency must provide an intelligible explanation; failure to do so is arbitrary and capricious)