TC Ravenswood, LLC v. Federal Energy Regulatory Commission, 741 F.3d 112

Background

NYISO runs monthly capacity auctions in New York using administratively determined demand curves tied to the hypothetical cost of a new peaker plant (cost of new entry) to signal investment needs.
NYISO filed 2011–2014 demand curves that excluded property taxes, used a 1.7% general-inflation escalation factor, and estimated energy & ancillary services (E&AS) revenues via a three-year regression model.
FERC approved the escalation factor and E&AS methodology but found the property-tax exclusion unreasonable, and suspended the Proposed Curves under §205(e) for five months while directing NYISO to file compliance revisions.
NYISO submitted a March 28 filing keeping the then-effective (preexisting) curves in place until the Commission acted; later it submitted Compliance Curves; FERC granted rehearing on property taxes (due to a New York law granting abatements) and approved the modified Compliance Curves, which NYISO used in auctions.
Petitioners (power generators) challenged FERC’s five-month suspension, argued the Commission effectively extended the suspension beyond five months by accepting NYISO’s voluntary delay, and contested technical choices: the 1.7% escalation factor, the E&AS regression model, and the exclusion of property taxes.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Legality/length of FERC §205(e) suspension	Suspension should have been nominal per West Texas; five months unreasonable	West Texas allows max suspension where extraordinary factors warrant; unique market needs justify five months	Court upheld five-month suspension as within Commission discretion and West Texas exception
Whether FERC effectively extended statutory suspension by accepting NYISO’s voluntary delay	April Order acceptance extended suspension beyond five months in violation of §205(e)	NYISO voluntarily delayed implementation; Commission accepted that filing but did not direct extension	Court held Commission did not exceed §205(e); NYISO’s voluntary delay is permissible
Escalation factor (1.7% vs. Handy-Whitman 7.8%)	Handy-Whitman is more appropriate; general index understates inflation	General index reasonable given recessionary data; Handy-Whitman may overstate	Court sustained FERC’s reasoned choice to use 1.7%—agency properly weighed competing evidence
E&AS revenues estimation (three-year regression/modeling)	Three years is too short and tests insufficient; model unreliable	Model has limitations but is not so flawed as to be unusable; alternative assumptions were unreasonable	Court deferred to FERC’s technical judgment and upheld the model
Property taxes excluded from cost of new entry	Exclusion conflicts with prior precedent and is unsupported because hypothetical peaker might not qualify for abatement	New York law created a tax abatement for qualifying peakers; NYISO sought rehearing so Commission could consider change in isolation	Court accepted FERC’s exclusion of property taxes given the enacted abatement and NYISO’s rehearing request

Key Cases Cited

Electricity Consumers Resource Council v. FERC, 407 F.3d 1232 (D.C. Cir.) (describing use of demand curves in capacity auctions)
Exxon Pipeline Co. v. United States, 725 F.2d 1467 (D.C. Cir. 1984) (standard for remand when agency imposes differing suspension lengths)
City of Kaukauna v. FERC, 581 F.2d 993 (D.C. Cir. 1978) (supplier may voluntarily delay new rate implementation beyond suspension period)
Keyspan-Ravenswood, LLC v. FERC, 474 F.3d 804 (D.C. Cir. 2007) (arbitrary-and-capricious standard for FERC technical determinations)
Motor Vehicle Mfrs. Ass'n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29 (1983) (agency must articulate rational connection between facts and choice)
Wisconsin Valley Improvement Co. v. FERC, 236 F.3d 738 (D.C. Cir. 2001) (deference to agency when weighing competing expert evidence)
Southwest Airlines Co. v. TSA, 650 F.3d 752 (D.C. Cir. 2011) (avoid second-guessing agencies in data-poor technical settings)