898 F.3d 1
D.C. Cir.2018Background
- MISO-required System Support Resource (SSR) agreements compensate generators required to continue operating for reliability; SSR costs in most of MISO are allocated to load‑serving entities (LSEs) that require the resource, but the ATC footprint historically used a pro rata allocation among all ATC customers.
- MISO filed SSR agreements (Presque Isle, White Pine, Escanaba) allocating costs pro rata in 2013–2014; Public Service Commission of Wisconsin filed a Section 206 complaint (Apr. 2014) challenging the Presque Isle allocation.
- A preliminary MISO load‑shed study showed Wisconsin received 42% of Presque Isle’s benefit though it bore 92% of costs under pro rata allocation; FERC found the pro rata provision unjust and unreasonable and ordered removal from the Tariff and a final load‑shed study (July 29, 2014).
- FERC directed final studies and compliance filings, later finding the pro rata allocation unjust and unreasonable again and directing MISO to allocate costs to the LSEs that actually benefited (Feb. 19, 2015; May 3, 2016).
- FERC ordered refunds reallocating SSR charges back to the dates of the complaints/orders and required surcharges on LSEs that had underpaid to fund refunds to LSEs that had overpaid (Sept. 22, 2016). Petitioners (the surcharged LSEs) challenged the orders as impermissible retroactive rate increases and arbitrary and capricious.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether FERC reasonably found ATC pro rata SSR allocation unjust and unreasonable under Section 206 | The preliminary study was insufficient/new evidence absent; final study undercuts FERC; FERC ignored historical basis for pro rata carve‑out | Preliminary study produced new, probative evidence of misalignment with cost‑causation; FERC considered history and later final data | FERC reasonably concluded pro rata allocation was unjust and unreasonable based on substantial evidence and reasoned explanation |
| Whether ordering refunds funded by surcharges is an impermissible retroactive rate increase violating the filed‑rate doctrine and Section 206 | Surcharges function as retroactive rate increases; City of Anaheim forbids retroactive surcharges | Reallocation of existing costs among payers is not a retroactive rate increase; Section 206(c) and Section 309 permit surcharge‑funded reallocations in appropriate circumstances | Reallocation via surcharge is permissible here; not a forbidden retroactive rate increase; within FERC’s remedial authority under Sections 206 and 309 |
| Whether FERC’s reliance on Section 309 and related precedents is a post‑hoc rationalization barred by Chenery | FERC’s brief invoked Section 309 post hoc; cannot rely on new legal grounds on review | FERC cited Niagara Mohawk and Xcel in its orders, which invoke Section 309 principles; Chenery does not bar interpretive support from related provisions | Court rejects Chenery objection; FERC effectively invoked Section 309 reasoning in its orders |
| Whether equitable considerations justified departing from FERC’s general practice of denying reallocation refunds | Petitioners claim FERC departed from policy without adequate justification and risked under‑recovery and reliance harms | No reliance harms identified; MISO can compute exact over/underpayments; SSR payments are non‑market, unavoidable, and MISO cannot absorb refunds | FERC provided adequate, case‑specific equitable reasons to order surcharge‑funded refunds; decision was within discretion |
Key Cases Cited
- Louisiana Pub. Serv. Comm’n v. Fed. Energy Regulatory Comm’n, 883 F.3d 929 (D.C. Cir. 2018) (discussing FERC’s discretion on refunds in cost‑allocation cases)
- Maine v. Fed. Energy Regulatory Comm’n, 854 F.3d 9 (D.C. Cir. 2017) (framework for Section 206 two‑step inquiry)
- Fed. Energy Regulatory Comm’n v. Elec. Power Supply Ass’n, 136 S. Ct. 760 (2016) (deference to FERC’s rate decisions)
- Xcel Energy Servs., Inc. v. Fed. Energy Regulatory Comm’n, 815 F.3d 947 (D.C. Cir. 2016) (Section 309 remedial principles and refund commitments)
- City of Anaheim v. Fed. Energy Regulatory Comm’n, 558 F.3d 521 (D.C. Cir. 2009) (invalidating retroactive surcharge that operated as a forbidden retroactive rate increase)
- Fed. Power Comm’n v. Sierra Pac. Power Co., 350 U.S. 348 (1956) (Section 206 limits and prospective remedy principle)
- TNA Merch. Projects, Inc. v. Fed. Energy Regulatory Comm’n, 857 F.3d 354 (D.C. Cir. 2017) (upholding FERC’s use of Section 309 remedial authority)
- Niagara Mohawk Power Corp. v. Fed. Power Comm’n, 379 F.2d 153 (2d Cir. 1967) (broad construction of FERC’s remedial power under Section 309)