Oрinion for the Court filed by Senior Circuit Judge WILLIAMS.
This appeal presents the issue of wheth- • er the Federal Energy Regulatory Commission may approve rates filed by a Regional Transmission Organization (“RTO”) to cover the cost of activity that for some purposes may be classified as lobbying. Rejecting petitioners’ contentions that approval of the rates was arbitrary and capricious and violated their First Amendment rights, we affirm FERC’s orders.
Since 1996, in an effort to facilitate thе development of competitive wholesale power markets, FERC has required power utilities to provide non-discriminatory open access transmission services. To this end it has encouraged creation of RTOs — entities consolidating control of all transmission services in a particular region. Promoting Wholesale Competition Through Open Access Non-Discriminatory Transmission Services by Public Utilities, 61 Fed.Reg. 21,540, 21,667 (1996) (“Order No. 888”) (“We continue to support the development of [RTOs]”). But the Commission found that the requirement of non-discriminatory access did not fully accomplish its efficiency goals. See Regional Transmission Organizations, 65 Fed.Reg. 810, 817 (2000) (“Order No. 2000”) (detailing inefficiencies that remained after Order No. 888). Hence, in Order No. 2000, the Commission stepped up the pressure, requiring transmission-owning utilities either to participate in an RTO or to explain their failure to do so. See 18 C.F.R. § 35.34(a), (c), (g), (h); Regional Transmission Organizations, 65 Fed.Reg. at 812.
Order No.2000 required all RTOs to meet a minimum independence requirement, but allowed RTOs to assume “different organizational forms” in order to satisfy the independence characteristic. Regional Transmission Organizations, 65 Fed.Reg. at 811 (“the Commission is not proposing a ‘cookie cutter’ organizational format”). Among the forms explicitly approved in Order No. 2000, see id. at 836, was one that FERC had noted in Order No. 888, an independent system operator or “ISO.” This would “separate operation of the transmission grid and access to it from economic interests in generation” *9 and provide what the Commission called “operational unbundling.” Order No. 888, 61 Fed.Reg. at 21,551-52 n. 115 & 21,594 n. 41 (internal quotations omitted).
The RTO involved in the present case is operated under just such an arrangement. It originated in 1971 with the formation of the New England Power Pool (“NE-POOL”), which in 1997 obtained FERC approval for the creation of ISO New England Inc. (“ISO-NE”), a “private, nonprofit entity to administer New England energy markets and operate the region’s bulk power transmission system.”
NSTAR Electric & Gas Corp. v. FERC,
As a FERC-authorized RTO, ISO-NE is required to submit its tariff to FERC for approval under § 205 of the Federal Power Act, 16 U.S.C. § 824(d). The tariff is meant to establish rates that will provide customers with “open access to the regional transmission system to all electricity generators ... in a non-discriminatory manner.”
Midwest ISO Transmission Owners v. FERC,
At issue in the current proceeding are the tariff sheets ISO-NE submitted for FERC approval covering its 2005 and 2006 revenue requirements. In each tariff ISO-NE sought over two million dollars in funding for accounts associated with “Government Affairs,” “Public Information,” and “Regulatory Affairs” (collectively, “external affairs”). See
ISO-NE,
In response to both tariffs, petitioners Braintree Electric Light Department, Reading Muniсipal Light Department, and Taunton Municipal Lighting Plant (collectively, “BRT”) — all ISO-NE customers— intervened and argued that further information was required to determine if the costs ISO-NE sought to recover for external affairs were just and reasonable within the meaning of § 205. In particular, it pointed to reports that lobbyists engaged by ISO-NE had filed with the U.S. Congress under § 5 of the Lobbying Disclosure Act of 1995 (2 U.S.C. §§ 1601-1612 at § 1604), as well as comparable reports filed under state law. BRT argued that these filings showed that ISO-NE’s proposed charges included lobbying costs, which BRT said were not permitted under FERC’s own precedent and regulations, and that FERC approval in effect compelled subsidization of speech in contravention of the First Amendment.
In response to BRT’s complaints, FERC
sua sponte
ordered a “paper hearing” in which it directed ISO-NE to “clarify the nature of each activity listed in the ‘lobbying reports’ filed by protestors and explain how each of the activities cited by protestors is an educational, informational, or mоnitoring activity on the one hand, or a lobbying activity on the other.”
ISO-NE,
The Commission rejected BRT’s substantive objections, but in a move to enhance transparency ordered ISO-NE to “prеpare and post on its website a monthly report concerning ‘external affairs’ and ‘corporate communications.’ ”
ISO-NE,
On appeal BRT challenges FERC’s deсision to uphold both the 2005 tariff (Docket No. 05-1210) and the 2006 tariff (Docket No. 06-1144). Before proceeding to the merits, a brief bit of procedural housekeeping is in order. FERC argues that BRT waived its challenge to the 2005 tariff because it failed to advance arguments specific to the 2005 tariff in its opening brief. BRT responds that its arguments against the 2006 orders were equally applicable, and clearly intended to apply with equal force, to the 2005 orders. Since we reject BRT’s аttacks on FERC’s orders covering the 2006 tariff, we need not reach the question of waiver. As to Docket No. 04-1335, BRT admits in its opening brief that it was not briefing the sole issue that it would have raised in that appeal, see Petr. Br. 1 n. 2, and accordingly, that petition for review is dismissed with prejudice. See
World Wide Minerals, Ltd. v. Republic of Kazakhstan,
Apart from the First Amendment challenge, we review FERC’s orders under the familiar arbitrary and capricious standard.
Midwest ISO Transmission Owners,
In approving ISO-NE’s rates FERC articulated a line between what we may loosely call informational lobbying (recoverable) and more politiсal variants (not recoverable). On the non-recoverable side of the line it identified “activities such as participation in Political Action Committees, candidate fundraising, entertainment expenses
(e.g.,
meals, sporting events, junkets) [as] clearly not recoverable lobbying activities.”
ISO-NE,
BRT asserts two primary reasons to convince us that FERC’s approval of the rates as just and reasonable was not based on reasoned decisionmaking: (1) FERC’s alleged violation of its own precedent; and (2) its alleged blindness to the possibility that an ISO might pursue goals different *11 from those sought by members, in particular goals not shared by all members.
BRT claims that FERC’s precedent broadly disallowed recovery for lobbying expenditures, even if informational and related to ISO-NE’s core purposes and objectives. FERC acknowledged that its prior statements on the subject had “not always been clear.”
Id.
at P 47. This appears quite true. On the one hand is a case cited by BRT,
Delmarva Power & Light Co.,
Moreover, FERC’s accounting rules have quite clearly left these issues somewhat up in the air. FERC (or more precisely, its predecessor, the Federal Power Commission) had recognized that “political expenditures of utilities fall into a peculiar category” and that it would possibly be “unfair” if such exрenditures were presumed recoverable in all instances.
Alabama Power Co.,
24 FPC 278, 286 (1960), reh’g denied,
Alabama Power Co.,
24 FPC 860 (1960), aff'd,
Southwestern Elec. Power Co. v. Fed. Power Commission,
Given the Commission’s having expressly left open the consequences of placing an expense in Account No. 426.4, it was quite logical, and no diversion from any clear prior pattern, that the Commission here “did not attempt to identify which expenditures should have been classified as lobbying in Account 426.4 because little purpose would be served, in light of our determination that
all
of the expenses were properly recoverable.”
ISO-NE,
BRT’s second attack on FERC’s reasoning points to FERC’s statement that “ISO-NE has no interest in obtaining a profit from its operations and seeks only to provide reliable service at the lowest reasonable cost.”
ISO-NE,
If FERC’s ruling below were based entirely on an assumption that ISO-NE must invariably operate in the best interests of its stakeholders solely because it is a nonprofit entity, then we would be inclined to agree with BRT’s criticism. Rent-seeking and shirking are surely not confined to for-profit firms. But FERC was hardly as naive as BRT depicts.
First, FERC candidly acknowledged that because ISO-NE was charged with providing system reliability and competitive markets for
“all
market participants,” this “necessarily has (and will) result in ISO-NE advocating positions that may be contrary to [those of] some of its individual members.”
ISO-NE,
Nor do we see anything unreasonable in FERC's classification of communications for which recovery was proper. ISO-NE plays a critical role in the administration of New England’s power markets and it seems eminently reasonable to encourage legislature access to such an informational resource. Similarly, FERC’s conclusion allowing recovery of ISO-NE’s costs in monitoring legislative activity, so that it may consider how such activity might affect its operations, appears quite reasonable.
In attacking FERC’s remark about ISO-NE’s absence of profit motive, and the suggestion that it “seeks only to provide reliable service at the lowest reasonable cost,” BRT points to
NSTAR Electric & Gas Corp.,
where we said that FERC had failed to identify “incentives driving ISO-NE to bargain for low prices.”
BRT’s remaining non-constitutional claim is that FERC lacked substantial evidence for its conclusion that ISO-NE’s expenditures really did fit on the recoverable side of the line FERC drew. Specifically, BRT argues that FERC’s conclusion is undermined by its reliance on what BRT calls ISO-NE’s “characterizations” of its communications with governmental bodies, and its decision to proceed by paper hearing.
In fact ISO-NE submitted a detailed mass of its actual communications, in the form of speeches, correspondence, PowerPoint presentations and hand-outs. These communications add up to nearly 600 pages, J.A. 1077-1661, and are introduced with a 35-page affidavit by ISO-NE’s Director of External Affairs, Carolyn O’Connor, J.A. 1041-75. Far from being characterizations, these are ISO-NE’s communications. BRT gives us no reason to think there have been any material omissions, with the possible exception of ISO-NE’s relations with FERC itself.
As to those relations, FERC noted that ISO-NE was entitled, like any other utility, to meet with the Commission and other regulators to pursue its legitimate interests. It said, “ISO-NE’s contacts with the Commission are strictly regulatory in nature; it is appropriate for ISO-NE as a public utility to recover costs of regulatory contacts.”
ISO-NE,
* * *
BRT argues next that even if FERC’s holding was reasonable in light of its precedent and the evidence, FERC’s decision that BRT and ISO-NE’s other customers must pay for ISO-NE’s external affairs expenditures contravenes the First Amendment’s prohibition of compelled speech.
In rejecting BRT’s claim, the Commission held bоth that there was no state action, the essential predicate for application of the compelled speech doctrine,
ISO-NE,
We pass on the state action issue. On that, FERC relied on the Supreme Court’s decision in
Jackson v. Metropolitan Edison Co.,
Expenditures are “germane” to an organization’s purpose where they “are necessarily or reasonably incurred for the purpose” of the organization.
Id.
at 14,
The argument fails for the same reason that it did in the prior context: FERC did not merely assume that any and all expenditures would be germane to ISO-NE’s mission, but reviewed and analyzed the
actual content
of ISO-NE’s communications. BRT harps on ISO-NE’s having adopted some highly contentious positions, but fails to show why they must be perceived as outside its mission. For example, it points to ISO-NE’s position on locational installed capacity and proposed mergers of grid operators as issues that “became controversial largely because ISO-NE is notoriously cost indifferent.” See Petr. Br. 29. But FERC directed ISO-NE to develop a locational capacity proposal, see
Devon Power LLC,
Thus it is simply not the case that FERC rested its germaneness finding on an assumption that ISO-NE, as a nonprofit entity, necessarily worked in the aggregate interests of its customers. Rather, the conclusion was based on its appraisal of thе communications in the light of ISO-NE’s role in the administration of New England’s power supply. We agree with FERC that the approval of ISO-NE’s rates did not violate the First Amendment.
Finally, we turn to BRT’s argument that FERC abused its discretion in making clear that its requirement of monthly website disclosures did not encompass “briefings, responses to inquiries, and similar activities” by ISO-NE.
ISO-NE,
FERC’s theory in excluding such communications was that they were “an integral part of ISO-NE’s regulatory or public informational responsibilities and therefore, should not be fettered by additional reporting requirements.”
ISO-NE,
In light of the substantial deference afforded FERC in this matter, we find that FERC’s proposed remedy is reasonable. In its clarification order FERC recognized that the distinction between types of external communications was not easy to draw; and hence refused to allow ISO-NE’s own categorization of expenses as either “external affairs” or “corporate communications” to determine what was included in the monthly reporting requirements. Id. at P 41. Furthermore, .the communications FERC excluded from the reporting requirement included such activities as “questions from Commission staff about uncontested ISO filings” and “providing information to state and federal, executive and legislative officials regarding the status of New England’s bulk-power system.” Id. at P 39. Such exclusions would presumably still require reporting of any meetings ISO-NE is involved in that could promote specific legislation or policy initiatives, which are the primary types of communication BRT seems to find objectionable. Finally, FERC explained that the purpose of its initial order was not to provide exhaustive lists of information, but rather “to provide stakeholders information regarding the nature of activities undertaken by ISO-NE and, therefore, the opportunity to seek further information from ISO-NE.” Id. at P 42. FERC thus imposed on ISO-NE the expectation that, *16 “if requested, ISO-NE will provide copies of any documents that it prepared for or distributed at meetings with public officials.” Id.
As clarified, FERC’s posting directive appears to be a reasonable balance of competing interests. ISO-NE has to disclose the most objectionable forms of communications, but will not be unduly bogged down with requirements likely to prove pointless. And of course, if the remedy proves inadequate or ISO-NE fails to comply, BRT is free to pursue additional remedies with FERC.
The appeals in Nos. 04-1335 and 05-1212 are dismissed (see supra at 10), and FERC’s orders approving ISO-NE’s tariffs for 2005 and 2006 are
Affirmed.
