NEW ENGLAND POWER GENERATORS ASSOCIATION, INC., Pеtitioner v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent Dynegy Marketing and Trade, LLC, et al., Intervenors
No. 16-1023 Consolidated with 16-1024
United States Court of Appeals, District of Columbia Circuit.
Argued October 27, 2017 Decided January 19, 2018
881 F.3d 1192
IV.
After reviewing thousands of pages of evidence over the span of seven years, the Interior Department took the tract of land at issue into trust for the North Fork and approved the tribe‘s proposed casino. Viewing the same extensive record and affording the appropriate measure of deference to the Department‘s supportable judgments, we, like thе district court, conclude that this decision was reasonable and consistent with applicable law. We affirm.
So ordered.
James E. Tysse, Washington, DC, argued the cause for petitioner. On the briefs were Suedeen G. Kelly, Washington, DC, John M. White, Washington, DC, and Bruce F. Anderson, Boston, MA.
Carol J. Banta, Senior Attorney, Federal Energy Regulatory Commission, argued the cause for respondent. With her on the brief was Robert H. Solomon, Solicitor.
Jason R. Marshall and Phyllis G. Kimmel, Washington, DC, were on the brief for intervenor New England States Committee on Electricity, Inс. in support of respondent.
Before: Griffith, Circuit Judge, and Sentelle and Randolph, Senior Circuit Judges.
The New England Power Generators Association petitions for review of two sets of orders of the Federal Energy Regulatory Commission concerning a scarcity pricing mechanism in the New England power market. ISO New Eng. Inc., 147 FERC ¶ 61,172 (2014) (“Tariff Order“), reh‘g denied, 153 FERC ¶ 61,223, (2015) (“Tariff Rehearing Order“); New Eng. Power Generators Ass‘n v. ISO New Eng. Inc., 150 FERC ¶ 61,053 (2015) (“Complaint Order“), reh‘g denied, 153 FERC ¶ 61,222 (2015) (“Complaint Rehearing Order“). The exhaustion requirements of the Federal Power Act (“FPA“) deprive us of jurisdiction over the Association‘s petition to review the Tariff Order. Accordingly, we dismiss the petition in Case No. 16-1023 seeking review of the Tariff Order. We reach the merits in the Association‘s challenge to the Complaint Order and hold that the Commission was not arbitrary or capricious in denying the Association‘s complaint. We therefore deny the petition in Case No. 16-1024 seeking review of the Complaint Order.
A.
ISO New England Inc. is a private, nonprofit entity that administers wholesale electricity and capacity markets in New England. See Blumenthal v. FERC, 552 F.3d 875, 878 (D.C. Cir. 2009). In this role, ISO New England must submit its tariff to the Commission for approval under
ISO New England operates two distinct markets for wholesale electricity under its tariff: a day-ahead market and a real-time market. In the day-ahead market, participants offer to sell one-hour blocks of electricity to be delivered the next day. In the real-time market, electricity is offered in five-minute increments for immediate delivery, which corrects for imbalances between electricity scheduled in the day-ahead market and reаl-time demand. Our opinion in Black Oak Energy, LLC v. FERC, 725 F.3d 230, 233 (D.C. Cir. 2013), discusses the history and purpose of these markets.
To ensure that generators produce enough energy in real time, ISO New England‘s tariff includes a special pricing mechanism triggered when energy in the real-time market is scarce. When insufficient energy is being produced or energy prices become excessive, the price in the real-time market is set based upon Reserve Constraint Penalty Factors. See Complaint Order, at P 6. We will refer to these as “Scarcity Rates” to reflect their function. The Scarcity Rates аre a set of fixed values, preestablished in ISO New England‘s tariff, that correspond to different categories of energy generation. The Scarcity Rates serve as inputs to ISO New England‘s pricing algorithm during scarcity conditions, as well as price caps representing maximum allowable prices in the real-time market. For our purposes, it is enough to say that higher Scarcity Rates produce higher real-time energy prices under stressed market conditions.
ISO New England also administers an auction market fоr capacity. Capacity is “a kind of options contract” to ensure availability of electricity in the future. Advanced Energy Mgmt. All. v. FERC, 860 F.3d 656, 659 (D.C. Cir. 2017) (per curiam). Under ISO New England‘s tariff, capacity is allocated in a forward capacity market in which capacity is bought and sold in annual blocks three years in advance. See Complaint Order, at P 2. For example, a capacity auction was held in February 2014 covering the capacity commitment year of June 1, 2017, through May 31, 2018. Payments for capacity purchased in thesе annual auctions are delivered to capacity suppliers monthly during the capacity commitment year. See id. In return, capacity suppliers must offer capacity in the day-ahead and real-time electricity markets over the course of that year. See id.
Like the Scarcity Rates in the real-time energy market, ISO New England uses special pricing mechanisms in the capacity market to correct perceived market failures. At issue here is the Peak Energy Rent Adjustment (the “Adjustment“), which attempts to claw back some revenues earned by capacity suppliers when prices in the real-time energy market are very high. The Adjustment has two intended purposes. See Complaint Order, at P 3 (citing Devon Power LLC, 115 FERC ¶ 61,340, at PP 24, 29 (2006)). First, it is intended to mitigate the costs of price spikes to electricity purchasers. Second, it is intended to reduce the incentive for
Importantly, this value is deducted from every capacity supplier‘s monthly capacity payments, without regard to whether a particular supplier actually sold energy in the real-time market at the high price. See id. However, according to the Associаtion, the vast majority of capacity suppliers clear their electricity offers in the day-ahead market. They therefore receive the day-ahead market price, rather than the real-time price on which the Adjustment is based. The Commission has acknowledged that this is a “potential inefficiency,” Tariff Rehearing Order, at P 105, and, in light of other changes to New England power markets, has approved elimination of the Adjustment starting with the capacity commitment year beginning June 1, 2019, ISO New Eng. Inc., 151 FERC ¶ 61,096, at P 1 (2015).
At issue here is the interaction between the Scarcity Rates and the Adjustment. Although the triggers for implementing Scarcity Rates and Adjustment Events are not identical, the magnitude of the Adjustment is based on the price of real-time energy, which in turn is based on the Scarcity Rates under certain market conditions. Thus, a change in the Scarcity Rates changes the Adjustment in theory, if not also in practice.
B.
In January 2014, ISO New England and the New England Power Pool (“NEPOOL“) Participants Committee submitted proposals to revise ISO New England‘s tariff under
Pursuant to
After the Commission issued the Tariff Order, several parties sought rehearing or requested clarification. Two of these filings matter in this case. First, the Association filed a Motion for Clarification, which addressed an unrelated issue, but it never requested rehearing. See Reply Br. of Pet‘r 1; Oral Arg. at 7:21-7:57. Secоnd, several parties (“Indicated Generators“), including members of the Association, requested rehearing. This request urged that ISO New England‘s tariff exclude the increases to the Scarcity Rates or alter the Adjustment in light of the increased Scarcity Rates. JA 269-70. On November 19, 2015, the Commission denied rehearing. Tariff Rehearing Order, at P 105. The Commission again recognized the “potential inefficiency” with the Adjustment but stated that it “exists independent of the increase” to the Scarcity Rates and was therefore unnecessary to cоnsider in the proceeding before it. Id. The Commission noted that it had approved revisions to the tariff that eliminated the Adjustment beginning June 1, 2019, and suggested that any changes prior to that date could be made through a separate stakeholder process. Id. at P 106. As a result, the increased Scarcity Rates went into effect on December 3, 2014. See ISO New Eng. Inc., 149 FERC ¶ 61,009, at P 23 (2014).
That same day, the Association filed a complaint under
II.
A.
As a threshold matter, we lack jurisdiction to consider the Association‘s challenge tо the Tariff Order because the Association has not met the requirements of
Moreover, it is insufficient under
B.
Even if the Association had submitted its Motion for Clarification as a request for rehearing, which it did not, we would still lack jurisdiction over the Tariff Order for another reason. Section 313(b) of the FPA provides, “No objection to the order of the Commission shall be considered by the court unless such objection shall have been urged before the Commission in the аpplication for rehearing unless there is reasonable ground for failure so to do.”
Nor can the contents of Indicated Generators’ rehearing request save the Association. It is of no moment that Indicated Generators objected to the increased Scarcity Rates’ effect on the Adjustment. Like
The Association offers the excuses that it had a “reasonable ground for failure,”
In addition, the two cases the Association cites for its “inextricable link” argument, Reply Br. of Pet‘r 4, do not control on our facts. The cited language from Cities of Batavia v. FERC, 672 F.2d 64, 72 n.15 (D.C. Cir. 1982), is dicta from a footnote; the jurisdictional issue there was resolved on other grounds, id. at 72-73. Kansas Cities v. FERC, 723 F.2d 82 (D.C. Cir. 1983), found jurisdiction when a rehearing request timely challenged an order accepting a compliance filing but not an earlier order specifying the relevant legal rule to be used in the agency proceedings, id. at 85-86. In that case, it was unclear whether the petitioners were “aggrieved” by the earlier order, as is required for jurisdiction under
III.
A.
Although we have no jurisdiction to consider the Association‘s objections to the Tariff Order, we have jurisdiction to consider its objections to the Complaint Order. The Association filed a timely request for rehearing raising the objections it now presses in its timely petition for judicial review. The Association has therefore satisfied
We conclude that the Complaint Orders were not arbitrary and capricious. The Association initiated its complaint pursuant to
First, the Commission found that the Association‘s evidence, which consisted of data from the December 4, 2014, Adjustment Event and a counterfactual historical back-cast, neglected to consider the likely frequency and size of future Adjustment Events. Complaint Order, at PP 36, 40; Complaint Rehearing Order, at PP 23, 28. Without such context, especially in light of other changes to ISO New England‘s tariff, the Commission reasonably found that this evidence did not show the Adjustment was unjust and unreasonable. Contrary to the Association‘s claim before the court, the Commission did not require proof of “additional instances of actual harm,” Br. for Pet‘r 43, but rather found that the Association had failed to explain what its data meant for the total impact of the Adjustment.
Second, the Commission faulted the Association for not addressing potential increases to еnergy prices in the day-ahead market, which in aggregate might offset expected increases to the Adjustment. Complaint Order, at PP 38-39; Complaint Rehearing Order, at P 29. The Commission noted that these rates adjust daily and might, on average, increase in anticipation of expected higher real-time market prices due to the increased Scarcity Rates. Complaint Order, at PP 38-39. The Association‘s shortcoming, in the Commission‘s view, was its failure to consider how other aspects of the energy market might respond to the new Scarcity Rates. As such, the Commission reasonably explained why it thought the Association had not demonstrated an aggregate change to supplier revenue that was unjust and unreasonable.
Third, the Commission determined that price floors effective in pre-Tariff Order capacity auctions might compensate for any additional losses from the potentially
Because the Commission fulfilled its obligation to “examine the relevant data and articulate a satisfactory explanation for its action,” Motor Vehicle Mfrs. Ass‘n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43, 103 S.Ct. 2856, 77 L.Ed.2d 443 (1983), we find the Complaint Orders were not arbitrary or capricious.
B.
We decline to disturb this result—as the Association urges us to do—in response to the outcome of the Association‘s second complaint proceeding challenging the Adjustment under
So long as any change is reasonably explained, it is not arbitrary and capricious for an agency to change its mind in light of experience, or in the face of new or additional evidence, or further analysis or other factors indicating that the agency‘s earlier decision should be altered or abandoned. Cf. FCC v. Fox Television Stations, Inc., 556 U.S. 502, 514-16, 129 S.Ct. 1800, 173 L.Ed.2d 738 (2009). The Supreme Court has itself overruled many of its decisions over the years in light of such considerations. See Congressional Research Service, The Constitution of the United States of America: Analysis and Interpretation, S. Doc. No. 112-9, at 2623-35 (2017). As a corollary, a change in an agency‘s course in reaction to new information does not indicate that its initial course was necessarily arbitrary and capricious when charted. On the facts before us, the Commission‘s reconsideration when presented with more data does not change our view of the propriety of the Complaint Orders.
IV.
The Association also raises procedural objections to the Commission‘s orders, ar-guing
V.
For the reasons stated above, the petition for review of the Tariff Order, Case No. 16-1023, is dismissed for lack of jurisdiction and the petition for review of the Complaint Order, Case No. 16-1024, is denied on the merits.
So ordered.
NATURAL RESOURCES DEFENSE COUNCIL and Powder River Basin Resource Council, Petitioners v. U.S. NUCLEAR REGULATORY COMMISSION and United States of America, Respondents Strata Energy, Inc., Intervenor
No. 16-1298
United States Court of Appeals, District of Columbia Circuit.
Argued October 10, 2017 Decided January 19, 2018