Louisiana Public Service Commission v. Federal Energy Regulatory Commission , 761 F.3d 540 ( 2014 )


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  •      Case: 13-60140   Document: 00512720054    Page: 1   Date Filed: 08/01/2014
    IN THE UNITED STATES COURT OF APPEALS
    FOR THE FIFTH CIRCUIT
    United States Court of Appeals
    Fifth Circuit
    No. 13-60140                           FILED
    c/w No. 13-60141                    August 1, 2014
    Lyle W. Cayce
    Clerk
    LOUISIANA PUBLIC SERVICE COMMISSION,
    Petitioner
    v.
    FEDERAL ENERGY REGULATORY COMMISSION,
    Respondent
    On Petition for Review of Orders
    of the Federal Energy Regulatory Commission
    Before WIENER, HAYNES, and HIGGINSON, Circuit Judges.
    HIGGINSON, Circuit Judge:
    In these petitions for review the Louisiana Public Service Commission
    (the “Louisiana Commission”) challenges the Federal Energy Regulatory
    Commission’s (“FERC”) interpretation of contractual language. Holding,
    among other things, that FERC’s interpretation is not arbitrary, unreasonable,
    or contrary to law, we DENY in part and DISMISS in part the Louisiana
    Commission’s petitions for review.
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    FACTS AND PROCEEDINGS
    A.    The Entergy System and the System Agreement
    Entergy Corporation (“Entergy Corporation”) 1 sells electricity in
    Arkansas, Louisiana, Mississippi, and Texas through its six operating
    companies. 
    120 FERC ¶ 61,079
     at PP 1, 3 (2007). The “System Agreement,”
    which was first executed in 1951, governs dealings between the operating
    companies     and     establishes   an     operating    committee       that   comprises
    representatives from Entergy Corporation and each operating company. La.
    Pub. Serv. Comm’n v. FERC, 
    522 F.3d 378
    , 383 (D.C. Cir. 2008) (“La. 2008”).
    Each operating company accounts for the costs of generation plants in its
    jurisdiction, and the committee spreads investment costs among the operating
    companies by assigning new plants on a rotating basis and dispersing costs
    associated with facilities that benefit the entire Entergy System. Id.; see
    Entergy La., Inc. v. La. Pub. Serv. Comm’n, 
    539 U.S. 39
    , 42 (2003). These efforts
    ideally achieve a rough equalization of costs among the operating companies.
    B.    FERC’s Regulatory Role
    The Federal Power Act (“FPA”), 
    16 U.S.C. §§ 824
    –824w, provides FERC
    statutory authority over the transmission and sale of electric energy at
    wholesale in interstate commerce. FERC regulates all rates and charges within
    its jurisdiction by confirming that they are “just and reasonable” and not
    unduly discriminatory or preferential. §§ 824d, 824e; see also New York v.
    FERC, 
    535 U.S. 1
    , 33 (2002) (Thomas, J., dissenting) (noting FERC’s “statutory
    mandate     to   regulate    when     it   finds   unjust,       unreasonable,    unduly
    discriminatory, or preferential treatment”). Section 206 of the FPA provides
    FERC authority to independently investigate rates, § 824d(e), but a
    1 For ease of reference, we also refer to Entergy Services, Inc., which is Entergy
    Corporation’s wholly owned subsidiary, as “Entergy Corporation.”
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    complainant may urge FERC to investigate a rate in a Section 206 proceeding.
    In a Section 206 proceeding the burden is on the complainant to demonstrate
    that the rate is “unjust, unreasonable, unduly discriminatory, or preferential.”
    § 824e(b). If FERC finds that the rate is unlawful, it must set a just, reasonable,
    nondiscriminatory rate. § 824e(a).
    C.    Entergy Louisiana Acquires the Vidalia Power Plant
    In 1985, Entergy Louisiana purchased most of the output from the
    Vidalia Hydroelectric Power Plant (“Vidalia”). “Vidalia was a local affair”;
    Entergy Corporation was minimally involved in the purchase, and the Entergy
    System made no efforts to rely on resources similar to Vidalia. La. 2008, 
    522 F.3d at 396
    . The Louisiana Commission “approved a phased-in rate schedule
    for the costs of the plant, which limited its costs to Entergy Louisiana initially,
    but then increased them until they leveled off at the end of the long-term
    contract.” 
    Id. at 385
    . The Louisiana Commission also guaranteed the “full
    recovery of [Vidalia’s] costs through Louisiana ratepayers.” 
    Id. at 396
    .
    In 2002, the Louisiana Commission entered a settlement with Entergy
    Louisiana “granting the latter exclusive retention of Vidalia’s accelerated tax
    deductions for the remaining life of the contract,” which allowed tax benefits
    to flow to Louisiana ratepayers. 
    Id.
     Another component of the settlement
    provided that Entergy Louisiana would “maintain its pre-existing capital
    structure” in any rate proceeding for a ten-year period. In re Entergy La., No.
    U-20925, 
    2002 WL 31618829
    , at *10 (Sept. 18, 2002) (“La. Pub. Serv. Comm’n
    2002”). Accordingly, and as discussed in detail below, “[a]s part of a rate case
    subsequent to that order,” Entergy Louisiana’s capital structure was adjusted.
    Entergy Servs., Inc., 
    137 FERC ¶ 61,029
     at P 74 (2011) (“Opinion No. 514”).
    D.    FERC Imposes the “Bandwidth Remedy”
    Over the 50-year operation of the Entergy System FERC twice has fixed
    an inequitable rate. In 1985, FERC attempted to remedy disparities in nuclear-
    3
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    capacity costs among the operating companies by ordering nuclear-investment
    equalization in the Entergy System. La. 2008, 
    522 F.3d at 384
    . In 2005, FERC
    acted again, this time by fashioning a “bandwidth remedy” in response to a
    complaint initiated by the Louisiana Commission. At the initial stage of the
    complaint proceeding, an administrative law judge found that fuel-cost
    disparities among the operating companies had left production costs unequal
    and imposed a “numerical bandwidth remedy” to roughly equalize production
    costs across the operating companies. La. Pub. Serv. Comm’n v. Entergy Servs.,
    Inc., 
    106 FERC 63,012
     at P 25, 51 (2004). The bandwidth remedy “ensure[d]
    that for each calendar year beginning with 2003, no Entergy Operating
    Company is more than +/− 7.5% relative to [the] System average [production
    costs].” 
    Id.
     at P 50.
    FERC subsequently affirmed the administrative law judge’s finding that
    production costs were no longer just and reasonable and affirmed the
    imposition of a bandwidth remedy. La. Pub. Serv. Comm’n v. Entergy Servs.,
    Inc., 
    111 FERC ¶ 61,311
     at P 1 (2005) (“Opinion No. 480”). FERC, however,
    “reverse[d] [the administrative law judge’s] determination on the appropriate
    bandwidth in favor of a broader bandwidth that eases the severity of the
    remedy’s impact.” 
    Id.
     Instead of the 7.5% bandwidth, FERC “conclude[d] that
    a bandwidth remedy of +/- 11 percent allowing for a maximum of a 22 percent
    spread of production costs, between Operating Companies on an annual basis,
    is just and reasonable and will help keep the Entergy System in rough
    production cost equalization.” 
    Id.
     at P 144. FERC also excluded Vidalia from
    the Entergy System when applying the bandwidth remedy because Vidalia was
    exclusively an Entergy Louisiana resource. 
    Id.
     at PP 173, 184. The D.C. Circuit
    held “FERC’s adoption of the +/- 11 percent bandwidth to be within its
    discretion,” and affirmed FERC’s “determination that Vidalia was not planned
    as a System resource.” La. 2008, 
    522 F.3d at 394, 397
    .
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    E.    Entergy Corporation Implements the Bandwidth Remedy
    In 2006, Entergy Corporation amended the System Agreement to
    account for the bandwidth remedy, and FERC accepted the modifications in
    2006 and 2007. See La. Pub. Serv. Comm’n v. Entergy Servs., Inc., 
    117 FERC ¶ 61,203
     (2006) (“2006 Compliance Order”), on reh’g and compliance, 
    119 FERC ¶ 61,095
     (2007) (“2007 Compliance Order”), aff’d, La. Pub. Serv. Comm’n
    v. FERC, 341 F. App’x 649, 649 (D.C. Cir. 2009) (“La. 2009”). Specifically,
    Entergy Corporation modified “Service Schedule MSS-3” to comply with
    Opinion No. 480’s bandwidth remedy. The System Agreement now controls
    deviations in each operating company’s production costs to contain them
    within +/-11% of the System average production costs. The System Agreement
    provides a formula for calculating the actual production costs for each company
    and the System’s average production costs and specifies the billing procedure
    for paying or receiving funds as required to maintain the rough equalization of
    production costs. See Section 31.09(d). The System Agreement also provides
    that the operating companies’ data reported in their annual FERC Form 1 will
    populate the bandwidth formula. See, e.g., Section 30.12 n.1 (“All Rate Base,
    Revenue and Expense items shall be based on the actual amounts on the
    Company’s Books for the twelve months ended December 31 of the previous
    year as reported in FERC Form 1.”).
    1.    First Annual Bandwidth Proceeding
    At Entergy Corporation’s first annual bandwidth proceeding, Entergy
    Corporation filed calculations of cost disparities and the operating companies’
    respective payments and receipts based on the previous year’s production-cost
    data. An administrative law judge ruled on Entergy Corporation’s
    submissions, Entergy Servs. Inc., 
    124 FERC ¶ 63,026
     (2007), and FERC
    affirmed in part and reversed in part. Entergy Servs. Inc., 
    130 FERC ¶ 61,023
    (2010) (“Opinion No. 505”), on reh’g, 
    139 FERC ¶ 61,103
     (2012) (“Opinion No.
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    505-A”), order on compliance, 
    139 FERC ¶ 61,104
     (2012), order on further reh’g,
    
    145 FERC ¶ 61,046
     (2013). The Louisiana Commission petitioned for review of
    Opinion Nos. 505 and 505-A before the D.C. Circuit, and the petition is
    pending. La. Pub. Serv. Comm’n v. FERC, D.C. Cir. No. 12-1282 (D.C. Cir.
    Filed July 5, 2012). 2
    2.     Second Annual Bandwidth Proceeding
    Entergy Corporation’s second annual bandwidth proceeding commenced
    in 2008, and after an initial determination by the administrative law judge,
    FERC issued two of the orders now before us in this petition. Opinion Nos. 514
    and 514-A.
    3.     Third Annual Bandwidth Proceeding
    In the third annual bandwidth proceeding in 2009, FERC denied an
    interlocutory appeal of an initial decision by the administrative law judge.
    Entergy Servs. Inc., 
    130 FERC ¶ 61,170
     (2010) (“Third Bandwidth
    Interlocutory Order”). FERC subsequently affirmed the administrative law
    judge’s decision. Entergy Servs., Inc., 
    139 FERC ¶ 61,105
     (2012) (“Opinion No.
    518”), on reh’g, 
    145 FERC ¶ 61,047
     (2013). The Louisiana Commission
    petitioned for review of these orders in our Court (5th Cir. 13-60874) and a
    member of our Court denied FERC’s motion to hold that appeal in abeyance
    pending the resolution of this appeal. 3
    4.     Fourth Annual Bandwidth Proceeding
    In Entergy Corporation’s fourth annual bandwidth proceeding FERC set
    the matter before an administrative law judge and ruled on the Louisiana
    Commission’s request for rehearing on depreciation inputs. Entergy Servs.,
    2  The Louisiana Commission has also filed an appeal from the 2013 order on further
    rehearing that has been consolidated with its pending appeal of Opinion Nos. 505 and 505-
    A.
    3 No. 13-60874, order of January 23, 2014 (Dennis, J.).
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    Inc., 
    132 FERC ¶ 61,065
     (2010), on reh’g, 
    137 FERC ¶ 61,019
     (2011) (“Fourth
    Bandwidth Rehearing Order”), on reh’g Entergy Servs. Inc., 
    145 FERC ¶ 61,049
    (2013) (granting clarification). 4
    F.    Complaint Proceedings
    Outside    of   the    annual   bandwidth      proceedings,    the   Louisiana
    Commission has filed multiple complaints with FERC. In 2008, the Louisiana
    Commission challenged the methodology and inputs used for calculating
    production costs. “With regard to the seven issues covering methodology
    deviation and the justness and reasonableness of cost inputs raised by the
    Louisiana Commission,” FERC found that these issues were already raised in
    the first bandwidth proceeding and dismissed the complaints because there
    was “no need to establish a separate proceeding to address them.” La. Pub.
    Serv. Comm’n v. Entergy Corp., 
    124 FERC 61,010
     at P 27 (2008).
    In 2010, the Louisiana Commission filed a complaint requesting uniform
    accounting standards in the bandwidth calculations notwithstanding retail
    depreciation rates. FERC set the matter for a “trial-type evidentiary hearing.”
    La. Pub. Serv. Comm’n v. Entergy Corp., 
    132 FERC ¶ 61,003
     at P 2 (2010).
    After an initial decision, FERC affirmed the administrative law judge’s
    conclusion that the Louisiana Commission had not “met its burden of proof
    under section 206 of the Federal Power Act . . . to show the existing bandwidth
    formula is unjust and unreasonable or unduly discriminatory or preferential.”
    La. Pub. Serv. Comm’n v. Entergy Corp., 
    139 FERC ¶ 61,107
     at P 2 (2012)
    (“Opinion No. 519”), reh’g pending.
    4  In January 2014, the Louisiana Commission petitioned our court for a writ of
    mandamus requesting an order instructing FERC to remove from abeyance the fifth, sixth,
    and seventh annual bandwidth proceedings and two Louisiana complaint proceedings
    against Entergy Corporation. We denied mandamus relief on March 13, 2014. No.14-30073
    (Jolly, Smith, and Clement, JJ.).
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    In a 2011 complaint, the Louisiana Commission also challenged the
    inclusion of certain expenses and revenues that predated the imposition of the
    bandwidth remedy. FERC denied the request but left open the issue of
    prospective adjustments. La. Pub. Serv. Comm’n v. Entergy Corp., 
    139 FERC ¶ 61,102
     at PP 26–28 (2012), reh’g pending.
    G.     The Five Orders on Review
    1.    Appeal No. 13-60140
    The first three orders on review arise from the Arkansas Commission’s
    complaint requesting that FERC modify the System Agreement.
    a.    Arkansas Complaint Order
    In 2009, the Arkansas Commission sought to remove language in the
    depreciation-rate calculations for nuclear generating units in the bandwidth
    formula. The challenged language, which we discuss below and refer to
    throughout as the “unless clauses,” indicated that FERC had jurisdiction over
    these depreciation rates. See infra Part A.1.a. FERC denied the complaint
    because the Arkansas Commission had not met its burden under Section 206.
    Arkansas Publ. Serv. Comm’n v. Entergy Corp., 
    128 FERC ¶ 61,020
     at P 23
    (2009) (“Arkansas Complaint Order”). FERC found that the Arkansas
    Commission’s arguments were “beyond the scope of its Complaint” and better
    directed at the decision in the first bandwidth proceeding. 
    Id.
     at P 24. FERC
    also found the contractual language “consistent with FERC’s authority under
    the FPA” because “[i]n order for the bandwidth calculation to provide a just
    and reasonable result under the FPA, the Commission must ensure that the
    inputs used to calculate the bandwidth are also just and reasonable.” 
    Id.
     at P
    25.
    b.    First Arkansas Rehearing Order
    FERC subsequently denied rehearing, finding it unnecessary to revise
    the language because FERC had clarified its treatment of depreciation
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    expenses in a number of other orders. Arkansas Publ. Serv. Comm’n v. Entergy
    Corp., 
    137 FERC ¶ 61,030
     at P 19 (2011) (“First Arkansas Rehearing Order”).
    FERC further clarified:
    [The Arkansas Complaint Order] was not intended to suggest that
    the justness and reasonableness of the various inputs to the
    bandwidth formula was [sic] open to challenge in the bandwidth
    proceedings. Instead, that language was intended to mean that
    each input in the bandwidth formula should be examined to make
    sure that the correct data was used in determining the bandwidth
    payments.
    
    Id.
     at P 23.
    c.   Second Arkansas Rehearing Order
    The Louisiana Commission next sought rehearing of the First Arkansas
    Rehearing Order. FERC subsequently denied rehearing, but clarified how the
    Louisiana Commission could challenge inputs to the bandwidth formula.
    Arkansas Publ. Serv. Comm’n v. Entergy Corp., 
    142 FERC ¶ 61,012
     at PP 25–
    42 (2012) (“Second Arkansas Rehearing Order”).
    2.       Appeal No. 13-60141
    The remaining two orders on review relate to the second bandwidth
    proceeding.
    a.   Opinion No. 514
    In Opinion No. 514 FERC reviewed the Arkansas Commission’s
    challenge to depreciation inputs and the Louisiana Commission’s challenge to
    Entergy Corporation’s adjustment of Entergy Louisiana’s capital structure to
    account for the Vidalia transaction. FERC reversed the administrative law
    judge’s    determination on the      depreciation   inputs but affirmed      the
    administrative law judge’s decision regarding the Vidalia transaction. Opinion
    No. 514, 
    137 FERC ¶ 61,029
     at PP 72–78.
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    b.   Opinion No. 514-A
    FERC subsequently denied rehearing on both issues. Opinion No. 514-
    A, 
    142 FERC ¶ 61,013
     at P 1.
    DISCUSSION
    The Louisiana Commission petitions for review of FERC’s interpretation
    of the System Agreement’s depreciation formula and Entergy Corporation’s
    treatment of the Vidalia transaction.
    A.     The Depreciation Issue
    The Louisiana Commission’s grievance with FERC’s interpretation of
    depreciation expenses in the System Agreement arises from contractual
    language in the System Agreement, FERC’s initial interpretation of this
    language, and FERC’s subsequent correction of its interpretation. Ultimately,
    we find that FERC’s corrective interpretation is reasonable, not arbitrary, and
    not otherwise discordant with law.
    1.    Depreciation under the System Agreement
    As discussed, the bandwidth formula is a formula rate incorporated into
    the System Agreement. The relevant sections instruct Entergy Corporation on
    the cost variables that populate the formula. The language in these sections,
    the “unless clauses,” is ambiguous as to when and how a party may challenge
    the justness and reasonableness of a particular depreciation value.
    a.   The “Unless Clauses”
    The System Agreement defines certain cost variables as incorporating
    actual values recorded in certain FERC accounts as approved by retail
    regulators. These definitions, however, contain an important proviso. For
    example, “NAD,” or “Nuclear Accumulated Provision for Depreciation and
    Amortization” is defined as “excluding ARO associated with NPP above, as
    recorded in FERC Accounts 108 and 111 (consistent with the accounting
    standards relating to Statement of Financial Accounting Standards (SFAS)
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    143 approved by the retail regulator having jurisdiction over the Company,
    unless the FERC determines otherwise).” (emphasis added). The other variables
    at issue in this petition contain similar “unless clauses.” 5
    b.     FERC’s Initial Interpretation
    In the early stages of implementing the bandwidth formula, it was
    unclear when and how a party could challenge whether a particular input was
    just and reasonable. Initially, FERC held that parties could challenge formula
    inputs in the bandwidth proceedings. In 2008, FERC dismissed the Louisiana
    Commission’s       Section     206    complaint      regarding     “the    justness     and
    reasonableness of cost inputs” because these issues were presented in the
    bandwidth proceeding and “there [was] no need to establish a separate
    proceeding to address them.” La. Pub. Serv. Comm’n, 
    124 FERC ¶ 61,010
     at P
    27.
    Consistent with its position that the bandwidth proceedings were the
    proper venue to challenge inputs, FERC rejected the Arkansas Commission’s
    complaint to remove the “unless clauses” from the System Agreement.
    5The System Agreement defines the variable “ADXN” as: “Accumulated Provision for
    Depreciation and Amortization associated with PPXN and CME above, as recorded in FERC
    Accounts 108 and 111, excluding ARO associated with PPXN and CME, if any, (consistent
    with the accounting relating to SFAS 143 approved by the retail regulator having jurisdiction
    over the Company, unless the FERC determines otherwise)” (emphasis added). “GAD,” or the
    “General Plant Accumulated Provision for Depreciation,” also is accompanied by the
    operative caveat: “(consistent with the accounting relating to SFAS 143 approved by the
    retail regulator having jurisdiction over the Company, unless the FERC determines
    otherwise)” (emphasis added). Depreciation expenses for nuclear plants and non-nuclear
    plants contain a slightly different formulation, but a similar theme. “NDE” is the “Nuclear
    Depreciation and Amortization Expense associated with (NPP) as recorded in Accounts 403
    and 404 and Decommissioning Expense, as approved by Retail Regulators, unless the
    jurisdiction for determining the depreciation and/or decommissioning rate is vested in the
    FERC under otherwise applicable law” (emphasis added). “DEXN,” in turn, is “Depreciation
    and Amortization Expense associated with the plant investment in PPXN as recorded in
    FERC Accounts 403 and 404, as approved by Retail Regulators unless the jurisdiction for
    determining the depreciation rate is vested in the FERC under otherwise applicable law”
    (emphasis added).
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    Arkansas Complaint Order, 
    128 FERC ¶ 61,020
     at P 25. FERC explained, “the
    authority to determine the payments under the bandwidth necessarily must
    include the ability to examine the inputs used to calculate the bandwidth.” 
    Id.
    c.    FERC Changes Course
    Notwithstanding its initial interpretation, FERC, in a variety of orders,
    changed course and explained that bandwidth proceedings were not the proper
    venue to challenge the formula. In the first bandwidth proceeding, FERC again
    interpreted the System Agreement, this time explaining:
    [A]lthough the . . . two provisions state that the Commission has
    the authority to change the depreciation and decommissioning
    expenses included in the bandwidth formula, we will not do so in
    a proceeding established to determine the actual production costs
    of the Operating Companies for 2006. Any changes to the
    bandwidth formula require a section 205 or 206 filing.
    Opinion No. 505, 
    130 FERC 61,023
     at P 172 (emphasis added). FERC further
    explained: “There is no question that the Commission has the authority to
    determine depreciation and decommissioning expenses for purposes of setting
    a wholesale rate. However, that is not what is before us in this proceeding.” 
    Id.
    at P 173.
    In the Third Bandwidth Interlocutory Order, FERC clarified its previous
    orders embracing the contrary interpretation:
    We acknowledge, however, that prior to Entergy’s annual
    bandwidth filings, when neither we nor the parties had any
    experience with such filings, the Commission did make some
    general statements that could be interpreted as suggesting that
    parties had the opportunity in Entergy’s annual bandwidth filings
    to challenge the reasonableness of any cost inputs in the Service
    Schedule MSS-3 bandwidth formula, including the depreciation
    rates effective for Entergy’s annual bandwidth filings. Such
    statements, however, were made prior to final Commission action
    on the first annual bandwidth filing and thus did not benefit from
    experience in addressing these annual bandwidth filings.
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    Consequently, the language in the Arkansas Commission
    Complaint Order, in hindsight, was not as precise as it could have
    been and may have been unintentionally misleading.
    
    130 FERC 61,170
     at P 20.
    In the second bandwidth proceeding, FERC reiterated its position on
    proper challenges to the formula: “The Commission has made clear that
    changes to the bandwidth formula must be done through either a section 205
    or 206 proceeding.” Opinion No. 514, 
    137 FERC 61,029
     at P 48. “[W]e interpret
    the ‘unless’ clause, while ambiguous,” FERC continued,
    as establishing that some of the actual depreciation expenses
    recorded and reflected in the bandwidth formula may include
    depreciation expenses charged to traditional wholesale customers
    that were approved by the Commission and not the retail
    regulators, rather than as an acknowledgement of the possibility
    that in a filing implementing the bandwidth remedy the
    Commission will require Entergy to input depreciation expenses
    other than the expenses already approved for inclusion in the
    bandwidth formula as approved by retail regulators and
    recorded in FERC Accounts 403 and 404.
    
    Id.
     at P 54.
    In the First Arkansas Rehearing Order, FERC corrected the
    interpretation it had put forth in the Arkansas Complaint Order:
    Consistent with our interpretation of the treatment of depreciation
    expenses in the annual bandwidth proceedings in the three orders
    discussed above, we clarify that the cited language from the July
    14 Order was not intended to suggest that the justness and
    reasonableness of the various inputs to the bandwidth formula was
    [sic] open to challenge in the bandwidth proceedings.
    
    137 FERC ¶ 61,030
     at P 23.
    2.       Jurisdiction
    Before discussing the merits of the Louisiana Commission’s petition, we
    address the Arkansas Commission’s motion to dismiss the Louisiana
    Commission’s petition in No. 13-60140 for lack of jurisdiction. Appeal No. 13-
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    60140 relates to the three orders arising from the Arkansas Commission’s
    complaint proceeding. Under the FPA, only a party “aggrieved by an order
    issued by the Commission in such proceeding may obtain a review of such
    order.” 16 U.S.C. § 825l(b). Moreover, to gain review, a party must seek
    rehearing of the relevant orders. See 16 U.S.C. § 825l(b) (“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 application for rehearing
    unless there is reasonable ground for failure so to do.”). The Arkansas
    Commission argues that the Arkansas complaint orders granted the Louisiana
    Commission the relief it sought; specifically, the orders denied the Arkansas
    Commission’s complaint to adjust the tariff language. Second Arkansas
    Rehearing Order, 
    142 FERC ¶ 61,012
     at P 24 (“Rehearing of an order on
    rehearing lies only when the order on rehearing modifies the result reached in
    the original order in a manner that gives rise to a wholly new objection. Here,
    we find that is not the case.”).
    To be sure, as to the Arkansas Complaint Order, the Louisiana
    Commission did not seek rehearing because the complaint was dismissed and
    FERC interpreted the System Agreement to allow for consideration of inputs
    at the bandwidth proceedings. On a rehearing request by the Arkansas
    Commission, however, FERC clarified that its prior statements about the
    viability of cost challenges in bandwidth proceedings were “not intended to
    suggest that the justness and reasonableness of the various inputs to the
    bandwidth formula was [sic] open to challenge in the bandwidth proceedings.”
    First Arkansas Rehearing Order, 
    137 FERC ¶ 61,030
     at P 23. It is this
    clarification that allegedly aggrieves the Louisiana Commission. Accordingly,
    the Louisiana Commission sought rehearing of this order. See Second
    Arkansas Rehearing Order, 
    142 FERC ¶ 61,012
     at PP 25–26. In the Second
    Arkansas Rehearing Order, FERC explained: “[T]he October 7 Rehearing
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    Order does not modify the results of the Order Denying Complaint; it supplies
    an improved rationale.” 
    Id.
     at P 25 (internal quotation marks omitted). The
    First Arkansas Rehearing Order did not reverse a previous FERC order, it
    explained, but rather “clarified the proper procedural manner in which to raise
    objections concerning bandwidth formula inputs, on the one hand, and changes
    to the methodology of Service Schedule MSS-3, on the other.” 
    Id.
     FERC did
    further “clarify” that certain challenges are amenable to the bandwidth
    proceedings, but that “consistent with any change to a filed rate, the effect of
    any changes to such terms contained within the bandwidth formula, including
    the manner in which data is sourced, will be prospective only.” 
    Id.
     at PP 41.
    FERC takes no position on the Arkansas Commission’s motion to
    dismiss for lack of jurisdiction. As FERC states, “[a]s a practical matter . . . [in
    the Arkansas Rehearing Orders] FERC explained, at some length, its
    treatment of retail depreciation rates for purposes of the bandwidth formula,
    and the appropriate avenues for challenging inputs and calculations under the
    bandwidth formula—issues that also are raised on review in 5th Cir. No. 13-
    60141.” Nonetheless, the Arkansas Rehearing Orders did “clarify” a rule that
    aggrieves the Louisiana Commission by identifying the proper forum for cost
    challenges and further suggesting that relief would be prospective only. This
    order “cannot be fairly characterized as being in [the Louisiana Commission’s]
    favor.” Oxy USA, Inc. v. FERC, 
    64 F.3d 679
    , 689 (D.C. Cir. 1995) (“By
    advocating a specific settlement, petitioners did not forfeit their standing to
    object to elements of the settlement to which they had agreed if changes made
    in others by the Commission work to their overall disadvantage.”).
    FERC therefore injected an adverse rule into the Arkansas Complaint
    proceeding in the First Arkansas Rehearing Order and it is reviewable here.
    See, e.g., S. Natural Gas Co. v. FERC, 
    877 F.2d 1066
    , 1073 (D.C. Cir. 1989)
    (“Otherwise, we would permit an endless cycle of applications for rehearing
    15
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    No. 13-60140 c/w No. 13-60141
    and denials, limited only by FERC’s ability to think up new rationales—which,
    since none of them would be put to a test in court, would not be much of a
    limitation.” (internal quotation marks omitted)); Sam Rayburn Dam Elec. Co-
    op v. Federal Power Comm’n, 
    515 F.2d 998
    , 1007 (D.C. Cir. 1975)
    (“Endorsement of the position that the FPC takes would permit an
    administrative agency to enter an ambiguous or obscure order, wilfully or
    otherwise, wait out the required time, then enter an ‘explanatory’ order that
    would extinguish the review rights of parties prejudicially affected.”). Although
    granting the motion would present no bar to our reaching the same
    depreciation issues raised in Opinion Nos. 514 and 514-A, we deny the
    Arkansas Commission’s motion to dismiss for lack of jurisdiction in Appeal No.
    13-60140.
    3.    The Louisiana Commission’s Petition for Review
    The System      Agreement     incorporates state regulatory agencies’
    depreciation rates into the bandwidth formula. Thus, FERC has interpreted
    challenges to the state depreciation rates as attacks on the formula itself.
    Annual bandwidth proceedings, by contrast, are reserved for challenges to
    whether Entergy Corporation has properly implemented the formula rate.
    Accordingly, FERC found that the Louisiana Commission’s grievances with the
    state depreciation rates are challenges to the formula itself and may not be
    addressed in an annual bandwidth proceeding.
    The Louisiana Commission makes three distinct challenges to FERC’s
    interpretation of the System Agreement. We review Commission orders under
    the standards set forth in the Administrative Procedure Act. 
    5 U.S.C. § 706
    (2)(A); Council of City of New Orleans, La. v. FERC, 
    692 F.3d 172
    , 176
    (D.C. Cir. 2012); PSEG Energy Resources & Trade LLC v. FERC, 
    665 F.3d 203
    ,
    207–08 (D.C. Cir. 2011) (“Under § 313(b) of the FPA, 16 U.S.C. § 825l(b), we
    have jurisdiction to review FERC’s orders, which we assess to determine
    16
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    No. 13-60140 c/w No. 13-60141
    whether they are ‘arbitrary, capricious, an abuse of discretion, or otherwise not
    in accordance with law.’” (quoting 
    5 U.S.C. § 706
    (2)(A))).
    a.    FERC’s interpretation does not constitute an
    unlawful subdelegation or conflict with the FPA.
    First, the Louisiana Commission contends that FERC’s interpretation of
    the System Agreement violates the FPA because it impermissibly subdelegates
    to state regulatory agencies its exclusive authority to regulate all aspects of
    bandwidth calculation. FERC does not claim statutory authority to
    subdelegate to state agencies, but rather responds that it has not in fact
    subdelegated its authority and that its interpretation is consistent with the
    FPA. The parties dispute the extent to which we should defer to FERC on this
    question, but the D.C. Circuit has rejected FERC’s claim for deference in a
    similar challenge. United States Telecom Ass’n v. FCC, 
    359 F.3d 554
    , 567 (D.C.
    Cir. 2004) (“The Commission’s plea for Chevron deference is unavailing. A
    general delegation of decision-making authority to a federal administrative
    agency does not, in the ordinary course of things, include the power to
    subdelegate that authority beyond federal subordinates.”). Accordingly, and
    because the result would be the same even under the standard of review most
    favorable to the Louisiana Commission, we review this challenge de novo.
    The System Agreement provides the formula for each operating
    company’s “Actual Production Costs.” Depreciation expense is one component
    of actual production costs, Opinion No. 514, 
    137 FERC ¶ 61,029
     at P 11, and
    that depreciation expense shall be based on “actual amounts on the Company’s
    books for the twelve months ended December 31 of the previous year as
    reported in FERC Form 1 . . . and shall include certain retail regulatory
    adjustments pursuant to the production cost methodology set forth in Exhibit
    ETR-26/ETR-28” (emphasis added). FERC interprets this to “require[] that
    depreciation expense, as well as all other expense items, be based on the actual
    17
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    amounts on the Company’s books for the twelve months ended December 31 of
    the previous year as reported in FERC Form 1.” Opinion No. 514, 
    137 FERC ¶ 61,029
     at P 47. Actual depreciation expenses reported on a company’s Form
    1 include state-regulator approved depreciation expenses: “The formula
    mandates the use of depreciation rates reported in the FERC Form 1,
    reflecting, in part, state regulator approved depreciation rates, which the
    Commission has adopted for use in the bandwidth formula.” 
    Id.
     at P 49. The
    Louisiana Commission challenges this interpretation as an unlawful
    subdelegation of FERC’s ratemaking authority to state agencies because FERC
    is interpreting the System Agreement to “preclude[] it from adjusting retail-
    approved depreciation expenses.”
    We have explained that “[a]n agency abdicates its role as a rational
    decision-maker,” and impermissibly subdelegates, “if it does not exercise its
    own judgment, and instead cedes near-total deference to private parties’
    estimates—even if the parties agree unanimously as to the estimated amount.”
    Tex. Office of Pub. Util. Counsel v. FCC, 
    265 F.3d 313
    , 328 (5th Cir. 2001). We
    conclude that there is no unlawful subdelegation in this case because FERC
    exercised its role when it initially reviewed and accepted the bandwidth
    formula    incorporating    the   state   agencies’   depreciation    rates:   “Such
    specification and incorporation of retail regulator-approved depreciation rates
    has been reviewed and accepted by the Commission as a just and reasonable
    element of the bandwidth formula methodology.” Opinion No. 514-A, 
    142 FERC ¶ 61,013
    , at P 17 (citing 2006 Compliance Order). Moreover, FERC has
    clarified that it will continue to exercise oversight of the state rates in a Section
    206 complaint proceeding: “If any entity wants to change the depreciation rates
    used in that formula, it must seek a modification to the bandwidth formula in
    a section 205 or 206 filing. It cannot do so in this proceeding, which is simply
    18
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    to implement the bandwidth formula for 2007.” Opinion No. 514, 
    137 FERC 61,029
     at P 52.
    Therefore, and contrary to the Louisiana Commission’s argument that
    FERC interpreted the System Agreement to “preclude” itself from reviewing
    the reasonableness of depreciation inputs, FERC reviewed the reasonableness
    of incorporating the state agencies’ rates when it accepted the bandwidth
    formula and continues to review them in Section 206 complaint filings. See,
    e.g., Pub. Utils. Comm’n of the State of Cal. v. FERC, 
    254 F.3d 250
    , 257 (D.C.
    Cir. 2001) (“In approving formula rates, the Commission has relied on § 206 as
    a mechanism to ensure that the rates are just and reasonable, and its reliance
    on § 206 has survived judicial scrutiny.” (internal citations omitted)).
    Further, the Louisiana Commission has prosecuted a Section 206
    complaint challenging the very inputs it contends FERC has shielded from
    review. In Opinion No. 519, FERC rejected the Louisiana Commission’s
    complaint because it did not “me[e]t its burden of proof under section 206 of
    the Federal Power Act . . . to show the existing bandwidth formula is unjust
    and unreasonable or unduly discriminatory or preferential.” Opinion No. 519,
    
    139 FERC ¶ 61,107
     at P 2. Importantly, the Louisiana Commission did not
    “demonstrate[] that the inclusion of retail depreciation data in the depreciation
    and decommissioning components of the bandwidth formula is unjust and
    unreasonable or unduly discriminatory or preferential.” 
    Id.
     at P 108; see also
    
    id.
     at P 121 (“We affirm the Presiding Judge’s holding that no evidence
    suggests the formula (or inputs) is unjust, unreasonable or unduly
    discriminatory or preferential.”). FERC’s continuing review in Section 206
    proceedings distinguishes it from the unease expressed in United States
    Telecom, of agencies’ “vague or inadequate assertions of final reviewing
    19
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    authority.” 
    359 F.3d at 568
    . 6 The Louisiana Commission concedes that “FERC
    did make that decision,” but does not explain how it nonetheless can press its
    argument that FERC subdelegated its authority. Accordingly, FERC has not
    unlawfully subdelegated to state regulators and continues to exercise its
    authority consistent with the FPA.
    b.     FERC’s interpretation is not arbitrary or
    unreasonable.
    Second, and apart from its subdelegation argument, the Louisiana
    Commission challenges FERC’s interpretation of the unless clauses as
    arbitrary and incorrect: “FERC’s interpretation defeats the purpose of the
    tariff and fails to consistently read its language.” Courts defer especially to
    FERC’s ratemaking orders. See, e.g., ExxonMobil Corp. v. FERC, 
    487 F.3d 945
    ,
    951 (D.C. Cir. 2007) (“In reviewing FERC’s orders, we are particularly
    deferential to the Commission’s expertise with respect to ratemaking issues.”
    (internal quotation marks omitted)); Pub. Utils. Com’n of State of Cal. v. FERC,
    
    254 F.3d 250
    , 254 (D.C. Cir. 2001) (“Because [i]ssues of rate design are fairly
    technical and, insofar as they are not technical, involve policy judgments that
    lie at the core of the regulatory mission, our review of whether a particular rate
    design is ‘just and reasonable’ is highly deferential.” (internal quotation marks
    omitted)). To this end, the D.C. Circuit gives “substantial deference to [FERC’s]
    interpretation of filed tariffs, even where the issue simply involves the proper
    construction of language.” Koch Gateway Pipeline Co. v. FERC, 
    136 F.3d 810
    ,
    814 (D.C. Cir. 1998) (internal quotation marks omitted). This deference to
    FERC on matters of its technical expertise in the ratemaking process is “simply
    an acknowledgment that the principles set forth by the Supreme Court in
    Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 
    467 U.S. 837
    6 Rehearing on Opinion No. 519 is pending and therefore FERC’s order is not before
    this Court on review.
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    (1984), extend to all areas in which an agency has been delegated power by
    Congress to act.” Koch, 136 F.3d at 814. The D.C. Circuit has termed its review
    “‘Chevron-like’ in nature.” Old Dominion Elec. Co-op. Inc. v. FERC, 
    518 F.3d 43
    , 48 (D.C. Cir. 2008).
    In the D.C. Circuit, review of FERC’s interpretation of the System
    Agreement proceeds in the familiar two steps: “We first look to see if the
    language of the tariff is unambiguous—that is, if it reflects the clear intent of
    the parties to the agreement. If the tariff language is ambiguous, we defer to
    the Commission’s construction of the provision at issue so long as that
    construction is reasonable.” Koch, 136 F.3d at 814–15; see also Idaho Power Co.
    v. FERC, 
    312 F.3d 454
    , 461 (D.C. Cir. 2002) (“If the tariff’s language is
    unambiguous, this court need not defer to FERC’s interpretation. After all, a
    court need not accept an agency interpretation that black means white.
    However, if the choice lies between dark grey and light grey, the conclusion of
    the agency . . . will have great weight.” (internal quotation marks omitted)).
    Our circuit has recognized, however, that “[a]lthough there may be room
    to defer to the views of the agency where the understanding of the problem is
    enhanced by the agency’s expert understanding of the industry, agency
    interpretation on such questions is not conclusive.” Mid La. Gas Co. v. FERC,
    
    780 F.2d 1238
    , 1243 (5th Cir. 1986); see also Tenn. Gas Pipeline Co. v. FERC,
    
    17 F.3d 98
    , 102 (5th Cir. 1994) (“This Court will not defer to FERC’s
    construction of such contracts unless FERC relied on its factual or technical
    expertise in reaching its conclusions.”); El Paso Natural Gas Co. v. FERC, 
    881 F.2d 161
    , 164 (5th Cir. 1989). In this case, the Louisiana Commission does not
    contest that FERC applied its technical and factual expertise in interpreting
    the System Agreement and noted that “[i]f expertise is required, the
    interpretation must still be reasonable.”
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    Nevertheless, at oral argument and in a subsequent Rule 28(j) letter, the
    Louisiana Commission urged that no deference is owed to FERC because “[i]t
    is . . . well understood that no deference is due if FERC’s interpretation is
    inconsistent with prior agency interpretations.” Idaho Power, 
    312 F.3d at 461
    .
    “Arguments presented for the first time at oral argument are waived.” Comsat
    Corp. v. FCC, 
    250 F.3d 931
    , 936 n.5 (5th Cir. 2001). In any event, Idaho Power
    considered a Commission interpretation “inconsistent with prior and
    subsequent agency interpretations” that FERC had “consistently adopted.” 
    Id.
    By contrast, FERC here abandoned its initial interpretation of the System
    Agreement in a variety of orders uniformly clarifying that it did not mean to
    indicate that the bandwidth proceedings were the appropriate forum for the
    Louisiana Commission’s challenges. To this end, the Supreme Court has
    explained that “[a]gency inconsistency is not a basis for declining to analyze
    the agency’s interpretation under the Chevron framework.” Nat’l Cable &
    Telecomm. Ass’n v. Brand X Internet Servs., 
    545 U.S. 967
    , 981 (2005). “For if
    the agency adequately explains the reasons for a reversal of policy, change is
    not invalidating, since the whole point of Chevron is to leave the discretion
    provided by the ambiguities of a statute with the implementing agency.” 
    Id.
    (internal citations omitted); see also Chevron, 
    467 U.S. at
    863–64 (“An initial
    agency interpretation is not instantly carved in stone. On the contrary, the
    agency,   to engage in informed rulemaking,            must   consider varying
    interpretations and the wisdom of its policy on a continuing basis.”); Verizon v.
    FCC, 
    740 F.3d 623
    , 636 (D.C. Cir. 2014) (“But so long as an agency adequately
    explains the reasons for a reversal of policy, its new interpretation of a statute
    cannot be rejected simply because it is new.” (internal quotation marks
    omitted)). Because FERC utilized its technical and factual expertise to
    interpret the ambiguous language, we reject the Louisiana Commission’s
    belated request to withhold deference. We note however, that even if FERC did
    22
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    not rely on any technical or factual expertise, and we were reviewing its
    interpretation “freely,” the System Agreement’s language sustains FERC’s
    interpretation. Mid. La. Gas Co., 
    780 F.2d at 1243
    .
    The Louisiana Commission interprets the unless clauses as requiring
    FERC to test each cost variable for justness and reasonableness in each annual
    bandwidth proceeding and providing FERC authority to substitute different
    depreciation-expense amounts from those on the FERC Form 1. FERC’s
    competing interpretation gives meaning to the first half of the definition, which
    explains “where Entergy is to get the information to populate the variable.”
    Opinion No. 514, 
    137 FERC 61,029
     at P 54. The second half, by using “unless,”
    explains that a company sometimes may use depreciation expenses charged to
    wholesale customers approved by FERC rather than by state agencies.
    Thus, we interpret the “unless” clause, while ambiguous, as
    establishing that some of the actual depreciation expenses
    recorded and reflected in the bandwidth formula may include
    depreciation expenses charged to traditional wholesale customers
    that were approved by the Commission and not the retail
    regulators, rather than as an acknowledgement of the possibility
    that in a filing implementing the bandwidth remedy the
    Commission will require Entergy to input depreciation expenses
    other than the expenses already approved for inclusion in the
    bandwidth formula as approved by retail regulators and recorded
    in FERC Accounts 403 and 404.
    
    Id.
    We find, and the Louisiana Commission does not dispute, that the unless
    clauses are ambiguous, as they are “not detailed enough to resolve the
    particular question before the court,” namely, whether FERC is mandated to
    restructure depreciation inputs at each annual bandwidth proceeding or
    whether the unless clauses instead refer only to those instances when state
    agencies do not provide the relevant data. Moreover, FERC’s interpretation is
    reasonable because it gives meaning to both clauses in the variable definitions.
    23
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    See Koch, 136 F.3d at 814. The Louisiana Commission’s interpretation of the
    unless clauses, by contrast, subsumes the primary clause, which provides that
    the amounts recorded reflect the actual depreciation expenses. Opinion No.
    514, 
    137 FERC 61,029
     at P 54 (“[I]f the ‘unless’ clause was intended to refer to
    FERC’s exclusive jurisdiction over the bandwidth formula, that clause would
    always apply and the remaining language of the definition would be rendered
    meaningless.”). The System Agreement reflects a decision to incorporate actual
    costs reflected on FERC Form 1 into the formula. Unlike FERC’s
    interpretation, the Louisiana Commission’s interpretation undercuts that
    remedial scheme in favor of a yearly reconstruction of each company’s costs in
    the bandwidth proceedings.
    FERC’s interpretation is also consistent with the filed-rate doctrine.
    Under the filed-rate doctrine, “[w]hen the Commission accepts a formula rate
    as a filed rate, it grants waiver of the filing and notice requirements of [§ 205]
    [, and] [t]he utility’s rates, then, can change repeatedly, without notice to the
    Commission, provided those changes are consistent with the formula.” Pub.
    Utils. Com’n of State of Cal. v. FERC, 
    254 F.3d 250
    , 254 (D.C. Cir. 2001)
    (alterations in the original). “[T]he formula itself is the filed rate that provides
    sufficient notice to ratepayers for purposes of the doctrine,” and if FERC were
    to supplant retail regulators’ actual depreciation rates with its own
    reconstructed rates, FERC would change the formula set forth in Section 30.12.
    Id. at n.3. An attack on the formula itself is not valid in an annual bandwidth
    proceeding; instead, FERC has explained the scope of bandwidth-proceeding
    challenges:
    [P]arties in a bandwidth implementation proceeding may
    challenge: (1) whether the inputs were calculated consistent with
    the formula and the applicable accounting rules; (2) conformance
    with retail regulatory approvals to the extent the formula requires
    use of values approved by retail regulators; and, (3) in instances
    24
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    where there are details omitted from the accepted Service
    Schedule MSS-3 formula, with the underlying details included in
    the methodology used in Exhibits ETR-26 and ETR-28.21 Further,
    . . . the Louisiana Commission and other parties may challenge
    the prudence of cost inputs to the bandwidth formula in this
    bandwidth proceeding.
    Fourth Bandwidth Rehearing Order, 
    137 FERC ¶ 61,019
     at P 13. 7 Accordingly,
    we uphold FERC’s interpretation of the System Agreement.
    c.     FERC’s change of interpretation was not arbitrary.
    Third, the Louisiana Commission argues that FERC’s “reversal of field
    without a persuasive explanation is arbitrary.” This challenge is reviewed
    under the arbitrary and capricious standard, which “does not authorize a
    reviewing court to substitute its judgment for that of the agency.” Brazos Elec.
    Power Co-op., Inc. v. FERC, 
    205 F.3d 235
    , 240 (5th Cir. 2000). We inquire
    “whether the decision was based on a consideration of the relevant factors and
    whether there has been a clear error of judgment,” 
    id.
     (internal quotation
    marks omitted), lending high deference to the agency. Tex. Clinical Labs, Inc.
    v. Sebelius, 
    612 F.3d 771
    , 775 (5th Cir. 2010).
    FERC changed its interpretation in light of its gained experience
    conducting annual bandwidth proceedings, explained its new interpretation of
    the System Agreement, and consistently has interpreted the System
    Agreement after the change: “[T]hese statements were made prior to final
    Commission action on the first annual bandwidth filing and thus did not
    benefit from experience in addressing these annual bandwidth filings.”
    Opinion No. 514, 
    137 FERC ¶ 61,029
     at P 48 (internal quotation marks
    7 An annual bandwidth proceeding is ill suited to an inquiry into the specific
    depreciation rates. Record testimony indicated that performing a depreciation study on an
    annual basis would be “not only impractical” but “a waste of resources” because “[d]oing such
    studies annually presumes that conditions change significantly on an annual basis to
    warrant a new study.”
    25
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    omitted). “Here, [FERC] offered a reasoned explanation for its approach; no
    more is required.” White Stallion Energy Ctr., LLC v. EPA, 
    748 F.3d 1222
    , 1245
    (D.C. Cir. 2014).
    The Louisiana Commission insists that FERC’s interpretation precludes
    it from gaining retroactive relief for past inequities, but the absence of
    retroactive relief is a function of the filed-rate doctrine. The Louisiana
    Commission’s proposed changes are to the bandwidth formula itself—
    substituting new depreciation rates for the state regulatory rates incorporated
    into the formula. Under the filed-rate doctrine, “[n]ot only do the courts lack
    authority to impose a different rate than the one approved by the Commission,
    but the Commission itself has no power to alter a rate retroactively. . . . This
    rule bars the Commission’s retroactive substitution of an unreasonably high or
    low rate with a just and reasonable rate.” Ark. La. Gas Co. v. Hall, 
    453 U.S. 571
    , 578 (1981) (internal citations and quotation marks omitted).
    Further, any prejudice to the Louisiana Commission is mitigated by
    Opinion No. 519, in which FERC resolved the Louisiana Commission’s
    arguments on the merits and found that the Louisiana Commission had not
    met its burden. Opinion No. 519, 
    139 FERC ¶ 61,107
     at P 122. The Louisiana
    Commission’s argument that the denial of retroactive relief in a future Section
    206 proceeding is a retroactive application of a prejudicial procedural-rule
    change is thus premature; the Louisiana Commission has not yet met its
    Section 206 burden for prospective relief let alone retroactive relief. As FERC
    acknowledged at oral argument, if the Louisiana Commission eventually
    proves successful and FERC denies retroactive relief, then the Louisiana
    Commission may better advance this argument, which relies on Pac. Molasses
    Co. v. FTC, 
    356 F.2d 386
    , 390 (5th Cir. 1966), and is raised in its Rule 28(j)
    letter.
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    Accordingly, the Louisiana Commission’s change in interpretation was
    reasoned and not arbitrary. We therefore deny the petitions for review as to
    the depreciation issues.
    B.     The Vidalia Issue
    The Louisiana Commission next challenges Entergy Corporation’s
    “reversal” of the Vidalia transaction under the language in the System
    Agreement as an impermissible change to the formula rate without proper
    notice. Deciding that the Louisiana Commission’s petition attacks a prior order
    not before us here, we dismiss the petition as an impermissible collateral
    attack. See Sacramento Mun. Util. Dist. v. FERC, 
    428 F.3d 294
    , 299 (D.C. Cir.
    2005) (“Because the time for seeking judicial review has long passed,
    Sacramento’s argument amounts to an impermissible collateral attack on the
    previously approved California ISO tariff.”); City of Nephi, Utah v. FERC, 
    147 F.3d 929
    , 934 (D.C. Cir. 1998) (“Challenges to this decision were appropriate
    during the Order No. 636 proceedings but fall outside of the court’s jurisdiction
    here.”).
    1.    Background
    In Opinion No. 480, FERC “conclude[d] that Vidalia was not planned as
    a resource for the benefit of Entergy’s system.” Opinion No. 480, 
    111 FERC ¶ 61,311
     at P 182. Because Vidalia did not benefit the Entergy System as a
    whole, FERC determined that Vidalia’s “costs should not now be spread
    throughout Entergy’s system.” 
    Id.
     at P 174. The D.C. Circuit affirmed FERC’s
    treatment of the Vidalia transaction: “In view of these considerations, and
    based on the record, FERC reasonably concluded that it would be
    inappropriate [t]o allow Louisiana to shift the escalating costs of the Vidalia
    contract to other states on the Entergy System and not accept responsibility
    for its own decision making.” La. 2008, 
    522 F.3d at 396
     (internal quotation
    marks omitted) (alteration in original).
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    Entergy Corporation subsequently submitted changes to the System
    Agreement to comply with Opinion Nos. 480 and 480-A. In its 2006 compliance
    filing, Entergy Corporation modified the System Agreement by, among other
    things, including a footnote explaining that:
    All Rate Base, Revenue and Expense items . . . shall include
    certain retail regulatory adjustments pursuant to the production
    cost methodology set forth in Exhibit [Nos.] ETR-26/ETR-28 filed
    in Docket No. EL01-88-001, including but not limited to: . . . (3) re-
    pricing of energy associated with the Vidalia purchase power
    contract for [Entergy Louisiana] based on the average annual
    Service Schedule MSS-3 rate paid by [Entergy Louisiana,]
    including the exclusion of the income tax savings of the Vidalia
    purchase power contract from ADIT and reflecting the reversal of
    the Vidalia capital transaction, and the debt rate associated with
    the Waterford 3 Sale/Leaseback for [Entergy Louisiana].
    (emphasis added). Entergy Corporation accompanied its 2006 filing with a
    transmittal letter explaining its adjustments to the System Agreement. Among
    the noticed changes, the letter explained that the Vidalia transaction would be
    adjusted: “Related adjustments to exclude income tax savings associated with
    the Vidalia purchase power contract, and to reflect the reversal of the capital
    cost transaction regarding Vidalia on behalf of ELL also will be made,
    consistent with Exhibits ETR-26 and ETR-28.”
    FERC twice accepted Entergy Corporation’s compliance filings without
    any objection by the Louisiana Commission as to the language indicating a
    “reversal” of the Vidalia transaction. See 2006 Compliance Order; 2007
    Compliance Order. In the second bandwidth proceeding, however, Entergy
    Corporation “added $289,502,500 to the long-term debt component of the
    capital structure, and $240,000,000 to the common equity component of the
    capital structure.” The Louisiana Commission objected to this reversal of
    Entergy Louisiana’s capital structure and now petitions for review of Opinion
    Nos. 514 and 514-A.
    28
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    No. 13-60140 c/w No. 13-60141
    2.     The Louisiana Commission’s Petition for Review
    The Louisiana Commission does not argue that FERC misinterpreted
    the System Agreement to allow Entergy Corporation to “reverse” the Vidalia
    transaction 8; instead, the Louisiana Commission urges that FERC’s approval
    of Entergy Corporation’s adjustment “violates the public notice requirements
    of the Federal Power Act and reflects arbitrary decisionmaking.” The FPA
    provides that, “[u]nless the Commission otherwise orders, no change shall be
    made by any public utility in any such rate . . . except after sixty days’ notice
    to the Commission and to the public.” 16 U.S.C. § 824d(d). The Louisiana
    Commission contends that by allowing Entergy Corporation to reverse the
    capital ratios of the Vidalia transaction FERC modified the rate and therefore
    was required to give proper notice and hold a Section 205 proceeding.
    We review FERC’s orders under the arbitrary and capricious standard.
    
    5 U.S.C. § 706
    (2)(A). “In reviewing an agency’s decision under the arbitrary
    and capricious standard, there is a presumption that the agency’s decision is
    valid, and the plaintiff has the burden to overcome that presumption by
    showing that the decision was erroneous.” Tex. Clinical Labs, 612 F.3d at 775.
    3.     Discussion
    The Louisiana Commission’s alleged harm arises from Entergy
    Corporation’s 2006 and 2007 compliance filings and not from the orders before
    us. See Opinion No 514-A, 
    142 FERC ¶ 61,013
     at P 34 (“The Louisiana
    Commission argues further that Entergy’s filing failed to properly notice the
    changes in methodology in the compliance filing, which renders the filing void.”
    (emphasis added)). To rule in favor of the Louisiana Commission we would
    have to unravel FERC’s 2006 and 2007 Compliance Orders that approved the
    8  The Arkansas Commission highlights that the Louisiana Commission has not filed
    a Section 206 proceeding to alter this language.
    29
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    No. 13-60140 c/w No. 13-60141
    tariff language sanctioning the reversal of the Vidalia transaction.
    Accordingly, the Louisiana Commission’s petition is an impermissible
    collateral attack on orders not before the Court. See Opinion No. 514-A, 
    142 FERC ¶ 61,013
     at P 38 (noting that the Louisiana Commission’s position “is an
    impermissible collateral attack on the Commission’s orders approving
    Entergy’s proposed amendments to Service Schedule MSS-3.”).
    a.    The Louisiana Commission was aware of the
    contested language in 2006, but did not object.
    Entergy Corporation’s compliance filing included a red-line revision of
    the System Agreement, which contained the addition of footnote 1, but the
    Louisiana Commission did not object to the Vidalia-transaction language.
    Opinion No. 514, 
    137 FERC 61,029
     at P 59. Although “[t]he Louisiana
    Commission protested certain parts of the April 2006 Compliance Filing,” it
    “did not protest language regarding Vidalia in footnote 1.” Opinion No. 514,
    
    137 FERC ¶ 61,029
    , at P 72. Entergy Corporation again proposed changes to
    the bandwidth formula in its second compliance filing and maintained the
    language authorizing the reversal of the Vidalia capital transaction, but the
    Louisiana Commission did not object. Accordingly, “[t]he Commission had not
    one, but two opportunities to reject the adjustment as a material change that
    required a separate section 205 filing.” 
    Id.
    Tellingly, the Louisiana Commission objected to other aspects of Entergy
    Corporation’s compliance filings in 2006 and 2007. See, e.g., 2006 Compliance
    Order, 
    117 FERC 61,203
    , at PP 65–69 (noting that “[t]he Louisiana
    Commission raises several other issues: (1) Entergy has failed to specifically
    identify the accumulated deferred income taxes associated with the nuclear
    generating facilities; (2) the description of the adjustment to reflect the River
    Bend Deregulated Asset Plan is incorrect; and (3) Entergy needs to provide
    more specificity with respect to the retail treatment of ELL’s Sale/Leaseback
    30
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    No. 13-60140 c/w No. 13-60141
    of Waterford 3.”); 2007 Compliance Order, 
    119 FERC ¶ 61,095
    , at P 51 (“The
    only protest of Entergy’s compliance filing comes in the form of a one-
    paragraph protest by the Louisiana Commission that seeks to reserve and
    raise on rehearing all issues that the Louisiana Commission raised in its
    challenges to Opinion Nos. 480 and 480-A.”); La. 2009, 341 F. App’x at 650–51
    (noting the Louisiana Commission’s three challenges to the compliance filing).
    Importantly, and demonstrating that the Louisiana Commission was put on
    notice by footnote 1, the Louisiana Commission objected to the repricing of
    Vidalia. See La. 2009, 341 F. App’x at 650 (“LPSC next argues that FERC
    should have rejected the compliance filing’s pricing method for the Vidalia
    hydroelectric plant.”). These compliance proceedings provided the proper
    forum for the Louisiana Commission’s objections to the System Agreement
    language.
    Indeed, in the 2006 Compliance Order, FERC rejected Entergy
    Corporation’s “request to make adjustments to the methodology reflected in
    Exhibits ETR-26 and ETR-28” because “Entergy must comply with the
    requirements of Opinion Nos. 480 and 480-A” in the compliance filings and
    submit a Section 205 filing if it wishes to change the formula. 2006 Compliance
    Order, 
    117 FERC ¶ 61,203
     at P 69. Entergy Corporation’s proposed changes
    were deemed “non-compliant adjustments to the methodology reflected in
    Exhibits ETR-26 and ETR-28.” Opinion No. 505, 
    130 FERC ¶ 61,023
     at P 108.
    The Louisiana Commission, however, did not object to the reversal of the
    Vidalia language as non-compliant, and this language remained in the System
    Agreement.
    31
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    b.     Substantial evidence supports FERC’s finding
    that the “reversal” language has a clear
    meaning.
    The Louisiana Commission contends that Entergy Corporation’s
    transmittal letter was misleading as to whether there were any changes to the
    formula. Entergy Corporation’s letter provided: “Related adjustments to
    exclude income tax savings associated with the Vidalia purchase power
    contract, and to reflect the reversal of the capital cost transaction regarding
    Vidalia on behalf of ELL also will be made, consistent with Exhibits ETR-26
    and ETR-28” (emphasis added). The Louisiana Commission urges that, despite
    the unmistakable reference to an adjustment to “reflect the reversal of the
    capital cost transaction regarding Vidalia on behalf of ELL,” the language
    “consistent with Exhibits ETR-26 and ETR-28” deceived it into believing no
    change was being made.
    FERC found, however, that record evidence supports the conclusion that
    “the meaning of the phrase ‘reversal of the Vidalia capital transaction’” is clear
    because the Louisiana Commission repeatedly had used the same terminology
    when referencing the Vidalia transaction’s capital adjustments. Opinion No.
    514-A, 
    142 FERC ¶ 61,013
     at P 40. For example, when the Louisiana
    Commission approved the tax settlement, it instructed: “To the extent that ELI
    uses the Proceeds to reduce its outstanding debt, it will also reduce equity to
    maintain the pre-existing capital structure.” Entergy then submitted
    testimony to the Louisiana Commission explaining its compliance with the
    terms of the commission’s order adopting the settlement agreement: “The
    Company has complied . . . with regard to the use of proceeds from the Vidalia
    Tax Deduction . . . Specifically, this was accomplished by reversing both debt
    and common equity related transactions identified as resulting from the
    application of the proceeds from the Vidalia Tax Deduction.” (emphasis added).
    32
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    Entergy Louisiana also submitted a filing to the Louisiana Commission
    documenting the reversal of the Vidalia transaction. Entergy Louisiana’s
    submission contains an entry showing adjustments “to Eliminate Amounts
    Due Currently & Reverse Vidalia Capital Transactions” (emphasis added). Two
    of the adjustments are entitled “reverse Vidalia redemptions” and “reverse
    Vidalia reductions,” and the filing contains a worksheet displaying the
    calculations. Indeed, the Louisiana Commission attached the schedule
    accompanying Entergy Louisiana’s filing as part of its own presentation of
    exhibits. Accordingly, FERC’s determination that the Louisiana Commission
    was a “highly informed party” that should have understood the meaning of the
    “reversal” language despite any apparent inconsistency between Exhibits
    ETR-26 and ETR-28 is supported by substantial record evidence. Opinion No.
    514-A, 
    142 FERC ¶ 61,013
     at P 40; see U.S. Cellular Corp., 364 F.3d at 256.
    Additionally, the Louisiana Commission’s alleged surprise is belied by
    Opinion Nos. 480 and 480-A, to which Entergy conformed its compliance
    filings. In La. 2008, the D.C. Circuit affirmed FERC’s rulings in those opinions:
    “In view of these considerations, and based on the record, FERC reasonably
    concluded that it would be inappropriate [t]o allow Louisiana to shift the
    escalating costs of the Vidalia contract to other states on the Entergy System
    and not accept responsibility for its own decision making.” 
    522 F.3d at 396
    . The
    determination to exclude the Vidalia contract therefore was reflected in
    Entergy’s initial compliance filings.
    Accordingly, the Louisiana Commission was aware of the purported
    inconsistency between the reversal of the Vidalia transaction and Exhibits
    ETR-26 and ETR-28 when Entergy Corporation made its 2006 and 2007
    compliance filings but failed to object to this language during those
    33
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    No. 13-60140 c/w No. 13-60141
    proceedings. 9 We cannot undo the 2006 and 2007 Compliance Orders in this
    petition for review. See, e.g., Pac. Gas & Elec. Co. v. FERC, 
    533 F.3d 820
    , 825
    (D.C. Cir. 2008) (“With few exceptions, a challenge made outside of the
    statutory period is a collateral attack over which we have no jurisdiction.”).
    Accordingly, we dismiss the Louisiana Commission’s petition for lack of
    jurisdiction.
    CONCLUSION
    For the above stated reasons, we DENY the Louisiana Commission’s
    petitions in part and DISMISS in part.
    9  Entergy Corporation argued to FERC that “the reversal of the Vidalia capital
    transaction is consistent with Exhibit Nos. ETR-26 and ETR-28” because the “two exhibits
    were prepared in January of 2003 and were used during the hearing in Docket No. EL01-88-
    000 (the proceeding that eventually resulted in Opinion No. 480), which was held in July and
    August 2003.” Opinion No. 514, 
    137 FERC ¶ 61,029
     at P 66. These two exhibits could not
    have reflected the Vidalia transaction because the FERC order directing the reversal of the
    Vidalia transaction occurred “after the time period covered by Exhibit Nos. ETR-26 and ETR-
    28.” 
    Id.
     Entergy Corporation “contends that more significantly the Louisiana Commission’s
    order approving Entergy’s retail ratemaking adjustment that reversed the Vidalia capital
    transaction did not occur until May 2005, almost two and a half years after Exhibit Nos. ETR-
    26 and ETR-28 were prepared.” 
    Id.
    34
    

Document Info

Docket Number: 13-60140, 13-60141

Citation Numbers: 761 F.3d 540, 2014 U.S. App. LEXIS 14848, 2014 WL 3805468

Judges: Haynes, Higginson, Wiener

Filed Date: 8/1/2014

Precedential Status: Precedential

Modified Date: 11/5/2024

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