Oklahoma Gas and Electric Company v. FERC ( 2021 )

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued April 14, 2021 Decided August 27, 2021
No. 20-1062
OKLAHOMA GAS AND ELECTRIC COMPANY,
PETITIONER
v.
FEDERAL ENERGY REGULATORY COMMISSION,
RESPONDENT
CPV KEENAN II RENEWABLE ENERGY COMPANY, LLC, ET AL.,
INTERVENORS
Consolidated with 20-1101
On Petitions for Review of Orders
of the Federal Energy Regulatory Commission
John Longstreth and Matthew J. Binette argued the causes
for petitioners Oklahoma Gas and Electric Company and
Southwest Power Pool, Inc. With them on the joint briefs were
Donald A. Kaplan and Victoria M. Lauterbach.
Bruce A. Grabow, Jennifer Brough, Stuart A. Caplan,
Matthew A. Fitzgerald, Noel Symons, Daniel E. Frank, Allison
2
E. Speaker, and Molly Suda were on the joint briefs for
intervenors CPV Keenan II Renewable Energy Company,
LLC, et al. in support of petitioners. William M. Keyser,
entered an appearance.
Beth G. Pacella, Deputy Solicitor, Federal Energy
Regulatory Commission, argued the cause for respondent.
With her on the brief were David L. Morenoff, Acting General
Counsel, and Robert H. Solomon, Solicitor.
Joseph W. Lowell argued the cause for intervenors Xcel
Energy Services Inc., et al. in support of respondent. With him
on the joint brief were Craig W. Silverstein, Stephen C.
Pearson, Cynthia S. Bogorad, Amanda C. Drennen, Stacey L.
Burbure, Phyllis G. Kimmel, Stephen M. Spina, and Timothy T.
Mastrogiacomo.
Before: TATEL, RAO, and WALKER, Circuit Judges.
Opinion for the Court filed by Circuit Judge RAO.
RAO, Circuit Judge: This case concerns the authority of
the Federal Energy Regulatory Commission (“FERC” or
“Commission”) to order a retroactive waiver of a billing
requirement contained in a filed tariff. Several utilities that are
managed by the Southwest Power Pool (“SPP”), a regional
transmission operator, paid for upgrades to the transmission
grid. The operative tariff required other utilities who benefitted
from these upgrades to share the costs of the expanded
network. The tariff, however, also required SPP to invoice the
charges monthly and to make any adjustments within one year.
The reimbursement calculation proved complicated, and it took
SPP eight years to implement it, during which time SPP did not
invoice for the upgrade charges.
3
The Commission initially granted SPP a waiver of the
tariff’s one-year time bar, but later determined it lacked the
authority to waive this provision retroactively. FERC’s revised
determination meant the utilities that had made substantial
outlays for upgrades were denied reimbursement for the eight
years that had elapsed. SPP and Oklahoma Gas and Electric,
one of the companies that sponsored upgrades and has been
denied reimbursement, filed these consolidated petitions for
review.
We deny the petitions. Once a tariff is filed, the
Commission has no statutory authority to provide equitable
exceptions or retroactive modifications to the tariff. SPP may
impose only those charges contained in the filed rate. Because
the one-year time bar for billing is part of the filed rate, FERC
could not retroactively waive it, even to remedy the arguable
windfall for users of the upgraded transmission networks.
FERC therefore properly denied the waiver, and it was not
arbitrary or capricious to order SPP to refund the retroactive
charges it had collected under the invalidated waiver.
I.
SPP is a regional transmission organization servicing
about 60,000 miles of transmission lines stretching from
Arkansas to Wyoming and from Texas to North Dakota. SPP
manages the transmission of electricity by collecting and
distributing various charges and revenues among its
stakeholders, which include both private and public utilities.
SPP and its stakeholders operate under a tariff approved by
FERC.
When a utility seeks to expand its generation capabilities,
it may need transmission service beyond what the transmission
grid currently can accommodate. To facilitate and encourage
4
investment in upgrades to the grid, SPP proposed a
reimbursement mechanism to its tariff, which FERC accepted.
See Sw. Power Pool, Inc., 110 FERC ¶ 61,028 (2005).
Attachment Z provided that a utility would initially fund
upgrades needed to accommodate its expansion of service—
that utility is the “upgrade sponsor.” Other utilities that
subsequently use the upgraded transmission facilities—the
“upgrade users”—would pay a share of the upgrade costs. This
reimbursement would continue until the upgrade sponsor was
fully reimbursed. SPP later proposed, and FERC accepted,
Attachment Z2, which clarified the standard for imposing
upgrade charges. See Sw. Power Pool, Inc., 123 FERC ¶ 61,208(2008). Under Attachment Z2, an upgrade sponsor would
receive credits from any upgrade users whose service could not
be provided “but for” the upgrade. See Resp’t Br. Add. 10–16
(Attachment Z2).
Later that year, Oklahoma Gas and Electric Company
(“Oklahoma Gas”), an SPP stakeholder, wanted to develop
wind generation in western Oklahoma. Although this region
has strong winds, it lacked sufficient connection to the
transmission grid to profitably move the energy to market.
Oklahoma Gas decided to fund upgrades to the grid’s
transmission facilities in reliance on Attachment Z2’s promise
of credits from later users of the upgrades.
Meanwhile, the implementation of the upgrade crediting
process proved to be complex. SPP obtained a vendor to
develop special software necessary to calculate the upgrade
charges, but it encountered delays and problems over the next
several years. In the meantime, sponsors continued to fund
network upgrades. SPP utilized a task force composed of its
stakeholders to address the calculation of the upgrade charges.
This stakeholder process kept the relevant parties apprised of
SPP’s efforts to implement the upgrade charges. SPP also
5
periodically provided “study reports” to the utilities, which
contained notations that upgrade charges “may be required for
the following Network Upgrades in accordance with
Attachment Z2.” J.A. 89. In 2015, SPP found a new software
vendor and a year later, finally was able to calculate the
upgrade charges for 2008 to 2016, which the parties refer to as
the “historical period.” At this point, the utilities using the
upgrades had not been billed for their share of the upgrade
costs.
By 2016, Oklahoma Gas had completed the upgrades to
transmit the energy it generated from wind. Several other SPP
stakeholders, including Xcel Energy Services, also used these
transmission upgrades. Although Oklahoma Gas was entitled
to compensation, it had not received any credits for its upgrade
costs.
Out of what it said was an abundance of caution, SPP
petitioned FERC for a waiver of a tariff provision governing
the timing of invoices. Section I.7.1 of SPP’s tariff provides
that, “[w]ithin a reasonable time after the first day of each
month, [SPP] shall submit an invoice to the Transmission
Customer for the charges for all services furnished under the
Tariff during the preceding month.” Pet’rs Br. Add. 15
(hereinafter Tariff § I.7.1). Although SPP may later adjust the
bills, adjustments must be made “within one year after
rendition of the bill reflecting the actual data for such service.”
Tariff § I.7.1. SPP sought a waiver of Section I.7.1 to permit it
to bill upgrade users for the upgrade charges incurred during
the historical period, i.e., more than a year prior. Xcel, along
with several other upgrade users, objected to the waiver request
on the ground that Section I.7.1 is part of the filed rate, so the
Commission cannot waive it.
6
The Commission initially granted SPP a waiver of
Section I.7.1, applying the waiver both retroactively and
prospectively. See Sw. Power Pool, Inc., 156 FERC ¶ 61,020,
slip decision (2016). Citing its four-part test for a waiver,
FERC found that (1) SPP acted in good faith; (2) it sought a
waiver of limited scope; (3) the waiver addressed a concrete
problem; and (4) the waiver had no undesirable consequences.
See id., slip decision at 21 ¶ 52. FERC denied the upgrade
users’ request for rehearing. See Sw. Power Pool, Inc., 161
FERC ¶ 61,144 (2017). With the waiver in hand, SPP began to
collect upgrade charges from the upgrade users for the
historical period. SPP then distributed about $140 million in
revenue credits to upgrade sponsors.
Xcel petitioned this court for review of the waiver orders.
Before briefing was complete, we issued a decision in Old
Dominion Electric Cooperative v. FERC, which reinforced that
FERC has “no discretion to waive the operation of a filed rate
or to retroactively change or adjust a rate for good cause or for
any other equitable considerations.” 892 F.3d 1223, 1230 (D.C.
Cir. 2018). We then granted FERC’s unopposed motion to
remand so that FERC could consider the application of Old
Dominion to this case in the first instance.
On remand, the Commission reversed course and denied
the retroactive waiver of the one-year billing requirement in
Section I.7.1. See Sw. Power Pool, Inc., 166 FERC ¶ 61,160,
slip decision (2019). FERC found that Section I.7.1’s billing
requirements are part of SPP’s filed rate, and a waiver would
impermissibly allow for retroactive billing of upgrade users in
contravention of the filed rate. The Commission rejected SPP’s
argument that it had provided upgrade users with notice
sufficient to satisfy the filed rate doctrine. The Commission
also ordered SPP to refund the upgrade charges it had already
collected from the upgrade users for the historical period. Two
7
commissioners filed concurring opinions to highlight the
inequity of this situation, though they agreed that the
Commission correctly denied the waiver and ordered the
refund. These commissioners emphasized that SPP’s failure to
implement Attachment Z2 for eight years meant that sponsors
of transmission upgrades, like Oklahoma Gas, had been
deprived of revenue and the users of those upgrades had
received a windfall. FERC denied rehearing. See Sw. Power
Pool, Inc., 170 FERC ¶ 61,125, slip decision (2020).
This court has jurisdiction to review SPP’s and Oklahoma
Gas’s (“petitioners”) consolidated petitions under 16 U.S.C.
§ 825l(b). We review FERC’s orders to determine whether they
are “arbitrary, capricious, an abuse of discretion, or otherwise
not in accordance with law.” 5 U.S.C. § 706(2)(A).
II.
The Commission concluded that the one-year billing
requirement in Section I.7.1 applied to the upgrade charges and
was part of the filed rate that could not be waived retroactively.
The petitioners argue first that the tariff did not prohibit SPP
from billing upgrade users more than one year after the upgrade
charges accrued. Second, the petitioners maintain that, even if
the time limit applied, FERC could provide a waiver because
the utilities using the upgrades were on notice that they would
be charged once the calculations were made. We take each
argument in turn.
A.
When reviewing the Commission’s interpretation of a
tariff, this court first “consider[s] de novo whether the relevant
language unambiguously addresses the matter at issue,” and if
so, we apply that unambiguous meaning. NextEra Desert Ctr.
8
Blythe, LLC v. FERC, 852 F.3d 1118, 1121 (D.C. Cir. 2017)
(cleaned up). “If, however, there is ambiguity, we defer to the
Commission’s construction so long as that construction is
reasonable.” Id. (cleaned up). We find the tariff provisions at
issue unambiguously apply to the upgrade charges.
A tariff provision must be understood according to its plain
meaning, which we draw from its text and context. Cf. Ameren
Servs. Co. v. FERC, 330 F.3d 494, 499 (D.C. Cir. 2003).
Section I.7.1 provides:
Within a reasonable time after the first day of
each month, [SPP] shall submit an invoice to
the Transmission Customer for the charges for
all services furnished under the Tariff during
the preceding month.… Invoices may be issued
using estimated data, to the extent actual data is
not available by the fifth (5th) working day of
the month following service. Adjustments
reflecting the difference in billing between the
estimated and actual data will be included on the
next regular invoice, with such adjustment
being due when that invoice is due. Any other
corrections found to be necessary will be made
on the next regular monthly invoice.
Bills will be adjusted to correct for all provable
meter errors. Billing adjustments for reasons
other than (a) the replacement of estimated data
with actual data for service provided, or (b)
provable meter error, shall be limited to those
corrections and adjustments found to be
appropriate for such service within one year
9
after rendition of the bill reflecting the actual
data for such service.
Tariff § I.7.1 (emphases added).
Section I.7.1 unambiguously requires SPP to provide a
monthly invoice to its stakeholders for all charges incurred
during the preceding month. As the petitioners conceded,
upgrade charges are “charges for [a] service[] furnished under
the Tariff.” Tariff § I.7.1; see also Oral Arg. Tr. 14:18–22,
22:12–16. SPP was thus obligated to bill for them monthly.
Attachment Z2, which sets out the arrangement for sharing
upgrade costs, is not to the contrary. This provision was an
addition to the tariff that included Section I.7.1, but the addition
included no language overriding Section I.7.1’s billing
requirements. In fact, Attachment Z2 says nothing at all about
the timing of billing for upgrade charges. Based on the plain
language of the tariff, we agree with the Commission that
Section I.7.1 applied to the upgrade charges during the
historical period.
The petitioners provide several reasons why Section I.7.1
does not apply to the upgrade charges. They first argue that
Section I.7.1 has no application because that provision
concerns billing “adjustments,” whereas the upgrade charges
concern the initial settlement of those charges. To be sure, the
second paragraph of Section I.7.1 focuses on billing
adjustments, generally prohibiting them one year after the
initial bill. Yet the petitioners ignore the first paragraph’s
requirement that SPP bill for all charges on a monthly basis,
which SPP failed to do for the upgrade charges. That SPP did
not calculate the upgrade charges until recently does not excuse
its failure to comply with Section I.7.1’s monthly billing
requirement. As the Commission explained, Section I.7.1
10
contains “no exception for processes or services that may take
longer than one year to implement.” 170 FERC ¶ 61,125, slip
decision at 11 ¶ 24. Moreover, it would permit an end run
around the monthly billing requirement and the one-year
prohibition on adjustments if SPP could avoid both those
obligations by never providing an initial bill.1
Next, the petitioners rely on Section I.7.1’s provisions
regarding the use of estimated data until actual data is
available. They reason that Section I.7.1 did not apply until the
actual data could be calculated, so no monthly bill was required
while the necessary software was being developed. The
petitioners cannot benefit from this provision for a simple
reason: SPP never provided estimated data on the upgrade
charges. The first paragraph of Section I.7.1 provides that SPP
may use estimated data on the monthly invoice “to the extent
actual data is not available by the fifth (5th) working day of the
month following service.” Tariff § I.7.1. The petitioners
suggest the study reports may be used as the relevant
“estimated data,” but the notations in those reports indicate
only that “[c]redits may be required for the following Network
Upgrades in accordance with Attachment Z2.” See, e.g.,
J.A. 89. This general reference to upgrade charges hardly
constitutes estimated data for those charges, much less
estimated charges provided on a monthly invoice. Because SPP
1
The petitioners also argue that SPP satisfied Section I.7.1 by
providing a bill for the upgrade charges within a “reasonable time.”
This overlooks that Section I.7.1 requires SPP to bill its stakeholders
“[w]ithin a reasonable time after the first day of each month.” Tariff
§ I.7.1. In context, the amount of “reasonable time” is cabined by a
monthly limitation. SPP’s billing for upgrade charges years after they
were incurred is plainly not “a reasonable time after the first day of
each month.” Tariff § I.7.1.
11
never provided estimated data, it cannot now bill for the actual
charges beyond the one-year limitation period.2
The petitioners also maintain that FERC’s interpretation
fails to give effect to Attachment Z2. Whenever possible, the
provisions of a tariff should be interpreted harmoniously “so as
to give effect to all of its provisions and to avoid rendering any
provision meaningless.” Pub. Serv. Co. of N.H. v. N.H. Elec.
Coop., 86 FERC ¶ 61,174, 61,598 (1999). Under petitioners’
interpretation, however, SPP can collect the upgrade charges
set forth in Attachment Z2 regardless of the billing
requirements of Section I.7.1. By contrast, the Commission’s
interpretation gives effect to both tariff provisions, allowing
SPP to collect the upgrade charges set forth in Attachment Z2,
but only by following the billing requirements of Section I.7.1.
The petitioners finally suggest that FERC incorrectly
elevated the “non-rate” terms about billing over the rates
specified in Attachment Z2. Because utilities relied on that rate
when sponsoring transmission upgrades, the rate should be
implemented with retroactive billing, irrespective of the timing
requirements in Section I.7.1. The Commission reasonably
concluded, however, that rate certainty cut the other way
because the enforcement of Section I.7.1’s requirements
“assures customers that a utility cannot assess them new
2
The petitioners contend that FERC confused estimated charges with
estimated data, the latter of which is all that Section I.7.1 requires.
We disagree. Although Section I.7.1 provides that “[i]nvoices may
be issued using estimated data,” those invoices must include “the
charges for all services furnished” that month. Tariff § I.7.1.
Accordingly, estimated data may be used to calculate the charges on
the monthly invoices, but estimated charges based on that data are
still required on the invoices. Regardless, SPP provided neither
estimated data nor estimated charges to the upgrade users.
12
charges after the one-year timeframe for doing so lapses.” 170
FERC ¶ 61,125, slip decision at 12 ¶ 25.
A plain reading of Section I.7.1 establishes that SPP could
not bill for upgrade charges more than one year after the
charges were incurred by the upgrade users.
B.
Because Section I.7.1’s billing requirements applied to the
upgrade charges, SPP needed a waiver from FERC to impose
those charges retroactively. FERC denied the waiver,
concluding a waiver would effectively result in a retroactive
change in the rates and therefore run afoul of the filed rate.
FERC’s decision was reasonable and consistent with this
court’s articulation of the filed rate doctrine and the statutory
limits on FERC’s authority to modify rates retroactively.
The Commission must ensure regulated entities charge
“just and reasonable” rates. 16 U.S.C. § 824d(a). As
incorporated into the Federal Power Act, regulated entities are
required to file with FERC “schedules showing all rates and
charges … and the classifications, practices, and regulations
affecting such rates and charges.” Public Utility Holding
Company Act of 1935, ch. 687, § 205, 49 Stat. 838, 851
(codified as amended at 16 U.S.C. § 824d(c)). Once filed, “no
change shall be made … in any such rate, charge,
classification, or service, or in any rule, regulation, or contract
relating thereto, except after sixty days’ notice to the
Commission and to the public” in another filing with FERC. 16
U.S.C. § 824d(d). As the statutory terms make clear, the filed
rate “is not limited to ‘rates’ per se,” but also extends to matters
“directly affect[ing] … rates.” Nantahala Power & Light Co.
v. Thornburg, 476 U.S. 953, 966–67 (1986). It follows that
13
FERC “has no authority under the Act to allow retroactive
change in the [filed] rates.” Old Dominion, 892 F.3d at 1226.
These statutory provisions “mandating the open and
transparent filing of rates and broadly proscribing their
retroactive adjustment are known collectively as the ‘filed rate
doctrine.’” Id. at 1226–27; see also Towns of Concord v.
FERC, 955 F.2d 67, 70–72 (D.C. Cir. 1992) (detailing the
origins of the filed rate doctrine and its justifications). The so-
called “doctrine” is shorthand for the interconnected statutory
requirements that bind regulated entities to charge only the
rates filed with FERC and to change their rates only
prospectively. When it applies, the filed rate doctrine is “a
nearly impenetrable shield” and does not yield, “no matter how
compelling the equities.” Old Dominion, 892 F.3d at 1230.
In this case, SPP failed to comply with Section I.7.1’s
billing requirements for the upgrade charges, and it now seeks
a retroactive waiver of those requirements, particularly its one-
year prohibition on billing adjustments. As FERC found,
however, Section I.7.1 is part of the filed rate. See 166 FERC
¶ 61,160, slip decision at 27 ¶ 50. If the Commission waived
Section I.7.1’s time bar, SPP would be permitted to charge
something other than the filed rate. Accordingly, the
Commission did not act arbitrarily or capriciously when it
denied SPP a retroactive waiver of Section I.7.1.
The petitioners do not contest Section I.7.1 is part of the
filed rate. They instead reiterate that FERC should not elevate
a “non-rate” term like Section I.7.1, which governs the timing
of invoices, over a rate term like Attachment Z2, which directly
imposes charges. The filed rate requirements are not so
confined. See Nantahala Power & Light, 476 U.S. at 966–67.
The Federal Power Act prohibits changes, not just to a rate, but
also to “any such rate, charge, classification, or service, or in
14
any rule, regulation, or contract relating thereto.” 16 U.S.C.
§ 824d(d).
Non-rate terms within the tariff may not be changed
retroactively, and those include billing limitations.3 For
example, the First Circuit has held that a tariff provision that
“mak[es] charges incontestable if not challenged within one
year” is “part and parcel of the rate schedule for purposes of
the filed rate doctrine.” Boston Edison Co. v. FERC, 856 F.2d
361, 368, 371 (1st Cir. 1988). FERC has likewise found that
billing limitations are part of the filed rate. See Seminole Elec.
Coop., Inc. v. Fla. Power & Light Co., 139 FERC ¶ 61,254,
62,873 (2012) (finding “the 24-month limitation on retroactive
billing in [the tariff] is itself the filed rate”); N.Y. Indep. Sys.
Operator, Inc., 128 FERC ¶ 61,086, 61,464 (2009) (finding a
tariff provision prohibiting corrections to finalized invoices is
part of the filed rate). In this case, Section I.7.1’s billing
requirements, although non-rate terms, are part of the filed rate.
The statute provides no grounds for distinguishing rate and
non-rate terms, but rather binds parties to the terms in the filed
tariff.
The petitioners next suggest they should benefit from an
“exception” to the filed rate doctrine because SPP gave notice
to the upgrade users that they would be responsible for upgrade
3
We note that FERC has rejected a distinction between rate and non-
rate terms in its recent proposed guidance on waivers. See Proposed
Policy Statement on Waiver of Tariff Requirements, 171 FERC
¶ 61,156, 62,265 (2020) (“[T]here is no basis for the Commission to
conclude that those doctrines apply any differently to non-rate terms
and conditions than to rates.”); accord Sunflower Elec. Power Corp.,
173 FERC ¶ 61,054, 61,340 (2020) (Danly, dissenting) (“Any
conclusion that a distinction can be drawn regarding the applicability
of these doctrines to rate versus non-rate terms is questionable at
best.”).
15
charges once properly calculated. “[T]he filed rate doctrine
simply does not extend to cases in which buyers are on
adequate notice that resolution of some specific issue may
cause a later adjustment to the rate being collected at the time
of service.” W. Deptford Energy, LLC v. FERC, 766 F.3d 10,
22 (D.C. Cir. 2014) (cleaned up).
This purported exception, however, does not recognize
any sort of notice given by one regulated entity to another.
Rather, notice may satisfy the filed rate doctrine when entities
have formal notice of the rates, as recognized by the two well-
established circumstances in which the court has found
adequate notice. First, the filed rate requirements are satisfied
when a tariff has a formula for calculating a rate, which states
clearly that charges will depend on application of the formula.
Old Dominion, 892 F.3d at 1231–32; see also NSTAR Elec. &
Gas Corp. v. FERC, 481 F.3d 794, 801 (D.C. Cir. 2007)
(concluding that a FERC rule provided notice to the market
participants). Second, the filed rate requirements are not
violated when a court invalidates a filed rate as unlawful, and
FERC must make retroactive changes to the rates. W. Deptford
Energy, 766 F.3d at 22. In both instances the regulated parties
receive formal notice—either through a FERC proceeding or
through the courts. Understood in this light, these are not
exceptions so much as further elaborations of the boundaries of
the statutory requirements that comprise the filed rate doctrine.
Accordingly, we have generally declined to find notice
outside of these “two limited circumstances.” Old Dominion,
892 F.3d at 1227. The petitioners argue that SPP provided
notice of the upgrade charges in three sources: Attachment Z2,
the stakeholder process in which some stakeholders
participated, and the notations in SPP’s study reports. None of
these sources provides the type of formal notice required to
satisfy the filed rate doctrine.
16
First, although Attachment Z2 was an addition to the filed
rate that set forth the possibility of upgrade charges, it did not
provide notice that upgrade users could be charged outside of
Section I.7.1’s billing requirements. To constitute sufficient
notice, “the relevant audience [must be] on notice at the outset
that the rates” are “subject to later revision.” NSTAR, 481 F.3d
at 801 (cleaned up). Attachment Z2 made no mention of
overriding or changing the timing of billing in Section I.7.1,
nor did it suggest that difficulties in calculation could result in
charges outside the normal billing period. Cf. Old Dominion,
892 F.3d at 1231 (concluding that a tariff provision did not
provide sufficient notice because it failed to forewarn that
“some specific issue may cause a later adjustment to the rate
being collected at the time of service”) (cleaned up).
Attachment Z2 failed to provide the requisite notice that
upgrade charges could occur outside Section I.7.1’s billing
requirements.
The other two alleged sources of notice—the stakeholder
process and SPP’s study reports—cannot provide sufficient
notice. Whatever information they might have provided, they
were not filed with the Commission, and a filing “is required
for all rate changes.” Id. at 1232 (finding a website statement
regarding possible retroactive charges insufficient because it
was not filed with FERC).
We recognize that SPP apprised stakeholders of ongoing
efforts to calculate the upgrade charges and the study reports
noted that “[c]redits may be required” for upgrades “in
accordance with Attachment Z2”—actions that may have
notified stakeholders that SPP intended to bill for shared
upgrade costs in the future. J.A. 89. Nonetheless, the type of
notice that matters for the filed rate doctrine is formal notice,
usually notice filed with FERC. Nothing in the filed tariff
17
indicated that upgrade charges could be billed outside of
Section I.7.1’s limitations.
FERC was therefore prohibited from waiving Section I.7.1
for the historical period at issue.4 The Commission “may not
disinter the past merely because experience has belied
projections, whether the advantage went to customers or the
utility; bygones are bygones.” Associated Gas Distribs. v.
FERC, 898 F.2d 809, 810 (D.C. Cir. 1990) (Williams, J.,
concurring in the denial of rehearing and rehearing en banc).
The filed rate requirement is stringent and admits of no
equitable adjustments by the Commission or this court.
III.
We next consider whether FERC acted arbitrarily or
capriciously by ordering a refund of the upgrade charges SPP
collected under FERC’s initial, but mistaken, waiver. When
reviewing the Commission’s exercise of its remedial powers,
we apply the arbitrary and capricious standard, but the “scope
of judicial review is particularly narrow.” See La. Pub. Serv.
4
The petitioners highlight that FERC has sometimes waived time
bars. That is true, but the decisions they cite failed to consider the
requirements of the filed rate doctrine. See, e.g., Sw. Power Pool,
Inc., 153 FERC ¶ 61,180 (2015). Because FERC correctly applied
the filed rate doctrine here, prior waivers that failed to consider these
requirements are not germane. The Commission’s proposed policy
statement recognizes that some of its earlier decisions “drifted
beyond the limits imposed by the filed rate doctrine and the rule
against retroactive ratemaking,” and the Commission has proposed
guidance to avoid such drifting in the future. See Proposed Policy
Statement on Waiver of Tariff Requirements, 171 FERC ¶ 62,264;
see also id. ¶ 62,266 & nn.36–37.
18
Comm’n v. FERC, 772 F.3d 1297, 1302 (D.C. Cir. 2014)
(cleaned up).
The Commission may craft a variety of remedies under
Section 309 of the Federal Power Act.5 The filed rate doctrine,
however, limits that remedial authority. See Verso Corp. v.
FERC, 898 F.3d 1, 10 (D.C. Cir. 2018); Pub. Utils. Comm’n of
Cal. v. FERC, 988 F.2d 154, 168 n.12 (D.C. Cir. 1993)
(explaining that if FERC’s actions “violated the filed rate
doctrine or the rule against retroactive ratemaking, we would
not then invoke the Commission’s assessment of the equities to
overcome those violations”). Once FERC determined that its
initial waiver of Section I.7.1 ran afoul of the filed rate, the
natural consequence was to order a refund of charges billed for
the historical period. FERC stated it would be “inappropriate”
to exercise equitable authority here, because its initial waiver
violated the filed rate doctrine. 166 FERC ¶ 61,160, slip
decision at 30 ¶ 57. Given FERC’s broad remedial discretion,
that decision was not arbitrary and capricious.
The petitioners also argue that ordering the refund defies
the cost causation principle, under which “all approved rates
[must] reflect to some degree the costs actually caused by the
customer who must pay them.” Midwest ISO Transmission
Owners v. FERC, 373 F.3d 1361, 1368 (D.C. Cir. 2004)
(cleaned up). When “a utility benefits from the costs of new
facilities,” the cost causation principle dictates that the utility
must pay for that benefit because it has “caused a part of those
costs to be incurred, as without the expectation of its
contributions the facilities might not have been built, or might
5
Section 309 provides that FERC “shall have power to perform any
and all acts, and to prescribe, issue, make, amend, and rescind such
orders, rules, and regulations as it may find necessary or appropriate
to carry out the provisions of this chapter.” 16 U.S.C. § 825h.
19
have been delayed.” Ill. Com. Comm’n v. FERC, 576 F.3d 470,
476 (7th Cir. 2009) (cleaned up). The petitioners argue the
stakeholders should pay for the upgrades they have used.
Attachment Z2 implements the cost causation principle by
requiring stakeholders who benefit from upgrades to pay for a
share of the upgrades. The cost causation principle, however,
concerns FERC’s approval of a rate as just and reasonable. K
N Energy, Inc. v. FERC, 968 F.2d 1295, 1300 (D.C. Cir. 1992)
(explaining the cost causation principle “add[s] flesh to the[]
bare statutory bones” of the “just and reasonable” standard).
The petitioners have provided no authority, nor have we found
any, to suggest that a filed rate, which FERC found to be just
and reasonable, can be waived because FERC later determines
that its application violates the cost causation principle. Cost
causation is a principle for ratemaking, not an abstract principle
that can trump a filed rate.
The petitioners wish FERC would have let things lie by
permitting SPP to keep the upgrade charges it had already
collected retroactively and distributed to upgrade sponsors like
Oklahoma Gas. We recognize Oklahoma Gas and other
sponsors of transmission upgrades relied on Attachment Z2,
which provided that other utilities using and benefitting from
the upgrades would share the costs of the upgrades. The
upgrade sponsors cannot recover any costs for most of the
historical period in which SPP was figuring out how to
calculate the charges. Meanwhile, users who benefitted from
the upgrades received a free pass during the historical period.
Whatever the equities of this situation, the Commission’s
decision to order the refund was a reasonable exercise of its
remedial authority in light of its determination that the initial
waiver violated the filed rate requirements and the upgrade
charges would not have been collected but for that waiver. The
outcome here should serve as a cautionary reminder to parties
20
that, if circumstances change, they should take action at the
outset, such as by seeking to amend the tariff or requesting
prospective waivers from FERC to act in contravention of a
filed rate.
We hold that FERC reasonably exercised its remedial
authority to order SPP to refund the retroactive upgrade
charges.
***
The filed rate requirements are a formidable obstacle for
entities regulated by FERC that wish to obtain retroactive relief
from the terms of their tariff. The Commission correctly
determined that Section I.7.1’s time bar was part of the filed
rate. Therefore, the Commission lacked authority to provide a
retroactive waiver and ordering a refund was a reasonable
remedy. For the foregoing reasons, we deny the petitions.
So ordered.