Entergy Svcs v. FERC ( 2004 )

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued September 10, 2004 Decided December 10, 2004
No. 02-1199
ENTERGY SERVICES, INC.,
PETITIONER
V.
FEDERAL ENERGY REGULATORY COMMISSION,
RESPONDENT
SOUTHERN COMPANY SERVICES, INC., ET AL.,
INTERVENORS
Consolidated with
02-1336, 02-1375, 03-1023
On Petitions for Review of an Order of the
Federal Energy Regulatory Commission
J. Wayne Anderson argued the cause for petitioners.
With him on the briefs were Floyd L. Norton, IV., Heath K.
Knakmuhs, S. Chris Still, Kevin A. McNamee, and Gerard A.
Clark. Andrew W. Tunnell and Matthew W. Estes entered
appearances.
2
Thomas D. Samford, IV, was on the brief for Alabama
Public Service Commission in support of petitioner and reversal
of orders.
Marlene K. Stern was on the brief of amicus curiae
Florida Public Service Commission in support of petitioner and
urging reversal. With her on the brief was David E. Smith.
Harold A. McLean entered an appearance.
Thurbert E. Baker, Attorney General, Attorney General's
Office of the State of Georgia, and Daniel S. Walsh, Assistant
Attorney General, were on the brief for amicus curiae Georgia
Public Service Commission in support of petitioner.
Dennis Lane, Solicitor, Federal Energy Regulatory
Commission, argued the cause for respondent. With him on the
brief were Cynthia A. Marlette, General Counsel, and Laura J.
Vallance, Attorney.
Ashley C. Parrish argued the cause for intervenor
Tenaska, Inc. With him on the brief was Neil L. Levy.
Before: SENTELLE, TATEL and ROBERTS, Circuit Judges.
Opinion for the Court filed by Circuit Judge SENTELLE.
Concurring opinion filed by Circuit Judge TATEL.
SENTELLE, Circuit Judge: Electricity utility companies
Entergy Services, Inc., Southern Company Services, Inc., and
Nevada Power Company, Inc., petition for review of various
orders of the Federal Energy Regulatory Commission in which
the Commission held that certain costs incurred by customers
connecting generators to petitioners’ networks must be “spread”
across all customers and not “directly assigned” to the respective
3
generator companies. Specifically, the Commission found that
because the connection facilities in each case were located “at
or beyond” the point of connection to the network, they
constituted “network upgrades” not directly assignable to
individual generators.
Petitioners contend (1) that the Commission’s orders
should be reversed because they are unsupported by substantial
evidence, and (2) that the Commission’s orders should be
reversed because the “At or Beyond” rule constitutes an
arbitrary departure from Commission precedent. Because we
agree with Intervenor Tenaska, Inc. that Entergy and Southern
lack standing to pursue their claims, we limit our review to the
objections advanced by Nevada Power. However, because we
hold that the order from which Nevada Power petitions has not
adequately explained the Commission’s apparent departure from
prior practice, we vacate and remand that order for further
proceedings.
I. Background
A. Regulatory Background
Petitioners in this case–Entergy Services, Inc.
(“Entergy”), Southern Company Services, Inc. (“Southern”), and
Nevada Power Co. (“Nevada Power”)–are electricity utility
companies that own transmission systems providing electricity
to large geographic regions. In order to foster a more
competitive, efficient market for electricity, federal regulation
requires that such “transmission providers” open their networks
to transmission customers–other sellers of electricity seeking to
supply power to their own customers. See Promoting Wholesale
Competition Through Open Access Nondiscriminatory
Transmission Services by Public Utilities; Recovery of Stranded
Costs by Public Utilities and Transmitting Utilities, Order No.
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888, FERC Stats. & Regs. ¶ 31,036 (1996), 61 Fed. Reg. 21,540(“Order No. 888”), on reh’g, Order No. 888-A, FERC Stats. &
Regs. ¶ 31,048, 62 Fed. Reg.12,274 (1997), on reh’g, Order No.
888-B, 81 F.E.R.C. ¶ 61,248 (1997), on reh’g, Order No. 888-C,
82 F.E.R.C. ¶ 61,046 (1998), aff’d, Transmission Access Policy
Study Group v. FERC, 225 F.3d 667 (D.C. Cir. 2000), aff’d sub
nom., New York v. FERC, 535 U.S. 1 (2002).
In implementation of Order No. 888, the Commission
promulgated a pro forma Open Access Transmission Tariff
(“OATT”) that sets forth the minimum terms and conditions
under which transmission providers may offer their services to
would-be customers. See Order No. 888-A at 30,503-43
(including the final OATT); 18 C.F.R. § 35.28(c)(1) (requiring
public utilities owning, controlling, or operating facilities
transmitting electricity in interstate commerce to “have on file
with the Commission a tariff of general applicability for
transmission services” or a tariff approved by the Commission
consistent with Order No. 888).
Under this tariff regime, some costs incurred by an
interconnecting customer are borne by the respective customer,
while other costs are spread across all customers on the network.
In general, when a Generator of electricity connects to a
Transmission Provider’s network consistent with Order No. 888,
the Transmission Provider cannot require the Generator to bear
costs incurred for the development of equipment that benefits all
users of the network. Duke Energy Co., 95 F.E.R.C. ¶ 61,279 at
61,980 (2001). Such costs, spread across all customers, are
known as “network upgrades.” The Generator must initially
finance the costs, but upon completion of the interconnection
project the Transmission Provider spreads the cost among all
customers and rebates to the Generator its initial investment by
providing it with transmission credits against its tariff expenses.
By contrast, when a new Generator incurs cost developing
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equipment of no benefit to the existing customers, the costs are
assigned to the Generator alone. This is known as “direct
assignment,” and the equipment is known as “direct assignment
facilities.”
The specific tariff and other interconnection details are
finalized in an Interconnection Agreement (“IA”) between the
Transmission Provider and the Generator. IAs are drafted by the
parties and are submitted to the Commission for approval.
B. Factual Overview
The consolidated cases before this court arise from the
Commission’s disapproval of four IAs submitted for its
approval.
Entergy submitted an unexecuted IA to the Commission
on November 14, 2001. Amelia Energy Center, LP (“Amelia”)
was the other party to the agreement. At issue were two
connection facilities: (1) a new Switching Station section to
accommodate two new 230 kV radial power lines from the
Generators; and (2) the re-routing of three existing power lines.
The Commission held that the IA could not directly assign costs
for the facilities at issue to Amelia, because the facilities were
located “at or beyond” the point of interconnection with the grid,
and as such provided benefit to all users. See Entergy Gulf
States, Inc., 98 F.E.R.C. ¶ 61,014 (2002), reh’g denied, 99
F.E.R.C. ¶ 61,095 (2002). On June 14, 2002, the Commission
accepted Entergy’s proposed termination of the IA; prior to
termination, the IA was of indefinite duration.
Southern submitted two IAs for Commission approval.
It submitted its first IA, between its Alabama Power
transmission system and Blount County Energy, LLC
(“Blount”), on November 30, 2001. At issue was a replacement
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breaker at the Miller Steam Plant substation. The Commission
held that the cost of the breaker could not be directly assigned
to the Generator, in light of the “At or Beyond” rule. Southern
Company Services, Inc., Letter Order, Docket No. ER02-430-
000 (Jan. 25, 2002), reh’g denied, 100 F.E.R.C. ¶ 61,246 (2002).
On January 24, 2003, the Commission accepted Southern’s
request to terminate the Blount IA; prior to termination, the IA
was of a forty-year term, subject to prior termination by mutual
assent.
Southern submitted its second IA, between its Georgia
Power transmission system and Athens Development, LLC
(“Athens”), on June 5, 2002. At issue were three 115 kV
breakers at two Georgia Power substations. The Commission
held that the cost of the breakers could not be directly assigned
to Athens, in light of the “At or Beyond” rule. Southern
Company Services, Inc., Letter Order, Docket No. ER02-2015-
000 (July 30, 2002), reh’g denied, 101 F.E.R.C. ¶ 61,309 (2002).
On August 9, 2002, Southern filed a “Notice of Cancellation”
regarding the Athens IA. See Southern Company Services, 103
F.E.R.C. ¶ 61,279 (2003). The IA was cancelled effective
January 6, 2003, when the parties submitted a revised IA. Prior
to cancellation, the original IA was of a term of no less than ten
years, subject to exceptions.
Nevada Power submitted an unexecuted IA to the
Commission on May 29, 2002. GenWest, LLC (“GenWest”)
was the other party to the agreement. At issue was a “one line
terminal” to be added to Nevada Power’s Harry Allen 500 kV
Switchyard. The Commission held that the cost of the one line
terminal could not be directly assigned to GenWest, in light of
the “At or Beyond” rule. Nevada Power Co., 100 F.E.R.C. ¶
61,077 at 61,302 (2002) (“Nevada Power I”), reh’g denied, 101
F.E.R.C. ¶ 61,036 (2002) (“Nevada Power II”). Neither party
has cancelled the agreement. It is for a term of at least ten years,
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subject to exceptions.
Following these administrative proceedings, Entergy,
Southern, and Nevada Power filed these petitions for review.
II. Analysis
A. Jurisdiction
Three of the four IAs at issue in these consolidated cases
have been cancelled by the parties, with the consent of the
Commission. Therefore, the cases arising under those three
contracts are now moot, and we lack jurisdiction to hear these
petitions. Moreover, because petitioners fail to show injury in
fact resulting from the Commission’s “At or Beyond” rule per
se, they lack standing to challenge generally the Commission’s
policies that underlie those orders.
A challenge to a specific Commission order regarding an
interconnection agreement is moot when the contract is
terminated. Northwest Pipeline Corp. v. FERC, 863 F.2d 73,
76-77 (D.C. Cir. 1988) (“Obviously, the challenged rate terms
disappeared into the regulatory netherworld when the
certificates themselves entered the archives. . . . Thus, to the
extent it seeks [review of Orders affecting the certificates,
Petitioner’s] claim is, beyond reasonable dispute, moot.”). The
Entergy and Southern IAs have joined their predecessors in the
regulatory netherworld; Entergy and Southern bring no live
controversy to this court. Arguably, at least, the flaw in
jurisdiction over two of the IAs should be viewed entirely in
terms of standing rather than mootness, as Entergy and Southern
(with reference to its second petition) had already terminated
their IAs before seeking the assistance of an Article III court.
By way of comparison, in Advanced Management Technology,
Inc. v. FAA, 211 F.3d 633 (D.C. Cir. 2000), we had to decide
8
whether standing or mootness doctrine applied in a situation
where the petitioner filed its challenge to the agency’s
termination of a contract after the agency had re-awarded the
contract to petitioner. “The claim may sound like one of
mootness–a justiciable controversy existed but no longer
remains–but the timing makes [Petitioner’s] problem one of
standing . . . . Standing is assessed ‘at the time the action
commences,’ i.e., in this case, at the time [Petitioner] sought
relief from an Article III court.” Id. at 636 (quoting Friends of
the Earth, Inc. v. Laidlaw Envtl. Servs., Inc., 528 U.S. 167, 191
(2000)) (internal citation omitted). In any event, we lack Article
III jurisdiction to consider their specific complaints.
Petitioners treat the justiciability analysis as a question
of mootness. Under the mootness analysis, Petitioners argue
that a challenge to agency action is not moot “where there is a
reasonable chance of the dispute arising again between the
government and the same [petitioner].” Legal Assistance for
Vietnamese Asylum Seekers v. Dep’t of State, 74 F.3d 1308,
1311 (D.C. Cir. 1996) (“LAVAS”), vacated on other grounds,
519 U.S. 1 (1997). Granted, we so held in LAVAS, but that is
not a parallel for the present case. In LAVAS, we noted that the
precedents upon which we relied therein stood “for the
proposition that the government cannot escape the pitfalls of
litigation by simply giving in to a plaintiff’s individual claim
without renouncing the challenged policy . . . .” Id. That is not
what happened in the petition before us today. The government
did not give in; Petitioners abandoned the petition. While it may
be true that the government cannot by selective surrender
establish mootness to prevent challenge to its policies, this does
not prevent mootness from occurring where the would-be
challengers have abandoned the case or controversy that they
would have us decide. The Entergy and Southern petitions fall
into the latter category, not the former. There is no ongoing case
or controversy. These challenges are moot.
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These Petitioners cannot take refuge under the broader
doctrine of “capable of repetition yet evading review.” See, e.g.,
Weinstein v. Bradford, 423 U.S. 147, 148-49 (1975). The very
contracts at issue establish operative terms of at least ten years.
Some were of indefinite duration. Such contracts provide ample
time for both administrative and judicial review. Indeed, the
present petition did not evade review; Petitioners themselves
chose to abandon the undertakings that gave rise to the
controversy. If further proof is needed that such contracts do not
fall within that exception to the mootness rule, the petition of
Nevada Power, which remains an active controversy before us,
clearly establishes that an IA need not evade review.
Southern and Entergy claim that they are nonetheless
before the court with a justiciable controversy because they are
asserting facial challenges to the ongoing policy as well as
seeking review of their underlying contracts. This argument
also fails to keep them in court. While it is true that a petitioner
with a mooted individual controversy may at times have
standing to challenge an ongoing policy, such a petitioner must
demonstrate standing to obtain each type of relief sought. See
City of Houston v. HUD, 24 F.3d 1421, 1429 (D.C. Cir. 1994).
Even if we assume that Entergy and Southern have properly
raised a challenge to Commission policies beyond the specific
orders for which they have sought review, they have not
demonstrated that they have standing to challenge such ongoing
policies.
To meet “the irreducible constitutional minimum for
standing,” petitioners must show, inter alia, that they suffer an
actual injury in fact which is caused by the Commission’s
policy. Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61
(1992). The Commission’s “At or Beyond” rule challenged by
Petitioners does not affect Entergy or Southern until they are
confronted with it in a matter before the Commission regarding
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a “live” interconnection agreement. Until then, they are in a
position identical to that of any other utility company whose
hypothetical future interconnection agreements may be
evaluated according to the rule. To open the courthouse doors
to Entergy and Southern for the purposes of their policy
challenge disembodied from the original Commission orders
would open the door to every other utility company’s challenges
to Commission policies. Federal courts do not have the
jurisdiction to render advisory opinions on such matters, with
respect to FERC or any other administrative agency.
Entergy and Southern lack standing to proceed before
this Court. This Court therefore lacks jurisdiction over the
Entergy and Southern petitions.1 Their cases are dismissed.
B. Limitation of Issues
The elimination of the Entergy and Southern cases limits
the matters remaining for this Court’s consideration. This
Court’s power to review FERC petitions is tightly
circumscribed: “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
1
In reaching this conclusion, we do not ignore Capitol
Technical Servs, Inc. v. FAA, 791 F.2d 964, 967 (D.C. Cir. 1986),
cited by the separate opinion of our colleague. Rather, we simply do
not read that case, or any other, as suggesting that standing need not
be established for a general challenge when such general challenge is
all that is left in the case. True, we did not in Capitol Technical
Services address the question of standing, but it seems that standing to
challenge the general policy in that case was clear enough. As the
Capitol Technical Services panel explained in analyzing ripeness, “the
hardship to Capitol is concrete and easily perceived; noncompliant
foreign aircraft cannot reasonably expect to contract with Capitol for
major maintenance at locations they cannot reach.” Id. at 969.
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rehearing unless there is reasonable ground for failure so to do.”
16 U.S.C. § 825l(b) (2004). “Parties seeking review of FERC
orders must petition for rehearing of those orders and must
themselves raise in that petition all of the objections urged on
appeal.” Platte River Whooping Crane Critical Habitat Maint.
Trust v. FERC, 876 F.2d 109, 113 (D.C. Cir. 1989) (emphasis in
original).
We construe § 825l narrowly. In Kelley ex rel. Mich.
Dep’t of Nat’l Resources v. FERC, we held that objections not
explicitly presented in proceedings below, but arguably
“implicit” in other objections, were not properly preserved:
“Suffice to say that an argument ‘implicit’ in prior requests
before the Commission’s staff does not satisfy the strict standard
of § 313(b) [of the Federal Power Act, codified at 16 U.S.C. §
825l].” 96 F.3d 1482, 1488 (D.C. Cir. 1996).
While § 825l offers petitioners an exception–i.e., a
“reasonable ground for failure” to urge the objection
below–Nevada Power offers no such reasonable ground for its
failure to raise several objections in its petition for FERC
rehearing. Therefore, any objections raised by Petitioners’
consolidated briefs but not raised by Nevada Power in its
administrative proceedings are not properly before this Court.
The only issues raised by Nevada Power in its petition
for rehearing and preserved in Petitioners’ consolidated briefs
are whether: (1) the Commission’s determination that the
facilities at issue benefit the entire network was not supported by
substantial evidence, and (2) the Commission’s “At or Beyond”
rule represents an unjustified departure from past precedent.
Request for Rehearing at 6-12, Nevada Power Co., Docket No.
ER02-1913-001 (Aug. 16, 2002). A different version of these
arguments advanced by Entergy or Southern that was not
advanced by Nevada Power–e.g., that the Commission ignored
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evidence that the facilities in question actually decrease network
stability–is not properly before this Court in our consideration
of Nevada Power’s case. Such an argument was not even
implicit–let alone explicit–in Nevada Power’s objections before
the Commission. Indeed, the evidence allegedly ignored by the
Commission–a sworn affidavit–was introduced in Southern’s
proceedings, not Nevada Power’s.
C. Substantial Evidence
Nevada Power argues that the Commission’s finding that
facilities located “at or beyond” the point of interconnection to
the network benefit the entire network was not supported by
substantial evidence. See 5 U.S.C. § 706(2)(E) (2004) (“The
reviewing court shall . . . hold unlawful and set aside agency
action, findings, and conclusions found to be . . . unsupported by
substantial evidence . . . .”). It argues that GenWest was the sole
beneficiary of the facilities at issue, and that geographic location
of the additions to the Harry Allen Switchyard is not itself
sufficient justification for a finding to the contrary.
But Nevada Power’s view of “benefit” is too narrow.
Like the petitioners in another recent challenge to the
Commission’s policy, this Petitioner suffers from a “cramped
view of what constitutes a ‘benefit.’” Entergy Services, Inc. v.
FERC, 319 F.3d 536, 543 (D.C. Cir. 2003) (“Entergy I”).
Nevada Power focuses on the benefit of “reliability” (or
“stability”), which we recognized in Entergy I, id. at 544. See
Brief for Petitioners at 30. So does Nevada Power’s expert.
Answer of Nevada Power Co. at Ex. A (Whalen Aff. at 2),
Nevada Power Co., Docket No. ER02-1913-000 (July 3, 2002).
But “stability” is not the only “benefit” recognized by the
Commission: the Commission cites the new facilities’
contribution to the Switchyard’s “expanded energy flow.” Brief
for Respondent at 48. Indeed, the Whalen affidavit recognizes
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that, but for the added facilities, GenWest could not contribute
its energy flow to the network. Id. This Court has recognized
that system expansion is a “benefit” sufficient to support the
Commission’s pricing policy, Entergy I, 319 F.3d at 544, and we
repeat that recognition here today.
The justifications that this Court accepted for the
Commission’s application of the pre-existing cost allocation
policy to those specific facilities also warrant this Court’s
approval of the policies’ application to the facilities here. As we
noted, “[o]ur conclusion that the Commission has adequately set
forth its rationale rests . . . on its explanation in the Consumers
Energy decisions that the Commission relied upon in the order
to review.” Id. at 543.
The Consumers Energy explanation was the
Commission’s justification of “a standard policy that requires
credits for customer-funded network upgrades,” Consumers
Energy Co., 96 F.E.R.C. ¶ 61,132 at 61,560 (2001) (“Consumers
Energy II”) (emphasis added), quoted in Entergy I, 319 F.3d at
543, not just for certain types of customer-funded network
upgrades. Petitioner contends that the facilities before us are not
network upgrades. However, Consumers Energy resolves the
question by its reference to the Commission’s May 17, 2001
order. The Commission defined “network upgrades” by the
point of connection of facilities, without a case-specific analysis
of marginal benefit to other users:
The Commission’s policy
regarding credits for network
upgrades associated with the
interconnection of a generating
facility has been, and continues
to be, that all network upgrade
costs (the cost of all facilities
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from the point where the
generator connects to the grid),
including those necessary to
remedy short-circuit and stability
problems, should be credited
back to the customer that funded
the upgrades once delivery
service begins.
Consumers Energy Co., 95 F.E.R.C. ¶ 61,233 at 61,804 (2001)
(“Consumers Energy I”) (emphasis added). In short, the
Commission’s definition of “network upgrade,” accepted by
Entergy I, includes any changes to facilities located on the grid.
The Consumers Energy I justification, quoted above and in
Entergy I, set forth an overarching defense of at least a “From”
test: “all facilities from the point where the generator connects
to the grid.” Id. (emphasis added).
Petitioners urge us to read Entergy I narrowly, restricting
it to the facilities at issue in that case: short-circuit and stability
network upgrades. 319 F.3d at 544. But to adopt such a narrow
reading would be to adopt a “cramped” view of Entergy I’s “less
cramped view.” Id. at 543. Entergy I does not endorse the
Commission’s policy merely with respect to short circuit and
stability network upgrades. As this Court said in that case, such
a limited holding was a mere “consequen[ce]” of the much
larger holding: that the Commission had reasonably explained
its crediting pricing policy generally. Id. That pricing policy,
spelled out in Consumers Energy, makes no mention of specific
reference to short circuit and stability network upgrades. It
referred to “all facilities from the point” of interconnection.
Consumers Energy I, 95 F.E.R.C. at 61,804 (emphasis added).
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D. Departure from Precedent
The only difficulty–and though it is a small one, it is one
upon which potentially millions of dollars of cost allocation
rest–is whether “from” as a test of allocation justified by the
Commission in Consumers Energy I equates to “at or beyond”
as the Commission urges in the present controversy, or merely
to “beyond.” Either is a natural reading of “from.” For
example, when a bridal couple declares their fealty “from this
day forward,” we would not likely interpret this as a declaration
of faithfulness to begin the next day. The Commission’s “at or
beyond” test is consistent with such an immediate beginning
inclusive of everything from the point of commencement
including that point. On the other hand, if a travel guide tells us
that it is “one hundred miles from City A to City B,” we would
not necessarily assume that any distance within the city of
commencement is included within that one hundred miles.
Neither construction would be unreasonable. Normally, we
would defer to the Commission’s interpretation of its own prior
ruling. Cassell v. FCC, 154 F.3d 478, 483 (D.C. Cir. 1998).
However, such deference would presuppose that the
Commission had justified the subsequent usage in the prior
declaration it purports to interpret. Such justification is not
present on the record before us.
As we noted above, FERC’s explanation of its policy
application to the present contract depends upon its adoption of
its rationale from the Consumers Energy decisions. As we
further discussed above, justification by adoption of a prior
ruling is perfectly appropriate and adequate. The difficulty is
that the Commission’s explanation in Consumers Energy, at
least on its face, is not consistent with the Commission’s
application of the test to the facts before us. Nevada Power’s
petition does not depend on any inherent flaw in the “from” test
as applied to improvements beyond the point of interconnection,
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but only as to those precisely “at” the interconnection. It
appears from the face of Consumers Energy II that the
Commission’s application of its test to the facts before it in that
case may have been consistent with Nevada Power’s
interpretation rather than the one FERC advances now. The
total interconnection cost at issue in Consumers Energy was
$13.2 million. Of that total, the Commission permitted (albeit
almost sub silentio) direct assignment of the “$3 million . . .
attributable to the physical interconnection of the generating
facility with consumers’ transmission grid,” and approved credit
for the “remaining $10.2 million in network upgrade costs . . .
.” Consumers Energy I, 95 F.E.R.C. at 61,082. If the
Commission had intended “from” to mean “at or beyond” rather
than simply “beyond,” then it is not at all clear what accounts
for the $3 million in direct assignment, as the interconnection
presumably is “at” the determinative point. We therefore must
vacate the order under review and remand the controversy to the
Commission for further proceedings.
The progression of Commission pronouncements of its
network upgrade policy demonstrates that the “At or Beyond”
test is the product of regulatory evolution – marked by change,
not consistency–beginning with Consumers Energy. The
Commission issued Consumers Energy I on May 17, 2001.
There it described “all network costs” as “the cost of all
facilities from the point where the generator connects to the
grid.” 95 F.E.R.C. at 61,804 (emphasis added). As we noted,
supra, in that analysis the Commission did not consider “the
physical interconnection of the generating facility with . . . the
grid” to be a “network upgrade.” Consumers Energy I itself was
a clarification, see Entergy I, 319 F.3d at 541, of a prior order in
which the Commission excluded from “system upgrades” “the
cost of minimum facilities needed to establish the
interconnection.” Amer. Elec. Power Service Corp., 91 F.E.R.C.
¶ 61,308, at 62,051 (2000) (“AEP”), quoted in Consumers
17
Energy II, 96 F.E.R.C. at 61,559.
Less than one month after the issuance of Consumers
Energy I, Commissioner Wood called for a change in policy.
He proposed that “costs of transmission beyond the power plant
busbar which are needed to accommodate the output of the new
generation facility should be borne by the transmission service
provider . . . .” Detroit Edison Co., 95 F.E.R.C. ¶ 61,415 at
62,540 (2001). Commissioner Wood credited his “recent
experience” on Texas’s regulatory body with demonstrating the
need for interconnection cost-allocation policies that foster fair,
efficient competition between old and new generators. Id.While this may appear to be a restatement, not change, of policy
in light of Consumers Energy I, the concurrence’s further
explanation reveals a difference. Looking back to
Commissioner Wood’s experience, we see that the policies of
the Public Utility Commission of Texas reflected an “At or
Beyond” test rather than a “From” test. In at least one case the
Texas Commission, in a decision authored by then-
Commissioner Wood, included as “transmission costs” “the
transmission switching facilities, necessary to provide the
interconnection between [Generator] and [Transmission Service
Provider].” Petition of Pasadena Cogeneration, L.P. for
Declaratory Order, Docket No. 20,760, Public Util. Comm. of
Texas, at ¶¶ I.15-18, III.1-2, 1999 Tex. PUC LEXIS 32 (Aug. 2,
1999). Commissioner Wood’s discussion of the role of efficient
cost-allocation in generator competition in Detroit Edison
mirrors his discussion in Pasadena Cogeneration. Given the
facts in Pasadena Cogeneration, he clearly endorsed an “At or
Beyond” test in 1999. He appears to have called for a similar
test in his 2001 Detroit Edison concurrence.
One month after Commissioner Wood’s statement in
Detroit Edison, the Commission denied a rehearing in
Consumers Energy, and it made no reference to either a “From”
18
test or an “At or Beyond” test, but it referred only to network
“upgrade” costs. Consumers Energy II, 96 F.E.R.C. at 61,561.
The day after Consumers Energy II, however, the
Commission stated its policy in a manner resembling an “At or
Beyond Test” more than a “From” test of the sort suggested in
Consumers Energy I, as it described the difference between a
direct-assignment “interconnection facility” and a “network
upgrade.” As the Commission noted: “Interconnection facility
costs are those costs associated with facilities on the generator’s
side of the interconnection with the grid, which traditionally
have been directly assigned to the generator. Network upgrade
costs are any upgrades necessary to grid facilities to allow the
generator to inject its power at the interconnection.” Removing
Obstacles to Increased Electric Generation And Natural Gas
Supply In The Western United States, 96 F.E.R.C. ¶ 61,155, at
61,674 (2001) (emphasis added). Removing Obstacles cited
Consumers Energy I as a proper statement of its network
upgrade cost-allocation policies, id. at 61,674 n.37, but did not
explain why Consumers Energy I did not consider “the physical
interconnection of the generating facility with . . . the grid” to be
a “network upgrade,” 95 F.E.R.C. at 61,802. Nor did it explain
why Consumers Energy II did not consider AEP’s “minimum
facilities needed to establish the interconnection” to be “system
upgrades.”
In the three years following Removing Obstacles and
Consumers Energy, the Commission has reiterated that its “At
or Beyond” test was born not in Removing Obstacles but in
Consumers Energy I and II. In the administrative proceedings
regarding Entergy’s petition now before this Court, the
Commission equated Consumers Energy’s “from the point [of
interconnection]” language with an “At or Beyond” rule. Order
Denying Rehearing, Entergy Gulf States, Inc., 99 F.E.R.C. ¶
61,095, at 61,399 (2002) (“Entergy makes much of the fact that
19
we referred to network facilities as all those ‘from’ the point
where the customer connects to the grid in Consumers, while
referring to them, for the first time, as facilities ‘at or beyond’
that point in Entergy. . . . [W]e fail to see a meaningful
distinction between these phrases . . . .”). The Commission has
continued to maintain this position in its hearings on Southern’s
more recent IAs. Southern Co. Servs., 108 F.E.R.C. ¶ 61,220 at
62,226 (2004); Southern Co. Servs., 108 F.E.R.C. ¶ 61,229 at
62,249 (2004). In Tampa Electric Co., the Commission traced
the lineage of the “At or Beyond” test at as far back as
Consumers Energy, and perhaps as far back as 1992’s Pub.
Service Co. of Colorado. 99 F.E.R.C. ¶ 61,192 at 61,795 (2002)
(citing 59 F.E.R.C. ¶ 61,311 at 62,149 (1992)). The
Commission repeated this genealogical claim in its denial of
rehearing in Nevada Power. 101 F.E.R.C. ¶ 61,036 at 61,145
(2002). But in none of these cases did the Commission take
account of Consumers Energy I and II’s discussion of facilities
at the point of “interconnection.”
Reading these cases, recounting the Commission’s
development of a “From” test, tracing its transformation into an
“At or Beyond” test, and keeping in mind the Commission’s
subsequent assertions that the two tests are one and the same, we
are left with the conclusion that the “At or Beyond” test
represents an apparent departure from Consumers Energy’s
“From” test. That departure may be slight, but it is a departure
nonetheless.
We do not suggest that the Commission may not directly
assign the costs at issue–as is apparent from our discussion in
Part C, the same substantial evidence appears to support either
test. But if the Commission does so, it must provide further
explanation. The Commission may change its practices, but it
must do so with “reasoned analysis indicating that prior policies
and standards are being deliberately changed, not casually
20
ignored.” Entergy I, 319 F.3d at 541. Departures from
precedent must not violate the Administrative Procedure Act’s
prohibition on arbitrary and capricious decisionmaking. 5
U.S.C. § 706(2)(A); TransCanada Pipelines Ltd. v. FERC, 24
F.3d 305, 308 (D.C. Cir. 1994).
Although an agency’s interpretation of its own precedent
is entitled to deference, Cassell v. FCC, 154 F.3d 478, 483 (D.C.
Cir. 1998), this Court cannot accept the Commission’s assertion
that “it has not now nor has it ever directly assigned the costs of
the network at its borders.” Brief for Respondent at 44. We will
therefore allow the petition of Nevada Power and remand this
case to the Commission for further explanation. That
explanation may take the form of a clarification of Consumers
Energy I that in some way establishes that we have misread the
Commission’s apparent direct assignment of costs occurring
precisely at the point of interconnection or an explanation of
why it has departed from that policy. It must do one or the other
if we are to sustain the result reached in the order on review.
Conclusion
For the reasons set forth above, we conclude that the
petitions of Southern and Entergy must be dismissed. However,
as to the order from which Nevada Power petitions for review,
we order that it be vacated and the case remanded to the
Commission for further proceedings consistent with this
opinion.
So ordered.
TATEL, Circuit Judge, concurring in part and concurring
in the judgment: I agree with the court on the merits and join
Parts I and II.B-D of its opinion. I also agree that we lack
jurisdiction over the Entergy and Southern petitions, but I cannot
join Part II.A because, in my view, the court’s approach
“incorrectly conflate[s] our case law on initial standing to bring
suit with our case law on postcommencement mootness,”
Friends of the Earth, Inc. v. Laidlaw Envtl. Servs., Inc., 528 U.S.
167, 174 (2000) (citations omitted).
Two of the three petitions fail—unarguably, in my
view—on standing grounds alone. Entergy filed its petition for
review on June 24, 2002, ten days after FERC accepted the
company’s proposed termination of its Interconnection
Agreement (“IA”) with Amelia Energy Center. Southern filed
its second petition for review on February 13, 2003, more than
a month after the effective cancellation of its IA with Athens
Development. Since neither IA remained in effect at the time
the companies sought judicial review, precedent requires that we
address jurisdiction as a question of standing, not mootness.
In Advanced Management Technology, Inc. v. FAA, 211
F.3d 633 (D.C. Cir. 2000), we had to decide whether standing or
mootness doctrine applied in a situation where the petitioner
filed its challenge to the agency’s termination of a contract after
the agency had re-awarded the contract to petitioner. “The
claim may sound like one of mootness—a justiciable
controversy existed but no longer remains—but the timing
makes [petitioner’s] problem one of standing. . . . Standing is
assessed ‘at the time the action commences,’ i.e., in this case, at
the time [petitioner] sought relief from an Article III court.” Id.
at 636 (quoting Laidlaw Envtl. Servs., 528 U.S. at 191) (internal
citation omitted); see also WorldCom, Inc. v. FCC, 308 F.3d 1,
10 (D.C. Cir. 2002) (where petitioner lacked standing at the
onset of its suit because the issue had lost “practical
significance,” it could not argue that its situation was “capable
of repetition yet evading review” since “that familiar exception
2
to mootness cannot confer standing on a claim when injury in
fact was missing at the outset”) (internal quotation marks
omitted); City of Orrville v. FERC, 147 F.3d 979, 985 n.5 (D.C.
Cir. 1998) (“Because [petitioner’s] preliminary permit expired
before it petitioned for review, . . . its claims are properly
disposed of on standing, rather than mootness, grounds.”). The
court cites Northwest Pipeline Corp. v. FERC, 863 F.2d 73, 76
(D.C. Cir. 1988), but in that case we applied a mootness analysis
because petitioner filed for review in 1987 (as the docket
number makes clear) well before “the challenged rate terms
disappeared into the regulatory netherworld” in June 1988. See
id.Given this case law, I believe this court had no reason to
consider whether mootness exceptions apply to the Entergy and
second Southern petitions, as the two companies lacked standing
in the first place. Once their IAs had terminated, neither
qualified as a party “aggrieved by an order issued by the
Commission” within the meaning of section 313(b) of the
Federal Power Act, 16 U.S.C. § 825l(b). “The requirement of
aggrievement serves to distinguish a person with a direct stake
in the outcome of a litigation from a person with a mere interest
in the problem.” City of Orrville, 147 F.3d at 985 (quoting
North Carolina Utils. Comm’n v. FERC, 653 F.2d 655, 662
(D.C. Cir. 1981)). After their IAs terminated, Entergy and
Southern had only a “mere interest.” They thus lack standing to
petition for review in this court.
Southern’s first petition for review presents a different,
more complex situation. Southern filed that petition on
November 1, 2002, almost three months before FERC accepted
the termination of the company’s IA with Blount County
Energy. “[A]t the time the action commence[d],” Laidlaw Envtl.
Servs., 528 U.S. at 191, Southern therefore had standing to
challenge FERC’s modification of the company’s IA, as well as
3
the policies on which that order rested. With the cancellation of
the IA, Southern’s specific challenge became moot, and (as the
court notes) neither the “voluntary cessation” nor the “capable
of repetition yet evading review” exception applies.
We thus need to determine whether a justiciable
controversy remains due to Southern’s broader reason for
objecting to the challenged order—namely, the company’s claim
that the policies underlying that order require it to revise other
IAs, revisions that will cost it some $22 million. This court
faced a similar issue in Capitol Technical Services, Inc. v. FAA,
791 F.2d 964, 967 (D.C. Cir. 1986), where petitioner,
maintenance provider for foreign aircraft, sought an exemption
from an FAA noise-control regulation so that it could fly two
DC-8s to the United States for servicing. By the time we heard
the petition, however, the time for servicing the two airplanes
had passed. Id. at 965-66. We held that although petitioner’s
challenge to the FAA’s denial of an exemption for the specific
planes had become moot, the “challenge to th[e] general policy
is not moot” because “[c]learly Capitol sought not only a
particular exemption, but also a decision favorable to the
continued viability of its business.” Id. at 968; see also City of
Houston v. Dep’t of Hous. & Urban Dev., 24 F.3d 1421, 1428-
1430 (D.C. Cir. 1994); Better Gov’t Ass’n v. Dep’t of State, 780
F.2d 86, 90-92 (D.C. Cir. 1986). Significantly, we did not
reevaluate whether Capitol had standing to petition for review
on policy grounds. Had we done so under the court’s logic
today, we would have concluded that Capitol lacked standing to
pursue its policy challenge, since Capitol was in a “position
identical to that of any other [maintenance provider] whose
hypothetical future [requests for foreign aircraft exemptions]
may be evaluated according to the rule,” see majority slip op. at
9-10. Instead, we applied mootness doctrine to evaluate the
justiciability of Capitol’s policy challenge and found “plainly
meritless” the agency’s argument that “[i]f Capitol wishes to
4
obtain exemptions for future flights by noncompliant foreign
operators to its maintenance facilities . . . it should reapply for
exemptions and, if unsatisfied, seek review of those decisions.”
791 F.2d at 989. Concluding that Capitol’s policy concerns
remained alive, we went on to find its challenge ripe because the
FAA’s policy was fit for review and Capitol would suffer
hardship without immediate review. 791 F.2d at 969 & n.26
(applying the ripeness test developed in Abbot Laboratories v.
Gardner, 387 U.S. 136 (1967)). As to fitness, we observed that
the issues were “purely legal . . . [and] there can be no question
that the agency action has taken final form; indeed, the agency
has not even suggested that any further policy evolution could
be expected.” Id.Disregarding Capitol Technical Services, the court today
holds that once a petitioner’s specific challenge has become
moot, we must go back and reevaluate the petitioner’s standing.
In support, the court relies on City of Houston, 24 F.3d at 1429-
30 & n.6, which stands for the proposition, established since at
least City of Los Angeles v. Lyons, 461 U.S. 95 (1983), that
plaintiffs in civil suits must establish standing separately for
each type of relief they seek—declaratory relief, injunctive
relief, damages, etc. By contrast, like the petitioner in Capitol
Technical Services, Southern has filed a petition for review of an
agency action and seeks the same relief on both specific and
policy grounds: vacatur of FERC’s order based on a finding that
the order was arbitrary and capricious. At the time Southern
petitioned for review, it plainly had standing to seek this relief,
and under Capitol Technical Services our jurisdiction over
Southern’s policy challenge should turn on whether that
challenge has also become moot or, alternatively, whether it is
unripe for review.
As to mootness, we have typically applied the policy-
challenge exception to mootness in situations where the specific
5
requests became moot due to circumstances beyond petitioners’
control. See Capitol Technical Servs., Inc., 791 F.2d at 967-68;
City of Houston, 24 F.3d at 1424, 1428-29; Better Gov’t Ass’n,
780 F.2d at 88, 90-92. But Southern’s specific request became
moot due to its voluntary decision to seek cancellation of its IA.
I am thus unsure whether Southern’s policy challenge remains
alive. In any event, I am convinced the challenge is unripe.
To begin with, this case differs from Capitol Technical
Services in a significant respect. There, the FAA “ha[d] not
even suggested that any further policy evolution could be
expected.” 791 F.2d at 969. At the time of Southern’s
challenge, by contrast, FERC’s policy had not yet become final.
Indeed, in later rulemaking orders, FERC revisited its “At or
Beyond Test” (and particularly its explanations for the test). See
Standardization of Generator Interconnection Agreements and
Procedures, Order No. 2003, [Regs. Preambles] FERC Stats. &
Regs. ¶ 31,146, 68 Fed. Reg. 49,846 (2003); on reh’g, Order No.
2003-A, [Regs. Preambles] FERC Stats. & Regs. ¶ 31,160, 69
Fed. Reg. 15,932 (2004). Absent a specific need for relief, it
seems unfair to require FERC to defend its earlier, less complete
explanation of its policy. Moreover, the “only hardship”
Southern “will endure as a result of delaying consideration of
this issue is the burden of having to file another suit.” See Webb
v. Dep’t of Health & Human Servs., 696 F.2d 101, 107 (D.C.
Cir. 1982). Because this relatively minimal hardship does not
outweigh the relatively strong interest in postponing judicial
review, I would find Southern’s policy challenge unripe.
Over a quarter century ago, Justice Brennan warned that
“Art. III jurisprudence . . . in such areas as mootness and
standing is creating an obstacle course of confusing standardless
rules to be fathomed by courts and litigants.” Kremens v.
Bartley, 431 U.S. 119, 140 (1977) (Brennan, J., dissenting). The
opinion in this case may add still more obstacles to the already
6
littered course. Until today, where a petitioner sought review
after the challenged order had ceased to aggrieve it, as with two
of the petitions in this case, we evaluated the case under
standing doctrine alone. Yet the court today addresses mootness
even though “if a plaintiff lacks standing at the time the action
commences, the fact that the dispute is capable of repetition yet
evading review will not entitle the complainant to a federal
judicial forum.” See Laidlaw Envtl. Servs., 528 U.S. at 191.
Moreover, we have no reason to reevaluate a petitioner’s
standing during the course of a proceeding, as we retain
authority to weed out those cases that cease to present justiciable
controversies by using the doctrines designed for that
purpose—mootness and ripeness. The court’s midstream
assessment of standing muddies this sensible framework. True,
standing and mootness are closely related, but they are cousins,
not twins.