Xcel Energy Services Inc. v. Federal Energy Regulatory Commission , 510 F.3d 314 ( 2007 )

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued October 5, 2007 Decided December 14, 2007
No. 06-1174
XCEL ENERGY SERVICES INC.,
PETITIONER
v.
FEDERAL ENERGY REGULATORY COMMISSION,
RESPONDENT
On Petition for Review of Orders of the
Federal Energy Regulatory Commission
Floyd L. Norton, IV argued the cause for petitioner. With
him on the briefs were Heath K. Knakmuhs and William M.
Dudley.
Carol J. Banta, Attorney, Federal Energy Regulatory
Commission, argued the cause for respondent. With her on
the brief were John S. Moot, General Counsel, and Robert H.
Solomon, Solicitor.
Before: GARLAND and GRIFFITH, Circuit Judges, and
WILLIAMS, Senior Circuit Judge.
Opinion for the Court filed by Senior Circuit Judge
WILLIAMS.
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WILLIAMS, Senior Circuit Judge: Section 205 of the
Federal Power Act, 16 U.S.C. § 824d, and FERC regulations,
18 C.F.R. § 35.3, require that utilities provide 60 days prior
notice to the Federal Regulatory Energy Commission before a
rate takes effect. FERC may waive that requirement,
however, “for good cause shown.” Id. at § 35.11. Xcel
Energy Services, Inc. challenges FERC’s decision not to
waive the prior notice requirement for four interconnection
agreements that Xcel filed more than four years after the
effective date chosen by the parties. Xcel’s challenge to the
ruling on one of the four agreements fails for want of
standing; as to the other three, we find FERC’s decision
neither arbitrary nor capricious.
* * *
Four interconnection agreements are at issue here, but the
four share origins with a fifth, on which the four disputed ones
pivot. Public Service Company of Colorado—an affiliate of
Xcel (and, for simplicity’s sake, also referred to here as
“Xcel”)—conducted a competitive bidding process that
resulted in power purchase agreements and five
interconnection agreements with four companies. Xcel
entered into all five interconnection agreements at various
times between January 26, 2001 and October 26, 2001. Xcel
filed an agreement with Plains End, LLC—the one of the five
that is not directly at issue here—on August 22, 2001, but a
dispute arose between the two over the calculation of the
facilities charge as set forth in the agreement. See Xcel
Energy Servs., Inc., 100 FERC ¶ 61,267 at 62,016 P 9 (2002).
FERC conditionally accepted the Plains End agreement on
September 13, 2002, made it effective as of August 23, 2001,
and held the facilities charge dispute in abeyance in order to
permit settlement negotiations between the parties. Id. at
62,019 P 33. The parties reached an agreement on March 12,
3
2004, which FERC accepted on May 27, 2004. See Xcel
Energy Servs., Inc., 107 FERC ¶ 61,198 (2004).
Of the four remaining transactions, an agreement was
initially filed for one in July 2001 (an agreement with
Fountain Valley Power, LLC), providing for a charge of about
$31,000 a month. FERC accepted it and granted a waiver
allowing a retroactive date of February 21, 2001. Agreements
for the remaining three transactions—two with Black Hills
Colorado, LLC, and another with BIV Generation Co., LLC—
were also signed in 2001 but not filed with FERC. For about
three of the next four years, service proceeded while the
parties awaited resolution of the Xcel-Plains End dispute. As
we have seen, that wrapped up in March 2004 and FERC
accepted the result in May.
Just shy of a year-and-a-half later, on November 14,
2005, Xcel filed the four “Amended and Restated”
interconnection agreements now at issue. Each new
agreement provided for a new facilities charge calculated
pursuant to the terms of the Plains End settlement agreement.
We note, and will return to the point later, that the Fountain
Valley agreement filed in 2005 provided for a charge of about
$6500 a month; the new rate represented about an 80%
reduction from the prior filing, presumably due to the
influence of the Plains End settlement. Xcel requested waiver
of the 60-day prior notice requirement, asking that each
agreement be effective as of the 2001 date of the initial
interconnection agreements. FERC declined to waive the
prior notice requirement and instead accepted the four
interconnection agreements with an effective date of January
13, 2006. Xcel Energy Servs., Inc., Letter Order, Docket Nos.
ER06-207-000, ER06-208-000. ER06-209-000, ER06-210-
000 (Dec. 23, 2005).
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Xcel requested rehearing. In an order denying rehearing,
FERC found that Xcel had failed to show either that the
agreements fit within the narrow situations in which it was
willing to grant waiver as a matter of course, or that there
were “extraordinary circumstances” justifying waiver. Xcel
Energy Servs. Inc., 114 FERC ¶ 61,295 at 62,048 P 9 (2006)
(“Order Denying Reh’g”). FERC explicitly rejected the idea
that the multi-year provision of service under unfiled
agreements, while the parties awaited resolution of the Plains
End matter, presented extraordinary circumstances. Id. This
petition followed.
* * *
Standing. Before we can reach the substance of Xcel’s
petition for review, we must address two issues related to its
standing.
Xcel describes a financial arrangement underlying all
four interconnection agreements that seems—at least at first
glance—somewhat odd. Those interconnection agreements
provide for Xcel to collect monthly facilities charges from its
counterparts, but power purchase agreements between the
parties require Xcel to reimburse its counterparts for those
charges in the same amount. Thus it would seem that what
Xcel takes it then gives away, resulting in a net gain of
nothing (or, more important for our purposes, a loss of
nothing from FERC’s decision not to waive the prior notice
requirement). But Xcel explains that this odd arrangement is
in fact a stepping stone to a financial recovery: collection and
reimbursement are a predicate to Xcel’s recovering the
amounts of its reimbursements from its retail customers. So
while the net effect between Xcel and its counterparts is zero,
Xcel’s net injury is not. As a direct effect of FERC’s refusal
to waive the prior notice requirement and permit an earlier
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effective date for these agreements, Xcel cannot recover those
amounts from its retail customers. FERC offers nothing to
contradict this analysis. Thus Xcel has an injury-in-fact—
except as to one agreement.
As to the fourth agreement the math fails. Xcel admits
that one of its interconnection agreements with Black Hills
Colorado, one related to the Valmont Generating Facility,
establishes a $0 monthly facilities charge. Because Xcel
collects nothing, it also reimburses nothing, so the agreement
gives it no ability to recover any amounts from retail
customers. Xcel essentially concedes that FERC’s decision
not to waive the prior notice requirement for this agreement
caused it no harm, but it nonetheless asks that we review the
decision simply because FERC addressed this interconnection
agreement in the same orders in which it addressed the others.
That coincidence provides no substitute for injury-in-fact, and
thus we dismiss the petition for review for lack of subject-
matter jurisdiction insofar as it challenges FERC’s orders in
Docket No. ER06-208.
Merits. The filing and prior notice requirements of
section 205 of the Federal Power Act, 16 U.S.C. § 824d, and
FERC regulations, 18 C.F.R. § 35.3, provide FERC with
timely information from which it can “monitor[] the
reasonableness of prices and undue discrimination in the
marketplace” and “assist the public in filing complaints” by
providing it with “good information about energy
transactions.” Revised Public Utility Filing Requirements, 99
FERC ¶ 61,107 P 46 (2002). The interconnection agreements
at issue here should have been filed with FERC not less than
60 days before going into effect, but FERC can waive that
prior notice requirement “[u]pon application and for good
cause shown.” 18 C.F.R. § 35.11. Xcel argues that it was
entitled to a waiver under existing precedent.
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In a matter decided well before the transactions here,
Central Hudson Gas & Elec. Corp., 60 FERC ¶ 61,106, reh’g
denied, 61 FERC ¶ 61,089 (1992), FERC reconsidered and
explained its policy towards waiver of the 60-day prior notice
requirement. FERC stated that it would generally grant
waivers for: (1) “uncontested filings that do not change rates,”
(2) “filings that reduce rates and charges,” and (3) “filings that
increase rates when the rate change and the effective date are
prescribed by contract.” Id. at 61338. But “absent a strong
showing of good cause” FERC would “deny requests for
waiver of notice for rate increases that do not implement a
contract requirement.” Id. at 61339.
For filings that provide for new service, as here, Central
Hudson gives great weight to whether the agreement was filed
before or after the commencement of that service. If the
agreement was filed prior to the commencement of service
FERC will grant a waiver “if good cause is shown,” but if an
agreement was filed on or after the day service has
commenced, FERC will not grant a waiver “[a]bsent
extraordinary circumstances.” Id. A year after Central
Hudson, FERC decided to eliminate the extraordinary
circumstances test “for waiver for the filing of service
agreements under umbrella tariffs” and to grant waiver of
notice “if service agreements are filed within 30 days after
service commences.” Prior Notice and Filing Requirements
Under Part II of the Federal Power Act, 64 FERC ¶ 61,139 at
61984, order on reh’g, 65 FERC ¶ 61,081 (1993) (“Prior
Notice”). FERC expressly reaffirmed, however, that it would
“not relax the ‘extraordinary circumstances’ standard of
waiver for any other type of agreement for new service.” Id.Xcel claims that the monthly access charges reflected in
the late-filed interconnection agreements hinged on the
negotiations and eventual settlement between Xcel and Plains
End, and that therefore extraordinary circumstances existed:
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earlier filing would have merely resulted in more time-
consuming dispute resolution at the expense of FERC
resources. Further, Xcel invokes the value of private
contracts; the parties have agreed to an effective date in each
of the interconnection agreements, and Xcel reasons that
FERC’s refusal to grant waivers under such circumstances
conflicts with precedents—FERC’s, ours, and the Supreme
Court’s (the Mobile-Sierra doctrine, see United Gas Pipe Line
Co. v. Mobile Gas Serv. Corp., 350 U.S. 332 (1956))—that
favor enforcement of contractual commitments.
“Our review of the Commission’s waiver rulings is ‘quite
limited,’ as ‘Congress, through § 205, has clearly delegated
waiver discretion to the Commission and not to the Courts.”
NSTAR Elec. & Gas Corp. v. FERC, 481 F.3d 794, 799 (D.C.
Cir. 2007) (quoting City of Girard v. FERC, 790 F.2d 919,
925 (D.C. Cir. 1986)). Since Xcel could readily have filed all
four disputed agreements pending the outcome of the Plains
End negotiations (or agency and court proceedings if
necessary), it seems far from arbitrary for the Commission to
find that the pendency of those discussions, and the parties’
apparent intent to use their outcome as a model, were not
extraordinary circumstances.
This is all the more evident from the strange case of
Xcel’s agreements with Fountain Valley. Xcel did file the
initial agreement in that case; the rates contained in the
amended agreement, which FERC refused to make
retroactive, included rates about 80% lower than those in the
initial filing. So a simple mechanism for handling the parties’
problem was obviously available.
As to Fountain Valley, of course, the amended agreement
appears to fit within the second of Central Hudson’s examples
of waivers that are granted readily—“filings that reduce rates
and charges.” In its reply brief, Xcel claims for the first time
8
that FERC should have considered waiver of the prior notice
requirement for its amended Fountain Valley agreement under
that relaxed standard. (Xcel’s Reply Br. 16). Xcel has twice
waived this argument, Consol. Edison Co. of N.Y. v. FERC,
347 F.3d 964, 970 (D.C. Cir. 2003), by failing to present it to
FERC as required by § 313(b) of the Federal Power Act, 16
U.S.C. § 825l(b), and by failing to raise it in its opening brief
here, see Power Co. of Am. v. FERC, 245 F.3d 839, 845 (D.C.
Cir. 2001). We are perplexed at the net result of FERC’s
delaying the filing of a rate-reducing amended agreement, but
Xcel’s quest for review suggests strongly that the initial filing
at the far higher rate yielded no revenue that Xcel has been
able to keep. In any event, we have no jurisdiction over the
matter.
Perhaps recognizing the weakness of its efforts to fit its
claim within the precepts of Central Hudson or Prior Notice,
Xcel points us to cases that predate Central Hudson. See City
of Holyoke Gas & Elec. Dep’t v. FERC, 954 F.2d 740 (D.C.
Cir. 1992); City of Girard, 790 F.2d 919; City of Piqua v.
FERC, 610 F.2d 950 (D.C. Cir. 1979). We are uncertain
whether these cases provide much support for Xcel’s claims,
and in any event we don’t see how any such support survives
the express reconsideration and restatement of FERC policy in
Central Hudson and Prior Notice.
Finally, we have no jurisdiction to address Xcel’s
separate argument that FERC’s decision not to waive the prior
notice requirement imposed a penalty that departed
dramatically from agency precedent. In Prior Notice, FERC
determined that “if waiver is denied and [a proposed just and
reasonable] rate goes into effect after service has commenced,
we will require the utility to refund to its customers the time
value of the revenues collected . . . for the entire period that
the rate was collected without Commission authorization.” 64
FERC ¶ 61,139 at 61979 (footnote omitted). Because Xcel
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never collected charges under its late-filed agreements,
however, it argues that FERC’s decision not to waive the prior
notice requirement has effectively deprived Xcel of the ability
to collect those charges at all—a greater penalty than mere
refund of the time value of those charges. But this is an
argument that Xcel needed to urge first before FERC, and
Xcel’s failure to raise the objection in an application for
rehearing deprives us of jurisdiction under § 313(b) of the
Federal Power Act, 16 U.S.C. § 825l(b). See also Pub. Serv.
Elec. & Gas Co. v. FERC, 485 F.3d 1164, 1169-70 (D.C. Cir.
2007).
* * *
As to the Black Hills Colorado agreement relating to the
Valmont facility, we dismiss the petition for lack of standing.
As to the other three disputed agreements, we uphold FERC’s
orders and deny Xcel’s petition for review.
So ordered.