Court backs FERC in decades-long dispute

Source: Hannah Northey, E&E reporter • Posted: Monday, June 17, 2013

A federal appeals court today upheld the Federal Energy Regulatory Commission’s handling of a legal dispute involving transmission agreements inked in the 1970s in New York and New Jersey.

The U.S. Court of Appeals for the District of Columbia Circuit ruled that FERC was correct to approve a settlement in 2010 between grid operators in the Midwest and utilities on the East Coast that ended years of litigation over changes to transmission agreements as they entered into an open access regime the agency created.

The court also rejected arguments made by NRG Power Marketing LLC that FERC failed to properly justify its approval of the settlement and gave Consolidated Edison Co. of New York Inc. rights not available to other companies.

The three-judge panel said FERC “did not act arbitrarily or capriciously in approving an agreement that did not conform to PJM’s open-access transmission tariff, and [the agency’s] justifications for approving the agreement were reasonable and supported by substantial evidence.”

New York-based ConEd and Public Service Electric & Gas Co. in New Jersey forged agreements over transmission services in past decades that sparked litigation that touched on FERC’s Order 888.

FERC ushered in wholesale power competition throughout the country when it approved the rule in 1996, and required all utilities to open their transmission systems to all generators and customers and offer them the same transmission service they provide themselves (Greenwire, March 2, 2006).

The rule also urged utilities to create independent system operators and regional transmission operators — entities that control and operate the grid in various regions of the country — and required each utility to file open access transmission tariffs.

In 2010, FERC addressed the dispute between ConEd, PSE&G and the grid operators to ensure ConEd received reliable service, and said the agreement did not show ConEd “undue preference.”

NRG, however, filed a petition and asked the court to review the matter, saying the agreement was preferential to ConEd.

The court rejected that assertion and said NRG failed to address “operational challenges” that existed in providing service to ConEd through two independent transmission operators. NRG also failed to acknowledge that FERC recognized the need for unique agreements to address specific reliability concerns, the court said.

“FERC ‘must be given the latitude to balance the competing considerations and decide on the best resolution,'” the judges wrote.