FERC loses court fight on utility payments for transmission upgrades

Source: Jeremy P. Jacobs, E&E reporter • Posted: Wednesday, August 27, 2014

A federal appeals court today threw out the Federal Energy Regulatory Commission’s approval of a regional operator’s decision to require a New Jersey electric utility to pay for grid upgrades that were completed years before it asked to join the operator’s network.

At issue in the complicated case before the U.S. Court of Appeals for the District of Columbia Circuit is West Deptford Energy LLC’s application to join the PJM Interconnection.

When the West Deptford Township company applied to join PJM in 2006, the operator’s tariff said it could charge a new utility for transmission upgrades to its grid that took place before the application. In this case, the upgrades to PJM’s Mickleton-Monroe transmission line were completed in 2003.

However, PJM amended its tariff in 2008 while West Deptford’s application was still pending. The new tariff language said it would only charge new members for upgrades completed in the five years prior to the utility’s joining.

West Deptford contended that because the upgrades were completed in 2003 and PJM had not accepted its application in 2008, it is not responsible for those costs — up to $9 million.

FERC sided with PJM. But Judge Patricia Millett, writing for the unanimous three-judge panel, said the commission had offered no explanation for why the earlier tariff applied.

“The Commission held that the amount of money West Deptford would have to pay to obtain transmission services would be dictated by a tariff provision that had been superseded more than three years before PJM even proposed a contract,” Millett wrote.

“To sustain that determination, the Commission was obligated to provide a reasoned explanation of how applying that charge comported with the text of the Federal Power Act or prior Commission precedent. The Commission’s decision did neither.”

The court vacated FERC’s decision and sent it back to the commission for further consideration.

FERC had contended in court that PJM had given West Deptford fair warning that it would be responsible for the costs of the upgrades, pointing to PJM studies and letters from 2006, 2010 and 2011.

West Deptford, however, maintained that PJM was violating the “filed rate doctrine” by applying a tariff that was no longer binding.

Click here for the opinion.