FERC wins, utilities lose in suit over transmission planning

Source: Amanda Reilly, E&E News reporter • Posted: Monday, June 25, 2018

The Federal Energy Regulatory Commission prevailed in court today in a lawsuit brought by dozens of electric utilities that claimed the agency was threatening local and regional transmission projects throughout the Midwest.

A three-judge panel of the U.S. Court of Appeals for the District of Columbia Circuit found the lawsuit suffered from a procedural defect and that FERC adequately responded to the utilities’ concerns.

At issue is FERC’s landmark regional grid-planning rule known as Order No. 1000, which required regional grid planning instead of the previous state- and utility-centric model and which the D.C. Circuit has previously upheld.

The order includes a requirement that transmission owners identify potential interregional projects — those that span the boundaries of transmissions systems — and consider those projects in their planning processes.

In filings to FERC on how it would coordinate with its Southeastern counterpart, the Midcontinent Independent System Operator, or MISO, included a cost-allocation formula that assumed smaller projects that had not yet been approved would be replaced with interregional ones.

MISO, however, didn’t consider the displacement of local and regional projects that had already been approved by its board.

But FERC found that formula didn’t fully comply with its requirement and that MISO needed to consider already-approved local and regional projects. Excluding those projects would undervalue the benefits of larger interregional projects, FERC said.

Led by Ameren Services Co., utilities filed suit in the D.C. Circuit, arguing the commission’s order would hurt developers that have already begun spending money on studies, real estate and materials for approved projects. MISO intervened on the utilities’ behalf.

“Literally, dozens” of projects are “susceptible to being bumped,” Michael Thompson, an attorney for the utilities, told judges at November oral arguments (E&E News PM, Nov. 8, 2017).

The court, though, typically applies a highly deferential standard when it comes to FERC decisions about complex energy issues.

In today’s opinion, written by Judge Sri Srinivasan, the D.C. Circuit found that the utilities failed to present a key argument in front of FERC before filing their lawsuit: that the commission’s orders impermissibly shifted the burden of proving just and reasonable rates to MISO.

Siding with the utilities would “undermine” the Federal Power Act’s requirement that claims be administratively exhausted before court challenges, wrote Srinivasan, who was appointed to the D.C. Circuit by President Obama.

The court also found that FERC applied a “thorough” and “reasoned” explanation for rejecting MISO’s cost-allocation formula.

“In the end, we conclude that the Commission adequately responded to petitioners’ concerns about the possible effects of including regional projects in the cost-allocation calculation,” Srinivasan wrote.

He added: “Petitioners’ disagreement with the Commission’s resolution of that issue does not render the Commission’s explanation any less thorough or reasoned.”

Judges David Tatel, a Clinton appointee, and Thomas Griffith, a George W. Bush appointee, heard the case with Srinivasan.

Click here to read the court’s opinion.