Searching over 5,500,000 cases.

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Old Dominion Electric Cooperative v. Federal Energy Regulatory Commission

United States Court of Appeals, District of Columbia Circuit

August 3, 2018

Old Dominion Electric Cooperative, Petitioner
Federal Energy Regulatory Commission, Respondent LSP Transmission Holdings, LLC, et al., Intervenors

          Argued March 19, 2018

          On Petitions for Review of Orders of the Federal Energy Regulatory Commission

          Jonathan S. Franklin argued the cause for petitioners. With him on the briefs were Michael A. Yuffee, Adrienne E. Clair, and Rebecca L. Shelton.

          Larisa M. Vaysman and Michael R. Engleman were on the brief for intervenors LSP Transmission Holdings, LLC, et al. in support of petitioners.

          Lona T. Perry, Deputy Solicitor, Federal Energy Regulatory Commission, argued the cause for respondent. With her on the brief was Robert H. Solomon, Solicitor.

          Morgan Parke, Stacey L. Burbure, Kenneth G. Jaffe, Neil H. Butterklee, Gary E. Guy, Amanda Riggs Conner, Randall V. Griffin, Richard P. Bress, David L. Schwartz, Vilna Waldron Gaston, and Sandra E. Rizzo were on the brief for intervenors FirstEnergy Companies, et al. in support of respondent. Kenneth R. Carretta and Elias G. Farrah entered appearances.

          Before: Henderson, Kavanaugh, [*] and Katsas, Circuit Judges.



         In the past, electric utilities in the mid-Atlantic region have shared the costs of high-voltage transmission lines, which benefit the entire region. In 2015, some of these utilities proposed to eliminate cost sharing for projects undertaken only to satisfy an individual utility's planning criteria, including projects that involve high-voltage lines. The Federal Energy Regulatory Commission approved this change and applied it to deny cost sharing for projects to rebuild two high-voltage lines. The petitioners, whose local zone now must bear the entire cost of these two projects, contend that FERC's decisions were unlawful or inadequately explained.


         The Federal Power Act gives FERC jurisdiction over facilities that transmit electricity in interstate commerce. See 16 U.S.C. § 824(b)(1); 42 U.S.C. § 7172(a)(1)(B). Under the Act, electric utilities must charge "just and reasonable" rates. 16 U.S.C. § 824d(a). For decades, the Commission and the courts have understood this requirement to incorporate a "cost-causation principle"-the rates charged for electricity should reflect the costs of providing it. See Ala. Elec. Co-op., Inc. v. FERC, 684 F.2d 20, 27 (D.C. Cir. 1982). We often frame this principle as one that ensures "burden is matched with benefit," so that FERC "generally may not single out a party for the full cost of a project, or even most of it, when the benefits of the project are diffuse." BNP Paribas Energy Trading GP v. FERC, 743 F.3d 264, 268 (D.C. Cir. 2014); see Midwest ISO Transmission Owners v. FERC, 373 F.3d 1361, 1368-69 (D.C. Cir. 2004). This cost-causation principle "add[s] flesh to [the] bare statutory bones" of the just-and-reasonable-rate requirement. K N Energy, Inc. v. FERC, 968 F.2d 1295, 1300 (D.C. Cir. 1992).

         To promote more efficient coordination among electric utilities, FERC has promulgated a regulation known as "Order No. 1000." Transmission Planning and Cost Allocation by Transmission Owning and Operating Public Utilities, 136 FERC ¶ 61, 051 (2011). It imposes two requirements relevant here. First, utilities in each planning region must jointly produce a regional transmission plan to determine what new facilities would best meet regional needs for electricity. Id. P 148. Second, in their respective tariffs, utilities must include a formula "for allocating the costs of new transmission facilities selected in the regional transmission plan for purposes of cost allocation." Id. P 558. This formula must satisfy six general principles, the first of which is the cost-causation principle: "The cost of transmission facilities must be allocated to those within the transmission planning region that benefit from those facilities in a manner that is at least roughly commensurate with estimated benefits." Id. P 622. Order No. 1000 requires each utility to show, through compliance filings, that its cost-allocation formula is consistent with the six specified principles. Id. P 603.

         This case involves disputes within a planning region encompassing much of the Mid-Atlantic and part of the Midwest. In this region, the transmission of electricity is overseen by PJM Interconnection, LLC, which controls but does not own the facilities of its member utilities. ("PJM" refers to Pennsylvania, New Jersey, and Maryland-the first three states in which PJM operated.) The region is subdivided into zones that correspond to areas served by each individual utility. The utilities are governed by the PJM Operating Agreement, which sets forth the respective rights and duties of PJM and its members, and the PJM Open Access Transmission Tariff, which details the terms on which the utilities provide service.

         To comply with the regional-planning requirement of Order No. 1000, PJM-member utilities maintain a Regional Transmission Expansion Plan. Schedule 6 of the Operating Agreement specifies what kind of projects must be included in this Regional Plan. As relevant here, Schedule 6 designates three categories of projects for inclusion in the Plan: (1) projects to satisfy PJM's own planning and reliability criteria; (2) projects to satisfy reliability criteria developed by standard-setting organizations such as the North American Electric Reliability Corporation ("NERC"); and (3) projects to satisfy planning criteria established by individual utilities. The utilities submit their individual planning criteria both to FERC, on a document called Form 715, and to PJM.

         Schedule 12 of the Tariff addresses the cost-sharing requirements of Order No. 1000. Before 2015, Schedule 12 required regional cost sharing for all "Regional Facilities," which it defined as projects that were (a) included in the Regional Plan to satisfy any of the planning criteria described above and (b) particular kinds of high-voltage projects. Schedule 12 also establishes the cost-allocation formula for such Regional Facilities. Half of these costs are allocated on a pro rata basis, based on the level of customer demand within each zone, regardless of where the specific project at issue is located. This method of cost allocation is called the "postage stamp" approach. The remaining costs are allocated based on an estimate of which zones most directly benefit from the project at issue, as made under what is called a "distribution factor ('DFAX') analysis." In contrast, the costs of lower-voltage facilities, which generally do not qualify as "Regional Facilities," are allocated solely under a DFAX analysis.

         As required by Order No. 1000, PJM submitted this cost-allocation methodology to FERC, which approved it in March 2013. PJM Interconnection, LLC, 142 FERC ¶ 61, 214, PP 412-26 (2013) ("PJM Compliance Order"). In so doing, FERC specifically found that "high-voltage transmission facilities have significant regional benefits that accrue to all members of the PJM transmission system." Id. P 413. Further, it found that the proposed hybrid cost-allocation method for high-voltage facilities, incorporating both postage-stamp and DFAX components, would satisfy the cost-causation principle "that costs be allocated in a manner that is roughly commensurate with benefits received." Id. According to FERC, the postage-stamp component "capture[d] the full spectrum of benefits associated with high-voltage facilities, including difficult to quantify regional ...

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.