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United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued November 25, 2003 Decided December 30, 2003
No. 02-1373
SOUTHERN COMPANY SERVICES, INC.,
PETITIONER
v.
FEDERAL ENERGY REGULATORY COMMISSION,
RESPONDENT
DUKE ENERGY MURRAY, LLC AND
TENASKA ALABAMA PARTNERS, L.P.,
INTERVENORS
–————
Petition for Review of Orders of the
Federal Energy Regulatory Commission
–————
Andrew W. Tunnell argued the cause for petitioner. With
him on the briefs were Dan H. McCrary, Jennifer M. Buett-
ner, and Kevin A. McNamee.
Laura J. Vallance, Attorney, Federal Energy Regulatory
Commission, argued the cause for respondent. With her on
the brief were Cynthia A. Marlette, General Counsel, and
Dennis Lane, Solicitor.
Bills of costs must be filed within 14 days after entry of judgment.
The court looks with disfavor upon motions to file bills of costs out
of time.
2
Ashley C. Parrish argued the cause for intervenors. With
him on the brief were Gretchen Schott, Larry F. Eisenstat,
M. Eric Eversole, and Neil L. Levy.
Before: GINSBURG, Chief Judge, and EDWARDS and TATEL,
Circuit Judges.
Opinion for the Court filed by Circuit Judge EDWARDS.
EDWARDS, Circuit Judge: On February 19, 2002, Southern
Company Services, Inc. (‘‘Southern’’) submitted an informa-
tional filing to the Federal Energy Regulatory Commission
(‘‘FERC’’ or ‘‘Commission’’) on behalf of a group of public
utilities. The filing notified the Commission of Southern’s
intention to seek recovery of line outage costs incurred to
allow generators operated by Tenaska Alabama Partners,
L.P. (‘‘Tenaska’’), and Duke Murray North America, LLC
(‘‘Duke’’), to interconnect with Southern’s transmission sys-
tem. The claim for costs was based on Southern’s intercon-
nection agreements with Tenaska and Duke. The Commis-
sion rejected the filing, holding that the interconnection
agreements did not specifically authorize recovery for outage
costs, and that, even if the agreements did authorize such
recovery, Southern had failed to show that the outages were
attributable to the interconnection of the generators. South-
ern then sought rehearing, but the request was denied by
FERC.
Southern now petitions this court for review of FERC’s
orders. We deny the petition for review solely on the ground
that the disputed interconnection agreements do not author-
ize recovery of outage costs.
I. BACKGROUND
Southern is the services company and agent for the Ala-
bama Power Company (‘‘Alabama Power’’) and the Georgia
Power Company (‘‘Georgia Power’’), as well as other public
utilities. The utilities own and operate a large, high-voltage
electric transmission system serving Alabama, Georgia, Flori-
da, and Mississippi. Tenaska and Duke each own and oper-
ate independent electric generating facilities that provide
3
electric power to the nation’s transmission grid. Tenaska’s
facility is in Alabama, and Duke’s facility is in Georgia.
In order to provide electric power, generating facilities
interconnect with an electric transmission system. To
achieve this end, Tenaska entered into an interconnection
agreement with Alabama Power on January 12, 2000, and
Duke entered into an interconnection agreement with Georgia
Power on April 23, 2001. Section 5.2.1 of the Tenaska
agreement provides that
Tenaska shall be responsible for, and shall reim-
burse Alabama Power for, all costs and expenses
incurred by or on behalf of Alabama Power in
connection with any planning, design, construction,
installation, testing, inspection, ownership, operation
and maintenance of the Interconnection Facilities.
Interconnection Agreement By and Between Tenaska Ala-
bama Partners, L.P. and Alabama Power Company § 5.2.1,
Appendix (‘‘App.’’) 11 (‘‘Tenaska Agreement’’). Section 5.2.1
of the Duke agreement states that,
[t]o the extent consistent with FERC policy, Genera-
tor shall be responsible for, and shall reimburse
Georgia Power for, all costs and expenses reason-
ably incurred by or on behalf of Georgia Power in
connection with the planning, design, construction,
installation, testing, inspection, ownership, operation
and maintenance of all or any part of the Intercon-
nection Facilities during the Term of this Agree-
ment.
Interconnection Agreement By and Between Duke Energy
Murray, LLC and Georgia Power Company § 5.2.1, App. 58
(‘‘Duke Agreement’’). FERC accepted these agreements for
filing as rate schedules governing the interconnection of
Tenaska’s and Duke’s generating facilities with Southern’s
transmission system. See Alabama Power Company Rate
Schedule Designations, Docket No. ER00-1608-000, App. 38;
Southern Operating Companies Rate Schedule Designations,
Docket Nos. ER01-2164-000 & ER01-2166-000, App. 98.
4
At issue in this case are ‘‘outage costs’’ incurred when
Southern temporarily removes transmission lines in order to
interconnect a generator. Transmission outages result from
a number of causes, including generator interconnections,
routine maintenance, load problems, or inclement weather
conditions. In this case, the disputed outages were planned
to accommodate the interconnection of the Tenaska and Duke
generators.
Southern scheduled a line outage from October 15, 2001
through November 4, 2001 to facilitate Tenaska’s interconnec-
tion. Letter from Terry J. Coggins, Interconnection Project
Manager, Southern Company Services, Inc. to Nicholas Bor-
man, Tenaska Alabama Partners, L.P. of 10/11/01, App. 119-
20. And Southern scheduled a line outage from January 2,
2002 through January 20, 2002, to facilitate Duke’s intercon-
nection. Letter from John E. Lucas, Transmission Services
Manager, Southern Company Services, Inc. to Tom Littleton,
Manager, Origination, Duke Energy North America, LLC of
12/19/01, App. 122-23. In letters confirming the arrange-
ments for the generator interconnections, Southern made it
clear that it expected to be reimbursed by Tenaska and Duke
pursuant to § 5.2.1 of their respective interconnection agree-
ments for the costs associated with these scheduled outages.
See id.; see also Letter from Coggins to Borman of 10/11/01,
App. 119. It is also undisputed that Tenaska and Duke
agreed to interconnect their facilities to Southern’s system
during these scheduled outages. And there is nothing in the
record to indicate that the contested outages were caused by
load or weather problems, or that routine maintenance was
scheduled during the outages.
On February 19, 2002, Southern submitted an informational
filing to FERC notifying the Commission that it intended to
seek recovery from Tenaska and Duke under the terms of the
interconnection agreements for line outage costs incurred
when the generators interconnected their facilities with
Southern’s transmission system. Southern identified three
specific categories of costs associated with the interconnec-
tions: ‘‘(1) costs associated with procuring power to compen-
sate for additional line losses caused by the outage; (2)
5
refunds to transmission customers associated with conditional
firm service; and (3) redispatch costs caused by the outage.’’
Informational Filing Regarding Southern Companies’ Recov-
ery of Transmission Line Outage Costs Under Their Inter-
connection Agreements with Tenaska Alabama Partners, L.P.
and Duke Energy North America, LLC at 2, App. 100
(‘‘Informational Filing’’), reported at 67 Fed. Reg. 9729
(F.E.R.C. 2002). Southern sought to recover costs in the first
two categories.
The informational filing noted that Southern did ‘‘not at
this time intend to assign any line outage costs to intercon-
nection customers that schedule to interconnect their facilities
during times when the affected line(s) was already scheduled
to be out of service for maintenance.’’ Informational Filing at
3, App. 101. Southern’s filing included an affidavit given by
James M. Howell, Jr., its Principal Engineer in Bulk Power
Operations, detailing the methodology for determining and
assigning responsibility for the outage costs. The affidavit
explains that,
during the line outage, Southern Companies use a
standard industry state estimator modeling applica-
tion to create a load flow model of the transmission
systemTTTT Southern Companies use a standard
industry power flow to capture, within each load flow
model, the flows that would have occurred if the line
had been in service for the time period of the load
flow model. The difference between the line-out
case and the line-in case represents the additional
losses attributable to the interconnection customer’s
scheduled line outage.
Affidavit of James M. Howell, Jr. at 3, App. 111.
Tenaska filed a protest to Southern’s informational filing,
and Duke filed a motion to intervene and protest. They each
argued that the interconnection agreements did not authorize
recovery of outage costs, and that such recovery was not
supported by FERC precedent. See Protest of Tenaska
Alabama Partners, L.P., App. 133-52; Motion to Intervene of
6
Duke Energy North America, LLC and Protest of Duke
Energy Murray, LLC, App. 153-67.
On April 10, 2002, FERC rejected Southern’s informational
filing. FERC held that ‘‘Southern has not shown that the
Interconnection Agreements at issue here allow recovery of
these costs.’’ Southern Co. Servs. Inc., 99 F.E.R.C. ¶ 61,031,
at 61,116 (2002) (‘‘Order Rejecting Filing’’). In the alterna-
tive, the Commission held that,
[w]hile Southern may be able to determine the loss-
es associated with a line outage, it has not demon-
strated that losses occurring during the outages
were solely attributable to Duke Murray and Tenas-
ka. Southern has not shown that the increase in
losses are not the result of other conditions, such as
load[,] weather conditions, or other outages in the
area.
Id. at 61,117.
Southern requested rehearing, which the Commission de-
nied. The Commission explained:
14. The Commission rejects Southern’s argument
that interconnection agreements here provide for
recovery of the costs at issue because of the ‘‘all
costs and expenses’’ language in § 5.2.1. We do not
read that language as allowing Southern to charge
the generators for costs that Southern has not
shown to be appropriately allocated to them. Trans-
mission outages occur in the normal course of busi-
ness, not just to interconnect generation facilities
(e.g. routine maintenance, reconfiguring or adding
transmission facilities or due to weather condi-
tions)TTTT
15. The Commission’s regulations require that all
rates and charges must be clearly and specifically
set forth in the rate scheduleTTTT
16. As we noted in the April 10 Order, identifica-
tion of broad cost categories is not sufficient. Inter-
7
connection agreements must specifically identify the
outage costs to be recovered.
Southern Co. Servs., Inc., 101 F.E.R.C. ¶ 61,035, at 61,143
(2002) (‘‘Order Denying Rehearing’’).
Southern now petitions this court for review of the orders
rejecting the informational filing and denying rehearing.
II. ANALYSIS
A. Standard of Review
In order to succeed in its challenge, Southern must show
that FERC’s orders – interpreting the interconnection agree-
ments as not authorizing Southern to recover outage costs
due to the failure of the agreements to set forth those costs
clearly and specifically – are ‘‘arbitrary, capricious, an abuse
of discretion, or otherwise not in accordance with law.’’ 5
U.S.C. § 706(2)(A) (1996). If the intent of the parties is
clearly expressed in the disputed agreements, that intent
must prevail. If the contractual language is ambiguous, we
defer to the agency’s reasonable interpretation. Reed v. R.R.
Retirement Bd., 145 F.3d 373, 375 (D.C. Cir. 1998) (citing
Chevron U.S.A. Inc. v. Natural Res. Def. Council, 467 U.S.
837 (1984); Nat’l Fuel Gas Supply Corp. v. FERC, 811 F.2d
1563, 1569 (D.C. Cir. 1987)).
When, as here, FERC has accepted agreements as rate
schedules, we defer to the Commission’s interpretation of
ambiguous contract provisions, ‘‘because ‘Congress has explic-
itly delegated to FERC broad powers over ratemaking, in-
cluding the power to analyze relevant contracts.’ ’’ Baltimore
Gas & Elec. Co. v. FERC, 26 F.3d 1129, 1135 (D.C. Cir. 1994)
(quoting Tarpon Transmission Co. v. FERC, 860 F.2d 439,
441-42 (D.C. Cir. 1988)). We will not accept FERC’s inter-
pretation of a contract, however, unless it is ‘‘amply sup-
ported, both legally and factually.’’ Id.
B. The Interconnection Agreements
Southern argues that the provision in the Tenaska and
Duke agreements allowing Southern to recover ‘‘all costs and
8
expenses’’ in connection with ‘‘planning, design, construction,
installation’’ of the interconnection facilities unambiguously
authorizes recovery of outage costs. Petitioner’s Br. at 16.
The Commission rejected this interpretation of the agree-
ments, because, under well-established FERC rules, all rates
and charges must be clearly and specifically set forth in the
rate schedule and the agreements here do not specifically set
forth costs related to outages. Order Denying Rehearing,
101 F.E.R.C. at 61,143. We agree.
FERC regulations provide that ‘‘[e]very public utility shall
file with the Commission and post, in conformity with the
requirements of this Part, full and complete rate schedules
TTT clearly and specifically setting forth all rates and charges
for any transmission or sale of electric energy subject to the
jurisdiction of this Commission.’’ 18 C.F.R. § 35.1(a) (2003).
In previous orders, the Commission has rejected transmission
owners’ attempts to allocate particular costs associated with
generator interconnections when the transmission owner has
failed to specify costs and detail how they will be determined.
E.g., Boston Edison Co., 94 F.E.R.C. ¶ 61,236, at 61,844
(2001); ISO New England, Inc., 91 F.E.R.C.¶ 61,311, at
62,080 (2000). Therefore, Southern was on notice that the
general contract language upon which it relies is insufficient
to support a claim for outage costs.
The problem here is a lack of specificity, not ambiguity.
Southern is right that the disputed ‘‘all costs’’ language can
be unambiguous in scope. Nonetheless, in light of the Com-
mission’s specificity requirement, ‘‘all’’ does not include out-
age costs when, as here, outage costs are not specified. In
other words, parties who are subject to FERC’s regulatory
authority are bound to know that their contracts must be
drafted with an eye toward and in conformity with applicable
Commission regulations.
It is noteworthy that a number of provisions in the Tenaska
and Duke agreements satisfy the specificity rule. For exam-
ple, § 4.1 of each of the agreements provides that ‘‘[a]ll
wiring, apparatus, and other equipment necessary to receive
or deliver electric energy on [generator’s] side of the Inter-
9
connection Point shall be supplied, maintained, and operated
by and at the expense of [generator].’’ See Tenaska Agree-
ment § 4.1, App. 10; Duke Agreement § 4.1, App. 57. In the
Duke agreement, Appendix B describes Georgia Power’s
interconnection facilities and Duke’s interconnection equip-
ment, and assigns the estimated costs of certain equipment
and modifications to the Generator. See Duke Agreement
Appendix B, App. 88. Another appendix to that agreement
assigns to Duke the estimated construction costs of intercon-
nection facilities. See Duke Agreement Appendix D, App. 91.
In contrast, outage costs are not mentioned in connection
with the ‘‘all costs’’ language cited by Southern. Nor are
they mentioned elsewhere in the interconnection agreements.
Furthermore, the Commission’s interpretation of the ‘‘all
costs’’ language as referring only to charges that are specifi-
cally set forth in the agreement does not render that lan-
guage superfluous. Contracts must be read as a whole, with
meaning given to every provision. KiSKA Constr. Corp. v.
Washington Metro. Area Transit Auth., 321 F.3d 1151, 1163
(D.C. Cir. 2003), cert. denied, 124 S. Ct. 226 (2003). In light of
the entire agreement, the language ‘‘all costs and expenses’’
in connection with ‘‘any planning, design, construction, instal-
lation’’ can reasonably be interpreted to refer to the specifi-
cally mentioned costs of building and maintaining the inter-
connection facility, not to the costs of interconnecting the
generator’s facility to Southern’s transmission system.
On the record before us, we must reject Southern’s argu-
ment that the agreements unambiguously authorize recovery
for outage costs. Because FERC’s rules require that all
charges be set forth clearly and specifically, we hold that the
Commission reasonably interpreted the ‘‘all costs’’ language
as lacking the specificity required to authorize recovery of
outage costs.
C. Sole Attribution of Costs
Because we accept the Commission’s determination that
the interconnection agreements do not authorize recovery of
outage costs, we need not decide whether FERC’s alternative
rationale for rejecting Southern’s filing – i.e., that Southern
10
failed to show that the disputed costs were attributable to
Tenaska and Duke – survives scrutiny. We note, however,
that the standard applied by the Commission in reaching this
alternative holding is highly dubious.
The undisputed evidence in this case shows that Southern
took lines out of service to facilitate Tenaska’s and Duke’s
interconnections. The Commission, however, simply ignored
this unrefuted evidence and suggested that Southern’s claim
should fail because Southern could not show ‘‘with certainty’’
that there might not have been outages even absent the
generator interconnections:
Southern has not shown that the increase in losses
are not the result of other conditions, such as load[,]
weather conditions, or other outages in the area. As
pointed out by [Duke], Southern cannot establish
with certainty that the claimed outage costs are
solely attributable to Duke Murray. The same ar-
gument can be made for Tenaska.
Order Rejecting Filing, 99 F.E.R.C. at 61,117. This standard
makes no sense. Indeed, it appears to pose an insurmounta-
ble obstacle even for transmission owners who negotiate
contracts that satisfy FERC’s specificity rule.
As noted above, the record here conclusively shows that
no conditions, save for the generator interconnections,
caused the disputed outages. Indeed, the outages were pur-
posely scheduled to accommodate Tenaska and Duke. At
oral argument, counsel for FERC could cite to nothing to
contradict this evidence. The record also indicates that, by
undisputed affidavit, Southern reasonably explained a meth-
odology for allocating costs. Given this record, the result in
this case might have been different if the Tenaska and Duke
agreements had specified ‘‘outage costs’’ as recoverable by
Southern. We need not speculate further on this question,
however, because FERC reasonably determined that the
agreements do not satisfy the specificity requirement.
III. CONCLUSION
For the foregoing reasons, the petition for review is denied.