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United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued October 7, 2004 Decided November 12, 2004
No. 03-1238
MIDWEST INDEPENDENT TRANSMISSION SYSTEM OPERATOR, INC.,
PETITIONER
v.
FEDERAL ENERGY REGULATORY COMMISSION,
RESPONDENT
NEW YORK INDEPENDENT SYSTEM OPERATOR, INC., ET AL.,
INTERVENORS
Consolidated with
03-1254
On Petitions for Review of Orders of the
Federal Energy Regulatory Commission
Stephen L. Teichler argued the cause for petitioners and
intervenors in support of petitioners. With him on the briefs
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
were Arnold H. Quint, Michael E. Small, Jeffrey G. DiSciul-
lo, and Deborah C. Brentani. Stephen G. Kozey entered an
appearance.
Lona T. Perry, 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.
Before: ROGERS, TATEL, and GARLAND, Circuit Judges.
Opinion for the Court filed by Circuit Judge TATEL.
TATEL, Circuit Judge: Obligated by statute to recoup its
costs from industries it regulates, the Federal Energy Regu-
latory Commission funds its electricity-related programs
through annual charges to public utilities based on the volume
of electricity they transmit. In this case, two transmission
providers, having unsuccessfully petitioned FERC to base
those charges on sales as well as transmissions—an approach
the Commission once followed but has now abandoned—ask
this court to order FERC to reconsider its position. They
argue that changed circumstances warrant a new rule be-
cause in the wake of severe disruptions in California and
other western electricity markets, FERC has shifted its focus
from transmission to sales—an allegation FERC vehemently
disputes. Because we order rulemaking ‘‘only in the rarest
and most compelling of circumstances,’’ WWHT, Inc. v. FCC,
656 F.2d 807, 818 (D.C. Cir. 1981), and because we defer to an
agency’s view of its own regulatory priorities, we deny the
petition for review.
I.
The Omnibus Budget Reconciliation Act of 1986 (the ‘‘Bud-
get Act’’) requires that ‘‘the Federal Energy Regulatory
Commission shall, using the provisions of this section and
authority provided by other laws, assess and collect fees and
annual charges in any fiscal year in amounts equal to all of
the costs incurred by the Commission in that fiscal year.’’ 42
3
U.S.C. § 7178(a)(1). ‘‘The fees or annual charges assessed
shall be computed on the basis of methods that the Commis-
sion determines, by rule, to be fair and equitable.’’ Id.
§ 7178(b).
FERC first implemented section 7178 with respect to elec-
tricity regulation through Order No. 472 in 1987. See Annu-
al Charges Under the Omnibus Budget Reconciliation Act of
1986, Order No. 472, [Regs. Preambles 1986-1990] FERC
Stats. & Regs. ¶ 30,746, 52 Fed. Reg. 21,263 & 24,153 (1987),
clarified, Order No. 472-A, [Regs. Preambles 1986-1990]
FERC Stats. & Regs. ¶ 30,750, 52 Fed. Reg. 23,650 (1987), on
reh’g, Order No. 472-B, [Regs. Preambles 1986-1990] FERC
Stats. & Regs. ¶ 30,767, 52 Fed. Reg. 36,013 (1987), on reh’g,
Order No. 472-C, 42 F.E.R.C. ¶ 61,013 (1988). That order
assessed charges based on the twin aspects of FERC’s elec-
tricity jurisdiction: transmission and wholesale sales in inter-
state commerce. In early 2000, FERC proposed updating
the assessment methodology in light of ‘‘sweeping changes’’ in
the electricity industry. See Revision of Annual Charges
Assessed to Public Utilities, [Proposed Regs. 1999-2003]
FERC Stats. & Regs. ¶ 32,550, at 33,917 (proposed Jan. 28,
2000), 65 Fed. Reg. 5,289, 5,291 (Feb. 3, 2000) (‘‘Revision of
Charges NOPR’’). Whereas vertically integrated public utili-
ties once provided ‘‘bundled’’ generation and transmission
service to customers in a local market, a series of FERC
orders in the 1990s required ‘‘functional unbundling’’ of trans-
mission and generation services, mandating non-
discriminatory access to interstate transmission facilities and
encouraging utilities to place transmission assets under the
control of independent entities such as ‘‘independent system
operators’’ (‘‘ISOs’’) and ‘‘regional transmission organizations’’
(‘‘RTOs’’). See generally Midwest ISO Transmission Owners
v. FERC, 373 F.3d 1361, 1363-65 (D.C. Cir. 2004); Pub. Util.
Dist. No. 1 of Snohomish County v. FERC, 272 F.3d 607, 610-
12 (D.C. Cir. 2001) (per curiam).
Because FERC’s new initiatives meant increased focus on
‘‘assuring open and equal access to public utilities’ transmis-
sion systems,’’ as opposed to monitoring wholesale electricity
rates, FERC proposed to ‘‘assess our electric regulatory
4
program costs solely on the MWh of electric energy transmit-
ted in interstate commerce by public utilities, rather than, as
in the past, on both jurisdictional power sales and transmis-
sion volumes.’’ Revision of Charges NOPR, [Proposed Regs.
1999-2003] FERC Stats. & Regs. at 33,920, 65 Fed. Reg. at
5,292. FERC pointed out that sellers, though not charged
directly, would bear a portion of the charges through higher
transmission rates. Id. at 33,920-21, 65 Fed. Reg. at 5,292.
In October 2000, following notice and comment, FERC
adopted the new policy in Order No. 641. See Revision of
Annual Charges Assessed to Public Utilities, Order No. 641,
[Regs. Preambles 1996-2000] FERC Stats. & Regs. ¶ 31,109,
65 Fed. Reg. 65,757 (2000) (codified at 18 C.F.R. § 382.201),
on reh’g, Order No. 641-A, 94 F.E.R.C. ¶ 61,290, 66 Fed. Reg.
15,793 (2001).
Meanwhile, the electricity industry had entered a crisis.
Beginning in June 2000, wholesale prices in California and
other western states, driven by a combination of high gas
costs, unusual weather, and slack supply, climbed to what
FERC later called ‘‘unprecedented’’ levels. See FERC, An-
nual Performance Report for Fiscal Year 2001, at 1, 5 (Mar.
2002), http://www.ferc.gov/about/strat-docs/FY01-PR.pdf
(‘‘FY2001 Report’’). As a result, retail costs in some areas
rose by 200 to 300 percent, while two major California
utilities, barred by state law from raising retail prices yet
forced to buy power at short-term market rates, incurred
crippling debts. See In re Cal. Power Exch. Corp., 245 F.3d
1110, 1114-16 (9th Cir. 2001) (‘‘CalPX’’); FY2001 Report at 5.
In response, FERC intervened and canceled a mandatory
spot market, thus freeing utilities to enter long-term forward
supply contracts. See CalPX, 245 F.3d at 1116-18; FY2001
Report at 5-6. At the same time, FERC launched an investi-
gation of market problems and eventually ordered refunds for
excessive wholesale prices. See CalPX, 245 F.3d at 1118-19;
FY2001 Report at 5-6.
Caught off guard by the California debacle, FERC was
contrite, stating in its FY2001 Annual Performance Report,
‘‘we have a duty to change the way we do business in light of
the Western energy crisis.’’ FY2001 Report at 7. Accord-
5
ingly, FERC adopted a new ‘‘Strategic Plan,’’ a ‘‘first-ever
Business Plan that will encourage much more conscious allo-
cation of resources to the highest priority issues facing us,’’
and ‘‘[n]ew performance measures, designed to build account-
ability into all our activities.’’ Id. In its performance report
for the following year, FERC proclaimed ‘‘a new sense of
focus and direction’’ and ‘‘an increased emphasis on market
oversight and investigation.’’ FERC, Annual Performance
Report for Fiscal Year 2002, at 5-6 (Feb. 2003), http://
www.ferc.gov/about/strat-docs/FY02-PR.pdf (‘‘FY2002 Re-
port’’). FERC established an Office of Market Oversight and
Investigation (‘‘OMOI’’) charged with ‘‘mak[ing] sure that
energy markets work,’’ id. at 9, and published notice of a
major initiative to standardize wholesale electricity markets
throughout the United States, see Remedying Undue Dis-
crimination Through Open Access Transmission Service and
Standard Electricity Market Design, [Proposed Regs. 1999-
2003] FERC Stats. & Regs. ¶ 32,563 (proposed July 31, 2002),
67 Fed. Reg. 55,452 (Aug. 29, 2002) (‘‘SMD NOPR’’); FY2002
Report 7-9. While ‘‘put[ting] in place sufficient regulatory
backstops to protect consumers against the exercise of mar-
ket power when structures do not support a competitive
market,’’ this ‘‘standard market design’’ (‘‘SMD’’) proposal
aimed ‘‘to remedy remaining undue discrimination and estab-
lish a standardized transmission service and wholesale elec-
tric market design that will provide a level playing field for all
entities that seek to participate in wholesale electric mar-
kets.’’ SMD NOPR, [Proposed Regs. 1999-2003] FERC
Stats. & Regs. at 34,281, 67 Fed. Reg. at 55,455.
FERC nonetheless stuck with Order No. 641 and assessed
the first charges under the new system in July 2002. Though
FERC had denied a rehearing request shortly after issuing
Order No. 641, see Revision of Annual Charges Assessed to
Public Utilities, Order No. 641-A, 94 F.E.R.C. ¶ 61,290, 66
Fed. Reg. 15,793 (2001), the New York Independent System
Operator, Inc. (‘‘NYISO’’) and other transmission providers
filed fresh challenges based on their first bills. Among other
things, they argued that the SMD proposal evidenced an
attention to wholesale markets inconsistent with FERC’s
6
assumptions in promulgating the new system. While insist-
ing its focus remained on transmission, FERC denied the
petitions as untimely collateral attacks on Order No. 641.
Cal. Indep. Sys. Operator, Inc., 101 F.E.R.C. ¶ 61,043 (2002).
In response, NYISO, joined this time by the Midwest Inde-
pendent Transmission System Operator (‘‘MISO’’) and one
other transmission provider, filed a rulemaking petition urg-
ing FERC to reconsider the order. The Midwest ISO Trans-
mission Owners—the group of utilities owning transmission
assets controlled by MISO—filed comments in support of the
petition. FERC denied the petition, see Midwest Indep.
Transmission Sys. Operator, Inc., 103 F.E.R.C. ¶ 61,048
(2003), and when MISO and the MISO Owners (to whom we
shall refer collectively as ‘‘MISO’’ throughout this opinion)
sought a rehearing, FERC denied that as well, see Midwest
Indep. Transmission Sys. Operator, Inc., et al., 104 F.E.R.C.
¶ 61,060 (2003).
MISO now petitions for review of these two orders. NYI-
SO has intervened in support.
II.
Although both parties assure us that we have jurisdiction
over this case, we have an independent obligation to be
certain. See Steel Co. v. Citizens for a Better Env’t, 523 U.S.
83, 94-95 (1998). We may consider petitions filed directly in
this court—as was MISO’s—only if Congress has provided for
initial review in the courts of appeals. Otherwise, parties
challenging agency action must first seek relief in the district
court, proceeding to this court only on appeal—a procedure
confusingly termed ‘‘nonstatutory review.’’ See Five Flags
Pipe Line Co. v. Dep’t of Transp., 854 F.2d 1438, 1439-40
(D.C. Cir. 1988). In this case, the jurisdictional basis ad-
vanced by the parties, 16 U.S.C. § 825l(b), is open to question
because it applies only to orders issued in proceedings ‘‘un-
der’’ the Federal Power Act (‘‘FPA’’), whereas the annual
charges at issue here derive from 42 U.S.C. § 7178, a provi-
sion of the Budget Act. In the end, however, we agree with
the parties that we have jurisdiction.
7
Though not part of the FPA, section 7178 directs FERC to
implement its mandate ‘‘by rule,’’ § 7178(b), and to assess and
collect the fees ‘‘using the provisions of this section and
authority provided by other laws,’’ § 7178(a)(1) (emphasis
added). With respect to FERC’s electricity-related pro-
grams, the most relevant ‘‘authority provided by other laws’’
is FERC’s FPA rulemaking power, which provides:
The Commission shall have power to perform any and all
acts, and to prescribe, issue, make, amend, and rescind
such orders, rules, and regulations as it may find neces-
sary or appropriate to carry out the provisions of this
chapter [i.e., the FPA].
16 U.S.C. § 825h. Because under section 7178 FERC’s elec-
tricity programs depend on the annual charges for funding,
regulations implementing those charges are ‘‘necessary or
appropriate to carry[ing] out’’ FERC’s broad mandate under
the FPA to regulate electricity ‘‘in the public interest,’’ 16
U.S.C. § 824(a).
To be sure, without section 7178, FERC would have no
authority to issue the rule MISO and NYISO seek, for we
held in New England Power Co. v. Federal Power Commis-
sion, 467 F.2d 425 (D.C. Cir. 1972), aff’d, 415 U.S. 345 (1974),
that the FPA’s rulemaking provision, having ‘‘an implementa-
ry rather than substantive character,’’ did not permit FERC
to recover its electricity budget absent specific statutory
authorization. Id. at 430-31; see also H.R. Rep. No. 99-727,
at 44 (1986), reprinted in 1986 U.S.C.C.A.N. 3,607, 3,640
(House Budget Committee report on the Budget Act) (indi-
cating that while ‘‘FERC does not currently have authority to
assess charges on regulated companies’’ for much of FERC’s
work, ‘‘[t]he legislation gives that authority to FERC’’). But
as we said of the FCC in Media Access Project v. FCC, 883
F.2d 1063 (D.C. Cir. 1989), ‘‘compliance with statutory di-
rectives TTT is certainly ‘necessary in the execution of [the
Commission’s] functions.’ ’’ Id. at 1066 (quoting 47 U.S.C.
§ 154(i)) (alteration in original). Now that section 7178 obli-
gates FERC to finance ‘‘all of the costs incurred by the
Commission’’ with annual charges, 42 U.S.C. § 7178(a)(1), and
8
further obligates it to calculate the charges ‘‘by rule,’’ id.
§ 7178(b), devising regulations to implement the annual
charges is ‘‘necessary or appropriate to carry[ing] out’’
FERC’s electricity regulation mandate under the FPA. Ac-
cordingly, FERC orders addressing section 7178 are ‘‘pro-
ceedings under’’ the FPA, even if the Commission’s authority
to issue them depends on the Budget Act.
The statutory context here—broad rulemaking power plus
a substantive statute calling for implementation via other
authorities—distinguishes this case from Five Flags Pipe
Line Co. In that case, we held that a direct review provision
limited to orders ‘‘issued under this Act’’ excluded challenges
to user fees imposed by the Secretary of Transportation
pursuant to a different statute. See Five Flags, 854 F.2d at
1440-41 (quoting Pub. L. No. 90-481, § 6, 82 Stat. 724 (1968)).
The statute containing the review provision at issue, however,
conferred much narrower rulemaking power than does the
FPA: far from allowing all ‘‘necessary or appropriate’’ ac-
tions, as the FPA does, the Natural Gas Pipeline Safety Act
(the ‘‘Gas Act’’), Pub. L. 90-481, 82 Stat. 720 (1968) (codified
as amended at 49 U.S.C. §§ 60101-60125), authorized the
Secretary to order only ‘‘minimum Federal safety standards
for the transportation of gas and pipeline facilities,’’ § 3(b), 82
Stat. at 721. User fees are obviously not a ‘‘safety standard.’’
At the same time, the user fee statute at issue in Five Flags,
unlike section 7178, made no reference to any general rule-
making power or authority provided by other laws. See Five
Flags, 854 F.2d at 1438-39 (discussing the Consolidated Omni-
bus Budget Reconciliation Act of 1986, Pub. L. No. 99-272,
§ 7005, 100 Stat. 82, 140-41 (1986) (codified as amended at 49
U.S.C. § 60301)). Thus, in contrast to the rules requested
here, which would engage FERC’s authority under both the
Budget Act and the FPA, the charges in Five Flags were
attributable to the user fee statute only.
Our decisions in General Electric Uranium Management
Corp. v. United States Department of Energy, 764 F.2d 896
(D.C. Cir. 1985), and City of Rochester v. Bond, 603 F.2d 927
(D.C. Cir. 1979), support our jurisdiction in this case. In the
first case, we exercised jurisdiction under the direct review
9
clause of the Nuclear Waste Policy Act of 1982, 42 U.S.C.
§ 10139(a)(1)(A), even though that provision applied only to
agency orders ‘‘under this part,’’ whereas the waste disposal
fees at issue—one-time charges paid into a ‘‘Nuclear Waste
Fund’’—originated elsewhere in the statute. See GE Urani-
um, 764 F.2d at 900-01. Calling it ‘‘inconceivable that Con-
gress intended to have review of all actions concerning waste
disposal in the court of appeals’’ save the disputed fees and ‘‘a
few other matters,’’ id. at 901-02, we considered it sufficient
for jurisdictional purposes that a policy statement calling for
the Nuclear Waste Fund appeared in the same part as the
review provision. See id. at 901, 902. From this, it follows
that the FPA’s declaration that ‘‘Federal regulation TTT of the
transmission of electric energy in interstate commerce and
the sale of such energy at wholesale in interstate commerce is
necessary in the public interest,’’ 16 U.S.C. § 824(a)—not to
mention section 825h’s broad grant of rulemaking authority—
brings the electricity-related annual charges within the FPA’s
review provision. Indeed, we think it equally ‘‘inconceivable’’
that Congress intended to exclude the charges from the wide
range of electricity-related actions subject to direct review
under the FPA.
In City of Rochester, we held that a petition alleging that
the Federal Aviation Administration had violated the National
Environmental Policy Act of 1969 (‘‘NEPA’’), 42 U.S.C.
§ 4332(2)(C), fell within the direct review provision of the
FAA’s organic statute. See City of Rochester, 603 F.2d at
932, 936-37. Spurning the theory that the review clause
governed only ‘‘those [claims] going to the substantive core of
an agency’s mandate (to which presumably NEPA would in
this case be penumbral),’’ and observing that we could not
‘‘imagine that Congress intended the exclusivity vel non of
statutory review to depend on the substantive infirmity al-
leged,’’ we declined to ‘‘fragment judicial review’’ based on the
source of the violations asserted in the petition. Id. at 936-37.
Likewise, here we interpret section 825l to afford unitary
review of FPA-related orders, including those that implement
substantive mandates from other statutes.
10
Moreover, ‘‘[a]bsent a firm indication that Congress intend-
ed to locate initial [Administrative Procedure Act] review of
agency action in the district courts, we will not presume that
Congress intended to depart from the sound policy of placing
initial APA review in the courts of appeals.’’ Fla. Power &
Light Co. v. Lorion, 470 U.S. 729, 745 (1985) (emphasis
removed). Here, as in most administrative cases and as
FERC counsel emphasized at oral argument, ‘‘[t]he factfind-
ing capacity of the district court is TTT unnecessary to judicial
review of agency decisionmaking,’’ because the administrative
proceedings have already generated the record necessary for
appellate review. Id. at 744. Hence, ‘‘jurisdiction in the
court of appeals avoids duplicative review and the attendant
delay and expense involved.’’ GE Uranium, 764 F.2d at 903.
Given that FERC’s fee regulations not only implement the
Budget Act, but also help ‘‘carry out’’ the FPA, bringing them
within the scope of section 825h, the placement of section
7178 in the Budget Act affords no ‘‘firm indication’’ that
Congress intended to depart from this ‘‘sound policy’’ embod-
ied in the FPA’s direct review provision.
III.
Turning to the merits, we review FERC’s denial of MISO’s
petitions under familiar APA standards, reversing only if
FERC’s action was ‘‘arbitrary, capricious, an abuse of discre-
tion, or otherwise not in accordance with law.’’ 5 U.S.C.
§ 706(2)(A). As ‘‘the parameters of the ‘arbitrary and capri-
cious’ standard will vary with the context of the case,’’ our
review is particularly deferential when ‘‘[t]he agency’s deter-
mination is essentially a legislative one.’’ WWHT, Inc. v.
FCC, 656 F.2d 807, 817 (D.C. Cir. 1981). Accordingly, ‘‘[w]e
will overturn an agency’s decision not to initiate a rulemaking
only for compelling cause, such as plain error of law or a
fundamental change in the factual premises previously consid-
ered by the agency.’’ Nat’l Customs Brokers & Forwarders
Ass’n of Am., Inc. v. United States, 883 F.2d 93, 96-97 (D.C.
Cir. 1989). We are particularly reluctant to compel rulemak-
ing when the interests at stake are ‘‘primarily economic,’’ as
11
they are here, id. at 97 (internal quotations omitted); our
cases reversing rulemaking denials have typically ‘‘involv[ed]
grave health and safety problems for the intended beneficia-
ries of the statutory scheme, TTT presenting facts urgently
warranting remedial rules,’’ id. at 103 (collecting cases).
Apart from their argument regarding changed circum-
stances, MISO’s and NYISO’s briefs assert various statutory
and policy-based reasons for overturning FERC’s system of
charges: that cost causation principles bar the Commission
from assessing charges only on transmission providers when
FERC’s regulatory activity is also directed at sellers; that
assessing charges on bundled load transmitted by ISOs and
RTOs, as Order No. 641 requires, exceeds FERC’s jurisdic-
tion because the load does not travel in interstate commerce;
that assessing such charges deters local utilities from joining
ISOs and RTOs; and that Order No. 641 contradicts the
Commission’s method of calculating gas pipeline user fees.
At oral argument, however, counsel for MISO and NYISO
withdrew these contentions.
Claiming that divestiture of transmission and generation
assets has stalled, the ISOs argue that Order No. 641’s
methodology causes a greater disincentive to RTO/ISO for-
mation than FERC expected. But although MISO and NYI-
SO argued before the Commission that the order ‘‘works as a
penalty to RTO participation’’—one of the policy arguments
they have now withdrawn—neither the rulemaking petition
nor the petition for rehearing pointed to changed circum-
stances in the electricity industry as a factor bearing on the
alleged disincentive. Because the ISOs have presented no
‘‘reasonable ground’’ for this default, we lack jurisdiction to
consider their argument. See 16 U.S.C. § 825l(b); Wabash
Valley Power Ass’n v. FERC, 268 F.3d 1105, 1114 (D.C. Cir.
2001).
This leaves only one argument for us to consider: that in
response to the California crisis, FERC changed its regulato-
ry focus and thereby undermined Order No. 641’s factual
basis. On this issue, we owe considerable deference to
FERC’s views, not only because of the ‘‘extremely limited,
12
highly deferential’’ standard of review, Nat’l Customs, 883
F.2d at 96, but also because FERC presumably knows its
priorities better than either MISO or NYISO—or for that
matter, this court. Although FERC’s activities and state-
ments may demonstrate its true intentions, contradicting
positions taken in litigation, we know of no case, and MISO
and NYISO cite none, where the circumstances compelling
reconsideration of a rule involve the agency’s own actions and
plans. Given that under our standard of review we must
defer to an agency’s reasoned view of whether circumstances
have changed sufficiently to justify a regulatory change, see
WWHT, 656 F.2d at 817, our deference must be all the
greater when the agency itself controls the circumstances in
question, as it does here. In light of these principles, we can
easily reject the ISOs’ claims.
Arguing that FERC’s ‘‘situation [is] analogous to The Hon-
eymooners when Ralph Kramden’s caught red-handed TTT
[and] turns to Alice and demands whether she’s going to
believe him or her own eyes’’ (Tr. of Oral Argument at 12),
MISO and NYISO cite three examples of FERC’s purported
focus on sales. First, they identify significant sales-related
efforts in FERC’s response to the California crisis, including
investigations of allegedly excessive prices. Second, they
point to FERC’s efforts, evidenced by its annual reports and
the creation of OMOI, to strengthen oversight of wholesale
electricity markets. Finally, they cite the SMD proposal as
evidence that FERC’s future work will tilt toward structuring
efficient markets rather than assuring transmission access.
In our view, none of this evidence reveals a dramatic
change in FERC’s priorities. To the extent the Commission’s
California intervention focused on sales, its actions reflected
the imperatives of a singular event—a ‘‘perfect storm,’’
FERC calls it (Resp’t’s Br. 47)—not a sustained shift in
regulatory priorities. As to the more permanent changes,
some—particularly the creation of OMOI—may indeed reflect
renewed commitment to market oversight. Yet FERC never
suggested in Order No. 641 that it would focus exclusively on
transmission; instead, it stated that ‘‘the time and effort of
our electric regulatory program is now increasingly devoted
13
to assuring open and equal access to public utilities’ transmis-
sion systems,’’ with ‘‘[w]holesale power sales rates TTT in-
creasingly being disciplined by competitive market forces and
less by the Commission directly.’’ Order No. 641, [Regs.
Preambles 1996–2000] FERC Stats. & Regs. at 31,848-49, 65
Fed. Reg. at 65,762 (emphasis added). Moreover, in assert-
ing that its work ‘‘is now increasingly’’ focused on transmis-
sion, id. (emphasis added), FERC’s point of comparison was
the period ‘‘[s]ince the issuance of Order No. 472, in 1987,’’
during which ‘‘the industry ha[d] undergone sweeping
changes,’’ and ‘‘the nature of the work of the Commission
likewise ha[d] changed.’’ Id. at 31,842, 65 Fed. Reg. at
65,758. Notwithstanding the California crisis, and, indeed,
FERC’s commitment to ‘‘polic[ing] individual behavior in
markets much more effectively than in the past,’’ FY2002
Report at 6, we see no indication that the Commission’s focus
has returned to what it was before the 1990s.
Indeed, the very documents cited by MISO and NYISO—
the annual reports and the SMD proposal—demonstrate that
transmission reform remains a top priority. The FY2002
report, for example, stresses that the goal of ‘‘complet[ing]
the transition to competitive energy markets as quickly and
comprehensively as possible,’’ id.—FERC’s ‘‘primary empha-
sis,’’ id. at 5—‘‘furthers work on initiatives begun in the last
couple years,’’ presumably including the transmission-related
orders. Id. at 6. Similarly, while the SMD initiative calls for
a standardized market design, describing ‘‘[m]arket monitor-
ing at all times, and market power mitigation when needed,’’
as ‘‘critical pieces of this initiative,’’ SMD NOPR, [Proposed
Regs. 1999–2003] FERC Stats. & Regs. at 34,281, 67 Fed.
Reg. at 55,455, it also proposes measures aimed at ‘‘reme-
dy[ing] remaining undue discrimination’’ in transmission ac-
cess—including ‘‘exercis[ing] jurisdiction over the transmis-
sion component of bundled retail transactions,’’ modifying
tariffs to offer ‘‘consistent transmission rules for all transmis-
sion customers,’’ and mandating that transmission owners
‘‘contract with an independent entity to operate their trans-
mission facilities.’’ Id. In addition, the proposal sets out
plans for a ‘‘congestion management system’’ designed to
14
‘‘allocat[e] scarce transmission capacity’’ and ‘‘encourage long-
term efficiency in the development of transmission, genera-
tion and demand response infrastructure.’’ Id. at 34,282, 67
Fed. Reg. at 55,456. Given these ongoing efforts to reform
the nation’s transmission system, it would be premature to
conclude on the basis of four highly unusual years that FERC
no longer devotes itself ‘‘increasingly’’ to that goal.
As a fallback, the ISOs argue that FERC inadequately
explained its denial of their petitions. See Am. Horse Protec-
tion Ass’n v. Lyng, 812 F.2d 1, 7 (D.C. Cir. 1987) (holding
that agency action was arbitrary and capricious where ‘‘the
Secretary ha[d] not presented a reasonable explanation of his
failure to grant the rulemaking petition’’). It is true that
FERC’s principal rationale for denying new rulemaking—that
it had ‘‘already considered and rejected’’ the petitioners’
arguments, 103 F.E.R.C. at 61,179—makes little sense insofar
as the ISOs were asserting a change in circumstances. Yet
FERC went on to explain that ‘‘a primary focus of the
Commission’s efforts in reforming the western markets and a
primary focus of the SMD NOPR [notice of proposed rule-
making] is transmission,’’ citing in particular FERC’s plans,
noted earlier, for ‘‘a revised open access transmission tariff
that is intended to remedy remaining undue discrimination,’’
and a ‘‘transmission congestion management system to ensure
that public utilities manage the Nation’s interstate transmis-
sion grid efficiently.’’ Id. at 61,180. FERC also explained
that ‘‘much of the Commission’s efforts involving western
markets go to whether public utilities have used transmission
schedules and constraints to manipulate prices or exercise
market power.’’ Id. FERC’s denial of the rehearing peti-
tion, while pledging that ‘‘the issues may merit further con-
sideration at a later time and we will reevaluate whether a
new rulemaking is warranted at that later time,’’ stated that
‘‘[t]he thrust of the Commission’s current work involves the
regulation of transmission.’’ 104 F.E.R.C. at 61,209. Though
brief, these explanations easily satisfy FERC’s limited burden
of justification under our ‘‘highly deferential’’ standard of
review. Nat’l Customs, 883 F.2d at 96.
15
In sum, finding neither evidence that a ‘‘significant factual
predicate of [FERC’s] prior decision on the subject TTT has
been removed,’’ WWHT, 656 F.2d at 819, nor that FERC
failed to draw ‘‘a rational connection between the facts found
and the choice made,’’ id. at 817 (internal quotations omitted),
we decline to direct the Commission to reconsider Order No.
641.
IV.
For federal agencies, as with mice and men, the best-laid
plans often go awry. See Robert Burns, To a Mouse, On
Turning Her up in Her Nest with the Plough (1785). We
trust that FERC—as it has promised—will reconsider its
system of charges if the resource-allocation assumptions un-
derlying Order No. 641 prove false. At this early juncture,
however, on the heels of a highly unusual four-year period
and in the face of the Commission’s continued efforts to
reform transmission, we decline to override FERC’s view of
its own priorities and compel new rulemaking. Accordingly,
we deny the petition for review.
So ordered.