United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued December 13, 2007 Decided February 29, 2008
No. 06-1326
OLD DOMINION ELECTRIC COOPERATIVE, INC.,
PETITIONER
v.
FEDERAL ENERGY REGULATORY COMMISSION,
RESPONDENT
PJM INTERCONNECTION, L.L.C., ET AL.,
INTERVENORS
Consolidated with
06-1331
On Petitions for Review of Orders of the
Federal Energy Regulatory Commission
William D. DeGrandis argued the cause for petitioners.
With him on the briefs were Bruce D. Ryan, Dennis Lane, and
Glen L. Ortman.
Carol J. Banta, Attorney, Federal Energy Regulatory
Commission, argued the cause for respondent. On the brief was
John S. Moot, General Counsel.
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A. Karen Hill, Donald A. Kaplan, and John Longstreth were
on the brief for intervenors PPL Electric Utilities Corporation
and Exelon Corporation in support of respondent.
Before: SENTELLE, Chief Judge, and GINSBURG and
GARLAND, Circuit Judges.
Opinion for the Court filed by Chief Judge SENTELLE.
SENTELLE, Chief Judge: CED Rock Springs, LLC (“Rock
Springs”) and Old Dominion Electric Cooperative (“Old
Dominion”) (together, “Petitioners”) petition for review of a
Federal Energy Regulatory Commission (“FERC” or “the
Commission”) order rejecting their rate filings under section 205
of the Federal Power Act (“FPA”), 16 U.S.C. § 824d. They also
petition for review of FERC’s order denying their request for
rehearing. Because we conclude that the Commission
adequately explained its decision to deny Petitioners’ rate filings
and its decision was not unduly discriminatory, we deny their
petition for review.
I. Background
In 1998, Petitioner Old Dominion began planning the
construction and development of a natural gas-fired combustion
turbine generating facility to be located in Rising Sun,
Maryland. The facility is now complete and consists of four
generation units—two owned by Old Dominion and two by
Petitioner Rock Springs—and transmission facilities consisting
of a 500 kV substation and two 900-foot 500 kV transmission
lines jointly owned by Petitioners. Petitioners connected their
generators to the electrical grid first by running radial lines from
their generators to the substation. They then looped their two
900-foot transmission lines from the substation to a 500 kV
transmission line owned by PECO Energy Company (“PECO”).
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Electricity flows freely from other generation facilities through
PECO’s transmission lines, and subsequently, through
Petitioners’ substation and two 900-foot lines. Electricity
produced by Petitioners’ generators only flows out from the
generators onto the transmission grid via the radial lines that
connect their generators to the substation. In other words,
Petitioners’ substation and two looped 900-foot 500 kV lines are
fully integrated in the electrical grid; Petitioners’ generators are
not.
PJM Transmission System (“PJM”) is a regional,
interconnected transmission grid composed of transmission and
generation facilities owned by Petitioners, PECO, and others.
All owners of generation and transmission facilities in the PJM
Transmission System are parties to the PJM Interconnection
L.L.C. Open Access Transmission Tariff (“Tariff”). The Tariff
establishes the rates, terms, and conditions of service for
transmission services over the PJM Transmission System. The
Tariff also requires an Interconnection Customer, a generator
that needs to connect to the PJM Transmission System,
to pay for 100 percent of the costs of the minimum
amount of . . . Network Upgrades necessary to
accommodate its Interconnection Request and that
would not have been incurred . . . but for such
Interconnection Request, net of benefits resulting from
the construction of the upgrades, such cost not to be less
than zero.
Tariff § 37.2.
During construction of the Rock Springs and Old Dominion
generating facilities, Petitioners submitted an Interconnection
Request as set forth in the Tariff for PECO to connect their
generators to the PJM Transmission System. PECO indicated
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to Petitioners that it would be unable to build the interconnection
facilities on the schedule that they preferred, so instead of
waiting for PECO to build the facilities, they opted to build them
themselves. Petitioners then began construction on the 500 kV
substation and two 900-foot 500 kV lines that now connect their
generators to the PJM Transmission System. If PECO had built
the interconnection facilities, the Tariff would have allocated the
cost to Petitioners minus any benefit to the PJM Transmission
System, and PECO would have owned the interconnection
facilities. Tariff § 37.2; id. § 40.1 (“Except to the extent
otherwise provided in a Construction Service Agreement entered
into pursuant to Subpart F below, the Transmission Owners shall
own all Attachment Facilities, Local Upgrades, and Network
Upgrades constructed to accommodate Interconnection
Requests.”). However, Petitioners built the interconnection
facilities themselves, so they each own a one-half share in the
substation and 1,800 feet of transmission line, making them
Transmission Owners (“TOs”). Because Petitioners are TOs and
not simply owners of generation facilities, in addition to being
parties to the Tariff, they are also parties to the Transmission
Owners’ Agreement (“TOA”).
Prior to signing the TOA, the relationship between PJM and
Petitioners was governed by a Facilities Operation Agreement
(“FOA”), a contract written to address Petitioners’ unique
position as both generation owners and TOs. Because
Petitioners wanted to preserve their status as Exempt Wholesale
Generators (“EWGs”) under the Public Utility Holding
Company Act of 1935 (“PUHCA”), 15 U.S.C. §§ 79a et seq.,
repealed by the Energy Policy Act of 2005, Pub. L. No. 109-58,
119 Stat. 594, the FOA included a provision that waived their
right to receive any revenue that “PJM may collect for
transmission services for which PJM may use the Facility . . . .”
FOA § 5.1.5. But other TOs were not satisfied with the FOA, so
the parties modified the TOA to allow Rock Springs and Old
5
Dominion to opt out of cost recovery. The modified TOA gives
each party “the right at any time unilaterally to file pursuant to
Section 205 of the Federal Power Act to change the revenue
requirements underlying its rates for providing services under
the PJM Tariff.” TOA § 2.2.1. The next sentence addresses
Petitioners’ EWG concerns and gives each party “the unilateral
right to adopt a revenue requirement of zero and to forgo any
right or claim to compensation for providing transmission
services under the PJM Tariff or any other document.” Id.
(emphasis added). Section 2.2 of the TOA states that
“[n]otwithstanding any other provision of this Agreement, or
any other agreement or amendment made in connection with the
restructuring of PJM, each individual Party shall retain all of the
rights set forth in this Section 2.2 . . . .”
Later FERC orders and the repeal of the Public Utility
Holding Company Act of 1935 assuaged Petitioners’ concerns
about their EWG status. As a result, Rock Springs and Old
Dominion filed petitions with FERC to recover operating and
management expenses, depreciation expenses, property taxes,
and return on equity for their substation and 1,800 feet of
transmission line. Old Dominion Elec. Coop., Filing of
Transmission Revenue Requirement Rate Application and Tariff
Revisions, at 6, Docket No. ER06-497-000 (Jan. 17, 2006).
These figures represent “the portion of plant costs attributable to
the two 900-foot transmission lines and related 500 kV
substation,” along with operating expenses for these facilities.
CED Rock Springs, LLC, Filing of Transmission Revenue
Requirement Rate Application and Tariff Revisions, at 8,
Docket No. ER06-497-000 (Jan. 17, 2006).
FERC rejected Petitioners’ rate filings in full. CED Rock
Springs, LLC, et al., 114 FERC ¶ 61,285 (Mar. 17, 2006)
(“Order Rejecting Rate Filings”). The Commission concluded
that Section 37.2 of the Tariff, which assigns to Generation
6
Interconnection Customers the cost of Network Upgrades that
“would not have been necessary but for the generation project
and that do not provide benefits to the transmission grid,”
precluded Petitioners from recovering the cost of building their
interconnection facilities. Id. at 61,961; see id. at 61,961–62.
Because Petitioners demonstrated no “but for” benefits to the
PJM Transmission System, FERC determined that the Tariff
foreclosed Petitioners from recovering their interconnection
costs from transmission revenue. Id. at 61,962. FERC also
found that Section 2.2 of the TOA and Section 9.1(a) of the
Tariff, which reserve a TO’s right to file for transmission service
revenue under section 205 of the FPA, do not override “the
express allocation of costs under section 37.” Id. at 61,962; see
id. at 61,962–64. In addition, FERC noted that in an earlier
filing, Petitioners expressly disclaimed any right to receive
transmission revenue from their facilities. Id. at 61,964; see Old
Dominion’s and Rock Springs’s Request for Expedited Order
Confirming Compliance with Order Nos. 888 and 889, at 3, 11
& 12, Docket No. OA02-9-000 (Aug. 30, 2002). FERC noted
that it had even issued an order in response to that filing stating
that “‘[w]hen Applicants’ transmission facilities provide
transmission service to PJM’s customers, Applicants will
receive no transmission revenue,’” for which Petitioners never
requested rehearing. Order Rejecting Rate Filings, 114 FERC
at 61,964 (quoting CED Rock Springs, Inc., et al., 101 FERC
¶ 61,325, 62,353 (Dec. 20, 2002)).
Petitioners were not satisfied with FERC’s initial order so
they sought rehearing, which FERC denied. CED Rock Springs,
LLC, et al., 116 FERC ¶ 61,163 (Aug. 22, 2006) (“Order
Denying Rehearing”). As in the first order, FERC determined
that because Petitioners put forth no evidence that their
interconnection facilities were necessary “but for” their
interconnection request, Section 37.2 bars Petitioners from
recovering the costs of those facilities through transmission
7
revenue. Id. at 61,705. FERC noted that, despite Petitioners’
assertions to the contrary, they cited no case in which “similarly
situated projects . . . have been treated differently.” Id. at
61,706.
Rock Springs and Old Dominion now petition this court for
review of FERC’s initial order and its order denying rehearing.
II. Analysis
We grant substantial deference to FERC’s orders, setting
them aside only if they are “arbitrary, capricious, an abuse of
discretion, or otherwise not in accordance with law.” 5 U.S.C.
§ 706(2)(A); see also FPL Energy Marcus Hook, L.P. v. FERC,
430 F.3d 441, 446 (D.C. Cir. 2005). Under this deferential
standard of review we uphold orders in which we can “discern
a reasoned path” to the decision. FPL Energy Marcus Hook,
430 F.3d at 449 (internal citations and quotations omitted).
This Court also “generally gives substantial deference to
[FERC’s] interpretation of filed tariffs, even where the issue
simply involves the proper construction of language.” S. Cal.
Edison Co. v. FERC, 415 F.3d 17, 21 (D.C. Cir. 2005) (internal
citation and quotations omitted). However, we do not defer to
FERC’s interpretation when the tariff language is unambiguous.
FPL Energy Marcus Hook, 430 F.3d at 446. This level of
review is “Chevron-like” in nature. Consol. Edison Co. of N.Y.
v. FERC, 347 F.3d 964, 972 (D.C. Cir. 2003); see Chevron
U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837,
842-43 (1984).
Petitioners ask this Court to review de novo FERC’s
interpretation of the Tariff and the TOA based on their
conclusion that FERC found the language in the relevant
documents to be unambiguous. It is true that “[a]n agency is
8
given no deference at all on the question whether a statute is
ambiguous, and if an agency erroneously contends that
Congress’ intent has been clearly expressed and has rested on
that ground, we remand to require the agency to consider the
question afresh in light of the ambiguity we see.” Cajun Elec.
Power Coop., Inc. v. FERC, 924 F.2d 1132, 1136 (D.C. Cir.
1991). In this case, however, FERC considered policy concerns
and extrinsic evidence proffered by Petitioners, demonstrating
it recognized the Tariff and the TOA were ambiguous and
exercised its discretion to resolve the ambiguities. See Order
Rejecting Rate Filings, 114 FERC at 61,962-64; Order Denying
Rehearing, 116 FERC at 61,704. Therefore, we afford
substantial deference to the Commission’s interpretation of the
relevant contract language. See Chevron, 467 U.S. at 842-43;
Koch Gateway Pipeline Co. v. FERC, 136 F.3d 810, 814-15
(D.C. Cir. 1998).
A. Network Upgrades
Petitioners first argue that Section 37.2 of the Tariff does
not apply to their rate filing because their substation and 1,800
feet of transmission line are not Network Upgrades. Petitioners
contest FERC’s classification of their transmission facilities as
Network Upgrades for two reasons: one, transmission facilities
cannot also be classified as Network Upgrades; and two, no
document refers to their transmission facilities as Network
Upgrades, while other facilities were expressly defined as
“Network Upgrades.”
In order for Section 37.2 to apply to Petitioners’ rate filings,
their interconnection facilities must be either Local Upgrades or
Network Upgrades. Tariff § 37.2 (referring only to payment
responsibility for Network and Local Upgrades). Network
Upgrades are defined as “[m]odifications or additions to
transmission-related facilities that are integrated with and
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support the Transmission Provider’s overall Transmission
System for the general benefit of all users of such Transmission
System.” Tariff § 1.26. Petitioners do not object to FERC’s
acknowledgment that even Petitioners “recognize[] the facilities
they own are modifications and additions to the existing”
transmission system, an admission that plainly places them in
the category of Network Upgrades. Order Denying Rehearing,
116 FERC at 61,702. Petitioners contend only that because their
facilities are transmission facilities, they cannot also be Network
Upgrades.
FERC sensibly rejected this either/or contention,
determining that Network Upgrades can also serve as
transmission facilities and noting that the Tariff makes “no
distinction . . . between network upgrades and transmission
facilities.” Id. FERC also reasonably found that the lack of
designation of these facilities as Network Upgrades in the TOA
or Tariff or any other part of the record is irrelevant. Id. at
61,703. The only reason for designating the facilities in such a
way would be to ensure that Petitioners “repay” another entity
for the cost of constructing the facilities. Id. There was no
reason to designate Petitioners’ facilities as Network Upgrades
when Petitioners were already paying for the construction costs
themselves.
B. Generation Interconnection Customers
Petitioners also claim that Section 37.2 does not apply to
them because they are not “ordinary” Generation
Interconnection Customers (“GICs”). Request for Rehearing of
CED Rock Springs, LLC, at 13–14, Docket No. ER06-491-001
(Apr. 14, 2006); see also Request for Rehearing of Old
Dominion Elec. Coop., at 12–13, Docket No. ER06-497-000
(Apr. 17, 2006). A GIC is defined as “[a]n entity that submits
an Interconnection Request to interconnect a new generation
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facility . . . with the Transmission System in the PJM Region.”
Tariff § 1.13B. Petitioners do not contest that they submitted an
Interconnection Request as required under the Tariff. PJM
Filing of Interconnection Service Agreement with Rock Springs,
Old Dominion and Rock Springs Generation and the FOA, at 3,
Docket No. ER02-1726 (May 6, 2002). Nor do they contest that
instead of waiting for PJM to construct the interconnection
facilities, Petitioners and PJM entered into an Interconnection
Agreement and a FOA that referred to Petitioners’ substation as
an “Interconnection Substation” and their 1,800 feet of 500 kV
transmission line as “interconnection facilities.” Id. at 5–6;
FOA § 1.1. Instead, Petitioners argue that they cannot be GICs
because they are TOs, and, according to Petitioners, TOs cannot
also be GICs. For support, they present an excerpt from a
transmittal letter PECO sent to FERC upon filing its
Interconnection Agreement:
The subject Interconnection Agreement establishes the
requirements, terms, and conditions for the
interconnection of Rock Springs/CED’s Transmission
Facilities with PECO’s Transmission Facilities, and
defines the continuing responsibilities and obligations of
the parties as transmission owners of interconnected
transmission facilities. . . .
The Interconnection Agreement differs from other
interconnection agreements recently filed by PECO
because it is between two transmission owners, as
opposed to between a transmission owner and a
generator. . . . PJM’s standardized tariff for generation
interconnection is also designed to address the
interconnection of new generation stations to
transmission facilities, and does not address the unique
situation presented here.
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PECO Energy Co., Filing of Interconnection Agreement with
PECO, Old Dominion and Rock Springs, at 3, Docket No.
ER02-1779 (May 9, 2002).
FERC adequately responded to Petitioners’ attempt to
dichotomize TOs and GICs by relying on the definition of a GIC
and examining it in light of the policy underlying Section 37.2.
The Commission found that GIC “is defined without limitation”
and “applies regardless of whether the interconnection customer
is also a transmission owner.” Order Rejecting Rate Filings,
114 FERC at 61,962. FERC noted that the policy underlying
Section 37.2, which is “to promote efficient interconnection and
enhance overall economic efficiency . . . would be undermined
by requiring generators initially to pay their interconnection
costs and allowing generators then to allocate those costs to
transmission service customers.” Id.; see also Order Denying
Rehearing, 116 FERC at 61,702 (“Allocation of cost
responsibility under section 37.2 does not depend on which
party chose to build facilities, but rather on whether the facilities
would have been built ‘but for’ the generation interconnection
project.”). In response to the excerpted letter, FERC reasonably
noted that creating an Interconnection Agreement when parties
rearrange ownership and operational arrangements “is both
expected, and under the [Tariff], irrelevant.” Order Denying
Rehearing, 116 FERC at 61,701 n.10. We find that FERC’s
reasoning adequately explains why Petitioners are classified as
GICs.
C. “But For” Facilities
Because FERC reasonably determined that Petitioners’
interconnection facilities are Network Upgrades and that
Petitioners are GICs, it was reasonable for the Commission to
apply the cost responsibility provisions in Section 37.2 of the
Tariff. Section 37.2 of the Tariff assigns to the Interconnection
12
Customer “100 percent of the costs of the minimum amount of
. . . Network Upgrades necessary to accommodate [an
Interconnection Customer’s] Interconnection Request and that
would not have been incurred under the Regional Transmission
Expansion Plan but for such Interconnection Request, net of
benefits resulting from the construction of the upgrades . . . .”
Interpreting Section 37.2 in light of the provision’s
language and the relevant policy considerations, FERC found
that it “determines cost responsibility based not on electrical
integration (whether the facilities operate as transmission
facilities) or ownership, but rather on whether the connection
facilities would have been built for another purpose or enable
the system to avoid certain expenditures.” Order Denying
Rehearing, 116 FERC at 61,701. To read the provision to allow
GICs to recoup interconnection costs through transmission
revenue would undermine the Commission’s policy “to promote
efficient interconnection and enhance overall economic
efficiency” and “defeat the purpose of Order No. 2003 to treat
generation interconnections built by transmission owners
differently from other generation interconnections.” Order
Rejecting Rate Filings, 114 FERC at 61,962. FERC found no
evidence that Petitioners’ interconnection facilities would have
been built but for their need to connect to the transmission grid.
Order Denying Rehearing, 116 FERC at 61,705. Because
Section 37.2 assigns to the GIC 100 percent of the costs of
interconnection when facilities would not have been built but for
the interconnection request, FERC denied Petitioners’ request to
recoup these expenditures through transmission revenue. Id.
On appeal, Petitioners make several allusions to services
their transmission facilities now provide to the grid, but they still
point to no evidence in the record that the PJM Transmission
System would have built facilities to provide these services in
the absence of Petitioners’ need to connect to the grid. While
13
Petitioners contend that FERC refused “to acknowledge the
benefits of increased reliability and flexibility” to the grid their
facilities provide, Petitioners’ Br. at 26, the presence or absence
of these purported benefits is not controlling. The allocation of
costs under Section 37.2 depends on the grid’s demonstrated
need for interconnection facilities, not the incidental services or
benefits any given interconnection facility may provide once it
is built. The same reasoning applies to explain why the future
cost of a $200,000 wave trap replacement and other unquantified
costs associated with complying with TOA regulations, Request
for Rehearing of Old Dominion Elec. Coop., at 26, Docket No.
ER06-497-000 (Apr. 17, 2006), are not evidence that the
facilities would have been built but for their interconnection
request. FERC adequately responded to this argument, asserting
that “these costs resulted from [Petitioners’] choice to build and
own these facilities[,]” not from any demonstrated need by the
system. Order Denying Rehearing, 116 FERC at 61,702. And
while the 500 kV capacity of their substation and transmission
lines more than doubles the maximum output of their generation
units, this additional capacity is not evidence that the PJM
Transmission System would have added facilities such as these
absent Petitioners’ need to interconnect. FERC reasonably
attributed this extra capacity to the need for the interconnection
facilities to match the transmission capacity of the grid so as not
to adversely affect the reliability of the grid. Order Denying
Rehearing, 116 FERC at 61,705. Because Section 37.2 requires
evidence that facilities would have been built “but for” a GIC’s
need to interconnect for the GIC to receive any credit towards
interconnection construction costs, FERC reasonably assigned
to Petitioners 100 percent of interconnection costs and denied
their rate filing for reimbursement of these costs.
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D. TOA § 2.2 and Tariff § 9.1(a)
Despite the language in Section 37.2 of the Tariff that
precludes cost recovery for Petitioners’ interconnection
facilities, Petitioners contend that Section 2.2 of the TOA and
Section 9.1(a) of the Tariff override Section 37.2’s applicability.
Section 2.2 of the TOA states that “[n]otwithstanding any other
provision of this Agreement . . . each individual Party shall
retain all of the rights set forth in this Section 2.2.” The rights
set forth in Section 2.2 include “the right at any time unilaterally
to file pursuant to Section 205 of the Federal Power Act to
change the revenue requirements underlying its rates for
providing services under the PJM Tariff” and “the unilateral
right to adopt a revenue requirement of zero and to forgo any
right or claim to compensation for providing transmission
services under the PJM Tariff . . . .” TOA § 2.2.1. Section
9.1(a) of the Tariff states:
[t]he Transmission Owners shall have the exclusive and
unilateral rights to file pursuant to Section 205 of the
Federal Power Act . . . for any changes in or relating to
the establishment and recovery of the Transmission
Owners’ transmission revenue requirements or the
transmission rate design under the PJM Tariff, and such
filing rights shall also encompass any provisions of the
PJM Tariff governing the recovery of transmission-
related costs incurred by the Transmission Owners.
Petitioners claim that the language in these provisions
unambiguously gives Petitioners the right to recover revenue for
their interconnection facilities through their rate filings despite
contrary language in Section 37.2 of the Tariff. Petitioners
contend that any contrary conclusion would make Section 2.2.1
of the TOA meaningless. They also claim that Section 2.2.1,
language not present in the parties’ prior agreement, served as
15
their quid pro quo for taking on the additional responsibilities
that TOA signatories incur. Such responsibilities include, inter
alia, complying with FERC Standards of Conduct and curtailing
transmission facility operation when instructed by PJM.
In response to Petitioners’ argument about the significance
of Section 2.2 of the TOA and Section 9.1(a) of the Tariff,
FERC found that the provisions are simply reservations of rights
that “permit[] the utility only to submit a filing to recover costs.”
Order Denying Rehearing, 116 FERC at 61,703. “Whether such
costs can be recovered, and from whom, depends upon an
analysis of the [Tariff] and the benefits, if any, that such costs
provide to other parties.” Id. FERC further stated that Section
2.2.1 of the TOA, which allows a party to “adopt a revenue
requirement of zero,” does not grant the converse affirmative
right to receive the revenue that Petitioners seek. Id. at 61,704.
A party to the TOA may apply for revenue, as the provision
allows, but it does not require FERC to accept an application for
revenue that other parts of the TOA and Tariff prohibit. Id. We
find no problem with the Commission’s reasoning.
Petitioners claim that FERC’s interpretation of Section 2.2.1
of the TOA to provide a unilateral right to file for revenue but
not to include an affirmative right to receive revenue renders the
provision meaningless. In Petitioners’ view, if they can file for
revenue and FERC can reject their filing, then Section 2.2.1
provides no right at all. But Petitioners ignore the fact that they
can file, and if the filing is not prohibited by another section of
the TOA or the Tariff, then they can receive the revenue to
which they are entitled. The provision operates in the same way
for every signatory to the TOA, giving each party an equal right
to file. Furthermore, Section 2.2.1’s right to forego
compensation, the language that Petitioners urged the parties to
the TOA to adopt, also had a tangible meaning to Petitioners.
As FERC aptly stated, “section 2.2.1 merely ensures that each
16
owner may decide unilaterally to forgo any compensation to
which the owner might be entitled, notwithstanding the joint
filings contemplated under the PJM agreements.” Order
Denying Rehearing, 116 FERC at 61,704. This provision
allowed Petitioners to comply with the now-repealed PUHCA.
Contrary to Petitioners’ assertion, Section 2.2.1 has meaning and
provides Petitioners with the right to recover revenue if they can
show their transmission facilities provide net benefits to the
system.
The extrinsic evidence that Petitioners present to support
their quid pro quo theory is inapposite in light of the fact that the
TOA only confers a “right at any time unilaterally to file” for
revenue, not to receive it. TOA § 2.1.1. There is no reason for
FERC to accord determinative weight to extrinsic evidence of
one party’s expectations, particularly when the contract
language provides for no such right. See Order Denying
Rehearing, 116 FERC at 61,704 (“[E]xtrinsic evidence cannot
overcome the provisions of the [Tariff] that do not permit such
recovery.”]. As FERC noted, “the affidavit never states that the
other parties were ever aware of, or agreed to, Rock Springs’ or
Old Dominion’s right to recover these costs from other
transmission customers.” Id. It is reasonable for the
Commission to discount extrinsic evidence of one party’s
“personal understanding of the contractual terms rather than its
objective meaning.” Amerada Hess Pipeline Corp. v. FERC,
117 F.3d 596, 606 (D.C. Cir. 1997). We further note that just as
the parties to the TOA derived no benefit from Old Dominion’s
new transmission lines, those parties derived no benefit from the
additional expenses Old Dominion incurred as a result of
signing the TOA. Therefore, there is no reason they would have
agreed to permit Old Dominion to recover revenue in exchange
for Old Dominion shouldering those regulatory burdens.
17
E. Undue Discrimination
Last, Petitioners assert that FERC’s interpretation of
Section 37.2 of the Tariff to preclude them from recovering the
cost of building their interconnection facilities through
transmission revenue is unduly discriminatory. Referring to a
spreadsheet they created and titled, “PECO Comparable
Facilities Included in PJM OATT Rates,” they claim that PECO,
another owner of transmission facilities and a party to the Tariff,
has recovered costs for substations and transmission lines
associated with other generation facilities through transmission
revenue. The spreadsheet contains no revenue figures and does
not indicate whether any of the “PECO Comparable Facilities”
are also interconnection facilities governed by Section 37.2 of
the Tariff. In fact, Petitioner Rock Springs admitted these
facilities were not built to connect a generating facility to the
PJM Transmission System. Rock Springs stated to the
Commission that “[s]ince PJM was restructured as an
independent system operator (“ISO”) in 1997, no PJM East
Transmission Owner has constructed generation and sought to
include the transmission facilities associated with such new
generation in its rate base.” Request for Rehearing of CED
Rock Springs, LLC, at 27, Docket No. ER06-491-001 (Apr. 14,
2006). FERC examined this evidence of undue discrimination
presented by Petitioners and quite reasonably did not regard it
as persuasive. Order Rejecting Rate Filings, 114 FERC at
61,964; Order Denying Rehearing, 116 FERC at 61,706.
Petitioners also cited PJM Interconnection, LLC, 94 FERC
¶ 61,295 (Mar. 15, 2001), rehearing denied, 95 FERC ¶ 61,217
(May 16, 2001), to support its claim of undue discrimination.
In PJM Interconnection, a TO recovered its investment in 42
miles of transmission line through a rate filing for transmission
revenue. 94 FERC at 62,074, 62,078. FERC adequately
distinguished PJM Interconnection, finding no evidence that the
18
transmission line in that case was constructed to connect a
generator to the grid, making Section 37.2 of the Tariff
inapplicable to that TO. Order Denying Rehearing, 116 FERC
at 61,705. Because Section 37.2 was not at issue in PJM
Interconnection, it did not provide evidence of any
discriminatory treatment toward Petitioners. Id.
There is insufficient evidence in the record to show that
FERC discriminated against Petitioners. Contrary to Petitioners’
contention, FERC’s statement in its brief that Petitioners failed
to sustain their burden of proof on the issue of undue
discrimination, is not a post-hoc rationalization. See id. at
61,706 (referring to Petitioners’ contention that other TOs are
recovering costs for similar facilities and stating that Petitioners
“offer no citations to show that there are any similarly situated
projects that have been treated differently”).
III. Conclusion
Because we conclude that FERC adequately explained its
decision to deny Petitioners’ rate filings and Petitioners
presented no evidence that FERC acted with any undue
discrimination, we deny their petition for review.