United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued November 7, 2008 Decided December 30, 2008
No. 07-1175
LOUISIANA PUBLIC SERVICE COMMISSION,
PETITIONER
v.
FEDERAL ENERGY REGULATORY COMMISSION,
RESPONDENT
ARKANSAS PUBLIC SERVICE COMMISSION, ET AL.,
INTERVENORS
On Petition for Review of Orders
of the Federal Energy Regulatory Commission
Michael R. Fontham argued the cause for petitioner.
With him on the briefs were Paul L. Zimmering, and Noel J.
Darce.
Carol J. Banta, Attorney, Federal Energy Regulatory
Commission, argued the cause for respondent. With her on
the brief were Cynthia A. Marlette, General Counsel, and
Robert H. Solomon, Solicitor.
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J. Wayne Anderson argued the cause for intervenors. On
the brief were Mary Woodford Cochran, Paul Randolph
Hightower, Ted Joseph Thomas, Clinton A. Vince, Orlando E.
Vidal, William S. Scherman, and Gregory W. Camet. Emma
F. Hand entered an appearance.
Before: ROGERS, TATEL, and KAVANAUGH, Circuit
Judges.
Opinion for the Court filed by Circuit Judge TATEL.
TATEL, Circuit Judge: Over the Louisiana Public Service
Commission’s objection, the Federal Energy Regulatory
Commission approved a new long-term allocation of power-
generating capacity among the affiliates of the Entergy
system. In so doing, FERC interpreted the provision of the
Entergy System Agreement that governs off-system sales as
inapplicable to short-term opportunity sales. Aggrieved by
FERC’s decision approving the long-term, intra-system
allocations and upset at FERC’s interpretation regarding the
short-term, off-system sales, the Louisiana Commission
petitions for review on both issues. Yet the only issue before
us on which FERC actually took action was the approval of
Entergy’s long-term allocations, making that the only issue
we have jurisdiction to decide. Finding it easily resolved by
our standard of review, we deny the petition.
I.
Because we have dealt many times with the Entergy
system and its predecessors, most recently in Louisiana
Public Service Commission v. FERC (“Louisiana 2008”), 522
F.3d 378 (D.C. Cir. 2008), we describe it here only briefly.
Entergy is a multi-state affiliation of power companies that
share the costs and benefits of power generation. At all times
relevant to this appeal, it consisted of five affiliates: Entergy
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Louisiana, Entergy Gulf States, Entergy New Orleans,
Entergy Mississippi, and Entergy Arkansas. The affiliation is
governed by the Entergy System Agreement, and although
that agreement creates an integrated system, it allots to each
affiliate the primary responsibility for and benefit from the
generation facilities in the affiliate’s jurisdiction. Because
these facilities run on different fuels, shifts in the relative
price of coal, gas, and nuclear energy can create striking cost
disparities among the affiliates. To balance such disparities,
we have long viewed the System Agreement as requiring that
affiliates share the costs of power generation in roughly equal
proportion. See, e.g., Miss. Indus. v. FERC, 808 F.2d 1525,
1554–55 (D.C. Cir. 1987). The Entergy System has
accomplished this rough equalization primarily through
careful allocation of new generation capacity. As an
“insurance policy” should long-term allocation plans fail to
achieve proper cost-spreading, however, FERC recently
adopted a “bandwidth remedy” that limits any relative cost
discrepancies plus or minus 11 percent. Entergy Servs., Inc.,
111 F.E.R.C. ¶ 61,311, at 62,356 (2005). We approved that
remedy in Louisiana 2008, 522 F.3d at 391.
Facing a complaint from New Orleans, which was
bearing unusually high production costs, Entergy submitted to
FERC a proposed reallocation of generating capacity. See
Entergy Servs., Inc. (“Opinion No. 485”), 116 F.E.R.C.
¶ 61,296, at 62,485 (2006). Under the proposed allocations,
Entergy Arkansas and Entergy Gulf States would “sell” their
cheaper generation capacity to Entergy New Orleans and
Entergy Louisiana, id. at 62,486 & nn.14–15, thereby
allowing New Orleans to pass costs from its more expensive
generators on to the now-undersupplied Entergy Gulf States.
These paper transfers of power would lower costs for New
Orleans and Louisiana but raise costs for Gulf States.
Representing Gulf States’s customers, the Louisiana
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Commission thus opposed the allocations as discriminatory.
The same administrative law judge who presided over the
extensive bandwidth proceedings approved the allocations,
Entergy Servs., Inc. (“Initial Decision”), 111 F.E.R.C.
¶ 63,077 (2005), and FERC affirmed that decision in relevant
part, both on exceptions from the initial decision, Opinion No.
485, 116 F.E.R.C. ¶ 61,296, and on petition for rehearing,
Entergy Servs. Inc. (“Opinion No. 485-A”), 119 F.E.R.C.
¶ 61,019 (2007).
In the course of these proceedings, the Louisiana
Commission discovered that Entergy Arkansas had been
selling cheap energy off system through a series of month-
long opportunity transactions without offering the other
Entergy affiliates first bite at those electrons. The Louisiana
Commission believed this a violation of section 3.05 of the
System Agreement, which provides:
It is the long term goal of the Companies that each
Company have its proportionate share of Base
Generating Units available to serve its customers
either by ownership or purchase. Any Company
which has generating capacity above its
requirements, which desires to sell all or any portion
of such excess generating capacity and associated
energy, shall offer the right of first refusal for this
capacity and associated energy to the other
Companies under Service Schedule MSS-4 Unit
Power Purchase.
Entergy System Agreement § 3.05 (2000). Although for
several reasons the ALJ thought that the short-term, off-
system sales were irrelevant to the long-term, intra-system
allocation issue before him, he also doubted whether it would
be sensible to apply this section of the System Agreement to
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short-term opportunity sales at all. Initial Decision, 111
F.E.R.C. at 65,429–30. On exceptions, FERC agreed that any
possible section 3.05 violation had nothing to do with the
long-term allocation issue. But echoing the ALJ’s doubts,
FERC also said that “section 3.05 was not triggered by the
one-month capacity sales.” Opinion No. 485, 116 F.E.R.C. at
62,505. Believing that FERC had authorized the repeated sale
of cheap energy off system, the Louisiana Commission
pressed this issue on rehearing. There, FERC reaffirmed its
view that any short-term sale violation had no import for the
long-term allocation question actually before it, Opinion No.
485-A, 119 F.E.R.C. at 61,062–63, but this time it went on to
explain in detail why section 3.05 of the System Agreement
just shouldn’t apply to short-term sales, id.
Before us the Louisiana Commission gives this
apparently ancillary short-term sale dispute pride of place,
arguing it first and resisting any attempt to connect it to the
long-term allocation issue on which Entergy initiated these
FERC proceedings. As the Louisiana Commission sees it,
“[t]he short term sale issue has substance independent of the
resource allocation” because “FERC’s unnecessary holding
on the point authorizes Entergy to sell cheap System
resources” in a way that causes the Louisiana Commission’s
constituents independent harm. Appellant’s Reply Br. 2.
Because we have no doubt that FERC resolved the long-term
allocation issue, we consider it first, turning second to the
question of whether we should consider the short-term sale
issue at all.
II.
Conceding that “minimizing differences in production
costs is a valid goal of resource allocations among operating
companies,” Appellant’s Reply Br. 12, the Louisiana
Commission challenges the long-term allocations approved by
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FERC as ill-designed to serve that end. It argues that these
allocations merely inverted the positions of Entergy New
Orleans and Entergy Gulf States, driving the former’s costs
down by transferring them to the latter. It argues that FERC
never studied the likely long-term effects of the allocation and
that it unduly relied on the backstop provided by the
bandwidth remedy. Ultimately, it says, the proof is in the
production costs: following the allocations Entergy New
Orleans went from about 12 percent above system average to
about 1 percent below, whereas Entergy Gulf States went
from about the average cost to about 8 percent above the
system average.
We review FERC’s treatment of this issue with great
deference. We affirm its orders unless arbitrary or capricious,
Louisiana 2008, 522 F.3d at 391, and treat its factual findings
as conclusive if supported by substantial evidence, 16 U.S.C.
§ 825l(b). Where the subject of our review is, as here, a
predictive judgment by FERC about the effects of a proposed
remedy for undue discrepancies among operating companies,
our deference is at its zenith. See Louisiana 2008, 522 F.3d at
393 (“We owe FERC great deference in reviewing its
selection of a remedy . . . .”); Envtl. Action, Inc. v. FERC, 939
F.2d 1057, 1064 (D.C. Cir. 1991) (“[I]t is within the scope of
the agency’s expertise to make such a prediction about the
market it regulates, and a reasonable prediction deserves our
deference notwithstanding that there might also be another
reasonable view.”).
Given this lenient standard of review, we find ourselves
unconvinced by the Louisiana Commission’s arguments for
second-guessing FERC’s judgment. Although the ALJ
acknowledged an apparent transfer of costs between New
Orleans and Gulf States, Initial Decision, 111 F.E.R.C. at
65,432, he found it impossible to attribute the rise in Gulf
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States’s costs to the transfer alone. Indeed, the ALJ pointed
to considerable record evidence in finding the data
“inconsistent with the cause and effect correlation argued by
[the Louisiana Commission].” Id. at 65,434. Among that
evidence was the fact that because of the size difference
between the two entities a transfer of capacity creating a six
percent fall in the costs for New Orleans would create only a
one percent rise in Gulf States’s costs, and vice versa. Id. at
65,432, 65,434. The ALJ concluded that the evidence pointed
to other causes that might have been contributing to a
disproportionate rise in costs for Gulf States, including
steadily increasing prices for natural gas. Id. at 65,434. He
went on to note that Gulf States was slated for its own long-
term allocations in the future and reasonably suggested that,
to the extent these later allocations failed to remedy cost
discrepancies persisting after the allocations under review, the
bandwidth remedy created in the prior proceeding ensured a
minimum level of rough equalization. Id. The ALJ also
rejected the Louisiana Commission’s alternative proposal as
failing to address “the most important goal of reducing the
disparity in relative production costs among the Operating
Companies.” Id. at 65,433. Thus, in light of the uncertainty
regarding the source of Gulf States’s cost increases, the
planned future allocations, and the backstop provided by the
bandwidth remedy, the ALJ saw no reason “to order a further
fine-tuning by reallocating long-term life-of-unit shares . . . to
try perhaps to shift [Gulf States’s] relative percentage down a
percent or two.” Id. at 65,434. FERC twice affirmed that
judgment, Opinion No. 485, 116 F.E.R.C. at 62,504; Opinion
No. 485-A, 119 F.E.R.C. at 61,063–64, and without cause to
question its reasonableness or its basis in record evidence, we
likewise affirm.
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III.
Although these proceedings began with Entergy’s request
for approval of its long-term capacity reallocation, the
Louisiana Commission allocates the bulk of its briefing to
challenging FERC’s interpretation of the System Agreement’s
right of first refusal. It seems the Louisiana Commission may
have originally presented this argument as somehow relating
to the long-term allocation issue, as the ALJ thought it
necessary to expressly reject various reasons for connecting
them. See Initial Decision, 111 F.E.R.C. at 65,430. But it’s
hard to tell. The Louisiana Commission now completely
rejects “[t]he efforts of FERC and Entergy to connect the
issues on appeal,” calling these efforts “nothing but a
diversion,” Appellant’s Reply Br. 1, and urging us to review
FERC’s interpretation of the System Agreement on the short-
term sales issue regardless of its disconnect from the long-
term allocation dispute. To be sure, the Louisiana
Commission’s argument regarding FERC’s interpretation of
section 3.05 was aired before the agency, and FERC has
strongly signaled its view of how it will likely read that
section in the future, Opinion No. 485-A, 119 F.E.R.C. at
61,062–63. Yet because we think it quite clear that FERC
made no final decision on any claim for relief on the basis of
a section 3.05 violation, we still have nothing to review.
A party may invoke our jurisdiction only if “aggrieved by
an order issued by the Commission,” 16 U.S.C. § 825l(b), not
to challenge agency dicta unrelated to the order actually
entered in the particular case. See Am. Gas Ass’n v. FERC,
912 F.2d 1496, 1520 (D.C. Cir. 1990) (denying review of
FERC’s gratuitous statement of law where only injury was
possible deference to this remark in future proceedings).
Indeed, unless the party challenges an actual FERC order, that
party lacks the requisite injury to support Article III standing.
As we said in Sea-Land Service, Inc. v. Department of
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Transportation, 137 F.3d 640 (D.C. Cir. 1998), “mere
precedential effect within an agency is not, alone, enough to
create Article III standing, no matter how foreseeable the
future litigation.” Id. at 648. Thus, the Louisiana
Commission cannot establish standing simply by claiming
that FERC apparently authorized future off-system
opportunity sales by construing the System Agreement’s right
of first refusal as failing to reach such sales in an unrelated
proceeding. For us to have Article III jurisdiction, the
Louisiana Commission must instead point to some relief that
FERC either granted or failed to grant in a proceeding where
such relief was actually at issue.
The Louisiana Commission has given us no reason to
believe that we are reviewing such a proceeding here.
Entergy initiated this FERC docket to secure approval of its
long-term allocations. Neither the Hearing Order listing the
matters before the ALJ nor FERC’s summary of what it
decided mentions the short-term sale issue. Opinion No. 485,
116 F.E.R.C. at 62,485. Counsel for the Louisiana
Commission admitted at oral argument that at their inception
FERC’s proceedings concerned this issue not at all and that
FERC had no need to pass upon it. Oral Arg. 3:06, 7:06. In
response, FERC counsel freely conceded that FERC’s
statements on the short-term sale issue amounted to nothing
more than non-binding dicta—to be accepted or rejected by
FERC as appropriate in a future docket where such sales are
properly in dispute. Id. at 12:20. Accordingly, we conclude
that these statements are in fact dicta and do not preclude the
Louisiana Commission from pressing this issue in a different
proceeding. Under these circumstances, Article III of the
Constitution allocates us no power of review. In this respect,
then, the petition is dismissed; in all others, it is denied.
So ordered.