Kansas Corp. Commission v. Federal Energy Regulatory Commission

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued November 20, 2017 Decided February 6, 2018

No. 16-1093

KANSAS CORPORATION COMMISSION,
PETITIONER

v.

FEDERAL ENERGY REGULATORY COMMISSION,
RESPONDENT

SOUTH CENTRAL MCN LLC, ET AL.,
INTERVENORS

Consolidated with 16-1164

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

Jason T. Gray argued the cause for the petitioner.
Kathleen L. Mazure was with him on brief.

Anand R. Viswanathan, Attorney, Federal Energy
Regulatory Commission, argued the cause for the respondent.
Robert H. Solomon, Solicitor, and Susanna Y. Chu, Attorney,
were with him on brief. Lona T. Perry, Attorney, entered an
appearance.
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Steven J. Ross argued the cause for the intervenors.
Shaun M. Boedicker, Michael F. McBride, William L. Massey,
Mark L. Perlis and Kevin F. King were with him on brief

Before: HENDERSON and SRINIVASAN, Circuit Judges, and
GINSBURG, Senior Circuit Judge.

Opinion for the Court filed by Circuit Judge HENDERSON.

KAREN LECRAFT HENDERSON, Circuit Judge: Petitioner
Kansas Corporation Commission (KCC), a Kansas regulatory
body that oversees Kansas public utilities, asserts that the
Federal Energy Regulatory Commission (FERC) acted
unlawfully by approving formula rates—which help determine
the electric rates charged by public utilities to consumers in
FERC jurisdictions—for future public utilities to use in
operating electric transmission facilities. KCC argues that
FERC cannot determine, as it must under the Federal Power
Act, 16 U.S.C. §§ 792 et seq., that the formula rates for such
not-yet-existing entities to implement at some point in the
future are “just and reasonable,” id. § 824d(a). By that same
argument, however, KCC has not suffered an injury in fact
sufficient to establish standing. A harm that will not occur
unless a series of contingencies occurs at some unknown future
time is not concrete, particularized, actual and imminent.
Accordingly, we dismiss KCC’s petitions for review.

I. BACKGROUND

FERC regulates the rates of public utilities engaged in the
wholesale transmission of electric energy in interstate
commerce. 16 U.S.C. § 824(a), (e). FERC must ensure, under
section 205 of the Federal Power Act, that public utilities’ rates
are “just and reasonable.” Id. § 824d(a) (“All rates and charges
made, demanded, or received by any public utility for or in
connection with the transmission or sale of electric energy . . .
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shall be just and reasonable, and any such rate or charge that is
not just and reasonable is hereby declared to be unlawful.”). To
do so, “every public utility shall file with” FERC, “[u]nder such
rules and regulations as [FERC] may prescribe . . . and in such
form as [FERC] may designate,” “schedules showing all rates
and charges for any transmission or sale” of electricity. Id.
§ 824d(c). Section 206 of the Federal Power Act allows
FERC—on its own initiative or upon a third-party complaint—
to adjust previously-approved rates if they are no longer just
and reasonable. Id. § 824e(a) (“Whenever [FERC], after a
hearing held upon its own motion or upon complaint, shall find
that any rate . . . is unjust, unreasonable, unduly discriminatory
or preferential, [FERC] shall determine that just and reasonable
rate . . . and shall fix the same by order.”).

FERC encourages public utilities to participate in regional
processes that allocate the costs of new energy transmission
facilities on a region-wide basis. See S.C. Pub. Serv. Auth. v.
FERC, 762 F.3d 41, 49–53 (D.C. Cir. 2014) (providing
overview of electric industry). The Southwest Power Pool
(SPP) is a FERC-regulated Regional Transmission
Organization that currently provides electricity to parts of
fourteen states 1 on behalf of member public utilities. The SPP
uses a selection process by which incumbent and

1
Arkansas, Iowa, Kansas, Louisiana, Minnesota, Missouri,
Montana, Nebraska, New Mexico, North Dakota, Oklahoma, South
Dakota, Texas and Wyoming. Electric Power Markets: Southwest
Power Pool—Overview, FEDERAL ENERGY REGULATORY
COMMISSION, www.ferc.gov/market-oversight/mkt-electric/spp.asp
(last visited Dec. 27, 2017). At the time of FERC’s orders, the SPP
extended to eight states only (Arkansas, Kansas, Louisiana,
Missouri, Nebraska, New Mexico, Oklahoma and Texas, see
Southwest Power Pool, Inc., 144 FERC ¶ 61,059 at P 25 (2013)) but
has since expanded to fourteen.
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nonincumbent utilities bid for the right to develop transmission
projects within the SPP footprint.

The SPP recovers transmission rates on behalf of utilities
operating transmission facilities in the SPP’s region through its
FERC-jurisdictional tariff. Part of the SPP’s tariff is the
facility’s formula rate. A formula rate “specifies the cost
components that form the basis of the rates a utility charges its
customers” in a “fixed, predictable nature,” which allows
utilities to recover costs that “fluctuate over time” and prevents
them from using “excessive discretion in determining the
ultimate amounts charged to customers.” Pub. Utils. Comm’n
of Cal. v. FERC, 254 F.3d 250, 254 (D.C. Cir. 2001) (internal
quotation omitted). KCC’s petitions involve two FERC orders
approving formula rates for future utilities that may seek to
develop transmission facilities in the SPP’s region.

Transource Energy, LLC is a parent company that “serves
as the holding company for transmission development-focused
subsidiaries” nationwide. Joint Appendix (JA) 25. Transource
Energy wanted to develop electric transmission facilities in the
SPP’s regional footprint. Because of statutory and regulatory
differences about “public utility governance and the issuance
of securities” among the various states in the SPP, Transource
Energy wanted to create state-specific subsidiaries which
would then submit state-specific bids for SPP facilities. JA 17.
Transource Energy formed Transource Kansas, a wholly
owned subsidiary, to compete for Kansas-based transmission
projects. Transource Energy also anticipates creating more
state-specific subsidiaries in SPP states (e.g., Transource
Arkansas) that will be “formally established as legal entities at
the time Transource Energy submits its bid to develop a
[transmission facility] within the corresponding state in the
SPP footprint.” JA 25.
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Transource Kansas wanted to get a formula rate approved
before it bid for SPP transmission facilities. Without advance
approval of the formula rate, it would be unable to
competitively bid for two reasons. First, the SPP evaluates bids
in part on a transmission facility’s charges, which are based in
part on the formula rate; without an approved formula rate,
Transource Kansas would be at a competitive disadvantage
compared with other facilities that did have approved formula
rates. Second, a utility has 180 days to bid for a transmission
facility but cannot obtain FERC approval of a formula rate for
up to one or two years, making it “impractical” to wait for
FERC approval until the bidding window opens. JA 20.

For the same reasons, Transource Energy also wanted to
get formula rates approved for future state-specific subsidiaries
(e.g., Transource Arkansas). Accordingly, when Transource
Kansas submitted the requisite section 205 filings to secure
formula rate approval, it also asked FERC to authorize future
affiliates (e.g., Transource Arkansas) to replicate the formula
rate approved for Transource Kansas if they won a bid.
Transource Kansas explained that the data it submitted to show
that its formula rate was just and reasonable would be used by
the future affiliates that shared the same parent company.

KCC, which is authorized to regulate rates for the sale of
electricity to Kansas consumers, see KAN. STAT. ANN. § 66-
101 (KCC has “full power, authority and jurisdiction to
supervise and control the electric public utilities” in Kansas),
objected. It argued that preapproving a formula rate for a future
affiliate violated FERC’s section 205 mandate to ensure that
charged rates are just and reasonable. FERC, however, granted
Transource Kansas’s request. Order on Transmission Formula
Rate Proposal and Incentives, 151 FERC ¶ 61,010 at P 81 (Apr.
3, 2015). FERC instructed that “if and when” SPP awarded a
bid to Transource Kansas, its section 205 filings should be
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labeled as the pro forma templates “for use by any Transource
[affiliates], which will obviate the need to make additional
section 205 filings.” Id.

KCC requested a rehearing, which FERC denied. Order
on Rehearing and Compliance, 154 FERC ¶ 61,011 (Jan. 8,
2016). FERC reasoned that future Transource affiliates will be
“similarly situated with respect to risk and capital
requirements” to Transource Kansas so it made sense to allow
both to use the same formula rate. Id. at P 17. FERC also
reasoned that preapproving a formula rate for Transource
Kansas, which did not operate any active transmission
facilities, was “no different” from preapproving a formula rate
for future Transource affiliates. Id. Accordingly, FERC “s[aw]
no reason at this time to litigate” separate formula rates for
Transource Kansas and its future sibling affiliates of the same
parent company. Id. at P 18.

MPT Heartland Development, LLC is another parent
company that, like Transource Energy, serves as a holding
company for subsidiaries created to develop transmission
facilities. MPT Heartland similarly formed Kanstar, a wholly
owned subsidiary, to compete for Kansas-specific projects.
MPT Heartland anticipates bidding on behalf of future state-
specific subsidiaries for transmission facilities. The
subsidiaries will be formally established as legal entities and
will take control of the transmission facilities if MPT Heartland
wins the bid. As with Transource Kansas, Kanstar submitted a
filing to FERC under section 205 requesting a formula rate for
its own use and approval for future Kanstar affiliates (e.g.,
Arkstar) to replicate its formula rate. KCC protested the
request. FERC accepted Kanstar’s proposal in relevant part and
rejected KCC’s protest. Order on Transmission Formula Rate
Proposal and Incentives, 152 FERC ¶ 61,209 at PP 83–84
(Sept. 17, 2015). KCC filed a request for rehearing of the
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Kanstar order. FERC denied rehearing “for the same reasons”
that FERC denied rehearing of the Transource Kansas order.
Order Denying Rehearing, 155 FERC ¶ 61,167 at P 9 (May 19,
2016).

KCC petitions for review of FERC’s April 3, 2015 and
January 8, 2016 orders (Transource Kansas) as well as its
September 17, 2015 and May 19, 2016 orders (Kanstar).

II. ANALYSIS

On the merits, KCC argues that FERC’s orders
“contravene[]” the Federal Power Act. Pet’r’s Br. at 28. Under
KCC’s reading, public utilities have an “obligation” to prove
their electric rates are “just and reasonable” and FERC has a
corresponding mandate to authorize only just and reasonable
rates under section 205. Pet’r’s Br. at 34 (discussing 16 U.S.C.
§ 824d(a)). KCC asserts that the “principal error in the
challenged orders” is that FERC has authorized future affiliates
(e.g., Transource Arkansas and Arkstar) to replicate, “at some
unknown time in the future,” the formula rates approved for
use by Transource Kansas and Kanstar without the former, if
formed, having to submit the requisite section 205 filings to
establish the justness and reasonableness of those rates. Pet’r’s
Br. at 27. FERC’s error, KCC asserts, shifted the burden to
entities such as KCC to challenge the formula rates in a later
section 206 proceeding, in which the challenger must prove the
rates are in fact unjust or unreasonable. See 16 U.S.C. § 824e(a)
(authorizing FERC to initiate, “upon [third-party] complaint,”
proceeding to determine if rates are no longer just and
reasonable and, if so, adjust them); Maine v. FERC, 854 F.3d
9, 21 (D.C. Cir. 2017) (in section 206 proceeding, “burden of
demonstrating that the existing [rate] is unlawful is on . . . the
complainant”).
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But we cannot address the merits without ensuring KCC
has the “irreducible constitutional minimum of standing.”
Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992). As
detailed below, we conclude that KCC does not have standing
because it lacks the necessary injury in fact.

To satisfy the constitutional requirements for standing, a
party must have (1) an injury in fact, (2) fairly traceable to the
challenged agency action, (3) that will likely be redressed by a
favorable decision. Id. at 560–61. An injury in fact is an
“invasion of a legally protected interest which is (a) concrete
and particularized, and (b) actual or imminent, not conjectural
or hypothetical.” Id. at 560 (internal quotation omitted).
Because KCC is not the “object of the [agency] action” it
challenges, its injury is not “self-evident.” Sierra Club v. EPA,
292 F.3d 895, 900 (D.C. Cir. 2002). Accordingly, it bears the
burden to identify record evidence sufficient to support its
standing to seek review. Id. at 899.

KCC’s opening brief cursorily states that “FERC’s
unfavorable rulings on the issues on appeal render KCC an
aggrieved party.” Pet’r’s Br. at 32. FERC’s rejection of KCC’s
challenges in the proceedings before it, however, does not
establish constitutional standing. See N.Y. Reg’l Interconnect,
Inc. v. FERC (NYRI), 634 F.3d 581, 586 (D.C. Cir. 2011) (party
does not acquire requisite “direct stake in a litigation simply by
participating in the antecedent administrative proceedings”
(internal quotation omitted)). KCC must affirmatively
demonstrate how it is adversely affected by FERC’s orders. See
Sierra Club, 292 F.3d at 899.

KCC’s more thorough effort made in its reply brief fares
no better. It asserts that FERC’s contravention of the Federal
Power Act is sufficient to support its standing. See Reply Br. at
6 (FERC orders “constitute[] concrete and particularized harm
 9
to KCC and Kansas ratepayers because FERC determined, in
advance, that [nonexistent] affiliates need not justify their rates
at the future point in time when they propose to provide”
electric service); id. at 7 (identifying “concrete harm” as
“FERC’s predetermination that not-yet-formed affiliates’ rates
are just and reasonable despite no such demonstration by those
affiliates under FPA Section 205”); id. at 9 (“[The] harm to the
KCC—undermining the FPA’s consumer-protection focus by
pre-approving rates that have not been shown to be just and
reasonable for the not-yet-formed affiliates authorized to
charge those rates—has already occurred.”).

United States Supreme Court precedent does not support
KCC’s theory of harm. A party claiming “only harm to his . . .
interest in [the] proper application of the . . . laws, and seeking
relief that no more directly and tangibly benefits him than it
does the public at large,” has no concrete and particularized
injury. Lujan, 504 U.S. at 573–74. KCC’s argument that it is
harmed because FERC violated the Federal Power Act and
determined legal rights is no more than a generalized interest
in the proper application of the law. That is not enough. See
Capital Legal Found. v. Commodity Credit Corp., 711 F.2d
253, 258 (D.C. Cir. 1983) (A “party who would complain that
agency action has violated [a statute] must be adversely
affected by that action”).

At oral argument, KCC identified a more specific harm: its
“future” burden of initiating a section 206 proceeding to
challenge the formula rates as unjust or unreasonable. See Oral
Argument at 3:50–3:55. As KCC’s theory goes, a public utility
must demonstrate under section 205 that its rates are just and
reasonable before commencing service. See 16 U.S.C.
§ 824d(a). FERC’s orders preapproving formula rates for
future affiliates that have not yet made section 205 filings to
establish the justness and reasonableness of the rates, KCC
 10
argues, improperly invert the Federal Power Act’s allocation of
burdens. KCC will have to challenge the same formula rates in
a section 206 proceeding, when it will bear the burden to prove
the rates are unjust or unreasonable.

But that harm is not imminent, as demonstrated by KCC’s
own arguments on the merits. It repeatedly argues that FERC
could not determine the formula rates were just and reasonable
because the formula rates will not be used until “some
unknown time in the future.” Pet’r’s Br. at 10, 15, 17, 25, 27,
33, 44, 51. A petitioner that asserts a harm that may occur
“some day,” with no “specification of when the some day will
be,” does not establish its standing. Lujan, 504 U.S. at 564; see
Pub. Citizen v. NHTSA, 489 F.3d 1279, 1293–94 (D.C. Cir.
2007) (no imminent harm to petitioner challenging rulemaking
that allegedly increased risks of car accidents because “the time
(if ever) when any such accident would occur is entirely
uncertain”).

Instead, any harm to KCC is “conjectural or hypothetical.”
Lujan, 504 U.S. at 560. The particularized effect of FERC’s
orders will not be felt by KCC unless an “attenuated chain of
possibilities” occurs. Clapper v. Amnesty Int’l USA, 568 U.S.
398, 410 (2013). It will not be harmed until and unless (1) the
parent company submits a bid for transmission facilities; (2)
the SPP awards the bid to the parent company of the then-
formed subsidiary, e.g., Transource Arkansas or Arkstar; (3)
the subsidiary seeks to use the formula rates; and (4) KCC
commences a section 206 proceeding.

KCC points to nothing in the record to meet its burden to
show a “substantial probability” that all of these steps will
occur and, if so, when. Am. Petroleum Inst. v. EPA, 216 F.3d
50, 63 (D.C. Cir. 2000) (internal quotation omitted). It does not
assert that any bid by the parent company is pending. Even if a
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bid had been placed, KCC’s feared result depends on the
SPP—an independent third party—accepting the bid. KCC
provides no supporting evidence that the SPP is more likely to
select the bids of Transource Kansas or Kanstar affiliates’
parent company than bids of other companies. We are
“usual[ly] reluctan[t] to endorse standing theories that rest on
speculation about the decisions of independent actors,”
Clapper, 568 U.S. at 414, and we will not break with that
general rule here. Finally, even if the SPP does select bids made
by the parent companies on behalf of future Transource Kansas
or Kanstar affiliates, it is uncertain that KCC will initiate a
section 206 proceeding. The formula rates may not, in the end,
turn out to be unjust or unreasonable at the time they are
imposed. If that is so, KCC would have no reason to bring a
section 206 proceeding and there would be no harm. See Oral
Argument at 5:20–5:30 (KCC counsel acknowledging that “it
may turn out that there is no issue” because formula rates may
be just and reasonable). In sum, then, KCC’s alleged harm
“stacks speculation upon hypothetical upon speculation, which
does not establish an actual or imminent injury.” NYRI, 634
F.3d at 587 (internal quotation omitted).

Further, KCC’s reliance on ANR Pipeline Co. v. FERC,
771 F.2d 507 (D.C. Cir. 1985), is unavailing. In that case, the
petitioner had standing because FERC’s approval of a pipeline
company’s rate increase was necessarily adverse to the
petitioner because it automatically took effect as soon as the
pipeline company filed to implement the new rate, which filing
the Court found “unavoidable.” Id. at 516. In contrast, if the
preapproved formula rates here are ever put into effect, KCC
may not necessarily challenge them because, as pointed out
supra, KCC may view the formula rates as just and reasonable
when imposed. Moreover, the SPP may never select
Transource Kansas or Kanstar affiliates to operate transmission
facilities within the SPP’s footprint. Thus, KCC’s alleged harm
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is not “unavoidable.” See NYRI, 634 F.3d at 587 (denying
corporation’s standing to challenge FERC orders because
alleged harm “rests upon a hypothetical chain of events, none
of which is certain to occur”); see also Whitmore v. Arkansas,
495 U.S. 149, 155 (1990) (injuries must be “concrete” in
“temporal sense”).

One final bit of housekeeping. KCC stated that it needs
judicial review now because FERC, in any proceeding initiated
by a future affiliate to use the preauthorized formula rates, will
be bound by the orders at issue here. Although in its reply brief
KCC expressly disclaimed that it relied on this theory to
establish standing, Reply Br. at 11 (denying that it “relies on
any precedential effect of the rulings below to establish
standing”), we address the issue because KCC nonetheless
expressed its concern, see Reply Br. at 6 (“These petitions
present the only opportunity to challenge [FERC’s] findings
without facing claims of collateral attack.”); Oral Argument at
2:30–2:45 (“At any future proceeding, the Kansas Commission
would not have the opportunity to challenge [FERC’s]
determinations. This appeal is the only opportunity.”). Whether
or not KCC is correct in its assertions, its now-or-never
argument cannot establish standing. We have repeatedly
rejected similar arguments. See New England Power
Generators Ass’n, Inc. v. FERC, 707 F.3d 364, 369 (D.C. Cir.
2013) (“[N]either a FERC decision’s legal reasoning nor the
precedential effect of such reasoning confers standing unless
the substance of the decision itself gives rise to an injury in
fact.”); Exxon Mobil Corp. v. FERC, 571 F.3d 1208, 1219
(D.C. Cir. 2009) (“[A] mere interest in FERC’s legal reasoning
and the possibility of a ‘collateral estoppel effect’ are
insufficient to confer a cognizable injury in fact.”).
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For the foregoing reasons, we dismiss KCC’s petitions for
lack of standing.

So ordered.