Verso Corp. v. Fed. Energy Regulatory Comm'n

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued April 6, 2018 Decided July 31, 2018

No. 15-1098

VERSO CORPORATION,
PETITIONER

v.

FEDERAL ENERGY REGULATORY COMMISSION,
RESPONDENT

MARQUETTE BOARD OF LIGHT AND POWER, ET AL.,
INTERVENORS

Consolidated with 16-1205, 16-1212, 16-1226, 16-1228,
16-1385, 16-1388, 16-1389, 16-1391, 16-1397, 16-1404

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

David W. D’Alessandro argued the cause for petitioner
Michigan Public Service Commission. William F. Demarest
Jr. argued the cause for petitioners Tilden Mining Company
L.C. and Empire Iron Mining Partnership. With them on the
joint briefs were Kelly A. Daly, M. Denyse Zosa, Steven A.
Neeley Jr., Sylvia J.S. Bartell, Lauren D. Donofrio, Assistant
Attorney General, Office of the Attorney General for the State
 2
of Michigan, Jennifer U. Heston, Saulius K. Mikalonis,
Christopher R. Jones, Elizabeth W. Whittle, Thomas J. Waters,
Christine C. Ryan, Phyllis G. Kimmel, Robert C. Fallon, and
Andrew B. Young. Steven D. Hughey, Assistant Attorney
General, Office of the Attorney General for the State of
Michigan, Francis A. Taylor Jr., and A. Hewitt Rose III,
entered appearances.

Holly E. Cafer, Senior Attorney, Federal Energy
Regulatory Commission, argued the cause for respondent.
With her on the brief were James P. Danly, General Counsel,
Robert H. Solomon, Solicitor, and Nicholas M. Gladd,
Attorney.

William L. Massey argued the cause for intervenor Public
Service Commission of Wisconsin. On the joint brief of
intervenors were Cynthia S. Bogorad, David E. Pomper, Rory
McGarry, Justin M. Vickers, Regina Y. Speed-Bost, and Debra
Ann Palmer.

Before: ROGERS, SRINIVASAN and WILKINS, Circuit
Judges.

Opinion for the Court filed by Circuit Judge WILKINS.

WILKINS, Circuit Judge: In Louisiana Public Service
Commission v. Federal Energy Regulatory Commission, this
Court affirmed FERC’s denial of refunds in a cost-allocation
case, upholding its discretion to deny refunds where a flaw in
rate design caused the costs to be borne disproportionately
among customers. See 883 F.3d 929 (D.C. Cir. Mar. 6, 2018).
This case presents a similar scenario with an opposite result:
here, after finding the rate-distribution methodology unjust and
unreasonable upon a Section 206 complaint, FERC ordered
refunds to customers who paid too much, funded by surcharges
 3
on customers who paid too little. Petitioners – who were
subjected to surcharges – challenge FERC’s orders as violating
the filed-rate doctrine and the prohibition on retroactive rate
increases. They also argue that FERC’s decisions were
supported by insufficient evidence and that FERC’s reliance on
the evidence it did employ was arbitrary and capricious.

We conclude that the reallocation at issue here does not
constitute an impermissible retroactive rate increase. FERC
reasonably determined that the prior rate methodology was
unjust and unreasonable, and its reliance on certain evidence in
reaching this conclusion was appropriate. Having established
that the existing rate was unjust and unreasonable, and having
determined that a different methodology would comply with
cost-causation principles, FERC had authority to order refunds
and corresponding surcharges under Section 206 and its broad
remedial authority under Section 309. Accordingly, we deny
the Petitions for review.

I.

This case involves system support resource (“SSR”) costs
in the territory of the American Transmission Company
(“ATC”) under the Midcontinent Independent System
Operator, Inc. (“MISO”) Tariff. To ensure system stability,
MISO requires energy producers in its territory to notify MISO
prior to ceasing operation. MISO then evaluates the
importance of the would-be retired facility and may require
continued operation if necessary for the reliability of energy
supply. Such providers are designated SSRs, and they are
compensated for the cost of continued operation under SSR
agreements with MISO.

For most of the MISO service area, SSR costs have long
been shared by customers based on the load served. Midwest
 4
Indep. Transmission Sys. Operator, Inc. Pub. Utils. with
Grandfathered Agreements in the Midwest Iso Region, 108
FERC ¶ 61,163, ¶ 61,968, P 372 (Aug. 6, 2004). Under this
allocation methodology, each load-serving entity (“LSE”) pays
for the reliability resources in proportion to its reliability needs.

For the ATC area, however, the MISO Tariff allocated
SSR costs pro rata among all customers. See id. at P 368.
FERC originally approved the ATC pro rata allocation as part
of the separate tariff for ATC’s territory in Michigan’s Upper
Peninsula and Wisconsin. See Wis. Elec. Power Co. Am.
Transmission Co., LLC Madison Gas & Elec. Co. Wis. Pub.
Serv. Corp. Wis. Power & Light Co., 97 FERC ¶ 61,337,
¶ 62,582 & n.4 (Dec. 21, 2001). However, FERC incorporated
ATC into the MISO system around the same time that it
approved ATC’s SSR-cost-allocation methodology. See Am.
Transmission Co., LLC, 97 FERC ¶ 62,182, ¶ 64,269 (Nov. 28,
2001). The MISO Tariff continued the pro rata allocation
methodology for the ATC area after it became part of MISO.
Specifically, Section 38.2.7.k of the Tariff provided that “any
costs of operating an SSR Unit allocated to the footprint of
[ATC] shall be allocated to all LSEs within the footprint of
[ATC] on a pro rata basis.” See Midcontinent Indep. Sys.
Operator, Inc. Pub. Serv. Comm’n of Wis., 148 FERC
¶ 61,071, ¶ 61,443, P 12 (July 29, 2014) (“July 29, 2014
Order”). Only the ATC area was subject to such a specified
methodology: for the rest of the MISO area, the Tariff
provided only that reliability costs were allocated to the LSEs
“which require[] the operation” of reliability resources. Id. at
P 18. In other words, SSR costs for all non-ATC service areas
were allocated to the LSEs that actually benefited from the
reliability resources.

The instant Petitions arise from SSR agreements regarding
three facilities in the ATC service area. MISO filed the first
 5
SSR agreement using the ATC pro rata allocation in October
2012, for the continued operation of a City of Escanaba,
Michigan facility, which FERC accepted. See Midwest Indep.
Transmission Sys. Operator, Inc., 142 FERC ¶ 61,170,
¶ 61,812, P 11 (Mar. 4, 2013). In early 2014, MISO filed an
SSR agreement requiring the continued operation of a Presque
Isle facility located in Marquette, Michigan, with costs
allocated to customers pro rata. FERC accepted the proposed
Presque Isle SSR Agreement on April 1, 2014. Midcontinent
Indep. Sys. Operator, Inc., 147 FERC ¶ 61,004, ¶ 61,013, PP
5, 12 (Apr. 1, 2014). MISO also submitted an SSR agreement
regarding the continued operation of a White Pine Electric
Power, LLC unit, which FERC accepted on June 13, 2014.
Midcontinent Indep. Sys. Operator, Inc., 147 FERC ¶ 61,199,
¶ 62,114, PP 1, 3, 11 (June 13, 2014).

On April 3, 2014, two days after FERC accepted the
Presque Isle SSR Agreement, the Public Service Commission
of Wisconsin (“Wisconsin Commission” or “PSCW”) filed a
complaint under Section 206 of the Federal Power Act, 16
U.S.C. § 824e, to challenge the allocation of the Presque Isle
SSR costs as unjust and unreasonable. The Complaint relied
on a study that MISO conducted, at the request of stakeholders,
to assess which load-serving entities in the ATC footprint
actually benefited from the continued operation of the Presque
Isle facility. PSCW Complaint at 3 & n.8, FERC Docket No.
EL14-34-000 (Apr. 3, 2014). The preliminary load-shed
analysis showed that 42 percent of the benefiting load of the
Presque Isle facility was in Wisconsin; however, the MISO
Tariff assigned 92 percent of the SSR costs to Wisconsin
ratepayers based on the pro rata allocation methodology. Id. at
3-4.

On July 29, 2014, FERC granted the Wisconsin
Commission’s Complaint. See July 29, 2014 Order, 148 FERC
 6
¶ 61,071. FERC concluded that the Wisconsin Commission
“met its burden . . . to show that the ATC pro rata cost
allocation provision in MISO’s Tariff is unjust, unreasonable,
unduly discriminatory, or preferential because . . . it does not
follow cost causation principles.” Id. at P 59. Relying on the
preliminary load-shed study, FERC reasoned that the pro rata
allocation “would allocate 92 percent of the Presque Isle SSR
costs to LSEs located in Wisconsin even though . . . such LSEs
only receive 42 percent of the reliability benefit.” Id. at P 61.
This evidence “demonstrat[ed] that the methodology d[id] not
reflect a proper allocation of costs.” Id. FERC explained that
the “preliminary nature of the load-shed study” was not
problematic for its analysis because the data showed that “the
current ATC pro rata cost allocation [] bears little, if any,
relation to the benefits provided” from the reliability
agreement. Id.

By way of remedy, the July 29, 2014 Order directed MISO
to remove the pro rata provision from the Tariff, “thereby
extending to the ATC footprint the general SSR cost allocation
Tariff language, which requires MISO to allocate SSR costs to
‘the LSE(s) which require(s) the operation of the SSR Unit for
reliability purposes.’” July 29, 2014 Order, 148 FERC
¶ 61,071, P 66. FERC further determined that the assessment
encapsulated in the preliminary load-shed study was
appropriate, but required MISO to submit a final load-shed
study within 30 days. Id. Finally, and most critically for this
Petition, FERC ordered refunds to reallocate the SSR costs in
the ATC footprint dating from the filing of the Section 206
Complaint. Id. at P 68.

Within weeks, FERC also addressed the Escanaba and
White Pine SSR Agreements that similarly allocated costs on a
pro rata basis. See Midcontinent Indep. Sys. Operator, Inc.,
148 FERC ¶ 61,116, P 12 (Aug. 12, 2014) (“Escanaba Initial
 7
Order”); Midcontinent Indep. Sys. Operator, Inc., 148 FERC
¶ 61,136, P 7 (Aug. 21, 2014) (“White Pine Initial Order”).
FERC directed MISO to conduct load-shed studies and submit
revised proposals allocating the costs of continued operation of
each of these units in accordance with the results. Escanaba
Initial Order, 148 FERC ¶ 61,116, P 37; White Pine Initial
Order, 148 FERC ¶ 61,136, P 44. FERC also ordered refunds
dated to April 16, 2014, for White Pine and June 15, 2014, for
Escanaba. See Pub. Serv. Comm’n of Wis., 156 FERC
¶ 61,205, P 12 (Sept. 22, 2016) (“September 22, 2016 Order”).

MISO completed a second load-shed study as directed by
the July 29, 2014 Order and submitted compliance filings
regarding each of the three SSR facilities. Pub. Serv. Comm’n
of Wis., 150 FERC ¶ 61,104, PP 8-9, 12-13, 15-16 (Feb. 19,
2015) (“February 19, 2015 Order”). The second load-shed
study attributed approximately 86 percent of the SSR benefits
to Local Balancing Authorities (“LBAs”) located in Wisconsin.
See J.A. 984-85. These results were far closer to the original
allocation – where 92 percent of the costs were allocated to
Wisconsin customers – than were the results of the preliminary
load-shed study upon which the Wisconsin Commission
Complaint and the July 29, 2014 Order relied.

FERC reviewed the compliance filings, among other
proceedings, in an order dated February 19, 2015. See Pub.
Serv. Comm’n of Wis., 150 FERC ¶ 61,104. In the February
19, 2015 Order, FERC reaffirmed its prior finding that MISO’s
pro rata allocation of SSR costs in the ATC area was unjust,
unreasonable, unduly discriminatory, or preferential under
Section 206 of the Federal Power Act. Id. at P 2. During this
time, MISO divided one of the LBAs that spanned areas of
Michigan and Wisconsin to “provid[e] a more granular
identification of reliability events in the Wisconsin-Michigan
boundary area.” MISO Tariff Filing at 2, FERC Docket No.
 8
ER14-2952 (Sept. 26, 2014), J.A. 1163; see also Feb. 19, 2015
Order, 150 FERC ¶ 61,104, PP 17-18. Accounting for the
newly divided LBAs, approximately 99 percent of the
reliability benefits were attributed to Michigan LSEs, while
Wisconsin LSEs received the remaining 1 percent. Feb. 19,
2015 Order, 150 FERC ¶ 61,104, P 19. FERC determined that
MISO’s proposed reallocation based on LBA boundaries “can
produce results that are not consistent with MISO’s Tariff or
cost causation principles by failing to allocate SSR costs to the
LSEs that benefit from those SSR Units.” Id. at P 2.
Accordingly, FERC required further compliance filings
allocating the costs from the Presque Isle, White Pine, and
Escanaba SSR Units to the benefitting LSEs directly. Id. This
required MISO to revise its study methodology to identify the
LSEs relying on the SSR resources. Id. at P 113. By order
dated May 3, 2016, FERC accepted MISO’s revised
SSR-cost-allocation methodology and ordered MISO to
prepare a refund report describing how MISO would effectuate
that methodology in the previously ordered refunds.
Midcontinent Indep. Sys. Operator, Inc., 155 FERC ¶ 61,134,
P 37 (May 3, 2016).

On September 22, 2016, FERC issued the final order under
review in these Petitions. See Sept. 22, 2016 Order, 156 FERC
¶ 61,205. FERC denied requests for rehearing of its decision
to order refunds for the Presque Isle, White Pine, and Escanaba
SSR costs from April 3, 2014, April 16, 2014, and June 15,
2014, respectively. Id. at P 40. Turning to the remedy, FERC
explained that it “ha[d] established a policy of not ordering
refunds in rate design and cost allocation cases,” but this policy
“is not a strict requirement in every cost allocation case.” Id.
at PP 41, 43. Instead, FERC’s approach would vary based on
equitable considerations. “[P]rimary” bases disfavoring
refunds include “the unfairness that results from retroactive
implementation of a new rate for both utilities and customers
 9
who cannot alter their past actions in light of that new rate, and
[] the potential for under-recovery.” Id. at P 44. FERC
reasoned that “neither of these grounds applies here,” because
no party “identified any particular decisions made in reliance
on the previous SSR cost allocation methodology,” and “MISO
can calculate the exact amount of SSR costs that should be
assessed to each LSE that underpaid in order to refund LSEs
that overpaid,” based on its records. Id. at PP 45-47.
Accordingly, FERC concluded, the equitable considerations
with respect to the three SSR units at issue “require a narrow
exception to the Commission’s general policy of not providing
refunds in a cost allocation case.” Id. at PP 50-51. FERC
ordered that the refunds “will be implemented through
surcharges to LSEs that paid too little under the previous
methodology.” Sept. 22, 2016 Order, 156 FERC ¶ 61,205,
P 51.

Petitioners – customers “that paid too little” and are now
subject to surcharges – challenge FERC’s authority to impose
surcharges as part of its remedy, contending that it amounts to
an impermissible retroactive rate increase. They also contend
that FERC’s decision was arbitrary and capricious because the
difference between the allocation rejected and the allocation
ultimately approved was insignificant.

II.

“Under the Federal Power Act, [FERC] must ensure that
all rates charged for the transmission or sale of electric energy
are ‘just and reasonable.’” Maine v. Fed. Energy Regulatory
Comm’n, 854 F.3d 9, 15 (D.C. Cir. 2017) (quoting 16 U.S.C.
§ 824e(a)). The scope of judicial review of such
determinations is “narrow”: courts afford “great deference” to
FERC’s rate decisions, and we “may not substitute our own
judgment for that of the Commission.” Fed. Energy
 10
Regulatory Comm’n v. Elec. Power Supply Ass’n, 136 S. Ct.
760, 782 (2016). That said, a reviewing court must “at least
assure itself that the Commission’s reason for its decision is
both rational and consistent with the authority delegated to it
by Congress.” Xcel Energy Servs. Inc. v. Fed. Energy
Regulatory Comm’n, 815 F.3d 947, 952 (D.C. Cir. 2016). The
courts review FERC’s decisions under the familiar
arbitrary-and-capricious standard of the Administrative
Procedure Act, and this review requires “a reasoned
explanation” “where an agency departs from established
precedent.” Transmission Agency of N. Cal. v. Fed. Energy
Regulatory Comm’n, 495 F.3d 663, 672 (D.C. Cir. 2007); see
5 U.S.C. § 706.

A.

Petitioners challenge FERC’s determination that the pro
rata methodology for distributing SSR costs was unjust and
unreasonable, contending that there was no new evidence or
change in circumstances to justify this conclusion, that the
results of the final load-shed study undermined FERC’s
reasoning, and that FERC “fail[ed] to consider the historical
basis” for that methodology, such that its orders lacked
reasoned decision-making. Pet’rs’ Br. 48-55. None of these
objections is persuasive.

FERC must undertake a two-step inquiry regarding a
Section 206 challenge. See Maine, 854 F.3d at 21. The first
step involves reviewing the rate subject to a Section 206
complaint to determine whether it is unjust, unreasonable,
unduly discriminatory, or preferential. Id. (citing 16 U.S.C.
§ 824e(a)). “Only after having made the determination that the
utility’s existing rate fails that test may FERC exercise its
section 206 authority to impose a new rate.” Id. In the orders
now under review, FERC followed this process – first
 11
determining that the existing allocation was problematic before
considering a replacement. At the time of the Wisconsin
Commission’s Complaint and the July 29, 2014 Order granting
it – in other words, during the first step of the Section 206
process – FERC had before it only the preliminary load-shed
study. The preliminary data showed that the Wisconsin
customers received 42 percent of the reliability benefit of the
SSR facilities, despite being allocated 92 percent of the costs.

Petitioners contend that the preliminary load-shed study is
not sufficient to support FERC’s conclusion that the existing
rate is unreasonable because the study merely confirmed the
difference between a load-shed methodology and the pro rata
methodology. Pet’rs’ Br. 41-45.

Contrary to Petitioners’ view, FERC’s determination that
the pro rata methodology was unjust and unreasonable relied
on new information not previously before the Commission. In
one sense, the eventuality that two different methodologies
would yield different results was reasonably known to the
parties and FERC during the initial decision that the pro rata
methodology was just and reasonable. But just because some
difference between the results of these two methodologies is
predictable does not make the information actually collected
any less telling. See OXY USA, Inc. v. Fed. Energy Regulatory
Comm’n, 64 F.3d 679, 690 (D.C. Cir. 1995) (explaining that
“[no] finding of unforeseeability is required before the
Commission may reach the conclusion that a rate that was
previously just and reasonable is no longer so”). The
preliminary load-shed evidence demonstrated a sizable gap
between the benefits accrued by each LSE and the allocated
cost, supporting FERC’s determination that the pro rata
methodology did not comport with cost-causation principles.
And the actual data underlying FERC’s consideration was not
before it in prior proceedings regarding the ATC
 12
SSR-cost-allocation methodology. As the February 19, 2015
Order noted, MISO did not previously require load-shed
studies for SSR units in the ATC area – there was no need for
this information in light of the pro rata allocation. See Feb. 19,
2015 Order, 150 FERC ¶ 61,104, PP 12, 15. In any event, the
preliminary load-shed study regarding the Presque Isle,
Escanaba, and White Pine units was new information about
newly designated SSRs. That MISO could have collected
similar information before designating these support resources
does not detract from the new information available through
the load-shed data underlying the Complaint, upon which
FERC relied.

We also are unpersuaded by Petitioners’ argument that the
final load-shed study defeats FERC’s conclusion that the pro
rata methodology was unjust and unreasonable. Petitioners
point out that, according to the second study, the pro rata
methodology was off by only about 6 percent with respect to
the benefits received by Michigan and Wisconsin respectively.
As an initial matter, the load-shed study that FERC actually
accepted showed that the pro rata methodology was an order of
magnitude more inaccurate than the second study had revealed:
the pro rata methodology was off not by 6 percent, but by 91
percent. In any event, Petitioners’ assertion that a 6 percent
difference is insufficient to show that the pro rata methodology
is unreasonable lacks support. See Pet’rs’ Br. 46.
And Petitioners failed to preserve this point, as they did not
argue before the Commission that the final load-shed data
undermined a finding that the pro rata methodology was
outside of the zone of reasonableness. See 16 U.S.C. § 825l(b).
Moreover, since FERC did not rely on a
zone-of-reasonableness analysis, this challenge is inapt: a rate
may be shown to be unreasonable under Section 206 even
without a showing that the rate is entirely outside the zone of
reasonableness. See Maine, 854 F.3d at 24 (“While showing
 13
that the existing rate is entirely outside the zone of
reasonableness may illustrate that the existing rate is unlawful,
that is not the only way in which FERC can satisfy its burden
under section 206.”). In addition, whether 6 percent is
significant for the reasonableness analysis is a policy question
for FERC to decide: Petitioners point to no precedent or
evidence to suggest that such a difference could not be
significant for the purposes of the Federal Power Act. Also
unavailing is Petitioners’ position that the difference between
the results of the preliminary load-shed study and the final
study call into question the validity of the evidence. FERC’s
recognition that more accurate data was necessary does not
undermine its reliance on the preliminary study at the time of
the Complaint, or on the final data once the study was
complete. Petitioners identify no support for the proposition
that FERC cannot rely on different evidence at each step of the
Section 206 inquiry.

Finally, we reject Petitioners’ contention that FERC failed
to take into account the historical rationale for the ATC
carve-out. See Pet’rs’ Br. 48-53. To the contrary, FERC
acknowledged the origins of the pro rata methodology as
springing from ATC’s cost-sharing philosophy and explained
its conclusion that ATC’s “original intent” in sharing costs was
“not served by the pro rata sharing of SSR costs . . . because
decisions concerning the operational status of . . . generation
assets are not subject to the ATC transmission planning
process.” July 29, 2014 Order, 148 FERC ¶ 61,071, P 65.
FERC further addressed the historical basis for the ATC’s pro
rata allocation in its February 19, 2015 Order, reasoning that
the new evidence related to cost causation undermined the
propriety of that vestigial methodology. See Feb. 19, 2015
Order, 150 FERC ¶ 61,104, P 76. That FERC rejected
then-protesters’ position – twice – does not mean that it failed
to consider it. Accordingly, we defer to FERC’s rate allocation
 14
determination as supported by substantial evidence and
reasoned decision-making.

B.

Having concluded that FERC reasonably determined that
the pro rata allocation was unjust and unreasonable under
Section 206, we turn to Petitioners’ challenge relating to
remedy.

Petitioners posit that the ordered surcharges effect a
retroactive rate increase, violating Section 206 and the
filed-rate doctrine. The Commission argues that because
“[t]his is a cost allocation case,” the limitations surrounding
retroactive rate changes do not come into play, and the remedy
imposed here was otherwise within FERC’s broad power to
effectuate the FPA under Section 309. See Resp’t’s Br. 39-46.
Because Section 206 contemplates surcharges in
cost-allocation cases, FERC’s orders here are within its
remedial authority. And because FERC explained valid
reasons for departing from its usual policy of denying
reallocation, that departure was not arbitrary or capricious.

i.

Section 206 defines FERC’s authority when an existing
rate is found unjust, unreasonable, unduly discriminatory, or
preferential. 16 U.S.C. § 824e. This includes two main tools
at FERC’s disposal. First, Section 206(a) authorizes FERC to
“fix” rates prospectively, after it concludes that a rate is
inappropriate upon a complaint by a market participant or on
FERC’s own impetus. See id. § 824e(a); Xcel, 815 F.3d at 950.
Second, Section 206(b) permits FERC to order refunds where
the previous rate was unfairly high, effectively setting the rate
as of the date that the Section 206 proceeding began – either
 15
when FERC instituted an investigation or the date of the
complaint, if instigated by a third party. 16 U.S.C. § 824e(b).
However, no concomitant authority exists to retroactively
correct rates that were too low. See Fed. Power Comm’n v.
Sierra Pac. Power Co., 350 U.S. 348, 353 (1956) (noting that
“[the Section 206] power is limited to prescribing the rate ‘to
be thereafter observed’ and thus can effect no change prior to
the date of the order”). This rule against retroactive rate
increases precludes FERC from ordering remedies that
accomplish a higher rate for a past period. In turn, the filed-rate
doctrine requires market participants to abide by the rates set:
“utilities are forbidden to charge any rate other than the one on
file with the Commission.” W. Deptford Energy, LLC v. Fed.
Energy Regulatory Comm’n, 766 F.3d 10, 12 (D.C. Cir. 2014).
The “rule against retroactive ratemaking” and the filed-rate
doctrine may thus be understood as “corollar[ies]” that make
static the rates paid for energy, once established. NSTAR Elec.
& Gas Corp. v. Fed. Energy Regulatory Comm’n, 481 F.3d
794, 800 (D.C. Cir. 2007). See also Ark. La. Gas Co. v. Hall,
453 U.S. 571, 577 (1981) (explaining the development of the
filed-rate doctrine in the context of the Natural Gas Act).

While Section 206’s limitations and the filed-rate doctrine
thus restrict the remedies that FERC may order, FERC’s
remedial authority is otherwise expansive. Section 309 of the
FPA provides that

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 necessary or
appropriate to carry out the provisions of this
chapter.
 16
16 U.S.C. § 825h. Section 309 accordingly permits FERC to
advance remedies not expressly provided by the FPA, as long
as they are consistent with the Act. See TNA Merch. Projects,
Inc. v. Fed. Energy Regulatory Comm’n, 857 F.3d 354, 359
(D.C. Cir. 2017) (citing Niagara Mohawk Power Corp. v. Fed.
Power Comm’n, 379 F.2d 153, 158 (D.C. Cir. 1967)). This
Court has endorsed FERC’s authority under Section 309 to
recoup erroneous refunds, id. at 362; Canadian Ass’n of
Petroleum Producers v. Fed. Energy Regulatory Comm’n, 254
F.3d 289, 299-300 (D.C. Cir. 2001), to order refunds where the
rate paid exceeds the filed rate, see Towns of Concord,
Norwood, & Wellesley, Mass. v. Fed. Energy Regulatory
Comm’n, 955 F.2d 67, 73 (D.C. Cir. 1992), and to imply a
refund protection where the Commission erred in accepting a
tariff revision that lacked such a commitment, see Xcel, 815
F.3d at 954-56. This variety of remedies indicates the
expansive range afforded by FERC’s Section 309 remedial
power.

The reallocation of SSR costs, including through
surcharges, is well within FERC’s remedial authority under
Section 309, read in harmony with Section 206 and the
filed-rate doctrine. While the surcharges at issue here resulted
in some customers paying more for past services than they were
charged originally, that cost increase to a subgroup of
ratepayers is not a “retroactive rate increase” as such: the
aggregate rate remained the same, divided differently among
the constituent payers. Although such a reallocation is not
expressly contemplated under Section 206, subsection (c)
confirms our interpretation by negative implication. Section
206(c) discusses “shifting costs” between utility companies
within a registered holding company. The provision bars
refunds in circumstances where “refunds . . . might otherwise
be payable” but where the refund order “is based upon a
determination that the amount of such decrease should be paid
 17
through an increase in the costs to be paid by other electric
utility companies of [the] registered holding company.” 16
U.S.C. § 824e(c). This statement that surcharges to pay for
refunds are impermissible in specific, limited circumstances
contemplates that the converse is true in all other
circumstances: surcharges to cover retroactive rate design
changes are acceptable when those limited circumstances do
not apply. Reading the Section 206(c) exception in conjunction
with Section 206(b) and against the backdrop of Section 309,
FERC’s authority to order refunds thus must be understood to
encompass surcharges to pay for ordered refunds where the
result is a reallocation of an existing rate. Only that
understanding gives meaning to the Section 206(c) carve-out
prohibiting surcharge-funded refunds as between multiple
utility companies within a single holding company. If FERC
could not ordinarily order surcharge-funded refunds, the
exception would be superfluous.

Petitioners rely heavily on this Court’s decision in City of
Anaheim, California v. Federal Energy Regulatory
Commission to argue that surcharges are unlawful, but that
decision is inapt. See 558 F.3d 521 (D.C. Cir. 2009). City of
Anaheim involved a Section 206 complaint by wholesale
electricity generators alleging that the FERC-approved rate for
must-offer generation was too low. FERC agreed, ordered a
rate increase, and applied it retroactively, with surcharges to
make up the difference. We rejected FERC’s action as an
impermissible retroactive rate change: long-standing
precedent holds that rate changes may be prospective only. Id.
at 523-25. Because the rate change increased what customers
paid during the past period of depressed rates, it made no
difference that FERC ordered the higher rates through
forward-looking surcharges. City of Anaheim thus stands for
the unremarkable proposition that FERC cannot order through
surcharges what it could not otherwise accomplish directly.
 18
But reallocation is a different animal altogether, and the
surcharges ordered here are part and parcel of that reallocation.
As FERC explained in its September 22, 2016 Order, “City of
Anaheim involved the Commission’s direct imposition of
retroactive surcharges to effectuate a rate increase,” while in
“the instant case [] the Commission has not changed the SSR
rates.” Sept. 22, 2016 Order, 156 FERC ¶ 61,205, P 48.
Because FERC’s remedial authority allows for rate
reallocation, and Section 206(c) buttresses this understanding,
FERC’s use of surcharges to effectuate the reallocation is
squarely within FERC’s authority.

Petitioners also argue that the Section 309 cases relied
upon by FERC in its September 22, 2016 Order are
distinguishable as involving error by the Commission. Pet’rs’
Br. 38; Pet’rs’ Reply Br. 7-8 (citing TNA, 857 F.3d at 360). But
Section 309 grants FERC broad remedial power regardless of
whether a mistake by FERC creates a reason to use it. The
provision itself allows for “any and all acts” “necessary or
appropriate” to carry out the FPA’s statutory ends, 16 U.S.C.
§ 825h, not merely to fix mistakes by the Commission. See
Niagara Mohawk, 379 F.2d at 158 (explaining that the
“necessary or appropriate” clause is “not restricted to
procedural minutiae, and . . . authorize[s] an agency to use
means of regulation not spelled out in detail, provided the
agency’s action conforms with the purposes and policies of
Congress and does not contravene any terms of the Act”). And,
as described above, this Court has validated FERC’s Section
309 authority in myriad contexts, with and without a predicate
error. Because Section 206 supports, rather than negates,
FERC’s authority to order rate reallocations, the statute does
not restrict FERC’s Section 309 authority for the remedy
ordered here.
 19
Finally, Petitioners invoke the Chenery doctrine. They
claim that FERC’s reliance on Section 309 in its brief “is an
impermissible post hoc rationalization of counsel,” since
“FERC did not rely on FPA Section 309 below,” and
Intervenors’ use of Section 206(c) to inform the interpretation
of Section 206(a) and Section 309 similarly “is improper.”
Pet’rs’ Reply Br. 2, 5-6, 11-12. See Sec. & Exch. Comm’n v.
Chenery Corp., 332 U.S. 194, 196 (1947) (limiting a reviewing
court to “the grounds invoked by the agency” when judging the
“propriety” of a “determination or judgment which the
administrative agency alone is authorized to make”). Neither
of these arguments hold water. While FERC did not explicitly
mention Section 309 in the challenged orders, it repeatedly
cited Niagara Mohawk, a Section 309 case about the scope of
permissible remedies, and Xcel Energy, a Section 309 case
about refund commitments. See, e.g., Escanaba Initial Order,
148 FERC ¶ 61,116, P 38 n.49; Feb. 19, 2015 Order, 150 FERC
¶ 61,104, P 90 n.220; Sept. 22, 2016 Order, 156 FERC
¶ 61,205, PP 49, 61 & n.126. By these references, FERC
invoked its Section 309 authority, even if not by name.
Moreover, Section 206(c) is only further textual support for the
conclusion that Section 206(a) does not preclude and Section
309 affords FERC the remedial authority used here. Chenery
poses no obstacle when we consider a party’s interpretation of
other statutory provisions to bolster the interpretation of the
statutory language at issue. See Am.’s Cmty. Bankers v. Fed.
Deposit Ins. Corp., 200 F.3d 822, 835 (D.C. Cir. 2000).

ii.

Having established that FERC has the statutory authority
to order a reallocation of SSR costs through refunds and
surcharges, we next consider whether FERC acted within its
discretion in doing so here. Petitioners argue that FERC
previously “acknowledged that it has no authority to order
 20
retroactive surcharges,” making this action a departure from its
ordinary policy. See Pet’rs’ Br. 36. However, as Petitioners
note, FERC consistently has construed its refund authority to
be equitable and flexible, with appropriate remedies dictated
by the circumstances. Id.

The circumstances here support FERC’s decision to order
refunds paid for by surcharges. In Louisiana Public Service
Commission v. Federal Energy Regulatory Commission, a
reallocation case like this one, this Court validated FERC’s
“previously muddled position” that “it has no generally
applicable policy of granting refunds” where a rate has been
unfairly allocated between multiple constituent payers, but “the
utility has received no net over-recovery.” 883 F.3d at 932. As
the Court explained, FERC’s “default position” with respect to
reallocation refunds relies on two premises: that typically “it
would be difficult for the utility to recover its costs fully”
because “it would be difficult or inequitable to extract
recompense” from customers that paid too little, and that
“customer firms that had made operational decisions in reliance
on one set of rates would be unable to ‘undo’ those transactions
retroactively in light of the new, corrected rates.” Id. at 933.

As FERC explained in the September 22, 2016 Order,
neither of these circumstances are present here. First, there is
no risk of “under-recovery” because “MISO has a record of the
SSR costs paid by each LSE . . . and [] can calculate the exact
amount of SSR costs that should be assessed to each LSE that
underpaid in order to refund LSEs that overpaid” based on the
revised methodology. Sept. 22, 2016 Order, 156 FERC
¶ 61,205, P 47. MISO’s LSE customer population has not
changed, so the calculation of over- and under-payments does
not present any concern of inequitable recovery. Second, no
challenger “identified any particular decisions made in reliance
on the previous SSR cost allocation methodology.” Id. at P 45.
 21
While parties protesting the retroactive application of the
changed rate design argued that the reallocation “create[d]
market uncertainty” by disrupting “sellers’ expectations,”
FERC concluded that because “SSR cost-allocation is an
out-of-market process,” “there are no markets involved, there
is no undermining of those markets, nor is there previous
market conduct that would have been adjusted to account for
eventual refunds.” Id. at P 46. In other words, because the SSR
costs cannot be avoided, changing rate design does not
implicate market-reliance concerns.

FERC’s rationale for distinguishing the reallocation at
issue here is particularly compelling in light of the unique
nature of the SSR agreements at issue. Reliability resources
are so designated because they are essential to the reliability of
the system’s energy supply, and SSR agreements are
accomplished in short order so as to avoid any gap in coverage.
As the Commission explained in its September 22, 2016 Order,
SSR agreements “must go into effect quickly to ensure that the
resource continues to operate,” and without an agreement in
place, a designated unit “would otherwise have provided SSR
service on an uncompensated basis while the required Tariff
process took its course.” Sept. 22, 2016 Order, 156 FERC
¶ 61,205, P 52. In addition, MISO is a non-profit that itself
lacks any funding to cover the costs of refunds to the LSEs that
paid too much. See Wis. Pub. Power, Inc. v. Fed. Energy
Regulatory Comm’n, 493 F.3d 239, 245 (D.C. Cir. 2007).
Accordingly, there was no over-recovery due to the pro rata
methodology that would have resulted in a surplus in MISO’s
hands. See Sept. 22, 2016 Order, 156 FERC ¶ 61,205, P 42
(discussing La. Pub. Serv. Comm’n & the Council of the City
of New Orleans, 155 FERC ¶ 61,120 (Apr. 29, 2016)). The
only way that FERC’s ordered refunds may be accomplished is
by collecting the necessary funds from MISO’s customers. As
the Commission reasoned, it is equitable that those customers
 22
receiving a windfall from the pro rata methodology pay it back
to effect the reallocation.

FERC’s consideration of these “relevant, significant facts”
distinguished its approach in this case from its usual policy and
the precedent it set in other cases. Cf. PG&E Gas
Transmission, Nw. Corp. v. Fed. Energy Regulatory Comm’n,
315 F.3d 383, 388-90 (D.C. Cir. 2003). Accordingly, we are
satisfied that FERC’s atypical remedy in this case reflects a
reasoned decision-making process and was within the
Commission’s discretion.

* * *

We thus deny the Petitions in full. FERC reasonably
determined that the pro rata allocation of SSR costs in the ATC
footprint was unjust and unreasonable, based upon substantial
evidence. The ordered remedy of refunds funded by surcharges
was within FERC’s remedial authority under Sections 206 and
309 of the FPA, and FERC adequately explained its rationale
in ordering that remedy here.