United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued March 15, 2023 Decided July 14, 2023
No. 22-1018
ADVANCED ENERGY UNITED, INC., ET AL.,
PETITIONERS
v.
FEDERAL ENERGY REGULATORY COMMISSION,
RESPONDENT
ALABAMA POWER COMPANY, ET AL.,
INTERVENORS
On Petition for Review of Orders
of the Federal Energy Regulatory Commission
Danielle C. Fidler argued the cause for petitioners. With
her on the briefs were Maia Hutt, Alexandra Farrell, Todd G.
Glass, Aaron Stemplewicz, Alexander L. Tom, John N. Moore,
Caroline Reiser, Ben Norris, and Adrienne Mouton-
Henderson. Jeffery S. Dennis entered an appearance.
Josiah Neeley was on the brief for amicus curiae R Street
Institute in support of petitioners.
2
Ari Peskoe was on the brief for amicus curiae Harvard
Electricity Law Initiative in support of petitioners.
Robert M. Kennedy, Senior Attorney, Federal Energy
Regulatory Commission, argued the cause for respondent.
With him on the brief were Matthew R. Christiansen, General
Counsel, and Robert H. Solomon, Solicitor.
Matthew A. Fitzgerald argued the cause for intervenors
Southeast EEM Members in support of respondent. With him
on the brief were Noel Symons and Katlyn A. Farrell.
Before: WILKINS and RAO, Circuit Judges, and TATEL,
Senior Circuit Judge.
Opinion for the Court filed by Circuit Judge WILKINS.
Opinion concurring in part and dissenting in part filed by
Circuit Judge RAO.
WILKINS, Circuit Judge: This petition challenges several
interrelated orders of the Federal Energy Regulatory
Commission (“FERC” or “Commission”) that permitted the
creation of a new energy transmission service across several
states in the Southeast region of the United States, entitled the
Southeast Energy Exchange Market (“SEEM”).
FERC adopted the first order (“Deadlock Order”) by
operation of law when its four Commissioners deadlocked 2-2
on whether the overall proposal was “just and reasonable” and
otherwise met the requirements of the Federal Power Act
(“FPA” or “Act”), 16 U.S.C. § 824d(a), and related FERC
regulations. In a later order by majority vote, the Commission
accepted tariff revisions by transmission service providers
within SEEM to enable the new transmission service.
3
Petitioners challenged these orders throughout the initial
proceedings, on rehearing at the Commission, and now in this
petition.
Petitioners raise a number of objections, claiming that the
Commission failed to adequately respond to their concerns,
misapplied or ignored its own precedent, and otherwise gave
unreasoned responses to their comments. For the following
reasons, we grant the petition in part, deny the petition in part,
and remand to the Commission for further proceedings.
I.
A.
The FPA authorizes FERC “to regulate ‘the transmission
of electric energy in interstate commerce’ and ‘the sale of
electric energy at wholesale in interstate commerce.’” FERC
v. Elec. Power Supply Ass’n, 577 U.S. 260, 266 (2016) (quoting
16 U.S.C. § 824(b)(1)). The FPA does not, however, authorize
the Commission to “regulate either within-state wholesale sales
or . . . retail sales of electricity (i.e., sales directly to users).”
Id. at 267. Instead, “[s]tate utility commissions continue to
oversee those transactions.” Id.
Under the FPA, public utilities regulated by FERC are
authorized to unilaterally set “rates, terms, and conditions for
service—commonly referred to as tariffs.” Pet’rs Br. 7 (citing
16 U.S.C. § 824d(c), (d)). Alternatively, “sellers and buyers
may agree on rates by contract.” Resp’t Br. 6 (citing 16 U.S.C.
§ 824d(c), (d)). “‘[A]ll rates and charges made, demanded, or
received by any public utility for or in connection with’
interstate transmissions or wholesale sales—as well as ‘all
rules and regulations affecting or pertaining to such rates or
charges’—must be ‘just and reasonable.’” Elec. Power Supply
Ass’n, 577 U.S. at 266 (quoting 16 U.S.C. § 824d(a)). Further,
4
regulated utilities may not: “(1) make or grant any undue
preference or advantage to any person or subject any person to
any undue prejudice or disadvantage, or (2) maintain any
unreasonable difference in rates, charges, service, facilities, or
in any other respect, either as between localities or as between
classes of service” “with respect to any transmission or sale
subject to the jurisdiction of the Commission.” 16 U.S.C.
§ 824d(b).
The FPA “contains two basic methods for changing
electricity rates.” City of Bethany v. FERC, 727 F.2d 1131,
1143 (D.C. Cir. 1984). Regulated utilities may unilaterally
change “any such rate, charge, classification, or service, or []
any rule, regulation, or contract relating thereto” but only “after
sixty days’ notice to the Commission and to the public” unless
the Commission excuses the notice requirement “for good
cause shown.” 16 U.S.C. § 824d(d). The “rate takes effect
immediately after [the] sixty days’ notice requirement has been
satisfied.” City of Bethany, 727 F.2d at 1143. Alternatively,
should FERC “first determine[] that a rate set by a public utility
is unjust, unreasonable, or unduly discriminatory,” the
Commission “itself may establish the just and reasonable rate.”
Id. (citing 16 U.S.C. § 824e(a)). In general, the FPA provides
that any “actions of the Commission shall be determined by a
majority vote of the members present” once a quorum of at
least three members is present. Pub. Citizen, Inc. v. FERC, 839
F.3d 1165, 1169 (D.C. Cir. 2016) (quoting 42 U.S.C. §
7171(e)).
The FPA also outlines the process by which “[a]ny person,
electric utility, State, municipality, or State commission
aggrieved by an order issued by the Commission” “may obtain
a review of such order.” 16 U.S.C. § 825l(a), (b). An aggrieved
party “may apply for a rehearing within thirty days after the
issuance of” the Commission’s order. Id. § 825l(a). That
5
application must “set forth specifically the ground or grounds
upon which such application is based.” Id. The Commission
is authorized to grant a rehearing, deny it, or “abrogate or
modify its order without further hearing.” Id. If the
Commission fails to act on “the application for rehearing
within thirty days after it is filed, such application may be
deemed to have been denied.” Id.
Aggrieved parties must undertake this process with FERC
before filing a petition for review of the Commission’s order
“in the United States court of appeals for any circuit wherein
the licensee or public utility to which the order relates is located
or has its principal place of business, or in the United States
Court of Appeals for the District of Columbia.” Id. § 825l(b).
Further, they must file a petition in the court of appeals “within
sixty days after the order of the Commission upon the
application for rehearing.” Id. “Section 313(a) [of the FPA]
states: ‘No proceeding to review any order of the Commission
shall be brought by any entity unless such entity shall have
made application to the Commission for a rehearing thereon.’”
New England Power Generators Ass’n, Inc. v. FERC, 879 F.3d
1192, 1198 (D.C. Cir. 2018) (quoting 16 U.S.C. § 825l(a)).
Unlike a FERC order arising from a majority vote by a
quorum of the Commissioners, this case concerns an order
resulting from a deadlock vote by the Commissioners. In 2016,
this Court held that “FERC’s deadlock does not constitute
agency action, and the Notices describing the effects of the
deadlock are not reviewable orders under the FPA.” Pub.
Citizen, 839 F.3d at 1172. Congress amended the FPA in 2018
to address the “[i]naction of [c]ommissioners.” See America’s
Water Infrastructure Act of 2018, Pub. L. No. 115-270, 132
Stat. 3765, 3868 (codified at 16 U.S.C. § 824d(g)). The Act
now provides that agency inaction on a rate change due to a 2-
2 deadlock vote, among other things, is an institutional order of
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FERC reviewable under 16 U.S.C. § 825l(b) and “each
Commissioner” must add to the record a “statement explaining
the views of the Commissioner with respect to the [rate]
change.” Id. § 824d(g)(1)(A–B).
B.
The Commission’s oversight of the sale and transmission
of electric energy has shifted over the years given significant
changes in the market for energy transmission. Historically,
“state or local utilities controlled their own power plants,
transmission lines, and delivery systems, operating as
vertically integrated monopolies in confined geographic
areas.” Elec. Power Supply Ass’n, 577 U.S. at 267. The
provision of electric energy is a capital intensive industry,
however, so utilities began “to share reserves with adjacent
utilities.” FERC, ENERGY PRIMER: A HANDBOOK OF ENERGY
MARKET BASICS 36 (2020), https://perma.cc/6CWN-2UE5
[hereinafter ENERGY PRIMER]. They “built interconnecting
transmission lines large enough to deliver power in case of a
major generator outage or some other system disruption.” Id.
These reserve-sharing agreements led to the creation of power
pools, “multilateral arrangements with members ceding
operational control over their generating units and transmission
facilities to a common operator.” Id. at 37, 38.
Under this monopoly model, “utilities owned and operated
the transmission lines with no obligation to allow others to use
them,” which was a “significant barrier to the development” of
independent power plants and an independent power industry.
Id. at 39. The Energy Policy Act of 1992, Pub. L. No. 102-486,
106 Stat. 2776, authorized FERC “to grant transmission access
on request,” resulting “in a patchwork of transmission access,”
ENERGY PRIMER 39. Independent power plants are now more
common and “almost all electricity flows not through ‘the local
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power networks of the past,’ but instead through an
interconnected ‘grid’ of near-nationwide scope.” Elec. Power
Supply Ass’n, 577 U.S. at 267.
FERC’s approach to ensure “just and reasonable rates”
changed to meet the times. Instead of “cost-based rate-setting
traditionally used to prevent monopolistic pricing,” the
Commission works “to ensure ‘just and reasonable’ wholesale
rates by enhancing competition—attempting, as [the Supreme
Court] [has] explained, ‘to break down regulatory and
economic barriers that hinder a free market in wholesale
electricity.’” Id. (quoting Morgan Stanley Cap. Grp. Inc. v.
Pub. Util. Dist. No. 1 of Snohomish Cnty., 554 U.S. 527, 536
(2008)).
One example of the Commission’s efforts to enhance
competition is a rule issued by FERC in 1996 to remedy,
among other things, “undue discrimination in access to the
monopoly owned transmission wires that control whether and
to whom electricity can be transported in interstate commerce.”
Promoting Wholesale Competition Through Open Access Non-
Discriminatory Transmission Services by Public Utilities;
Recovery of Stranded Costs by Public Utilities and
Transmitting Utilities, 61 Fed. Reg. 21540, 21541 (May 10,
1996) [hereinafter “Order No. 888”]. In Order No. 888, the
Commission “found that electric utilities were discriminating
in the ‘bulk power markets,’ in violation of § 205 of the FPA,
by providing either inferior access to their transmission
networks or no access at all to third-party wholesalers of
power.” New York v. FERC, 535 U.S. 1, 11 (2002). FERC
“required the functional unbundling of wholesale generation
and transmission services, and directed utilities to provide
open, non-discriminatory access to their transmission facilities
to competing electricity suppliers.” Resp’t Br. 8–9 (citing New
York, 535 U.S. at 11–13).
8
Four years later, FERC built upon this reform with an
order “encourag[ing] transmission providers to establish
‘Regional Transmission Organizations’—entities to which
transmission providers would transfer operational control of
their facilities for the purpose of efficient coordination.”
Morgan Stanley, 554 U.S. at 536. Further, the Commission
“has encouraged the management of those entities by
‘Independent System Operators,’ not-for-profit entities that
operate transmission facilities in a nondiscriminatory manner.”
Id. at 536–37.
Today, “[t]wo-thirds of the population of the United States
is served by electricity markets run by [seven] regional
transmission organizations or independent system operators
(RTO/ISOs or organized markets).” ENERGY PRIMER 61. The
primary distinction between the “RTO/ISO markets and their
predecessors (such as vertically integrated utilities, municipal
utilities and co-ops) is that RTO/ISO markets deliver electricity
through competitive market mechanisms.” Id. “The
centralized markets they operate employ auctions to set a
uniform market-clearing price for energy the day before it is
needed and establish binding schedules for the production and
consumption of that energy.” Resp’t Br. 9.
Traditional wholesale markets still exist, “primarily in the
Southeast and the West outside of California where utilities are
responsible for system operations and management, and,
typically, for providing power to retail consumers.” ENERGY
PRIMER 61. “Electric service providers in the Southeast
bilateral market include vertically integrated utilities—i.e.,
utilities that own the generation, transmission, and distribution
systems used to serve consumers—federal government-owned
providers, state-owned providers, and municipalities.” Resp’t
Br. 7–8. Utilities in bilateral markets primarily generate their
own energy to serve their customers or—and sometimes in
9
addition—enter “long-term power purchase arrangements”
with other utilities. Id. at 8. “The amount of energy required
by end users is called ‘load,’ and thus local utilities are
sometimes referred to as ‘load-serving entities.’” Id. at 6.
According to the Commission, utilities in these markets
sometimes use short-term transactions to purchase energy from
another utility when it is more expensive to generate the energy
themselves. Id. at 8; see also ENERGY PRIMER 71. “Overall
demand for short-term transactions tends to rise during periods
of system stress, for example summer heat waves or winter
cold snaps.” ENERGY PRIMER 71. Historically, short-term
transactions are less common than long-term energy
transactions, with “[t]he Southeast ha[ving] relatively low
volumes of short-term trades compared to the Western
regions.” Id.
It was against this backdrop that the Southeast Energy
Exchange Market was created.
C.
1.
On February 12, 2021, Southern Company Services, Inc.,
acting as agent for Intervenor Alabama Power Company,
submitted the SEEM Proposal for FERC acceptance under
Section 205(c) of the FPA. See J.A. 286. At its founding,
SEEM consisted of 19 different entities—designated as
“Members”—across 10 different states in the Southeast. See
Pet’rs Br. 12. The SEEM Proposal was “filed as Alabama
Power [Company’s] Rate Schedule No. 1011 in its Market-
Based Rate Tariff eTariff database” but was submitted on
behalf of the SEEM Members. J.A. 286 n.2. The founding
SEEM Members included “private investor-owned utility
companies, state agencies, municipal utilities, nonprofit
10
electric cooperatives, and a Federal agency (the Tennessee
Valley Authority).” Intervenors Br. 2.
The SEEM Proposal takes the form of a contractual
agreement with numerous terms that outline SEEM’s structure,
governance, operations, and participation requirements. See
J.A. 1032–94. As relevant here, Members have access to “an
automated platform that facilitates intra-hour trades of energy.”
Resp’t Br. 10. Non-members—designated as “Participants”—
may also take part in SEEM energy transactions but lack the
Member’s authority to manage the business of SEEM. See
generally J.A. 1043–44 (describing authority of SEEM
Members). To join SEEM, prospective Participants must: (1)
“Enter into a transmission service agreement with each SEEM
Member that requires the delivery of such an agreement” to
take SEEM transmission service; (2) “Own or otherwise
control generation [(a ‘Source’)] and/or be contractually
obligated to serve customers within the SEEM footprint [(a
‘Sink’)]”; (3) “Sign a SEEM [Participant] Agreement, which
requires the signature of the SEEM Agent at the direction of
SEEM’s Operating Committee”; and (4) “Enter into an
Enabling Agreement with at least three SEEM Participants.”
Pet’rs Br. 13 (citing J.A. 1081–82).
The transactions created by the SEEM Proposal differ in
several key ways from traditional energy transactions in the
Southeast region.
First, the transactions utilize otherwise-unused
transmission capacity, namely “the transmission capacity that
is available only after all other transmission customers make
their transmission reservations.” J.A. 133.
Second, the energy transmitted is described as “non-firm
energy,” meaning “product for which delivery or receipt of the
energy may be interrupted for any reason or no reason, without
11
liability on the part of either buyer or seller.” Id. at 1080. This
differs from typical transactions in this market because most
use agreements that require firm, or uninterruptible, energy
intended to “assur[e] market participants of a specified quality
and quantity of service under normal operating conditions.”
Market Assessments: Glossary, FERC, https://perma.cc/3P7D-
WFM9. Firm energy service “can be either ‘network’ (i.e.,
priority service with access to the entire network) or ‘point-to-
point’ (i.e., service between two locales).” Resp’t Br. 96.
Third, rather than direct negotiation between buyers and
sellers, SEEM’s automated platform uses an algorithm to
match bids and offers for electricity on 15-minute intervals
with price matched transactions on a “split-the-savings”
pricing basis. See J.A. 289. “‘[S]plit-the-savings’ pricing
means that the transaction price will reflect the midpoint
between the seller’s offer price and the buyer’s bid price, with
an adjustment for losses.” Id. at 289. SEEM transactions use
an electronic tag, or “e-Tag,” that “assigns and tracks the
transmission systems used to deliver energy,” Resp’t Br. 79,
and allows for the “coordination required between multiple
entities,” J.A. 1079. This transaction system is an innovation,
not just due to the electronic platform but also since “there are
few sub-hourly, non-firm energy transactions taking place
today in the Southeast.” Id. at 134.
Prior to SEEM, “[t]o engage in bilateral power purchases
and sales, electric service providers have had to use phone or
electronic communication tools to discover each other,
negotiate terms of sale, arrange for transmission service, and
schedule delivery.” Id. at 119. While buyers and sellers are
not entering direct negotiations like they had to before SEEM,
they can use the SEEM platform’s “toggle” feature to limit
possible transaction partners—as long as three potential
counterparties remain—based on geographic or other
12
“[c]ounterparty [s]pecific [c]onstraints” like a potential
counterparty’s credit limit. Id. at 312; see also id. at 1082–83.
Finally, buyers and sellers pay for the energy transmitted
in SEEM transactions but do not have to pay a separate charge
for the transmission service itself. This feature is unique as
well, since transmission facilities have revenue requirements
that are met, in part, by charging a particular tariff rate per
transmission. See id. at 465. Zero-cost transmission also
“allows entities to transact across multiple utility transmission
systems without incurring cumulative transmission charges,”
also called “pancaked” transmission charges. Pet’rs Br. 51
(citing J.A. 317); id. at 11. This zero-charge transmission
service is known as “Non-Firm Energy Exchange
Transmission Service,” or “NFEETS,” in the SEEM Proposal.
The original submission requested that the SEEM Proposal
become effective on May 13, 2021, but the Commission found
the submission to be deficient. FERC requested additional
information ranging from how the energy transactions under
SEEM would occur to how non-Member utilities and other
parties would participate. The SEEM Members
(“Intervenors”) responded in a submission dated June 7, 2021.
After FERC found that response deficient, Intervenors
submitted their final filing on August 11, 2021, asking FERC
to accept the SEEM proposal. Both of Intervenors’ responses
“were treated as filing amendments and reset the clock for
Commission action.” Resp’t Br. 16.
FERC also received submissions from other parties during
this time. One of the Members—Tennessee Valley Authority,
a federal utility serving power to over 10 million people in the
Southeast—filed a motion to intervene to provide comments,
noting its substantial interest in the proceeding and explaining
how its participation was necessary for three other Members to
13
engage in SEEM transactions. Petitioners, who were in
separate coalitions at the time, also filed motions and
comments to raise issues with the SEEM proposal.
In their final submission, Intervenors “request[ed] an
effective date (as to the Southeast EEM Agreement and
concurrence filings) of October 12, 2021, sixty days from the
filing.” J.A. 1031. In actuality, sixty calendar days from
August 11, 2021, was Sunday, October 10, 2021. FERC failed
to issue an order on the SEEM Proposal by October 10, 2021,
and on October 13, 2021, FERC released a notice stating that
the SEEM Proposal went into effect by operation of law on
October 12, 2021, under Section 205 of the FPA. See J.A. 23.
The notice provided that the Commission failed to act on the
SEEM Proposal as of October 11, 2021, “because the
Commissioners [were] divided two against two as to the
lawfulness of the change.” Id. In accordance with the recently
amended FPA, the Commissioners added statements to the
record explaining their views as to the SEEM Proposal.
Commissioners Christie and Danly voted to accept the
Proposal, see id. at 60–75, 76–116, while Commissioners Glick
and Clements voted to reject the Proposal, id. at 25–34, 35–59.
Petitioners, acting in two separate coalitions at the time,
sought rehearing on the Commission’s failure to act on the
SEEM Proposal in submissions dated November 12, 2021. See
id. at 1100–1245. While both requests raised similar issues
with the SEEM Proposal, the Clean Energy Coalition
Petitioners also moved, in the alternative, for clarification on
the SEEM Proposal.
On December 10, 2021, FERC denied the rehearing
requests as untimely and declined to address the alternative
motion for clarification. See id. at 194–201. FERC noted that
it “ha[d] not previously explained in an order the proper
14
calculation of the deadline for rehearing requests following the
failure of the Commission to act within the time period
prescribed by section 205(d) of the FPA,” but did so in the
order. J.A. 197. The Commission interpreted Section 205(d)
of the FPA to provide that “the statutory period for
Commission action established in section 205(d) expires on the
later of the day prior to the effective date [requested by the
applying party] or the 60th day after the filing is made.” Id. at
198.
Since Intervenors requested an effective date of October
12, 2021, the last day the Commission could have issued an
order on the SEEM Proposal—under FERC’s construction of
Section 205(d)—was October 11, 2021, a day after 60 days had
passed from when the SEEM Proposal was filed. FERC went
on to provide that it could not issue an order to accept or deny
the SEEM filing except “in response to a timely request for
rehearing . . . or a new section 205 filing in a new proceeding.”
Id. at 198. It noted that its regulatory calculation rules “cannot
and do not operate to extend the statutory deadline for
Commission action pursuant to section 205(d).” Id. at 199
(citing 18 C.F.R. § 385.2007(a)(2)).
Under FERC’s construction, October 11, 2021, was the
date of its inaction and thus the date of FERC’s “order” as to
the SEEM Proposal “per section 205(g)(1)(A)” of the FPA. Id.
at 200. Accordingly, Petitioners’ deadline—30 days after the
order in question—was November 10, 2021. Id. Since
Petitioners filed their requests for rehearing of the Deadlock
Order on November 12, 2021, two days later, FERC stated that
it “must reject both rehearing requests as untimely.” Id. at 201.
Petitioners requested rehearing of the December 2021
order denying their rehearing request of the Deadlock Order.
15
The Commission also denied that request. SEEM launched on
November 9, 2022. Intervenors Br. 2.
2.
Part of the SEEM Proposal required Members who were
transmission service providers to request revisions to their
tariffs to allow for NFEETS, the SEEM transmission service.
They filed these requests at the same time as the SEEM
Proposal, on August 11, 2021, but FERC addressed them
separately after the SEEM Proposal was adopted by operation
of law. J.A. 117. Petitioners submitted protests to the
requested revisions, but FERC approved each revision in an
order by majority vote of the Commissioners filed on
November 8, 2021. See id. at 117–55. Commissioner
Clements dissented and argued, among other things, that the
requested tariffs “fail to provide for open access to the
Southeast EEM and provide for rates that have not been shown
to be just and reasonable.” Id. at 156.
On December 8, 2021, Petitioners sought rehearing of the
November 2021 order. That request was denied by operation
of law on January 10, 2022. FERC issued an order addressing
Petitioners’ arguments raised on rehearing and denied them as
unpersuasive over the dissent of Commissioner Clements. Id.
at 226–56. For purposes of this opinion, the original order
approving the tariff revision and FERC’s order on rehearing are
collectively referred to as the “Tariff Order.”
3.
On November 24, 2021, Intervenors filed proposed
amendments to the SEEM Proposal. FERC unanimously
approved the amendments, limiting its review just to the
proposed revisions and not the entire SEEM Proposal. The
amendments addressed concerns raised about the transparency
16
of SEEM and the original SEEM Proposal’s application of
Mobile-Sierra to the entire agreement. The Mobile-Sierra
doctrine requires FERC to “presume a contract rate for
wholesale energy is just and reasonable” and mandates that the
Commission “cannot set aside the rate unless it is contrary to
the public interest.” Okla. Gas & Elec. Co. v. FERC, 827 F.3d
75, 76 (D.C. Cir. 2016).
FERC accepted the proposed amendments and, among
other things, limited the “Mobile-Sierra application of the just
and reasonable standard of review to future changes to certain
specified provisions” of the SEEM Proposal. Resp’t Br. 26;
see also id. at 65–66 (outlining the provisions to which the
Mobile-Sierra presumption applies); J.A. 1152 (listing
provisions). Petitioners requested rehearing of this order, but
the request was denied by operation of law. FERC issued an
order on May 19, 2022, addressing Petitioners’ arguments on
rehearing but reached the same result.
II.
We begin, as we must, with questions of our jurisdiction.
See Kaplan v. Cent. Bank of the Islamic Republic of Iran, 896
F.3d 501, 510 (D.C. Cir. 2018) (citing Steel Co. v. Citizens for
a Better Env’t, 523 U.S. 83, 101 (1998)).
A.
The first jurisdictional issue we address is standing.
“[S]tanding has three parts: injury in fact, causation, and
redressability.” Util. Workers Union of Am. Loc. 464 v. FERC,
896 F.3d 573, 577 (D.C. Cir. 2018). Petitioners assert that they
“satisfy the test for associational standing.” Pet’rs Br. 24. To
successfully demonstrate associational standing, Petitioners
must establish that “(1) at least one of [their] members would
have standing to sue in his own right; (2) the interest [they]
17
seek[] to protect is germane to [their] purpose; and (3) neither
the claim asserted nor the relief requested requires the member
to participate in the lawsuit.” Ctr. for Biological Diversity v.
EPA (“Center”), 861 F.3d 174, 182 (D.C. Cir. 2017) (quotation
marks omitted).
“Where, as here, a case comes to us on a petition directly
from an agency, the petitioner’s burden of production . . . is . . .
the same as that of a plaintiff moving for summary judgment in
the district court: it must support each element of its claim to
standing by affidavit or other evidence, including whatever
evidence the administrative record may already contain.” Util.
Workers, 896 F.3d at 577 (quotation marks omitted). “A
petitioner seeking [the Court’s] direct review of agency action
cannot rest on bare assertions; it must ‘identify in the record
evidence sufficient to support its standing to seek review or, if
there is none because standing was not an issue before the
agency, submit additional evidence to the court of appeals.’”
Id. at 578 (quoting Sierra Club v. EPA, 292 F.3d 895, 899 (D.C.
Cir. 2002)). “Once one petitioner has demonstrated standing[,]
[the Court] may permit the participation of others.” Env’t
Action v. FERC, 996 F.2d 401, 406 (D.C. Cir. 1993).
Petitioners represent two categories of groups. The first,
“bulk energy market participants,” assert that their “business
interests are harmed by FERC’s orders.” Pet’rs Br. 24. For
example, Voltus, a member of Petitioner Advanced Energy
United, Inc. (“AEU”), is a “leading software platform” that
connects “distributed energy resources (DERs) to electricity
markets.” Pet’rs Br. Add. 117. Its Chief Regulatory Officer
attests that FERC’s approval of SEEM harms Voltus because
it “does not meet the SEEM Agreement’s entrance
requirements” to become a Member or Participant, “which
forecloses revenue streams and opportunities for [its]
business.” Id. at 119. The second group of petitioners includes
18
“residential and commercial customers” in the Southeast who
claim that “FERC’s approval of SEEM . . . [will] increase[e] in
the long term the rates they pay for electricity.” Pet’rs Br. 24–
25.
The Voltus declaration “assert[s] injuries under the
doctrine of competitor standing, which recognizes that
economic actors suffer constitutional injury in fact when
agencies lift regulatory restrictions on their competitors or
otherwise allow increased competition.” Am. Fuel &
Petrochem. Mfrs. v. EPA, 3 F.4th 373, 379 (D.C. Cir. 2021)
(quotation marks omitted). Like SEEM, Voltus uses a software
platform to facilitate energy transactions and attests to having
at least one customer in the region. See Pet’rs Br. Add. 117–
18. Since Voltus does not meet the SEEM participation
requirements, however, its ability to compete and deliver
services in the SEEM footprint is limited relative to SEEM
Participants. See id. at 118–20. Accordingly, AEU has shown
that FERC’s orders result in an “imminent increase in
competition” for at least one of its members, and “the rest of
the standing inquiry . . . falls into place: the increased
competition is caused by the agency’s action and redressed by
restoring the regulatory status quo ante.” Am. Fuel &
Petrochem. Mfrs., 3 F.4th at 379. The first requirement to
establish associational standing is therefore met.
The second and third requirements are also established
here. AEU is a trade association “dedicated to making energy
secure, clean, and affordable.” Pet’rs Br. vi. The interests
AEU seeks here—promoting “competition from lower-cost
independent power producers” and the lower “cost of
electricity that utilities pass through to Petitioners’ members,”
id. at 25—are “germane to its purpose,” Center, 861 F.3d at
182. There is also no argument that AEU’s members are
required to participate in this litigation to seek judicial review
19
of the underlying orders. Accordingly, AEU has established
associational standing.
Since one of the Petitioners has demonstrated standing, the
remaining may appear before the Court. See Env’t Action, 996
F.2d at 406.
B.
The Commission challenges the Court’s jurisdiction over
the petition seeking review of the Deadlock Order. A
petitioner’s timely filing of request for rehearing of a FERC
order “is a mandatory petition-for-rehearing requirement” that
provides an “express statutory limitation on the jurisdiction of
the court.” New England Power Generators Ass’n, 879 F.3d at
1197 (quotation marks omitted). While it is undisputed that the
Petitioners filed timely petitions for rehearing as to the Tariff
Order, the Commission argues that the Petitioners failed to
submit a timely petition for rehearing of the Deadlock Order
which accepted the SEEM Proposal by operation of law.
To answer this question, we must interpret Section 205(g)
of the FPA. Section 205(g) includes a provision addressing
administrative proceedings related to inaction by FERC, see 16
U.S.C. § 824d(g)(1), and a provision conferring federal court
jurisdiction to review “orders” arising from FERC’s inaction,
see id. § 824d(g)(2). While both the Commission and
Petitioners rely upon prior FERC rulings and regulations to
interpret whether the petition for rehearing was timely,
“agencies get no deference in interpreting jurisdictional
statutes.” Allegheny Def. Project v. FERC, 964 F.3d 1, 18
(D.C. Cir. 2020) (en banc). Section 205(g), through reference
to Section 205(d), 16 U.S.C. § 825l, “addresses both the filing
of an application for rehearing as a precondition to judicial
review, and the effect of agency inaction within a specified
time limit on opening the courthouse doors.” Allegheny, 964
20
F.3d at 12. Accordingly, interpretation of the statute “falls to
the courts, not to the Commission,” id. at 12, and the meaning
is decided de novo. Id. at 11–12; see also United Mine Workers
of Am., Int’l Union v. Dole, 870 F.2d 662, 665 (D.C. Cir. 1989)
(“Statutory provisions laying down time periods for taking
appeals, like any other enactments, must be interpreted and
applied by courts; in so doing we use the federal rules as
guides.”).
To interpret the statute, “we begin by examining the text.”
Carter v. United States, 530 U.S. 255, 271 (2000). Section
205(g) provides:
(g) Inaction of Commissioners
(1) In general
With respect to a change described in
subsection (d), if the Commission permits
the 60-day period established therein to
expire without issuing an order accepting
or denying the change because the
Commissioners are divided two against
two as to the lawfulness of the change, as
a result of vacancy, incapacity, or recusal
on the Commission, or if the Commission
lacks a quorum--
(A) the failure to issue an order accepting
or denying the change by the Commission
shall be considered to be an order issued
by the Commission accepting the change
for purposes of section 825l(a) of this
title; and
21
(B) each Commissioner shall add to the
record of the Commission a written
statement explaining the views of the
Commissioner with respect to the change.
(2) Appeal
If, pursuant to this subsection, a person
seeks a rehearing under section 825l(a) of
this title, and the Commission fails to act
on the merits of the rehearing request by
the date that is 30 days after the date of
the rehearing request because the
Commissioners are divided two against
two, as a result of vacancy, incapacity, or
recusal on the Commission, or if the
Commission lacks a quorum, such person
may appeal under section 825l(b) of this
title.
16 U.S.C. § 824d(g). Section 205(d), which is referenced in
Section 205(g)(1), states:
(d) Notice required for rate changes
Unless the Commission otherwise orders,
no change shall be made by any public
utility in any such rate, charge,
classification, or service, or in any rule,
regulation, or contract relating thereto,
except after sixty days’ notice to the
Commission and to the public. Such
notice shall be given by filing with the
Commission and keeping open for public
inspection new schedules stating plainly
the change or changes to be made in the
22
schedule or schedules then in force and
the time when the change or changes will
go into effect. The Commission, for good
cause shown, may allow changes to take
effect without requiring the sixty days’
notice herein provided for by an order
specifying the changes so to be made and
the time when they shall take effect and
the manner in which they shall be filed
and published.
Id. § 824d(d). The plain text of Section 205 gave the
Commission 60 days to act after Intervenors submitted the final
SEEM Proposal filing on August 11, 2021. Accordingly, the
final date for FERC to act on the SEEM Proposal was October
10, 2021. Since that date “marks the consummation of the
agency’s decisionmaking process,” it serves as the date of the
Commission’s “order” for purposes of judicial review under
Section 313 of the FPA. Pub. Citizen, 839 F.3d at 1171. Under
the plain language of Section 313, Petitioners had to “apply for
a rehearing within thirty days after the issuance of [the October
10, 2021] order.” 16 U.S.C. § 825l(a). Thirty days from
October 10, 2021, was Tuesday, November 9, 2021.
Petitioners’ filing on Friday, November 12, 2021, was,
therefore, untimely under the text of the relevant statutes
standing alone.
However, our analysis does not end with the statutory text.
We use the time computation rules of Federal Rule of Appellate
Procedure 26 to construe “any statute that does not specify a
method of computing time.” FED. R. APP. P. 26(a); see also
Dole, 870 F.2d at 664–65. Those rules, like FERC’s own time
counting regulations, specify that any time period for which
“the last day is a Saturday, Sunday, or legal holiday, the period
continues to run until the end of the next day that is not a
23
Saturday, Sunday, or legal holiday.” FED. R. APP. P.
26(a)(1)(C); see also 18 C.F.R. § 385.2007(a)(2) (“In each case
the [time] period does not end until the close of the
Commission business of the next day which is not a Saturday;
Sunday; . . . or legal public holiday.”).
Here, the Commission’s deadline—October 10, 2021—
originally fell on a Sunday, and the following day—October
11, 2021—was a federal holiday, Columbus Day.
Accordingly, the final date that FERC could have exercised its
authority was October 12, 2021. Since 30 days after that date—
November 11, 2021—was also a federal holiday, Veterans
Day, the last day Petitioners could have filed their petition for
rehearing of the Deadlock Order was November 12, 2021. See
Dole, 870 F.2d at 665 (“[T]ime periods, including
jurisdictional time periods, are to be construed in accordance
with Fed. R. App. P. 26(a), excluding final weekend days and
holidays unless a specific statutory provision requires
otherwise.”).
Accordingly, the Commission erred in finding the petition
for rehearing of the Deadlock Order untimely below, and the
related orders finding as such are therefore vacated. While this
Court has jurisdiction over the petition under Sections 205(g)
and 313(b) of the FPA, see 16 U.S.C. §§ 824d(g), 825l(b), the
Court will remand the petition as it relates to the acceptance of
the SEEM Proposal and related amendments to “the
Commission . . . so that it may . . . consider and rule upon
[Petitioners’] application for rehearing” in the first instance.
Dayton Power & Light Co. v. Fed. Power Comm’n, 251 F.2d
875, 877 (D.C. Cir. 1957).
III.
As noted above, FERC accepted “tariff revisions
implementing the Non-Firm Energy Exchange Transmission
24
Service” in a majority-vote order, Resp’t Br. 77; see also J.A.
117–93, and reached the same result in a separate order after
Petitioners requested rehearing, see J.A. 226–56. This Court
has jurisdiction over the Petition as it relates to the Tariff Order
as it is undisputed that Petitioners’ requests for rehearing of the
Tariff Order were timely submitted.
This Court “review[s] FERC’s ratemaking orders under
the Administrative Procedure Act’s arbitrary and capricious
standard.” Emera Me. v. FERC, 854 F.3d 9, 21 (D.C. Cir.
2017). The Court’s “role . . . is to ensure that the Commission’s
judgment is supported by substantial evidence and that the
methodology used in arriving at that judgment is either
consistent with past practice or adequately justified.” Id. at 22.
Further, the Court’s “review in ratemaking cases is . . . limited
to ensuring that the Commission has made a principled and
reasoned decision supported by the evidentiary record.” Id.
(quotation marks omitted). While the Court’s standard of
review is “highly deferential,” “it bears repeating that courts
have never given regulators carte blanche.” Id. (quotation
marks omitted). Though the Court has “recognized FERC’s
discretion in ratemaking cases, [the Court] ha[s] stated that in
all cases, the Commission must explain its reasoning when it
purports to approve rates as just and reasonable.” Id. at 23
(quotation marks omitted).
Petitioners raise several challenges to the Tariff Order.
We address each in turn.
A.
The Petitioners’ first challenge is unavailing. We have
noted that “transmission-owning utilities . . . can be expected
to act in their own interest to maintain their monopoly . . . even
if they do so at the expense of lower-cost generation companies
and consumers.” Transmission Access Pol’y Study Grp. v.
25
FERC, 225 F.3d 667, 684 (D.C. Cir. 2000) (per curiam).
Petitioners argue that the Commission “disregarded th[is] basic
principle of utility regulation” by assuming Intervenors, as
monopoly utilities, would not use the SEEM participation
requirements and other “new mechanisms” in their own interest
at the expense of their customers. Pet’rs Br. 45–46. They
reference an expert affidavit they submitted during the
administrative proceedings explaining how different features
of SEEM could allow Intervenors to discriminate against
prospective Participants. Id. at 46; see also J.A. 804–10.
Petitioners contend that the Commission improperly required
Petitioners to prove that the Intervenors “ha[d] a subjective
intent to take advantage of known opportunities to unduly
discriminate,” Pet’rs Br. 45–46, when Intervenors actually had
the burden under Section 205 to demonstrate that the requested
tariff revisions were “just and reasonable,” 16 U.S.C.
§ 824d(e).
Petitioners’ argument is not without some merit. Their
expert affidavit explained numerous ways SEEM’s
participation requirements could be manipulated by a Member
acting in its own monopoly interests. See J.A. 804–10. The
affidavit provided, for example, that the “largest generation
owning entities” could “‘toggle off’ potential counterparties in
a coordinated strategy to block any beneficial trades.” Id. at
805. Yet, at many points, the Tariff Order is dismissive of
Petitioners’ evidence and concerns. See, e.g., id. at 146 (“No
evidence in the record suggests the Operating Committee will
prevent the Agent from countersigning a given Participant
Agreement.”).
Here, however, the Commission properly concluded that
the record demonstrated that SEEM’s structure disincentivizes
such anticompetitive behavior. As the Commission found,
SEEM’s automated bidding platform encourages existing
26
Participants to contract with “as many potential counterparties
as possible in order to maximize the number of potential
bilateral transactions.” Id. Under this record, it was not
arbitrary and capricious for the Commission to find that
SEEM’s model discouraged Members from acting in bad faith.
Further, and as the Commission highlights, the Tariff Order
explains that it placed the burden of proof on the relevant
Intervenors, as applicants for the tariff revisions. See id. at 238
(“We continue to find that Filing Parties have satisfied their
burden under section 205 of the FPA . . . .”).
Accordingly, Petitioners fail to demonstrate that the
Commission “unjustifiably assum[ed]” that the requested tariff
revisions were just and reasonable, Pet’rs Br. 45, or “altered the
burden of proof” in its determination that the SEEM
participation requirements were not unduly discriminatory,
Pet’rs Reply Br. 23.
B.
However, we find merit in Petitioners’ contention that
FERC’s approval of the Tariff Order is inconsistent with prior
Commission regulations “requir[ing] jurisdictional
transmission tariffs to be consistent with or superior to the pro
forma open-access transmission tariff contained in its Order
No. 888 rulemaking, which directed utilities to provide open
access to their transmission lines in a nondiscriminatory
fashion.” Resp’t Br. 85; see also Pet’rs Br. 58–60.
They argue that SEEM’s condition that Participants have
a Source or Sink in the SEEM geographic footprint contravenes
Order No. 888’s requirement that “[a] non-discriminatory
open-access tariff must be available to any entity that can
request transmission services.” 61 Fed. Reg. at 21570.
FERC’s “pro forma tariff contains minimum terms and
conditions of non-discriminatory service.” Sacramento Mun.
27
Util. Dist. v. FERC, 616 F.3d 520, 531 (D.C. Cir. 2010) (per
curiam) (quotation marks omitted). While “[t]ransmission
providers may adopt tariff provisions that deviate from those
of the pro forma tariff,” the “deviations must be consistent with
or superior to the terms of the pro forma tariff.” Id. (quotation
marks omitted).
As noted in the prior section, the Commission determined
that the requested tariff revisions were “just and reasonable and
not unduly discriminatory or preferential.” J.A. 133. For this
reason, the Commission found the requested tariff revisions to
be “consistent with or superior to the pro forma [Open Access
Transmission Tariff]” even though that determination arises
from a different inquiry than that of Order No. 888’s open
access requirement. J.A. 238–39. The Commission’s primary
finding was that the SEEM participation requirements,
specifically the geographic requirement that SEEM
Participants must be a Source or Sink in the geographic area
(ostensibly to allow for the e-Tag system and 15-minute
interval trades) and the three-eligible-counterparty rule, were
not unduly discriminatory because they “incorporate
preexisting requirements in the Southeast bilateral market, are
widely-used, and are also necessary from an operational
perspective.” Id. at 239. In effect, the Commission determined
that the requested tariff revisions’ deviations from Order No.
888’s pro forma tariff were proper given the expected value of
the SEEM service, the equal terms applied to all prospective
entities in the region, and the technical requirements necessary
to allow the service to operate.
This explanation would be reasonable if we were operating
from a clean slate. Order No. 888’s pro forma tariff
requirement means “any entity that can request transmission
services” should be able to access those services. 61 Fed. Reg.
at 21570. Since entities located outside of the geographic
28
region cannot use the required e-Tags to request SEEM’s intra-
hour transactions, it follows that Order No. 888 would not
prohibit a tariff that excludes such entities.
Here, however, the record reflects 65 existing bilateral
trading partners who cannot participate in this new service due
to the geographic requirement. Pet’rs Br. 59 (citing J.A. 1269).
Prior to SEEM, trading partners in the Southeast bilateral
market were required to register “generation resources and
customer delivery points,” but they were not obligated to be
located within a specific geographic footprint to conduct
transactions as SEEM mandates. Id.; see also Resp’t Br. 79.
The Commission maintains that the geographic limitation is
“necessary from an operational perspective,” J.A. 239, since—
as Intervenors submitted—“the necessary communications
with neighboring transmission systems could not take place ‘in
the less-than-20 minute timeframe’ required to effectuate
Market transactions,” Resp’t Br. 79 (quoting J.A. 145). Yet,
the Commission fails to grapple with the objection that any
exclusionary “technical requirement” is one of the Intervenors’
own making. J.A. 145.
Intervenors developed SEEM, and there is no explanation
in the record why they could not have “invested in the software
or other analytical capabilities necessary to facilitate access” to
SEEM for existing bilateral trading partners outside of the
stated geographic footprint. J.A. 162. The creation of a new
service that—by its design—excludes existing market
participants evokes the discriminatory practices against third-
party competitors by monopoly utilities that prompted the
Commission’s adoption of Order No. 888. See New York, 535
U.S. at 11 (noting that the Commission issued Order No. 888
after finding “that electric utilities were discriminating in the
‘bulk power markets’ . . . by providing . . . no access at all to
third-party wholesalers of power”). The Commission fails to
29
offer an adequate explanation for how the requested tariff
revisions are “consistent with or superior to” the status quo
when the only explanation for SEEM’s exclusion of existing
bilateral trading partners is that it was simply designed that
way.
On remand, the Commission should provide a more
fulsome explanation for why the “market design decisions
made by the filing parties”—couched as operational
requirements and limits associated with “technical
feasibility”—are actually superior to the status quo in light of
Order No. 888’s open access principles. J.A. 253–54; see also
id. at 144. Rather than 15-minute intervals, could SEEM
provide intra-hour trades at a longer interval that would still be
cost-effective while allowing for existing trading partners
outside of the region to request service? Is there any other
workable alternative besides e-Tags that would not exclude
existing partners yet allow for intra-hour trades? Order No.
888 requires a more cogent explanation when the design of a
new service denies access to preexisting market participants.
Accordingly, the Commission failed to explain how the
requested tariff revisions were “consistent with or superior to
the terms of the pro forma tariff” in light of Petitioners’
objections. Sacramento Mun. Util. Dist., 616 F.3d at 531
(quotation marks omitted).
C.
Petitioners’ next argument is also persuasive. They
contend the Commission erred in finding that SEEM is not a
“loose power pool” as defined by Commission regulations. See
generally Promoting Wholesale Competition Through Open
Access Non-Discriminatory Transmission Services by Public
Utilities; Recovery of Stranded Costs by Public Utilities and
Transmitting Utilities, 62 Fed. Reg. 12274 (Mar. 14, 1997)
30
[hereinafter “Order No. 888-A”]. Utilities that are members of
“loose power pools” are required to allow open membership
and ensure that pool transmission service be made available to
non-members through a joint, pool-wide open access
transmission tariff “regardless of the type of entity, affiliation,
or geographic location.” Order No. 888, 61 Fed. Reg. at 21594;
see also Order No. 888-A, 62 Fed. Reg. at 12313.
Order No. 888 defines a “loose pool” as “any multi-lateral
(more than 2 public utilities) arrangement, many of which
contain discounted and/or special transmission arrangements.”
61 Fed. Reg. at 21594. The Commission later clarified the
definition of a “loose pool” in Order No. 888-A, explaining that
a loose pool is “any multilateral arrangement, other than a tight
power pool or a holding company arrangement, that explicitly
or implicitly contains discounted and/or special transmission
arrangements, that is, rates, terms, or conditions.” 62 Fed. Reg.
at 12313. As Petitioners note, the Commission concedes that
SEEM constitutes a “multi-lateral arrangement.” See J.A. 147–
48. Accordingly, the outstanding issue is whether SEEM
“explicitly or implicitly contains discounted and/or special
transmission arrangements.” Order No. 888-A, 62 Fed. Reg. at
12313.
The Commission construes Order No. 888-A’s language
of “discounted . . . rates, terms, or conditions,” id. (emphasis
added), to not include a rate that “‘entails no opportunity cost’
and is not a substitute for any transmission service,” Resp’t Br.
87 (citation omitted) (quoting J.A. 144 n.110). In support
thereof, it references a prior FERC matter in which the
Commission found “that the use of a zero-rate transmission
product that relied on otherwise unused transmission capacity
did not constitute a discount.” Id. (citing Pub. Serv. Co. of
Colo., 154 FERC ¶ 61,107 at ¶¶ 84–85 (2016)); see also J.A.
143–44. The Commission defines “special” to mean
31
something “favorable to other forms of service.” Resp’t Br. 90
(citing J.A. 238). Petitioners contend that the Commission’s
construction contradicts its past regulations, specifically Order
No. 888, and otherwise “is at odds with the word[s’] natural
meaning.” Pet’rs Br. 51.
This Court “afford[s] substantial deference to FERC’s
interpretation of its own regulations, unless the agency’s
interpretation is plainly erroneous or inconsistent with the
regulation.” City of Oswego v. FERC, 97 F.3d 1490, 1498
(D.C. Cir. 1996) (cleaned up). We must “defer to the
[agency’s] interpretation unless an alternative reading is
compelled by the regulation’s plain language or by other
indications of the [agency’s] intent at the time of the
regulation’s promulgation.” Thomas Jefferson Univ. v.
Shalala, 512 U.S. 504, 512 (1994) (quotation marks omitted).
In addition, “an agency’s interpretation of a statute or
regulation that conflicts with a prior interpretation is entitled to
considerably less deference than a consistently held agency
view.” Id. at 515 (cleaned up).
The plain language of both words at issue does not compel
a different interpretation from the construction offered by the
Commission. “Discount” is defined as “[a] reduction from the
full amount or value of something, esp. a price.” DISCOUNT,
BLACK’S LAW DICTIONARY (11th ed. 2019). The plain
meaning of the word, therefore, implies that there must first be
“something” to discount from. Accordingly, the Commission
contends that NFEETS is not a discount of “something,”
because the service is “only available if there is unused
transmission capacity,” meaning there is no transmission
service prior to NFEETS for which the new service is a
substitute nor a prior related rate to reduce. Resp’t Br. 87.
32
Of course, this is not the “only . . . reasonable
construction” of this term. Kisor v. Wilkie, 139 S. Ct. 2400,
2415 (2019). The “something” offered at a reduction here
could be the actual cost associated with transmitting energy in
these intra-hour trades even though that valuation is missing
from the record. As the old adage goes, “nothing in life is free”;
everything has a cost. Regardless, the Commission’s
interpretation of “discounted” does not compel a different
construction. The dictionary defines “special” as: “1. Of,
relating to, or designating a species, kind, or individual thing[;]
2. (Of a statute, rule, etc.) designed for a particular purpose[;]
3. (Of powers, etc.) unusual; extraordinary.” SPECIAL,
BLACK’S LAW DICTIONARY (11th ed. 2019). Again, while the
Commission’s interpretation is not the only available
construction, the “regulation’s plain language” does not
necessarily compel an “alternative reading.” Shalala, 512 U.S.
at 512.
Nevertheless, Petitioners’ argument that FERC’s
construction is inconsistent with Order No. 888 is persuasive.
They note that one aspect of NFEETS is that it is “non-
pancaked,” an example of a “discounted rate” specifically
referenced in Order No. 888. See Pet’rs Br. 50; see also Order
No. 888, 61 Fed. Reg. at 21594 (“[T]he pool could make
available a transmission rate that is structured the same as the
discounted rate (e.g., non-pancaked). . .”). This indicates that
“at the time of the regulation’s promulgation,” FERC intended
the term “discounted rate” to include non-pancaked rates like
NFEETS. Shalala, 512 U.S. at 512.
While FERC did find in Public Service Company of
Colorado that a zero-rate transmission service was not “a
discount of non-firm transmission service,” the Commission
did not reach that conclusion in the context of determining
whether the underlying agreement constituted a “loose power
33
pool” under Orders Nos. 888 and 888-A. 154 FERC ¶ 61,107
at ¶ 84. Rather, the Commission explained in that subsection
why the “proposal for zero-rate transmission service . . . [was]
. . . just and reasonable” and not “an impermissible subsidy”
for the parties to the underlying agreement. Id. The
Commission merely stated, without explanation, that the
requesting parties in Public Service were “not proposing the
establishment of a loose power pool.” Id. ¶ 85. Public Service
is further distinguished since “the zero-dollar transmission in
[that case] only applied within a single [balancing authority
area (“BAA”)], whereas NFEETS eliminates rate pancaking
between [multiple] BAAs.” J.A. 140.
Regardless, the Commission’s reliance on Public Service
does not address the specific objection that Order No. 888 gave
“non-pancaked” as an example for what the Commission meant
by “discounted” “at the time of the regulation’s promulgation.”
Shalala, 512 U.S. at 512. The Commission should have
provided a more cogent explanation for its interpretation of
“discounted” given Order No. 888’s explicit reference to non-
pancaked as an example of a discounted rate.
The Commission’s construction of the word “special” was
predicated, at least in part, on its interpretation of “discounted.”
See J.A. 238 (“To the contrary, as used in Order No. 888-A’s
definition of loose power pool, the word ‘special’ is reasonably
read to connote something favorable, in a manner similar to the
word ‘discounts’ referenced in the same definition.”).
Accordingly, it was not harmless error for the Commission to
have misconstrued the definition of “discounted.” Further, had
the Commission found NFEETS to be a “discounted” rate, it
would have required SEEM to “establish open, non-
discriminatory membership provisions and modify any
provisions that [were] unduly discriminatory or preferential.”
Order No. 888, 61 Fed. Reg. at 21594.
34
Remand is required to afford the Commission the
opportunity to provide a sufficient explanation for its
determination that SEEM is not a loose power pool or to allow
it to change course.
D.
Petitioners’ remaining challenges to the Tariff Order are
easily dispensed.
First, Petitioners contend that the requested tariff revisions
violate the “cost causation” principle. Under this Circuit’s
precedent, rates must “reflect to some degree the costs actually
caused by the customer who must pay them” to be considered
“just and reasonable.” Midwest ISO Transmission Owners v.
FERC, 373 F.3d 1361, 1368 (D.C. Cir. 2004). Petitioners
highlight Intervenors’ “economic analysis” which found that
NFEETS, at $0 cost, “could eventually cannibalize some
hourly trading yielding a reduction in non-firm transmission
revenues.” Pet’rs Br. 61 (quoting J.A. 503). They explain that
this loss of revenue from hourly traders who switch to NFEETS
would lead to transmission providers increasing transmission
rates. Id. Petitioners argue that this would result in higher costs
for non-SEEM customers who will not benefit from lower cost
SEEM transactions, such as “independent power producers
who sell rather than buy power in the bulk energy market.” Id.
at 61–62.
Section 205, however, does not require “absolute
uniformity” between rates or customers’ “overall rates of
return.” Ala. Elec. Co-op., Inc. v. FERC, 684 F.2d 20, 28 (D.C.
Cir. 1982). As the Commission notes, the short-term hourly
trading that may be cannibalized by SEEM brings minimal
revenues today to the relevant transmission providers. See
Resp’t Br. 98 (citing J.A. 412). It was not arbitrary or
capricious for the Commission to find that a negligible cost
35
increase to existing customers—the occurrence of which is
speculative at best—did not violate the cost causation
principle. Our Court “ha[s] never required a ratemaking
agency to allocate costs with exacting precision.” Midwest ISO
Transmission Owners, 373 F.3d at 1369.
Second, Petitioners assert that the Commission
impermissibly waived the joint tariff requirement. Under the
Commission’s regulations, a joint system-wide tariff must be
filed by transmission providers who enter into any “multi-
lateral trading arrangement or agreement that contains
transmission rates, terms or conditions,” even if the agreement
does not constitute a loose power pool. 18 C.F.R.
§ 35.28(c)(3). Petitioners contend that the Commission
arbitrarily granted a waiver to “multiple large Utilities who are
control area operators,” Pet’rs Br. 55, when prior regulations
explain that “it is difficult to imagine any circumstance that
would justify waiving the requirements of this Rule for any
public utility that is also a control area operator,” Order No.
888-A, 62 Fed. Reg. at 12431.
“[I]t is elementary that an agency must adhere to its own
rules and regulations.” Reuters Ltd. v. FCC, 781 F.2d 946, 950
(D.C. Cir. 1986). Accordingly, “[a]d hoc departures from
those rules, even to achieve laudable aims, cannot be
sanctioned.” Id. While “the agency is not required to author
an essay for the disposition of each application [of waiver][,]
[i]t suffices, in the usual case, that [the Court] can discern the
‘why and wherefore.’” WAIT Radio v. FCC, 418 F.2d 1153,
1157 n.9 (D.C. Cir. 1969).
The Commission contends, inter alia, that the joint tariff
requirement was properly waived since the animating concern
for the joint tariff requirement is to address “preferential intra-
pool transmission rights and rates,” and it did not find that
36
SEEM is a loose power pool. See Resp’t Br. 93. We have held,
however, that the Commission failed to provide a reasoned
explanation for finding that SEEM is not a loose power pool
under Order No. 888. Since the Commission has not yet
“crystallized” its policy at this stage, this issue is not yet ripe
for the Court’s review. Miss. Valley Gas Co. v. FERC, 68 F.3d
503, 508 (D.C. Cir. 1995). We need not resolve this issue at
this time since the Commission must revisit it on remand if it
finds that SEEM is not a loose power pool. There is also no
significant “hardship to the parties of withholding court
consideration” as Petitioners may challenge any future order
that results in the waiver of the joint tariff requirement. Id.
IV.
“‘[V]acatur is the normal remedy’ when a rule is found
unlawful.” Am. Pub. Gas Ass’n v. DOE, 22 F.4th 1018, 1030
(D.C. Cir. 2022) (quoting Allina Health Servs. v. Sebelius, 746
F.3d 1102, 1110 (D.C. Cir. 2014)). Under certain
circumstances, however, the Court may remand without
vacatur and allow the agency to “fix the deficient rule.” Id.
“The decision to vacate depends on two factors: the likelihood
that ‘deficiencies’ in an order can be redressed on remand, even
if the agency reaches the same result, and the ‘disruptive
consequences’ of vacatur.” Black Oak Energy, LLC v. FERC,
725 F.3d 230, 244 (D.C. Cir. 2013) (quoting Allied-Signal, Inc.
v. U.S. Nuclear Regul. Comm’n, 988 F.2d 146, 150–51 (D.C.
Cir. 1993)).
The aforementioned deficiencies can be characterized as
“the Commission simply fail[ing] to respond to the objections
put before it.” Fox Television Stations, Inc. v. FCC, 280 F.3d
1027, 1053 (D.C. Cir.) modified on reh’g, 293 F.3d 537 (D.C.
Cir. 2002). Since SEEM “began operations in November
2022,” Resp’t Br. 1, and only provides energy transactions for
37
non-firm service, it follows that vacatur would not be
disruptive, and the parties offer no arguments to the contrary in
their briefing. Accordingly, vacatur of the Tariff Order is
appropriate. As noted above, the Commission’s orders finding
Petitioners’ rehearing requests of the Deadlock Order untimely
are vacated, and the petition—as it relates to review of the
Deadlock Order and the associated orders accepting
amendments to the SEEM Proposal—is remanded without
vacatur of the related orders to the Commission so that
Petitioners’ timely petition for rehearing may be addressed in
the first instance by the agency.
So Ordered.
RAO, Circuit Judge, concurring in part and dissenting in
part: The energy market in the southeastern United States is
structured around bilateral transactions that must be
individually negotiated. Because of the transaction costs
associated with this model, it has generally not been feasible
for utilities to conduct short-term transactions. To address this
issue, utilities proposed the Southeast Energy Exchange
Market (“SEEM”), which includes an algorithm to match
buyers and sellers of energy at 15-minute intervals. This
proposal went into effect by operation of law, and FERC
subsequently approved tariff revisions implementing a new no-
cost transmission service (NFEETS) that is central to SEEM.
FERC’s order implementing NFEETS was both lawful and
reasonable. SEEM adds value to energy markets in the
Southeast by permitting beneficial transactions that otherwise
could not happen. While SEEM is open only to entities within
SEEM’s geographic footprint, there are compelling technical
reasons why this must be the case. Finally, FERC correctly
concluded that SEEM is not a loose power pool. Because I
would uphold FERC’s approval order, I respectfully dissent
from parts III.B and III.C of the majority opinion.
I.
Understanding why FERC’s approval of the tariff
revisions is reasonable requires some further explanation of
how SEEM operates and why it is valuable. As the majority
opinion describes, the energy market in the Southeast operates
as a traditional wholesale market. In order for utilities to deliver
power to customers, they must obtain energy either through
their own facilities or by purchasing at wholesale from energy
suppliers in bilateral transactions. See FERC, ENERGY PRIMER:
A HANDBOOK OF ENERGY MARKET BASICS 58, 61 (Apr. 2020).
Wholesale agreements incur substantial transaction costs. As
SEEM’s proponents explained, “[t]o effectuate any particular
transaction, the parties must discover one another, negotiate the
2
terms of the sale, arrange and pay for transmission services
across all utilized transmission systems, and schedule the
delivery of energy.” Accordingly, most transactions occur on a
long-term basis, such as through requirements contracts or
long-term purchase power agreements. It is rare for trades to
occur more frequently than hourly or between entities that are
geographically distant. This model leaves a certain amount of
energy unused, as transaction costs foreclose parties from
entering into mutually beneficial short-term arrangements to
buy and sell energy.
SEEM is designed to resolve this problem and is projected
to save consumers tens of millions of dollars a year. SEEM
applies two design features to make short-term transactions
feasible. First, SEEM employs an algorithm to match entities
looking to purchase energy with entities looking to sell energy.
This algorithm matches eligible buyers and sellers at 15-minute
increments, pricing transactions at the midpoint between the
offer price and the bid price. The algorithm serves only a
matching function. The transactions are consummated under
the terms of agreements separately entered into between
participants.
Second, transmission owners participating in SEEM must
amend their tariffs to make available unused transmission
capacity at no cost, in what is called Non-Firm Energy
Exchange Transmission Service (“NFEETS”). This removes
one major barrier to effectuating short-term transactions, which
is arranging and purchasing transmission services for the
transaction. The free transmission applies only to unused
capacity, and the service can be disrupted by higher-priority
transactions. NFEETS thus facilitates a limited set of short-
term transactions that are otherwise not feasible under the
bilateral model.
3
SEEM’s proponents submitted the proposed agreement to
FERC under section 205 of the Federal Power Act. 16 U.S.C.
§ 824d(a). As the majority opinion describes, FERC
deadlocked as to the SEEM proposal and SEEM took effect by
operation of law in October 2021.* Shortly thereafter, FERC
approved by majority vote proposed tariff revisions
implementing NFEETS. See Duke Energy Progress, LLC,
Order Accepting Tariff Revisions (“Tariff Order”), 177 FERC
¶ 61,080 (Nov. 8, 2021). FERC later denied rehearing,
amending the Tariff Order to respond to certain concerns raised
by petitioners. See Duke Energy Progress, LLC, Order
Addressing Arguments Raised on Rehearing (“Tariff
Rehearing Order”), 178 FERC ¶ 61,195 (Mar. 24, 2022).
II.
Petitioners argue it was arbitrary and capricious for FERC
to approve NFEETS. Primarily, petitioners argue the
organizational structure of SEEM will permit the vertically
integrated utilities that run the market to discriminate against
competing generators. The majority correctly rejects this
argument, as FERC reasonably found that SEEM’s members
would benefit from a large number of potential counterparties,
thus discouraging members from discriminating against
competitors. See Maj. Op. 24–26. The majority also correctly
rejects petitioners’ argument that NFEETS violates the cost-
causation principle. See Maj. Op. 34–35. Nonetheless, the
*
I agree with the majority that FERC erred in finding the requests
for rehearing of the Commission’s deadlock order untimely. I also
agree that petitioners have standing to challenge the orders at issue
here.
4
majority vacates the Tariff Order, finding the approval of no-
cost transmission service (NFEETS) arbitrary and capricious.
The reasons offered by the majority lack support in the
record, and I would hold that FERC acted lawfully and
reasonably when approving NFEETS in the Tariff Order.
A.
First, the majority faults FERC for failing to explain why
SEEM could permissibly exclude bilateral trading partners
located outside the Southeast. See Maj. Op. 26–29. Because
NFEETS is only available to participants in SEEM, the
majority suggests the Commission’s approval was arbitrary
and capricious. But FERC explained, in detail, why it was
technologically infeasible for the new market to include those
utilities and why SEEM was nonetheless an improvement over
the status quo.
In its landmark Order No. 888, FERC required utilities to
provide open access “to any entity that can request
transmission services.” See Promoting Wholesale Competition
Through Open Access Non-Discriminatory Transmission
Services by Public Utilities; Recovery of Stranded Costs by
Public Utilities and Transmitting Utilities, 61 Fed. Reg. 21,540,
21,570 (May 10, 1996). To implement this rule, FERC
promulgated pro forma tariffs guaranteeing open and non-
discriminatory access to transmission lines. Utilities may
propose deviations from the pro forma tariff so long as “such
terms and conditions are consistent with, or superior to” the
terms and conditions in the pro forma tariff. Id. at 21,619.
FERC reasonably found that NFEETS, the no-cost
transmission service designed to implement SEEM, comported
5
with these standards. NFEETS does not limit access to any
currently existing service. Rather, it provides an entirely new
service that facilitates valuable short-term energy transactions,
resulting in substantial cost savings across the Southeast. See
Tariff Order at P 40. The tariff revisions are thus strictly
preferable to the existing tariffs. And while there are limitations
on which entities can participate in SEEM, these constraints
“incorporate preexisting requirements in the Southeast bilateral
market, are widely [] used, and are also necessary from an
operational perspective.” Tariff Rehearing Order at P 23.
The majority does not contest FERC’s conclusion that the
availability of NFEETS will add value by making SEEM
possible or that this no-cost transmission service operates in a
non-discriminatory way. Nevertheless, the majority finds
FERC’s explanation wanting because existing trading partners
located outside the Southeast will not be able to access SEEM
or NFEETS and because “there is no explanation in the record”
why SEEM could not have been designed to allow such entities
to participate. Maj. Op. 28.
But the record belies the majority’s conclusion. The
Commission explained at length why SEEM’s geographic
requirement was necessary. As the Southeast energy market is
structured today, transmission service cannot be assigned
without an e-Tag, which in turn requires utilities to possess
either a “registered Source” or a “registered Sink.” See Tariff
Order at P 66. This technical requirement predates SEEM and
renders it “not currently technically feasible” for transactions
to occur on a short-term basis with entities not located within
SEEM’s geographic footprint. Id. As the utilities explained, the
e-Tag system makes it impossible to reliably coordinate the
timing of transactions conducted outside of that footprint.
SEEM did not invent the e-Tag system; it simply incorporated
6
e-Tag as part of the existing infrastructure for energy
transactions in the Southeast. It would be absurd to suggest
(and the majority doesn’t) that SEEM’s proponents were
required to redesign the existing energy infrastructure before
seeking approval of NFEETS.
Moreover, the majority nowhere finds that FERC’s
considered, technical judgment on this matter is incorrect.
Rather, the majority merely muses that SEEM’s proponents
could have abandoned their proposed market design and
instead opted to “provide intra-hour trades at a longer interval.”
Maj. Op. 29. But the majority’s hypothetical would undermine
the primary benefit of SEEM, which is to permit short-term
transactions that currently do not occur because of transaction
costs. SEEM was designed to permit trades to occur on
relatively short intervals. The shorter the transaction time the
greater the number of mutually beneficial transactions that may
occur, and hence the greater the value added by SEEM.
Alternatively, the majority speculates there might be some
“workable alternative besides e-Tags that would not exclude
existing partners yet allow for intra-hour trades.” Maj. Op. 29.
But the majority does not suggest what such an alternative
would be; the petitioners do not advance any such alternative
in their briefing before us; and no such alternative appears in
the record. FERC was required to consider the proposal before
it, not whether NFEETS was superior to any alternative that
may be conceived by a panel of this court.
The majority effectively requires a heightened standard for
new services that may exclude existing market participants.
Maj. Op. 29. But this fails to recognize that SEEM creates a
new market for short-term energy sales. This new market does
not supplant the existing bilateral wholesale market for long-
term sales, a market that remains available to trading partners
7
outside of SEEM. Instead, SEEM establishes a mechanism for
short-term sales and provides no-cost transmission to
effectuate those sales. Some providers with wholesale contracts
cannot participate in this arrangement because of their location.
But that does not answer the question before the Commission,
namely whether the no-cost transmission service for SEEM
was “consistent with, or superior to” the existing pro forma
tariff. The Commission reasonably approved NFEETS by
concluding SEEM was a valuable new service, facilitating
socially beneficial energy transactions that could not otherwise
occur, and that NFEETS was necessary to effectuate SEEM.
This was sufficient for FERC to approve NFEETS. The
fact that FERC failed to consider hypothetical energy market
structures postulated by this court does not render the Tariff
Order arbitrary and capricious. In light of the record before it,
the Commission made a reasoned decision in approving the
rate filing.
B.
Second, the majority suggests that SEEM might have
constituted a loose power pool and that the Commission failed
to explain its finding to the contrary. See Maj. Op. 29–34. If
SEEM were a loose power pool, transmission owners would be
required under Order No. 888 to provide transmission service
through a joint pool-wide tariff, rather than through the
individual tariff revisions necessary to effectuate NFEETS. See
61 Fed. Reg. at 21,594. But as the majority notes, SEEM was
not a loose power pool under the operative regulatory
definition. Under that definition, a loose power pool is “any
multilateral arrangement, other than a tight power pool or a
holding company arrangement, that explicitly or implicitly
contains discounted and/or special transmission arrangements,
8
that is, rates, terms, or conditions.” Promoting Wholesale
Competition Through Open Access Non-Discriminatory
Transmission Services by Public Utilities; Recovery of
Stranded Costs by Public Utilities and Transmitting Utilities,
62 Fed. Reg. 12,274, 12,313 (Mar. 14, 1997).
While SEEM is a “multilateral arrangement,” FERC
reasonably concluded it does not include “discounted and/or
special transmission arrangements.” The majority apparently
agrees on this point, explaining that the plain meaning of
“discounted” and “special” presumes a comparable service that
is not discounted or special. See Maj. Op. 30–32; see also
MERRIAM WEBSTER’S COLLEGIATE DICTIONARY (11th ed.
2003) discount (“[A] reduction made from the gross amount or
value of something.”); special (“[D]istinguished by some
unusual quality; esp: being in some way superior.”). As FERC
explained, SEEM allocates otherwise unused transmission
capacity “and thus entails no opportunity costs.” Tariff Order
at P 64. In other words, since SEEM creates the opportunity for
new transactions, it does not in any sense result in a discounted
or special rate from existing arrangements.
Despite the majority’s agreement on this straightforward
interpretation, it finds FERC’s construction “inconsistent with
Order No. 888.” Maj. Op. 32. To support this conclusion, the
majority rests on a passing parenthetical in Order No. 888,
which suggests as an example of discounted rates those that are
“non-pancaked.” 61 Fed. Reg. at 21,594. A “pancaked” rate
arises when energy is sold from one grid into another, causing
transmission fees to stack up. Since NFEETS provides
transmission service at no cost, the majority reasons that it is
non-pancaked and therefore discounted.
9
NFEETS, however, eliminates all transmission charges, so
there is no question of pancaking (or not pancaking) a series of
charges—in effect there is no cake at all. Of course, as Order
No. 888 recognizes, in some circumstances eliminating one or
more of the rates in a pancake of stacked rates will result in a
discount. FERC stated that NFEETS “eliminates rate
pancaking,” Tariff Order at P 54, but that is because it
eliminates all rates, not because it is a non-pancaked discount.
Focusing on flapjacks does not undermine the core of FERC’s
analysis, which the majority endorses, namely that there is no
comparable service and that the word “discounted” can do no
work absent such a baseline.
At least the majority declines to adopt the strained
definition the opinion hints at—that a service without
opportunity costs is never special or discounted, except in the
specific circumstance when it is non-pancaked. The majority
simply concludes FERC must “provide[] a more cogent
explanation” on remand. Maj. Op. 33. But this is a pointless
exercise. The proper interpretation of FERC’s regulations is a
legal question that may be resolved by this court in the first
instance. As the majority agrees, the phrase “discounted or
special” does not encompass the services provided by SEEM.
On remand, FERC will thus be compelled to reiterate its
conclusion that SEEM is not a loose power pool. Accordingly,
any deficiency in FERC’s explanation is harmless. Remand is
“unwarranted in cases where there is not the slightest
uncertainty as to the outcome of the agency’s proceedings on
remand.” Calcutt v. FDIC, 143 S. Ct. 1317, 1321 (2023) (per
curiam) (cleaned up).
***
10
SEEM provides a valuable service by establishing a new
market for utilities in the Southeast to engage in short-term
energy transactions. Because FERC reasonably approved the
no-cost transmission service necessary to implement SEEM, I
respectfully dissent from the majority’s decision to vacate the
Commission’s order. In light of the record before us, the
Commission acted lawfully, and I would deny the petition for
review of the Tariff Order.