Alliant Energy Corp. v. Federal Energy Regulatory Commission

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued April 6, 2001 Decided June 19, 2001

No. 99-1448

Alliant Energy Corporation, et al.,
Petitioners

v.

Federal Energy Regulatory Commission,
Respondent

Enron Power Marketing, Inc., et al.,
Intervenors

 No. 99-1544

Enron Power Marketing, Inc.,
Petitioner

v.

Federal Energy Regulatory Commission,
Respondent

MidAmerican Energy Company, et al.,
Intervenors

Steven J. Ross argued the cause for the MAPP Members as
petitioners in No. 99-1448 and as intervenors in No. 99-1544.
Catherine M. Giovannoni and Richard T. Saas were on brief.

Jeffrey D. Watkiss argued the cause for Enron Power
Marketing, Inc. as petitioner in No. 99-1544 and as interve-
nor in No. 99-1448. Ronald N. Carroll was on brief.

David H. Coffman, Attorney, Federal Energy Regulatory
Commission, argued the cause for the respondent. Dennis
Lane, Solicitor, Federal Energy Regulatory Commission, was
on brief.

Donna M. Attanasio argued the cause for intervenors
Northern States Power Company and Northern States Power
Company (Wisconsin) in No. 99-1448. Earle H. O'Donnell
was on brief.

Isaac D. Benkin was on the brief of intervenor Nebraska
Public Power District in No. 99-1448.

Before: Williams, Sentelle and Henderson, Circuit
Judges.

Opinion for the court filed by Circuit Judge Henderson.

Karen LeCraft Henderson, Circuit Judge: The petitioners
challenge two decisions of the Federal Energy Regulatory
Commission (Commission or FERC) that ordered the Mid-
Continent Area Power Pool (MAPP) to refund "third party
compensation" charges it assessed customers after March 1,

1997 for transmitting electricity into or outside of the MAPP
geographical area. First, a group of petitioning MAPP mem-
bers (MAPP petitioners) assert that the ordered refunds are
impermissibly retroactive and that they were incorrectly cal-
culated. In addition, petitioner Enron, a MAPP member and
beneficiary of the refunds, maintains the refunds should
include not only the third party compensation charges, as the
Commission directed, but also a portion of the amounts
Enron paid MAPP border utilities, based on their tariff rates,
to transmit the energy inside or outside the MAPP area. For
the reasons set forth below, we reject all of the petitioners'
arguments and deny both petitions for review.

I.

MAPP is an association of energy transmission utilities,
generators and marketers serving an area encompassing part
or all of several midwestern and western states and two
Canadian provinces. Among other functions, MAPP coordi-
nates energy sales and transmissions between and among its
members. Before 1994 MAPP's energy pooling agreement
required its members to provide free, reciprocal transmission
service to other members. In 1994 the pooling agreement
was amended with the addition of a tariff, "Schedule F," that
imposed a charge for transmissions among MAPP members,
but at a discounted distance-based rate rather than at the
individual transmitting members' filed tariff rates. FERC
accepted the new agreement, including Schedule F, in a
decision dated December 15, 1994. Mid-Continent Area
Power Pool, 69 F.E.R.C. p 61,347 (1994). The Commission
provided the following explanation for its decision to accept
the new schedule:

Notwithstanding our concerns with the calculations and
adjustments discussed above, we will accept the proposed
MAPP rates for filing because MAPP's methodology
produces rates that are just and reasonable and not
unduly discriminatory or preferential when tested
against traditional standards. We note that the single
system-wide MAPP rate that members will pay for ser-

 vice over the entire MAPP system is lower than the rate
that each jurisdictional MAPP member could separately
propose under a traditional rate while taking into account
distance and power flows.

Id. at 62,307.

In March 1996 MAPP filed a proposed restated pooling
agreement that amended Schedule F to include a new section
2.4 requiring that a MAPP member purchasing energy from
or selling energy to a non-member arrange for extra-MAPP
transmission with a MAPP border utility (paying the border
utility's tariff for the transmission) and, in addition, that the
member pay MAPP itself the Schedule F intra-pool transmis-
sion charge in order "to compensate Members for third party
use of their systems in connection with [the] sales or pur-
chases." Joint Appendix (JA) 56.1

On May 16, 1996 the Commission issued "Order 888," a
final rule which requires generally that each public utility,
and utility pool, file an "open access tariff" by a specific
deadline. Promoting Wholesale Competition Through Open
Access Non-discriminatory Transmission Services by Public
Utilities and Recovery of Stranded Costs by Public Utilities
and Transmitting Utilities, Order No. 888, 61 Fed. Reg.
21,540, 21,541 (1996) (codified at 18 C.F.R. s 35.28). The

__________
1 Section 2.4 of the filing provided in full:

Additional Use of Rate Schedules: In addition to the primary
purpose of this Tariff, as set forth in Sections 2.1 and 2.2, the
Members shall also use the rate schedules appended hereto to
compensate Members for third party use of their systems in
connection with sales or purchases by Members to or from non-
Members that otherwise meet the requirements of a Coordina-
tion Transaction. Such transactions must be scheduled and
arranged by the transacting parties under the Transmission
Providers' Open Access Transmission Tariffs or other trans-
mission agreements.

JA 56. Section 1.7 of Schedule F defines a "Coordination Transac-
tion" as "[a]ny sale for resale of power and/or energy between
Members, for a period not to exceed two years, using existing
generation and transmission facilities." JA 48.

order required power pools such as MAPP to file both
"reformed power pooling agreements" and "a joint pool-wide
Final Rule pro forma tariff" not later than December 31,
1996. Id. at 31,728. The reformed power pool agreement
must "establish open, non-discriminatory membership provi-
sions and modify any provisions that are unduly discriminato-
ry or preferential." Id. The tariffs, like all open access
tariffs filed under Order 888, are required to conform both to
the "pro forma tariff" set out in the final rule2 and to FERC's
1994 Transmission Pricing Policy Statement, 59 Fed. Reg.
55,031 (1994), clarified, 71 F.E.R.C. p 61,195 (1995) (Policy
Statement).3 See Order 888, 61 Fed. Reg. at 21,541, 21,618-
19.

On September 12, 1996 the Commission issued a decision
accepting the restated MAPP agreement filed the previous
March, including Schedule F. Mid-Continent Area Power
Pool, 76 F.E.R.C. p 61,261 (1996). The Commission noted its
1994 order had found that the tariff's methodology, "while

__________
2 The pro forma tariff was issued in its final form in "Order
888-A," 62 Fed. Reg. 12,274 (Mar. 14, 1997).

3 The Policy Statement espoused a "new policy ... designed to
allow much greater transmission pricing flexibility than was allowed
under previous Commission policies." 59 Fed. Reg. at 55,031. The
Commission announced therein that it would "permit more flexibili-
ty to utilities to file innovative pricing proposals that meet the
traditional revenue requirement and will allow such proposals to
become effective 60 days after filing, as long as they satisfy certain
pricing principles" and "the Commission determines that such a
pricing proposal meets the statutory requirements of the [Federal
Power Act], i.e., is just and reasonable and not unduly discriminato-
ry or preferential." Id. (footnote omitted). One of the principles
that had to be satisfied was the "comparability standard" "for
judging whether access to transmission services is unduly discrimi-
natory, or anticompetitive." Id. at 55,034. Under that standard,
"[a]n open access tariff that is not unduly discriminatory or anti-
competitive should offer third parties access on the same or compa-
rable basis, and under the same or comparable terms and condi-
tions, as the transmission provider's uses of its system." Id.
(footnote omitted; alteration original).

flawed, produced rates that were just and reasonable and not
unduly discriminatory or preferential when tested against
traditional standards" because "the single system-wide MAPP
rate that members would pay for service over the entire
MAPP system would be lower than the rate that each public-
utility MAPP member could separately propose under a
traditional, postage stamp rate while taking into account
distance and power flows." Id. at 62,341-42 (citing 69
F.E.R.C. at 62,307). The 1996 restated Schedule F, the
Commission concluded, "still produces rates that are reason-
able when compared to the rate that each public-utility
MAPP member could separately propose using a traditional,
postage stamp rate methodology." Id. at 62,342. The Com-
mission nevertheless warned MAPP:

Nothing in this order relieves MAPP public utility mem-
bers of their obligations under Order No. 888 to file a
joint pool-wide pro forma tariff no later than December
31, 1996, and to begin to take service under that tariff for
all pool transactions no later than December 31, 1996.
They must also file a reformed power pooling agreement
no later than December 31, 1996 that establishes open,
non-discriminatory membership provisions and modifies
any provisions that are unduly discriminatory or prefer-
ential. When those filings are made, the Commission will
review rate and non-rate issues pertaining to MAPP to
ensure that MAPP's public utility members are comply-
ing with Order No. 888.

Id. at 62,336; see also id. at 63,342 (noting that "issue [of
special rates] can be renewed when MAPP files its joint pool-
wide pro forma transmission tariff in response to Order No.
888"); id. n.11 ("Under Order No. 888, public-utility members
of loose pools like MAPP must file reformed power pooling
agreements no later than December 31, 1996, and a joint
pool-wide pro forma transmission tariff no later than Decem-
ber 31, 1996. Therefore, we will soon have another opportu-
nity to review rate issues when the revised MAPP agreement
is filed.").

 On December 24, 1996 MAPP submitted a "compliance
filing," as required by Order 888, which included a substan-
tially unchanged Schedule F. On February 20, 1997 Enron,
after being assessed the third party charge for extra-MAPP
transmission in accordance with Schedule F, intervened to
challenge the MAPP compliance filing as inconsistent with
Order 888 and its pro forma tariff. In an order issued
February 28, 1997 the Commission declared that MAPP's
submissions were "hereby accepted for filing and suspended
for a nominal period, to become effective March 1, 1997,
subject to refund and subject to the issuance of further
orders." 78 F.E.R.C. p 61,203, at 61,883 (1997).

On March 10, 1997 Enron sent MAPP a letter complaining
that imposing the Schedule F charges on top of the border
utility's individual tariff rate charge for extra-MAPP trans-
mission was discriminatory. When the parties failed to re-
solve the dispute internally or through mediation, Enron filed
a complaint with the Commission on August 19, 1997 assert-
ing MAPP's filing did not conform to the Order 888 pro forma
tariff because it discriminated against extra-MAPP transac-
tions. Enron sought a declaration that MAPP violated Order
888 by failing to file an open access tariff and by assessing
the third party charges and requested that the Commission
order MAPP to (1) file a conforming nondiscriminatory tariff
without third party additive charges and (2) refund to Enron
the third party charges it had paid.

In an order issued April 15, 1999 the Commission directed
MAPP "to eliminate tariff provisions that are related to
member-restricted services," 87 F.E.R.C. p 61,075, at 61,310
(99), and specifically to eliminate section 2.4 which it found
"unacceptable," id. at 61,313. The Commission also directed
MAPP to provide "refunds for any and all billings under the
compliance tariff ... for transactions periods [sic] commenc-
ing March 1, 1997, the date that MAPP's compliance tariff
became effective." Id. at 61,324.

Enron filed a "Request for Clarification or Alternatively
Rehearing" of the April 15, 1999 decision, seeking a declara-
tion that the refunds should include not only the third party

charges but also the difference between the transmission
charges Enron paid (based on the border utilities' tariffs) and
what Enron would have paid if charged the discounted mem-
ber transmission rate. The MAPP petitioners also filed for
rehearing, on behalf of MAPP, challenging the Commission's
authority to order retroactive refunds and the method of their
calculation. In an order issued November 1, 1999 the Com-
mission denied each rehearing petition and clarified that the
refunds should be limited to the third party compensation
charges.4

Both the MAPP petitioners and Enron petitioned the court
for review.

II.

First, MAPP asserts the third party compensation charge
refund ordered by the Commission constitutes retroactive
ratemaking in violation of the Federal Power Act. "The
governing principle is that when there is a 'substitution of
new law for old law that was reasonably clear,' the new rule
may justifiably be given prospectively-only effect in order to
'protect the settled expectations of those who had relied on
the preexisting rule.' By contrast, retroactive effect is appro-
priate for 'new applications of [existing] law, clarifications,
and additions.' " Public Serv. Co. of Colo. v. FERC, 91 F.3d
1478, 1488 (D.C. Cir. 1996) (quoting Williams Natural Gas
Co. v. FERC, 3 F.3d 1544, 1554 (D.C. Cir. 1993)), cert. denied,
Amoco Prod. Co. v. Public Serv. Co. of Colo., 520 U.S. 1224
(1997). In this case, the Commission's April 15, 1999 decision
rejecting MAPP's compliance filing and ordering refunds was
a permissible application of existing law, Order 888, which the
Commission had issued on May 16, 1996. MAPP nonetheless
contends that, when it submitted its compliance filing on
December 24, 1996, it reasonably relied on the Commission's

__________
4 Meanwhile, MAPP filed, and the Commission approved, a re-
vised Schedule F which, inter alia, eliminated both the border
utility tariff charge and the third party compensation charge and
extended the discounted intra-pool rate to extra-pool transmission.
See Mid-Continent Area Power Pool--Order on Compliance Filing,
88 F.E.R.C. p 61,157 (Aug. 2, 1999).

September 12, 1996 decision accepting Schedule F for filing
and expressly concluding that its methodology, "while flawed,
produced rates that were just and reasonable and not unduly
discriminatory or preferential when tested against traditional
standards." See 76 F.E.R.C. at 62,341.5 We conclude MAPP
could not reasonably rely on the September 1996 order to
establish that Schedule F, and in particular section 2.4,
complied with Order 888.

Order 888 was expressly designed "to remedy undue dis-
crimination in access to the monopoly owned transmission
wires that control whether and to whom electricity can be
transported in interstate commerce." 61 Fed. Reg. at 51,541.
Under Order 888 every electrical transmitter was required,
for the first time, to file an open access tariff that conformed
to both the Commission's new pro forma tariff and its 1994
Policy Statement. 61 Fed. Reg. at 21,541, 21,618-19. Once
this new regime took effect and MAPP made its compliance
filing, as Order 888 required, it could not reasonably rely on
the pre-Order 888 acceptance. See Public Serv. Co. of Colo.
v. FERC, 91 F.3d 1478, 1490 (D.C. Cir. 1996) (reliance on
Federal Power Commission treatment of state tax under
National Gas Act "would have been foolhardy" because subse-
quent "enactment of [Natural Gas Policy Act's] substantially
new regulatory regime ... undermined any assurance" that
such treatment would "withstand scrutiny under the [Natural
Gas Policy Act]"). The unreasonableness of MAPP's claimed
reliance is particularly apparent when viewed in context. The
Commission had expressly warned MAPP in the September
12, 1996 acceptance order that the rates would be reexamined
under Order 888 after the compliance filing due in December
and repeated this warning when it accepted the December
1996 filing subject to refund on February 28 1997. It should
therefore have come as no surprise to MAPP that the Com-
mission subsequently reexamined Schedule F, found the tariff

__________
5 With regard to retroactivity, the MAPP petitioners acknowledge
that "[t]he only question before this Court is whether MAPP
reasonably relied on the September 1996 Order when it restated its
schedule F rates in the Order No. 888 compliance filing." MAPP
Reply Brief at 7.

was discriminatory under both Order 888 and its pro forma
tariff and ordered refund of overcharges paid after March 1,
1997.6

The MAPP petitioners next challenge the refund order on
the ground that the Commission did not determine the
amount charged non-member purchasers and sellers was
above that which was "just and reasonable" so as to warrant a
refund. They argue that, because the stacked rates of indi-
vidual members were available as an alternative to Schedule
F and were higher than the Schedule F rates charged, the
Schedule F rates are necessarily reasonable and no refunds
are due. This contention, however, ignores the heart of the
matter: the discriminatory effect of Schedule F, which the
Commission resolved by ordering reimbursement of the of-
fending section 2.5 charge. That an alternative rate exists
that is higher than the Schedule F rate is of no consequence.

Finally, Enron contends it should have recovered refunds
not only of the discriminatory third party charges but also of
the difference between each charging border utility's tariff
rate and what it would have been charged had the discounted
intra-MAPP rate been applied to the extra-MAPP transmis-
sion. The Commission, however, provided a simple and rea-
sonable justification for refusing to order a refund of any part
of the border members' tariff rates: those rates were never
placed at issue in this proceeding. Enron's complaint did not
challenge their justness and reasonableness. As a conse-
quence the Commission made no finding they were unjust or
unreasonable and they are not a part of the filing that was
the subject of the proceeding below but are set out in the
individual border members' separately filed tariffs. See 89
F.E.R.C. at 61, 389.7

__________
6 The brief discussion of section 2.4 in the April 14, 1999 decision
expressly cites only the 1994 Policy Statement, 87 F.E.R.C. at
61,323, but other passages in the order make clear that the Com-
mission found MAPP's tariff discriminatory under Order 888 as
well, see 87 F.E.R.C. at 61,309-10, 61,074-75.

7 The Commission also contends now, with some force, that it
lacks authority to order MAPP to refund charges that were collect-

 For the preceding reasons the petitions for review are

Denied.

__________
ed and retained by third parties, namely the charging border
members. In light of our holding, however, we need not address this
issue and we therefore dismiss as moot MAPP's motion to strike
the portion of Enron's reply brief responding to it.