Connecticut Valley Electric Co. v. Federal Energy Regulatory Commission

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued October 7, 1999 Decided April 14, 2000

No. 98-1294

Connecticut Valley Electric Company, Inc.,
Petitioner

v.

Federal Energy Regulatory Commission,
Respondent

Granite State Hydropower Association, et al.,
Intervenors

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

James H. McGrew argued the cause and filed the briefs for
petitioner.

Beth G. Pacella, Attorney, Federal Energy Regulatory
Commission, argued the cause for respondent. With her on

the brief were Jay L. Witkin, Solicitor, and John H. Conway,
Deputy Solicitor.

Earle H. O'Donnell, Donna M. Attanasio, Laurel W.
Glassman, Margaret A. Moore, and Howard E. Shapiro were
on the brief for intervenors Westmoreland-LG & E Partners
and Wheelabrator Claremont Company, L.P. Allan W.
Anderson, Jr., and David B. Ward entered appearances for
intervenor Granite State Hydropower Association.

Before: Ginsburg, Rogers, and Tatel, Circuit Judges.

Opinion for the Court filed by Circuit Judge Ginsburg.

Ginsburg, Circuit Judge: Connecticut Valley Electric Com-
pany, a local distribution company serving some 10,000 cus-
tomers in New Hampshire and Vermont, petitions for review
of two orders of the Federal Energy Regulatory Commission
denying Connecticut Valley any relief against a power pro-
ducing facility that violated s 3(17)(C)(ii) of the Federal Pow-
er Act (FPA). Connecticut Valley claims the Commission's
orders violate s 210 of the Public Utility Regulatory Policies
Act of 1978 (PURPA), and that the Commission is required
by s 3(17)(C)(ii) of the FPA to revoke the facility's status as a
"Qualifying Facility" (QF), or alternatively that the Commis-
sion's refusal to revoke the facility's QF status or to provide
any other relief is an abuse of the agency's remedial discre-
tion.

We hold that we are without jurisdiction to address Con-
necticut Valley's claim arising under s 210 of the PURPA.
We reject Connecticut Valley's claim that s 3(17)(C)(ii) of the
FPA requires the Commission to revoke the facility's QF
status, and we conclude that the Commission's decision to
deny any relief was a valid exercise of its remedial discretion.
We therefore deny the petition for review.

I. Background

The Congress enacted Title II of the PURPA, Pub. L. No.
95-617, 92 Stat. 3117, 3134 (1978), in an effort to encourage
the development of cogeneration and small power production
facilities. A "cogeneration facility" produces both electric

energy and steam or some other form of usable energy, 16
U.S.C. s 796(18)(A); a "small power production facility" pro-
duces less than 80 megawatts of electricity using biomass,
waste, renewable resources, or geothermal resources as the
primary energy source, id. s 796(17)(A). The Supreme Court
described s 210 of the PURPA in FERC v. Mississippi, 456
U.S. 742, 750-51 (1982) (citations omitted):

... [Congress] felt that two problems impeded the
development of nontraditional generating facilities: (1)
traditional electricity utilities were reluctant to purchase
power from, and to sell power to, the nontraditional
facilities, and (2) the regulation of these alternative ener-
gy sources by state and federal utility authorities im-
posed financial burdens upon the nontraditional facilities
and thus discouraged their development.

In order to overcome the first of these perceived
problems, s 210(a) directs FERC ... to promulgate ...
rules requiring utilities to offer to sell electricity to, and
purchase electricity from, qualifying cogeneration and
small power production facilities....

To solve the second problem perceived by Congress,
s 210(e), 16 U.S.C. s 824a-3(e), directs FERC to pre-
scribe rules exempting the favored cogeneration and
small power facilities from certain state and federal laws
governing electricity utilities.

In order to secure these benefits to qualifying cogeneration
and small power production facilities--so-called Qualifying
Facilities, or QFs--the Commission has promulgated the
following regulations, respectively: 18 C.F.R. ss 292.303-305,
which require an electric utility to sell to a QF electricity for
use in its operations at regulated tariff rates and to buy the
QF's output at the utility's "avoided cost";* and 18 C.F.R.

__________
* PURPA s 210(b), 16 U.S.C. s 824a-3(b), caps the total amount
a utility may be required to pay for purchases from a QF at
"incremental cost," also called "full avoided cost," American Paper
Inst., Inc. v. American Elec. Power Serv. Corp., 461 U.S. 402, 404
(1983), which is defined as "the cost to the electric utility of the
electric energy which, but for the purchase from such cogenerator

ss 292.601-602, which exempt a QF from the Public Utility
Holding Company Act of 1935, 15 U.S.C. s 79 et seq., most
state regulation as a public utility, and much of the FPA. A
small power producer (SPP) is a QF only if it (1) meets
various Commission requirements respecting fuel use, fuel
efficiency, and reliability, 16 U.S.C. s 796(17)(C)(i) and (2) "is
... not primarily engaged in the generation or sale of electric
power (other than electric power solely from cogeneration
facilities or small power production facilities)," id.
s 796(17)(C)(ii).

A. Regulatory Background: Gross Versus Net Output

There are two ways of measuring the power production
capacity of a QF: one looks to gross output, which is all
electricity produced by the facility, the other to net output,
which is gross output less the electricity used in the QF's own
operations. The distinction is important because many QFs
purchase their internal operating needs at tariffed rates from
the electric utility to which they sell their output, which the
utility is required to buy at the utility's full avoided cost. If
the QF were allowed to sell its gross output to the electric
utility at full avoided cost, then it would in effect be selling
back at a significant markup the quantum of electricity it
purchased from the utility for its internal operating needs.

In 1991, the Commission for the first time addressed
whether a facility that sold its gross output would lose its

__________
or small power producer, such utility would generate or purchase
from another source," s 210(d), 16 U.S.C. s 824a-3(d). In promul-
gating regulations to implement s 210, the Commission adopted
this statutory cap as the amount a utility would be required to pay
for all purchases from a QF. See 18 C.F.R. s 292.304(b)(2). In
other words, the Commission set the rate at the maximum level.
The Supreme Court approved in American Paper, 461 U.S. at 417.

Calculation of the full avoided cost rate is complicated. See 18
C.F.R. s 292.304(e). For purposes of this petition the important
point is that the rate that a QF can require a utility to pay is almost
always higher than the regulated tariff rate at which the QF can
purchase from the utility electricity for its internal operating needs.

status as a QF because it would no longer be, as required by
s 3(17)(C)(ii),* "not primarily engaged in the generation or
sale of electric power (other than electric power solely from
cogeneration facilities or small power production facilities)."
Turners Falls Ltd. Partnership, 55 FERC p 61,487. The
Commission began by recognizing that s 3(17)(C)(ii) is ambig-
uous: If a utility provides a QF with power for its operations
through one line, and the QF provides its gross output back
to the utility through a separate line, then in one sense
(namely, the physical) the QF is selling only electricity "solely
from cogeneration or small power production facilities" and
the requirement of s 3(17)(C)(ii) is satisfied; in another
(namely, the economic) sense, however, the QF is selling back
to the utility electricity that was generated by the utility, in
violation of that section. See id. at 62,668.

In light of this ambiguity and the broad discretion the
Congress granted the Commission in s 3 of the FPA to
determine the requirements for QF certification, the Commis-
sion concluded that it could lawfully interpret the statute
either to allow or to preclude a QF's sale of its gross output.
See id. at 62,669. In the end, however, the Commission
decided that the policies of the PURPA are served better if
the statute is read to say that a facility that sells its gross
output is not a QF. See id. at 62,671.

B. Procedural Background: Petition to Revoke Clare-
mont's QF Status

Wheelabrator Claremont Company (hereinafter Claremont)
operates an SPP facility in Claremont, NH. In 1983 the New
Hampshire Public Utilities Commission approved a settle-
ment agreement among Connecticut Valley, Claremont
(through its predecessor in interest), and the NHPUC's own

__________
* Turners Falls actually addressed a cogenerator's status as a
QF pursuant to s 3(18)(B)(ii). Section 3(17)(C)(ii), which applies to
SPPs, and s 3(18)(B)(ii), which applies to cogenerators, are identi-
cal; the parties agree that the Commission's interpretation of
s 3(18)(B)(ii) in Turners Falls applies to both provisions. For the
sake of consistency, therefore, we refer to s 3(17)(C)(ii) throughout
this opinion.

staff. See In re New Hampshire/Vermont Solid Waste Pro-
ject, DR 82-343, Order No. 16,232, 68 NHPUC 96. The
settlement, as embodied in a contract executed between Con-
necticut Valley and Claremont and approved by the NHPUC
in 1984, provided that Connecticut Valley would purchase the
"entire electrical output" of Claremont's proposed SPP facili-
ty for 20 years at Connecticut Valley's full avoided cost (of
nine cents per kWh, adjusted for inflation) while simulta-
neously providing Claremont with its needs for electricity in
its operations, at Connecticut Valley's consolidated tariff rate,
which has proven to be less than the adjusted contract rate.
Claremont applied to the Commission for QF certification,
representing that its output would be 4.5 MW but it did not
specify whether that was its gross or net output. The
Commission certified the Claremont facility as a QF in 1986,
and in 1987 Claremont began selling to Connecticut Valley its
gross electrical output of 4.5 MW.

In 1993 Claremont, in response to an inquiry from the
NHPUC, reported that its gross output was 4.5 and its net
output 3.9 MW. Connecticut Valley then asked the NHPUC
to investigate whether Claremont qualified as a QF in view of
its having sold its gross output. Instead, the NHPUC, noting
that the FERC has exclusive jurisdiction over the decertifica-
tion of a QF, ordered Connecticut Valley to petition the
Commission for revocation of Claremont's QF status. See In
re Connecticut Valley, DR 93-196, Order No. 21,000
(NHPUC Oct. 18, 1993).

Connecticut Valley duly filed a complaint with the Commis-
sion seeking revocation of Claremont's QF status based upon
Claremont's sales of gross output and its alleged misrepre-
sentations to the Commission in applying for QF status.
Connecticut Valley further requested that, once Claremont's
QF status was revoked, the Commission take jurisdiction over
Connecticut Valley's contract with Claremont pursuant to
ss 205-206 of the FPA and either rescind the contract and
retroactively determine just and reasonable rates for past
sales, or at least prospectively reform the contract so that
Connecticut Valley need purchase only Claremont's net out-
put.

 Although the Commission agreed with Connecticut Valley
that Claremont could not be a QF because its gross sales took
it outside the rule of s 3(17)(C)(ii), the Commission denied
Connecticut Valley any relief. See Connecticut Valley Elec.
Co. v. Wheelabrator Claremont Co., 82 FERC p 61,116, at
61,422 (1998). The Commission explained that the statute is
ambiguous and could be read to allow gross sales by a QF.
Not until Turners Falls, the Commission concluded, had it
made clear that gross sales would violate s 3(17)(C)(ii) and
thus preclude QF status. See id. at 61,418. Noting, however,
that many QFs had in good faith entered into long-term
contracts for the sale of their gross output, and not wanting
to upset their settled expectations, the Commission adopted a
remedial policy that was only partially retroactive: "We will
... revoke the QF status of any facility which sells in excess
of its net output pursuant to a contract entered into after the
date of issuance of Turners Falls." Id. at 61,420. Because
the Claremont contract predated Turners Falls, the Commis-
sion declined to revoke Claremont's QF status or to take any
other remedial action. See id. at 61,422.

Connecticut Valley petitioned for rehearing, arguing that
s 3(17)(C)(ii) is not ambiguous and therefore the Commission
should have decertified Claremont or provided Connecticut
Valley some alternative relief for Claremont's acknowledged
violation of the statute. The Commission denied rehearing,
83 FERC p 61,136 (1998), and Connecticut Valley petitioned
this court for review of both Commission orders.

II. Analysis

Connecticut Valley and the Commission agree that under
s 3(17)(C)(ii) of the FPA an SPP that sells more than its net
output, as Claremont does, cannot be a QF. The Commission
maintains that it may nonetheless refuse to revoke Clare-
mont's QF status and may deny Connecticut Valley any
alternative relief. Connecticut Valley claims that the Com-
mission's refusal to revoke Claremont's QF status or to
provide some alternative relief violates s 210 of the PURPA

and s 3(17)(C)(ii) of the FPA, and is an abuse of the Commis-
sion's remedial discretion.

A. Section 210 of the PURPA

Connecticut Valley claims that under the challenged orders
it is required to pay Claremont more for electricity than the
lawful maximum established by s 210 of the PURPA, that is,
its full avoided cost. The matter is less than straightforward
because s 210 actually caps the total amount (not just the per
unit rate) a utility is required to pay a QF for electricity: the
utility can be required to pay no more than "the cost to the
electric utility of the electric energy which, but for the
purchase from such cogenerator or small power producer,
such utility would generate or purchase from another source."
16 U.S.C. s 824a-3(d). Connecticut Valley claims its contract
with Claremont requires it to purchase Claremont's gross
output, whereas but for the purchase from Claremont, Con-
necticut Valley would need to generate or purchase electricity
equal only to Claremont's net output. Thus the Commission's
refusal to revoke Claremont's QF status and reform the
contract requires Connecticut Valley to pay more than its full
avoided cost.

Although neither party raised this issue in their briefs, we
asked the parties to address at oral argument whether we
have jurisdiction to adjudicate in the first instance a dispute
arising under s 210. See New York State Electric & Gas
Corp. v. FERC, 117 F.3d 1473, 1477 (D.C. Cir. 1997); Niaga-
ra Mohawk Power Corp. v. FERC, 117 F.3d 1485, 1489 (D.C.
Cir. 1997). The Commission takes the position that we do
not. Connecticut Valley replies with a variety of arguments,
none of which is responsive to the Commission's jurisdictional
argument.

We agree with the Commission that New York State Elec-
tric and Niagara Mohawk control this case. Section 210 sets
up an elaborate enforcement scheme in which the roles of the
Commission, the state public utility commissions (PUCs), and
the federal courts are specifically delineated. Under
s 210(a), the Commission is required to promulgate regula-
tions governing utilities' purchases of electricity from QFs,

including regulations implementing the statutory cap under
ss 210(b)-(d). 16 U.S.C. ss 824a-3(a), (b), (d). The state
PUCs are then required (by s 210(f), 16 U.S.C. s 824a-3(f))
to implement the Commission's regulations. If a PUC fails to
implement the regulations, the Commission may bring an
enforcement action against that PUC in federal district court.
Alternatively, if a private party petitions the Commission to
initiate an enforcement action against a PUC and the Com-
mission declines, then that party may itself sue the PUC in
federal district court to force implementation of the regula-
tions. See s 210(h)(2), 16 U.S.C. s 824a-3(h)(2); see also
New York State Electric, 117 F.3d at 1476.

Thus, when Connecticut Valley says that s 210 "requires
FERC to cap QF rates at full avoided cost," it is correct only
in the limited sense that the Commission is required to
promulgate regulations to that effect. The Commission satis-
fied that obligation when it promulgated 18 C.F.R.
s 292.304(a)(2), which limits the cost at which a utility pur-
chases power from an SPP at an amount equal to the utility's
full avoided cost. The Commission's only obligations under
s 210 are the promulgation and periodic revision of these
regulations and of the exemption regulations required by
s 210(e); therefore, the Commission's decision not to take
any action in response to Claremont's apparent violation of
s 3(17)(C)(ii) cannot be a violation of s 210 by the Commis-
sion. The Commission has in effect merely "announced the
position ... it would take in any future enforcement action
that [Connecticut Valley] might bring," New York State Elec-
tric, 117 F.3d at 1476, namely, that it will not seek to remedy
violations of s 210 arising from Claremont's sale of gross
output under a contract entered into prior to the Commis-
sion's decision in Turners Falls.

Connecticut Valley may have a valid claim that the
NHPUC has violated s 210 by approving a contract that
requires Connecticut Valley to purchase gross output and
therefore to pay more than the utility's full avoided cost. As
we have said before, "[t]he failure of a state commission to
ensure that a rate does not exceed a utility's avoided cost is a
failure to comply with a [Commission] regulation implement-

ing the PURPA," which "would ordinarily be challenged
through an enforcement action brought in district court under
s 210(h)." Id. Based upon the Commission's position as
stated in the orders under review, that agency would presum-
ably decline to bring an enforcement action if Connecticut
Valley petitioned it to do so; and its declination would clear
the way for Connecticut Valley to bring its own enforcement
action in district court.

If this court, in the guise of reviewing the Commission's
present no-action position, were to address the question
whether the petitioner's contract with Claremont violates
s 210, then we would "usurp the role of the district court as
the court of first instance, contrary to the enforcement
scheme adopted by the Congress in s 210(h) of the PURPA."
Industrial Cogenerators v. FERC, 47 F.3d 1231, 1235 (D.C.
Cir. 1995). Therefore, we conclude we are without jurisdic-
tion to address Connecticut Valley's claim arising under
s 210. See id. at 1236; New York State Electric, 117 F.3d at
1477; Niagara Mohawk, 117 F.3d at 1489.

B. Section 3(17)(C)(ii) of the FPA

Connecticut Valley next challenges the Commission's deci-
sion to grandfather contracts entered into prior to its decision
in Turners Falls and therefore not to revoke Claremont's QF
status. Connecticut Valley claims that in view of the clear
congressional decision in FPA s 3(17)(C)(ii) that an SPP
selling more than its net output is not within the definition of
a QF, "the Commission lack[s] the discretion to grandfather
any QF contracts requiring utilities to purchase a QF's gross
output."

In order to establish that the Commission has no remedial
discretion, Connecticut Valley must demonstrate not only that
Claremont's sale of gross output violates s 3(17)(C)(ii), but
also that the Commission is required to apply the revocation
rule of Turners Falls to contracts predating that decision.
The first point is moot, for the Commission agrees that
Claremont is in violation of the statute. The second point is
the difficult one for Connecticut Valley because "the breadth
of agency discretion is, if anything, at [its] zenith when the

action assailed relates primarily not to the issue of ascertain-
ing whether conduct violates the statute, or regulations, but
rather to the fashioning of policies, remedies and sanctions."
Niagara Mohawk Serv. Corp. v. FPC, 379 F.2d 153, 159 (D.C.
Cir. 1967); Louisiana Public Power Comm'n v. FERC, 174
F.3d 218, 225 (D.C. Cir. 1999). In other words, the Commis-
sion ordinarily has remedial discretion, even in the face of an
undoubted statutory violation, unless the statute itself man-
dates a particular remedy. See, e.g., Towns of Concord,
Norwood, & Wellesley v. FERC, 955 F.2d 67, 72-73, 76 n.8
(D.C. Cir. 1992).

Section 3(17)(C)(ii) does not expressly specify a particular
remedy for the violation of its terms. Compare National
Insulation Transp. Comm. v. ICC, 683 F.2d 533, 537-38 (D.C.
Cir. 1982) (ICC would lack remedial discretion for certain
rate violations because 49 U.S.C. s 10707(d)(1) (1982) ex-
pressly mandates refund). Connecticut Valley argues, none-
theless, that s 3(17)(C)(ii) unambiguously defines the require-
ments for status as a QF, and the Commission must carry out
this clear congressional command by denying QF status to
any facility that does not fit the bill.

We reject this claim because, contrary to the petitioner's
premise, s 3(17)(C)(ii) is not unambiguous. As the Commis-
sion first recognized in Turners Falls, when electricity sales
between a QF and a utility are analyzed from a physical
perspective, s 3(17)(C)(ii) can reasonably be interpreted to
allow a QF to sell its gross output. See Turners Falls, 55
FERC at 62,668. Based upon this ambiguity, the Commis-
sion, as the agency charged with administering the FPA,
determined that it had discretion to interpret the statute as
allowing or precluding the sale of gross output by a QF; it
then determined that the interpretation more in keeping with
the purpose of the Act prohibits such sales. Both interpreta-
tions of s 3(17)(C)(ii) are self-evidently reasonable in the face
of this ambiguity, and Connecticut Valley raises no legal
principle that would require the Commission--despite the
severe impact upon both the settled expectations of private
parties and the governmental interest in encouraging the
development of nontraditional generating facilities--to apply

retroactively the interpretation of s 3(17)(C)(ii) it ultimately
adopted in Turners Falls. Cf. Clark-Cowlitz Joint Operating
Agency v. FERC, 826 F.2d 1074, 1081 (D.C. Cir. 1987) (en
banc) (private and governmental interests may overcome
"general principle [that agency] may apply ... new interpre-
tation" retroactively). In light of the ambiguity of
s 3(17)(C)(ii) and the absence of a specific remedial command
from the Congress, we conclude that the Commission retains
remedial discretion to decide whether to revoke Claremont's
status as a QF.

C. Abuse of Remedial Discretion

Because we conclude that the Commission has discretion
with respect to remedying Claremont's violation of
s 3(17)(C)(ii), Connecticut Valley is remitted to challenging
the Commission's exercise of that discretion, which we review
only for abuse. See Louisiana Public Serv. Comm'n v.
FERC, 174 F.3d 218, 225 (D.C. Cir. 1999). An agency abuses
its remedial discretion if its decision "conflicts with the 'core
purpose[]' " of the statute it administers, Towns of Concord,
955 F.2d at 74 (quoting Maislin Indus., Inc. v. Primary
Steel, Inc., 497 U.S. 116, 133 (1990)), or if it is not "otherwise
reasonable," that is, based upon a reasonable accommodation
of all the relevant considerations and not inequitable under
the circumstances. Towns of Concord, 955 F.2d at 75-76; see
also Koch Gateway Pipeline Co. v. FERC, 136 F.3d 810 (D.C.
Cir. 1998); Laclede Gas Co. v. FERC, 997 F.2d 936 (D.C. Cir.
1993). Insofar as the Commission's remedial decision is
based upon factual determinations, they must be supported
by substantial evidence in the record. See 16 U.S.C.
s 825l(b); Louisiana Public Serv. Comm'n, 174 F.3d at 225.

Connecticut Valley argues that the Commission's decision
not to revoke Claremont's QF status or to provide any
alternative relief is an abuse of discretion for a number of
reasons. First, Connecticut Valley claims the decision direct-
ly conflicts with all three statutory purposes expressed in
s 101 of the PURPA, to wit, "conservation of energy," "op-
timization of [electric utility] efficiency," and "equitable rates
to electric consumers." 16 U.S.C. s 2611.

 As the Commission properly notes, however, s 101 applies
only to Title I of the PURPA, whereas QF status is a
creature of Title II. And the Supreme Court has said that
the core purpose of Title II is "to encourage the development
of cogeneration and small power production facilities" by
addressing "problems imped[ing] the development of nontrad-
itional generating facilities." FERC v. Mississippi, 456 U.S.
at 750. In other words, Title II reflects, predominantly,
solicitude for certain types of producers rather than for the
consumers who must pay their rates. Accordingly, the Com-
mission deemed it material in the orders under review that
"many QFs ... have entered into contracts which require[ ]
or permit[ ] the ... sale of gross output." 82 FERC at
61,419. Revoking the QF status of those facilities, or altering
their "obligations and responsibilities under[ ] such executed
PURPA sales contracts," id. at 61,420, would undercut the
purpose of the Congress in Title II to encourage the develop-
ment of these nontraditional generating facilities. We see no
conflict, therefore, between the Commission's exercise of re-
medial discretion and the relevant statutory purpose.

Nor can we accept Connecticut Valley's second argument,
which is that the Commission's failure even to consider harm
to consumers was an abuse of discretion. According to
Connecticut Valley, s 210(b) of the PURPA expressly re-
quires the Commission to balance the interests of consumers
against those of producers, thus:

The rules prescribed under subsection (a) of this section
shall insure that, in requiring any electric utility to offer
to purchase electric energy from any [QF], the rates for
such purchase ... shall be just and reasonable to the
electric consumers of the electric utility and in the public
interest....

16 U.S.C. s 824a-3(b). This requirement is directed, howev-
er, at the Commission's exercise of rulemaking authority over
the rates utilities must pay QFs for power. The Supreme
Court has already held that the full avoided cost rule satisfies
the requirements of s 210(b). See American Paper Inst., 461
U.S. at 415-17. Therefore the Commission did not abuse its

discretion when it omitted explicitly to consider anew the
interests of consumers.

Third, Connecticut Valley claims the Commission failed
adequately to consider whether Occidental Geothermal, Inc.,
17 FERC p 61,231 (1981), and Power Developers, Inc., 32
FERC p 61,101 (1985), put Claremont on notice, before the
contract was executed (or at least before Claremont filed its
application for certification as a QF), that a QF may not sell
its gross output. The Commission did not fail fully to consid-
er those cases. On the contrary, the Commission expressly
read both cases as having resolved issues related to but not
the same as that resolved in Turners Falls: In Occidental
Geothermal the Commission held that net output is the
appropriate measure of the 80-MW limitation upon SPPs;
and in Power Developers it concluded that "a QF may not sell
more than net output at avoided cost rates." Connecticut
Valley, 82 FERC at 61,417-18. Although both cases were, of
course, relevant to the Commission's understanding of this
case, the Commission reasonably concluded that it was not
until Turners Falls that it "removed any remaining ambiguity
about whether the 'simultaneous buy-sell' rule permitted a
sale in excess of net output [and] clearly stated that a sale in
excess of net output would deprive a facility of its QF status."
Id. at 61,417; see also 83 FERC p 61,136, at 61,610. There
was no abuse of discretion here.

Fourth, Connecticut Valley argues the Commission failed to
consider whether Claremont intentionally or negligently mis-
led the Commission by stating its gross rather than its net
output in its application for certification. The Commission
did not have to address this claim in the orders under review,
however; it was rendered moot when the Commission held
that it was reasonable for a facility applying for QF certifica-
tion prior to the Turners Falls decision to have believed that
the Commission's "simultaneous buy-sell" rule allowed the QF
to sell its gross output. See 82 FERC at 61,418. The
Commission noted that many applicants--and indeed several
state PUCs--had thought gross sales were permitted under
the Commission's regulations, and that although this point
had been "clarified to a significant degree in 1985 in Power

Developers," it was not until Turners Falls in 1991 that the
Commission "removed any remaining ambiguity." Id. The
Commission could hardly say, therefore, that prior to that
decision a QF was either intentionally deceptive or even
merely negligent if it listed its gross rather than its net
output in applying for QF certification.

Finally, Connecticut Valley claims the Commission failed to
support with substantial evidence a key factual determination,
namely, that Claremont had a settled expectation it could
lawfully sell its gross output when it entered into the con-
tract. As Connecticut Valley conceives the issue, the Com-
mission must show that, in developing and financing the SPP
facility, Claremont actually relied upon being able to sell its
gross output.

The Commission never made a factual finding about Clare-
mont's actual reliance, however. Rather, the Commission
reiterated its general policy "against invalidating contracts
for which a PURPA-based challenge was not timely raised--
that is, before the contracts were executed," so as not "to
upset the settled expectations of parties to, and to invalidate
any of their obligations and responsibilities under, such exe-
cuted PURPA sales contracts." Id. at 61,419-20; see also 83
FERC p 61,136, at 61,611. The Commission reasonably in-
fers the parties' settled expectations from the terms of their
executed contract; either party may avoid such an inference
by including a specific reservation in its contract or by
challenging the validity of a contract provision at the time it
executes the contract.

Because the Commission did not make a factual finding
relative to settled expectations, but rather drew a reasonable
inference in accord with its established policy, it need not
support this aspect of its decision with substantial evidence.
Nor does Connecticut Valley claim that the Commission is
legally required to determine settled expectations by making
a case-specific factual inquiry rather than relying upon a rule
of general applicability. The only question remaining, there-
fore, is whether the Commission's application of its general
rule in this case was arbitrary and capricious. See Southeast-

ern Michigan Gas Co. v. FERC, 133 F.3d 34, 38 (D.C. Cir.
1998). Connecticut Valley included no reservation clause in
the contract suggesting disagreement about or uncertainty
over the purchase and sale of Claremont's gross output; nor
was Connecticut Valley challenging gross sales in court or
before the Commission at the time it entered into the con-
tract. We therefore conclude that the Commission's applica-
tion in this case of its general rule inferring the settled
expectations of the parties to a contract from the terms of
their agreement was not arbitrary or capricious.

III. Summary and Conclusion

We are without jurisdiction to review Connecticut Valley's
claim that the orders under review violate s 210 of the
PURPA. As to Connecticut Valley's other challenges, we
conclude that the Commission acted within its remedial dis-
cretion in refusing to revoke Claremont's QF status or to
provide any other relief to Connecticut Valley. Therefore,
the petition for review is

Denied.