United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued November 19, 2002 Decided January 21, 2003
No. 01-1381
Florida Municipal Power Agency,
Petitioner
v.
Federal Energy Regulatory Commission,
Respondent
Florida Power & Light Company,
Intervenor
On Petition for Review of Orders of the
Federal Energy Regulatory Commission
Robert A. Jablon argued the cause for petitioner. With
him on the briefs was Daniel I. Davidson.
Judith A. Albert, Attorney, Federal Energy Regulatory
Commission, argued the cause for respondent. With her on
the brief were Cynthia A. Marlette, General Counsel, and
Dennis Lane, Solicitor.
Clifford (Mike) Naeve was on the brief for intervenor.
Before: Sentelle, Henderson and Tatel, Circuit Judges.
Opinion for the Court filed by Circuit Judge Tatel.
Tatel, Circuit Judge: Granted access to Florida Power &
Light's electricity transmission lines for the purpose of estab-
lishing network transmission service, Petitioner Florida Mu-
nicipal Power Agency challenges three decisions of the Feder-
al Energy Regulatory Commission rejecting its request for
pricing credits. Finding the Commission's decisions sup-
ported by substantial evidence and neither arbitrary nor
capricious, we deny the petition.
I.
After determining that utilities were discriminatorily deny-
ing power suppliers access to electricity transmission lines,
the Federal Energy Regulatory Commission issued Order
No. 888 requiring public utilities that own, control, or operate
transmission facilities to file open access tariffs under which
they agree to provide non-discriminatory access to their
transmission networks in addition to the point-to-point service
they had been offering. Promoting Wholesale Competition
Through Open Access Non-Discriminatory Transmission
Services by Public Utilities; Recovery of Stranded Costs by
Public Utilities and Transmitting Utilities, Order No. 888,
F.E.R.C. Stats. & Regs. p 31,036, 61 Fed. Reg. 21540, 21541
(1996), clarified, 76 F.E.R.C. p 61,009 and 76 F.E.R.C.
p 61,347 (1996), modified, Order No. 888-A, F.E.R.C. Stats. &
Regs. p 31,048, 62 Fed. Reg. 12,274 (1997), order on reh'g,
Order No. 888-B, 81 F.E.R.C. p 61,248, 62 Fed. Reg. 64,688
(1997), order on reh'g, Order No. 888-C, 82 F.E.R.C. p 61,046
(1998), aff'd Transmission Access Policy Study Group v.
FERC, 225 F.3d 667 (D.C. Cir. 2000) (per curiam) ("TAPS"),
aff'd, New York v. FERC, 535 U.S. 1 (2002). In point-to-point
transmission service, utilities pay for energy transmission
from designated points of receipt to designated points of
delivery. TAPS, 225 F.3d at 725 n.12. As Order No. 888
explains, however, "[n]etwork service allows more flexibility
by allowing a transmission customer to use the entire trans-
mission network to provide generation service for specified
resources and specified loads without having to pay multiple
charges for each resource-load pairing." Order No. 888, 61
Fed. Reg. at 21,547 n.65. Thus, unlike point-to-point service,
network service permits a utility using another utility's trans-
mission lines "to fully integrate load [(the total demand for
service on a utility system)] and resources on an instantane-
ous basis in a manner similar to the transmission owner's
integration of its own load and resources." Id. at 21,547.
Three additional features of Order No. 888 are relevant to
this case. First, the order requires load ratio pricing for
network transmission service, a form of transmission that
"provides the customer with the same full system ability for
transmitting power as the transmission owner." TAPS, 225
F.3d at 725. "Under load ratio pricing, the costs of the
transmission system are allocated on the basis of the ratio of
the network customer's load to the transmission provider's
entire load on its transmission system." Respondent's Br. at
7.
The second relevant principle from Order No. 888 respond-
ed to arguments made by utility customers (like Petitioner
Florida Municipal Power Agency (FMPA)) that because some
customers sell power in a way that does not bear on network
resources--known as behind-the-meter generation--load ra-
tio pricing's use of total load for determining a customer's
rate might require payment for unneeded network transmis-
sion. TAPS, 225 F.3d at 725-26. These transmission cus-
tomers thought they should therefore receive pricing credits
for all behind-the-meter facilities. Id. FERC agreed in part.
Although holding that customers were entitled to pricing
credits for facilities "integrated" into the transmission net-
work, the Commission cautioned that "[t]he fact that a trans-
mission customer's facilities may be interconnected with a
transmission provider's system does not prove that the two
systems comprise an integrated whole such that the transmis-
sion provider is able to provide transmission service to itself
or other transmission customers over those facilities--a key
requirement of integration." Order No. 888, 61 Fed. Reg. at
21,630 (emphasis in original). "[F]or a customer to be eligible
for a credit," FERC explained, "its facilities must not only be
integrated with the transmission provider's system, but must
also provide additional benefits to the transmission grid in
terms of capability and reliability, and be relied upon for the
coordinated operation of the grid." Order No. 888-A, 62 Fed.
Reg. at 12,330. In other words, FERC would determine
credits on a case-by-case basis.
Third, Order No. 888 adopts the principle of "comparabili-
ty," meaning that the same integration standard that applies
to transmission customers for the purpose of determining
eligibility for pricing credits also applies to transmission
providers for rate determination purposes. Order No. 888, 61
Fed. Reg. at 21,630 n.452. Thus, if a transmission provider
includes a facility in its rate base, then its transmission
customers may receive rate credits for any similarly situated
facilities.
Running parallel to the development of Order No. 888, and
in many respects providing a basis for it, this case began in
1993 when FMPA, a nonprofit public agency that provides
point-to-point electric power supply to its twenty-nine mem-
ber cities that sell retail electricity to the public, developed a
plan for offering network transmission service. FMPA re-
quested the right to purchase transmission service from
Intervenor Florida Power & Light, owner of the state's
largest transmission system. When Florida Power rejected
that request, FMPA filed a complaint with FERC. Granting
FMPA's request for network transmission service, FERC
ordered the parties to agree on rates, conditions, and terms of
service within sixty days. Fla. Mun. Power Agency v. Fla.
Power & Light Co., 65 F.E.R.C. p 61,125 (1993), reh'g dis-
missed, 65 F.E.R.C. p 61,372 (1993).
When FMPA and Florida Power failed to reach an agree-
ment, FERC issued a final order addressing cost-of-service
issues. Fla. Mun. Power Agency v. Fla. Power & Light Co.,
67 F.E.R.C. p 61,167 (1994) ("FMPA I"). Foreshadowing
Order No. 888, FERC adopted Florida Power's load ratio
pricing proposal, but agreed that in certain circumstances
FMPA might be entitled to pricing credits for facilities that
are "integrated" into Florida Power's network. The Commis-
sion explained:
If FMPA has transmission facilities that will operate
as part of the integrated transmission system, a
credit would be reasonable. Indeed, this is in line
with Florida Power's position that it is redefining
the native load served by the Florida Power trans-
mission system to include all of FMPA's resources
and loads. If FMPA owns grid facilities that are
now used to integrate the same resources and loads,
those facilities are part of the integrated transmis-
sion system, and Florida Power must include an
appropriate credit for any such grid facilities when it
submits its compliance filing in this case.
Id. at 61,482 n.76.
In 1996, acting on several requests for rehearing, FERC
rejected FMPA's argument that Florida Power had improper-
ly refused to grant FMPA pricing credits, holding that none
of FMPA's facilities was integrated into Florida Power's
network. Fla. Mun. Power Agency v. Fla. Power & Light, 74
F.E.R.C. p 61,006 (1996) ("FMPA II"). At the same time,
FERC recognized the comparability principle that later found
its way into Order No. 888: "Just as FMPA cannot obtain
credit for facilities not used by Florida Power to provide
service, so Florida Power cannot charge FMPA for facilities
not used to provide transmission service." Id. at 61,010 n.48.
In FMPA II, FERC rejected FMPA's request to supple-
ment the record to include evidence relating to a facility
FMPA operates in Lake Worth, Florida, as well as evidence
relating to the "Rate Case." Id. at 61,007. The latter refers
to a separately docketed FERC proceeding that began in
1993 when Florida Power filed a proposed tariff adjustment
that would have affected the prices it charged transmission
users, including FMPA. Fla. Power & Light Co., 64 F.E.R.C.
p 61,361 (1993). Although Florida Power and FMPA reached
a settlement, that settlement did not resolve FMPA's claim
that Florida Power's rate base should be adjusted to exclude
facilities that are not "integrated" with the rest of Florida
Power's transmission system. Fla. Power & Light Co., 92
F.E.R.C. p 61,241 (2000). This issue, referred to as a "re-
served issue," remains pending before the Commission. Re-
spondent's Br. at 10. In FMPA II, therefore, FERC denied
FMPA's request that "if the Commission rejects the proposed
credits for FMPA facilities, Florida Power be directed to
exclude from its transmission rates the cost of transmission
facilities that FMPA believes are not part of the integrated
grid...." FMPA II, 74 F.E.R.C. at 61,010 n.48. "This
issue," the Commission explained, "is among the rate issues
being litigated in the Rate Case, and the parties have agreed
that all rate issues will be resolved in the Rate Case." Id.
Finally, in FMPA III, the Commission denied FMPA's
second petition for rehearing. Fla. Mun. Power Agency v.
Fla. Power & Light, Co., 96 F.E.R.C. p 61,130 (2001). Reject-
ing FMPA's request for pricing credits, FERC again held
that FMPA failed to demonstrate that its facilities were
integrated into Florida Power's network. Id. at 61,545.
FERC also ruled that FMPA's contention that the Commis-
sion should "reduce the Florida Power rate base to be
consistent with a disallowance of FMPA facilities that are
necessary to connect generation and load," fell outside the
scope of the instant proceeding. Id. Noting FMPA's argu-
ment that the rate base reduction issue "was among the
reserved issues in the settlement proceeding," FERC ex-
plained that "the reservation of an issue in one proceeding
does not operate to transfer such issue to another proceed-
ing." Id.
II.
FMPA now challenges the Commission's denial of pricing
credits in FMPA I, FMPA II, and FMPA III. We review
FERC's orders under the arbitrary and capricious standard
and uphold FERC's factual findings if supported by substan-
tial evidence. See, e.g., Pacific Gas & Elec. Co. v. FERC, 306
F.3d 1112, 1115 (D.C. Cir. 2002); Process Gas Consumers
Grp. v. FERC, 292 F.3d 831, 836 (D.C. Cir. 2002). "The
'substantial evidence' standard," we have explained, "requires
more than a scintilla, but can be satisfied by something less
than a preponderance of the evidence." FPL Energy Me.
Hydro LLC v. FERC, 287 F.3d 1151, 1160 (D.C. Cir. 2002)
(internal citation omitted).
FMPA argues that the Commission erred by excluding
evidence from the Rate Case, or alternatively, that it improp-
erly refused to consolidate the Rate Case with the FMPA
cases. As to its first argument, FMPA claims not that the
excluded evidence pertains directly to the integration of its
facilities, but rather that FERC has allowed Florida Power to
include facilities in its rate base that are identical to FMPA
facilities in terms of network benefits. According to FMPA,
because the comparability principle requires equal treatment
of transmission providers and users, the Commission must
grant FMPA credit for facilities similar to ones the Commis-
sion allowed Florida Power to include in its rate base. We
disagree.
To begin with, FMPA never argues--fatally for its posi-
tion--that Rate Case evidence directly establishes that its
facilities are integrated into Florida Power's network. More-
over, even if FERC treats FMPA facilities differently from
similar Florida Power facilities, the Commission's denial of
pricing credits does not violate the comparability principle for
an obvious reason: FERC has yet to rule on FMPA's request
for reductions in Florida Power's rate base. See Petitioner's
Br. at 16 (noting that the Commission has not ruled on
reductions in Florida Power's rate base). "As a theoretical
matter," FMPA concedes, "FERC could order relief in the
Rate Case." Petitioner's Br. at 20. Theoretical? That
FERC "could order relief in the Rate Case" is dispositive.
Until FERC resolves FMPA's request for reductions in Flori-
da Power's rate base (one of the "reserved issues"), FERC's
denial of pricing credits cannot violate the comparability
principle. FERC's exclusion of Rate Case evidence was thus
not an abuse of discretion.
Nor did FERC improperly refuse to consolidate the Rate
Case with the FMPA proceedings. Administrative agencies
enjoy "broad discretion" to manage their own dockets, Tele-
comm. Resellers Assoc. v. FCC, 141 F.3d 1193, 1196 (D.C. Cir.
1998), and FMPA offers no reason to believe that FERC
abused that discretion in this case. Even if, as FMPA claims,
FERC has unreasonably delayed deciding the Rate Case, the
place for resolving that issue is there, not here.
FMPA next argues that FERC ignored evidence demon-
strating the integration of its facilities with those of Florida
Power's. This contention appears to rest almost entirely on
FERC's statement in FMPA III that "FMPA has not demon-
strated, nor does FMPA even argue, that its facilities meet
the [integration] test." FMPA III, 96 F.E.R.C. at 61,545.
"These statements," FMPA insists, "show that FERC was
unaware of and, therefore, could not have considered basic
evidence and argument of integration." Petitioner's Br. at
21. Other statements in FMPA III, however, indicate that
FERC understood FMPA's arguments and its evidence, but
found them insufficient to justify granting credits. "The key
issue in the case," the Commission wrote in FMPA III, "is
whether FMPA's facilities are integrated with Florida Pow-
er's transmission system.... In FMPA II, the Commission
found that a credit was not appropriate." FMPA III, 96
F.E.R.C. at 61,543. The Commission also discussed its core
finding in FMPA II that FMPA's facilities are "interconnect-
ed with Florida Power's facilities[,] ... not integrated" with
them. Id. Because FMPA presented no new evidence of
integration in FMPA III--a point FMPA counsel conceded at
oral argument--FERC's reliance on findings and conclusions
from FMPA II was entirely appropriate.
So what did FERC mean when it said that FMPA neither
argued nor presented sufficient evidence of integration? We
have no idea. The Commission's brief provides no explana-
tion, nor was agency counsel able to do so at oral argument.
This enigma is not fatal, however, for under our deferential
standard of review, we uphold agency decisions if supported
by substantial evidence, "notwithstanding their expository
shortcomings." Pan-Alberta Gas, Ltd. v. FERC, 251 F.3d
173, 176 (D.C. Cir. 2001).
Here, substantial evidence supports FERC's denial of pric-
ing credits. Florida Power's expert testified that five of the
seven FMPA cities at issue--Key West, Lake Worth, Clewi-
ston, Green Cove Springs, and Jacksonville Beach--"are in-
terconnected only with the [Florida Power] transmission sys-
tem" and that each city is essentially a " 'dead-end' off the
[Florida Power] system, in that ... power delivered from the
Florida Power transmission system necessarily must be con-
sumed wholly within the city." Third Adjemian Aff. p 7. The
expert also testified that the five FMPA facilities provide no
benefit to the Florida Power network: "[W]hile the internal
facilities enable each utility to distribute power within its own
system, the facilities in no way reduce [Florida Power's] costs
in integrating the loads of each city with all of FMPA's other
network resources because they do not impact the facilities
required by [Florida Power] to transmit power to and from
these utilities." Id. p 16. Although FMPA's other two cit-
ies--Ft. Pierce and Vero Beach--interconnect to Florida
Power's network at multiple points, Florida Power's expert
testified that those "facilities do not reduce [Florida Power's]
costs in providing network transmission service because the
[Ft. Pierce-Vero Beach] line has a negligible electrical impact
on [Florida Power's] ability to transmit power to and from the
two cities." Id. p 18. It is true, as FMPA points out, that the
expert also testified that "a negligible amount of power can
flow over the line," but the expert further explained that this
flow provided no benefit to Florida Power because "even
without the line, [Florida Power] is able to deliver power to
retail customers in that area and to transmit power to [Flori-
da Power's] other load centers in South Florida." Third
Adjemian Aff. p 19. According to FMPA, Florida Power
relied on the Ft. Pierce-Vero Beach line during a planned
transmission system outage, but Florida Power presented
evidence that the line may not actually have assisted its
network and that it had sufficient capacity to serve its
customers during the outage. See Fourth Adjemian Aff. at
p p 2-7; Birch Aff. p p 7, 10.
Based on this and other record evidence, FERC concluded
that "[t]he transmission facilities of most FMPA members are
interconnected with the Florida Power transmission system
at single points that are used only to transfer power between
the Florida Power transmission system and each FMPA
member's transmission system." FMPA II, 74 F.E.R.C. at
61,010. The Commission further explained:
While the FMPA facilities may serve a transmission
function on the FMPA side of the interconnection
point between FMPA and the Florida Power system,
they are not used by Florida Power to provide
transmission service to FMPA or any other party.
Nor are they used to transmit Florida Power's pow-
er to its non-FMPA customers.
Id. Crediting Florida Power's expert regarding the Ft.
Pierce-Vero Beach lines, FERC also concluded that the lines
were not integrated because they provided, at best, "unneed-
ed redundancy" with Florida Power's network. Id. The
Commission explained, "[a]n integrated transmission system
(as opposed to two interconnected transmission systems) is
comprised of transmission facilities operated as part of the
same network, integrating all resources and loads on that
network." Id.
To be sure, FMPA points to some contradictory evidence.
See Petitioner's Br. at 22-23 (arguing that FMPA facilities
benefit Florida Power by increasing reliability and that the
Ft. Pierce-Vero Beach lines allow Florida Power to sell
power in South Florida, increase Florida power grid capacity,
and effect Florida Power planning). The question we must
answer, however, is not whether record evidence supports
FMPA's version of events, but whether it supports FERC's.
Ark. Elec. Energy Consumers v. FERC, 290 F.3d 362, 367
(D.C. Cir. 2002) (explaining court's limited role in reviewing
FERC decision under "substantial evidence" standard). Ap-
plying our deferential standard of review--a particularly def-
erential standard where, as here, FERC decided between
"disputing expert witnesses," Wis. Valley Improvement Co. v.
FERC, 236 F.3d 738, 746-47 (D.C. Cir. 2001)--we have no
doubt that the Commission's decision to deny credits is
supported by substantial evidence. See supra pp. 9-11.
FMPA's remaining challenges are equally unpersuasive.
FMPA says that FERC failed to consider evidence regarding
Key West. But the lone document FMPA cites never men-
tions Key West; instead, it discusses FMPA's general argu-
ments regarding integration which FERC addressed in
FMPA II. See Fourth Malmsjo Aff. p 19. FMPA says that
FERC improperly rejected its motion to lodge Florida Pow-
er's proposal to buy the Lake Worth utility (allegedly showing
that Florida Power would have included Lake Worth in its
rate base) and ignored Breaker Diagrams showing the config-
uration of Florida Power's system. But because both the
Lake Worth evidence and the Breaker Diagrams relate to
Florida Power's rate base, not to the integration of FMPA's
facilities, FERC properly excluded them for the same reason
that it properly excluded the rest of the Rate Case evidence.
See supra pp. 7-8. FMPA says that the Commission applies
the integration standard inconsistently, but we rejected just
that argument in TAPS. See TAPS, 225 F.3d at 726-27
(describing FERC's discussion of integration in FMPA I and
FMPA II as "completely consistent with the Commission's
resolution of the credits issue in the proceedings before us").
Finally, FMPA argues that FERC's recently published
Standard Market Design Notice of Proposed Rule Making,
see Remedying Undue Discrimination Through Open Access
Transmission Service and Standard Electricity Market De-
sign, 67 Fed. Reg. 55452 (Aug. 29, 2002) ("SMD-NPRM"),
"appears to reflect a significant shift in Commission policy,"
Petitioner's Rep. Br. at 6-10, regarding the integration stan-
dard, thus requiring remand pursuant to Williston Basin
Interstate Pipeline Co. v. FERC, 165 F.3d 54, 62-63 (D.C.
Cir. 1999) (holding that agency's adoption of new rule during
judicial proceeding requires immediate remand of pending
cases involving discarded rule). The NPRM, however, ex-
pressly states that it does not resolve any issues relating to
integration. "Which facilities will or will not be under a
[Regional Transmission Organization's] operational control,"
the Commission explained, "does not predetermine transmis-
sion pricing, cost allocation, or rate design determina-
tions...." SMD-NPRM, 67 Fed. Reg. at 55,500 n.173. In
any event, and unlike the rule at issue in Williston, FERC
has yet to finalize the NPRM. Even if, as FMPA suspects,
FERC is applying the NPRM in other proceedings, adversely
affected parties in those cases may challenge the Commis-
sion's actions pursuant to 16 U.S.C. s 825l(b).
The petition for review is denied.
So ordered.