Pub Svc Elec & Gas v. FERC

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued March 20, 2007 Decided April 13, 2007

No. 05-1325

PUBLIC SERVICE ELECTRIC AND GAS COMPANY,
PETITIONER

V.

FEDERAL ENERGY REGULATORY COMMISSION,
RESPONDENT

NEPTUNE REGIONAL TRANSMISSION SYSTEM, LLC, ET AL.,
INTERVENORS

Consolidated with 05-1330 and 05-1335

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

Michael E. Ward and John A. Levin argued the cause for
petitioners. With them on the briefs were James H. McGrew,
Peter K. Matt, David E. Goroff, Jodi L. Moskowitz, and
Kenneth G. Jaffe.
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Robert A. Weishaar, Jr., Vasiliki Karandrikas, Judith B.
Appel, Attorney, New Jersey Division of the Ratepayer
Advocate, and Helene S. Wallenstein, Senior Deputy Attorney
General, Attorney General’s Office of State of New Jersey,
were on the brief for intervenor Gerdau Ameristeel Corp. and
amici curiae New Jersey Division of the Ratepayer Advocate
and New Jersey Board of Public Utilities in support of
petitioners.

Michael E. Kaufmann, Attorney, Federal Energy
Regulatory Commission, argued the cause for respondent.
With him on the brief were John S. Moot, General Counsel,
and Robert H. Solomon, Solicitor. Patrick Y. Lee, Attorney,
Federal Energy Regulatory Commission, entered an
appearance.

John N. Estes, III argued the cause for intervenor
Neptune Regional Transmission System, LLC. With him on
the brief was Donna M. Francescani.

Before: RANDOLPH and KAVANAUGH, Circuit Judges, and
WILLIAMS, Senior Circuit Judge.

Opinion for the Court filed by Senior Circuit Judge
WILLIAMS.

WILLIAMS, Senior Circuit Judge: PJM Interconnection
LLC is a regional transmission organization (“RTO”) that
coordinates the movement of wholesale electricity in all or
part of thirteen eastern states and the District of Columbia. Its
more than 450 members include power generators,
transmission owners, electricity distributors, power marketers,
and large consumers. An open access tariff, filed with and
approved by the Federal Energy Regulatory Commission,
provides the terms and conditions for new interconnections.
When a firm submits an interconnection request, the RTO
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undertakes in sequence three types of studies estimating the
cost of effecting the interconnection. The process culminates
in an interconnection service agreement. This case addresses
the circumstances under which PJM is permitted to repeat its
interconnection studies, thereby changing the amount the
interconnecting firm must pay.

Petitioners (transmission owning members of PJM, state
agencies and an industrial user) argue that the tariff permits
unlimited restudy prior to the completion of the
interconnection service agreement. On this view, the charge
for interconnection would take account of the impact of all
events transpiring up to that moment. FERC found that the
tariff was ambiguous on the subject, that unlimited restudy
would be unreasonable, and that a better reading of the tariff
would permit restudy in only a limited set of circumstances.
We find FERC’s reading amply worthy of deference.

* * *

Neptune is a firm sponsoring a merchant transmission
project that will deliver 660 MW of capacity from New Jersey
to Long Island via a high-voltage, direct-current, underwater
transmission cable. Projects such as Neptune’s add additional
capacity to an electric grid, enhancing market integration and
competition by expanding transmission and trading
opportunities between regions. Neptune initiated its
interconnection request with PJM in December 2000, and
established its place in PJM’s first-come, first-served
interconnection queue in March 2001.

Interconnection provisions added to PJM’s tariff in 1999
require it to undertake three studies of each queued project.
The first is a “feasibility study” that preliminarily determines
both what system upgrades are necessary to accommodate a
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new interconnection and the requesting party’s responsibility
for those upgrade costs. Tariff Section 36.2. Next, PJM must
conduct a “system impact study,” which refines cost
responsibility estimates for necessary system upgrades. Tariff
Section 36.4.1. Customers may terminate or withdraw their
interconnection requests based on the impact study’s findings.
PJM then conducts a final “facilities study” and makes its
ultimate good faith estimate of the cost to be charged the
interconnecting customer. Tariff Section 36.7.

By October 2003 PJM completed its initial second-phase
study (“system impact”), estimating the cost of network
upgrades due to Neptune’s interconnection at $3.7 million. It
soon revised that study because of the withdrawal of a higher-
queued interconnection project; this revision, undisputed by
Neptune, yielded a new estimate of $4.4 million. In March
2004, however, PJM informed Neptune that its system
interconnection costs had to be restudied yet again on account
of several generator retirements in the PJM system. PJM thus
undertook a third restudy—and then a fourth. By June 2004
the estimate has risen to $26.3 million. (It appears undisputed
that the withdrawal of generators may imply additional
upgrade costs associated with an interconnection.) In
September 2004, on account of further generator retirements,
PJM informed Neptune of the need for a fifth system impact
study. Neptune objected to the third, fourth, and fifth studies,
but PJM refused to conduct a facility study (the third and final
interconnection study step) or enter into an interconnection
service agreement until it completed its fifth system impact
study.

In December 2004, Neptune filed a complaint with FERC
under § 206 of the Federal Power Act, 16 U.S.C. § 824e,
asking it to compel PJM to move forward toward an
interconnection service agreement based on the second system
impact study. Without an interconnection service agreement,
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Neptune was unable to secure construction financing in time
to build needed facilities and meet a commitment to be
operational by June 2007. Neptune sought expedited
consideration.

In February 2005 the Commission granted Neptune’s
complaint, finding that PJM’s final three restudies were not
performed in accordance with its tariff. Neptune Regional
Transmission System, LLC v. PJM Interconnection, LLC, 110
FERC ¶ 61,098 (2005) (“Complaint Order”). Noting that the
PJM tariff was silent as to some aspects of the restudy issue
and ambiguous as to others, id. at 61,404 P 21, the
Commission interpreted the tariff to generally preclude
restudies based on most events post-dating an interconnector’s
establishment of its place in the queue. It stressed the role of
queue position in creating a coherent system for assigning
interconnection costs and facilitating interconnection:

[T]he queue position provides a potential customer a
reasonable degree of certainty as to its financial costs. If
an interconnection customer were to be held financially
responsible for the costs of events occurring after its
System Impact Study is completed it would be impossible
for the customer to make reasoned business decisions.
Instead, the customer would be susceptible to constant
changes within the provider’s system. . . . In fact, as in
this case, there could be a never-ending series of changes,
creating havoc for interconnection providers and
customers alike.

Id. at 61,405 P 23. The Commission concluded that “cost
allocations due to the announcements of generator retirements
should have no bearing on the Facility Study [the third type of
study],” and that “PJM should have provided to Neptune a
Facility Study immediately upon the completion of its second
System Impact Study.” Id. at 61,406 P 29.
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In reaching its decision, the Commission explicitly drew
on “the principles of Order No. 2003,” id. at 61,406 P 27,
which it had adopted in 2003, well after its approval of the
relevant language in PJM’s tariff. See Standardization of
Generator Interconnection Agreements and Procedures,
Order No. 2003, 68 Fed. Reg. 49,846 (2003); see also Notice
Clarifying Compliance Procedures, 106 FERC ¶ 61,009
(2004). The 2003 order limits restudy to three circumstances:
(1) when a higher-queued project drops out of the queue, (2)
when the modification of a higher-queued project is required,
or (3) when the point of interconnection is re-designated. The
restudies to which Neptune objected fell completely outside
these exceptions. Order No. 2003’s reasons for limiting
restudy (and thus making queue position critical) were
essentially the same practical considerations as the ones the
Commission invoked here. See Complaint Order, 110 FERC
at 61,404-405 P 22.

FERC deferred issues of classification and recovery of
any costs above the $4.4 million interconnection costs to a
later date, when transmission service was requested. Id. at
61,406 P 31. On petition for rehearing and clarification, the
Commission “reaffirm[ed] that a project’s queue position
forms the basis for the determination of an interconnection
customer’s cost responsibilities,” but said that costs above the
$4.4 million appropriately charged to Neptune for
interconnection “are solely reliability upgrade costs [and
should be] allocated to Transmission Owners and then
assigned to transmission customers” as specified in the PJM
tariff. Neptune Regional Transmission System, LLC v. PJM
Interconnection, LLC, 111 FERC ¶ 61,455 at 63,008 P 19 &
63,009 P 25 (2005) (“Rehearing Order”). Petitioners brought
a timely challenge to the orders.
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* * *

The Commission raises two preliminary objections to
petitioners’ challenge. First, it questions their standing,
denying that they have suffered or are in imminent peril of
suffering injury in fact—a concrete and particularized injury
that is actual or imminent. See Lujan v. Defenders of Wildlife,
504 U.S. 555, 560 (1992) (citations omitted). Second, FERC
argues that petitioners’ claims are unripe, asking us to
evaluate “(1) whether delayed review would cause hardship to
the plaintiffs; (2) whether judicial intervention would
inappropriately interfere with further administrative action;
and (3) whether the courts would benefit from further factual
development of the issues presented.” Ohio Forestry Ass’n v.
Sierra Club, 523 U.S. 726, 733 (1998). Standing and ripeness
often overlap significantly, and they do here: As to both, we
find FERC’s arguments unavailing.

FERC’s argument rests largely on its conclusion that
costs above the $4.4 million identified in the second system
impact study will be classified and recovered in future
proceedings—that is, that their disposition has not been
settled, making judicial review more appropriate at a future
time, if and when those charges are assigned to petitioners.
But the orders’ effects on allocation of the costs above $4.4
million, however inconclusive, are only a part of their impact.
As interconnection studies made under the tariff are paid for
by the interconnecting party (as opposed to the RTO), see
Tariff 41.4.3, at the very least FERC’s orders conclusively
shift the cost of any additional restudies away from Neptune
and onto the RTO. Moreover, the orders effectively forced
PJM into proceeding with the interconnection agreement and
thus, inevitably, the interconnection. Order on Unexecuted
Service Agreements, 111 FERC ¶ 61,456 (June 23, 2005).
Both these aspects of FERC’s order are enough for standing.
They are equally sufficient to show ripeness. FERC has
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suggested no institutional interests in postponing review of the
restudy issue, and adjudication will not benefit from
additional facts. A showing of hardship is therefore
unnecessary. See Sabre, Inc. v. DOT, 429 F.3d 1113, 1120
(D.C. Cir. 2005) (“[A]bsent institutional interests favoring the
postponement of review, a petitioner need not show that delay
would impose individual hardship to show ripeness.”).

* * *

We review FERC’s interpretation of tariffs in much the
same way we apply deference under Chevron U.S.A., Inc. v.
NRDC, 467 U.S. 837, 842-43 (1984), to agency interpretations
of statutes. Koch Gateway Pipeline Co. v. FERC, 136 F.3d
810, 814 (D.C. Cir. 1998). If the tariff language is
unambiguous, we (unsurprisingly) follow it; if not, we defer to
reasonable interpretations by the Commission. Id. at 814-15.

The language of the tariff tells us little. Section 41.4.3,
entitled “Re-study,” states simply that:

If re-study of the System Impact Study is required, the
Transmission Provider shall notify the Transmission
Interconnection Customer in writing explaining the
reason for the re-study and providing a scheduled
completed date. Any cost of re-study shall be borne by
the Transmission Interconnection Customer being
restudied.

Complaint Order, 110 FERC at 61,405 P 25. This section
tells us about the process for a restudy but says nothing about
the circumstances permitting restudy. Given the section’s
focus, and its failure to mention generator retirements or any
other possible occasion for restudy, it is of no consequence.
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Section 42.2, on which the parties largely focus, is little
more enlightening on the problem at hand:

A Transmission Interconnection Customer shall be
obligated to pay for 100 percent of the costs of the
minimum amount of Local Upgrades and Network
Upgrades necessary to accommodate its Transmission
Interconnection Request and that would not have been
incurred under the Regional Transmission Expansion
Plan but for such Transmission Interconnection Request
....

Petitioners focus on the “but for” reference, and indeed
do a good deal of rhetorical tub-thumping on the obviousness
of its meaning. But the language establishes only a
proposition on which all parties agree: that the subsection
makes Neptune responsible for all costs of attachment and
system upgrades that would not have been incurred “but for”
the interconnection request. It says nothing directly about the
time as of which “but for” causation should be assessed.

For this timing question, petitioners would draw the line
at the signing of the interconnection service agreement
because, they assert, this is the step in the process that
definitively “locks in the actual cost of the upgrades” required
to complete an interconnection. In contrast, FERC would
draw the line much earlier in the process, when the
interconnection customer has established its place in the
interconnection queue, because that is the point at which
requesting parties often make their business plans. At oral
argument, Neptune, as intervenor, argued that FERC’s
position is buttressed by the text of § 42.2 because the
provision holds Neptune responsible only for costs that would
not have been incurred “but for [the] Transmission
Interconnection Request,” and it is that request which
establishes a party’s position in the queue.
 10

We agree with FERC that the tariff language fails to
resolve the issue. We therefore turn to whether the
Commission’s interpretation of the tariff was a reasonable
one. As FERC emphasizes, its reading helps provide
workability, certainty and predictability in the interconnection
process. “If an interconnection customer is required to
anticipate unspecified events occurring after its System
Impact Study is completed, other than costs arising from
changes from higher-queued generators, individual
interconnection customers would be unable to make reasoned
business decisions.” Complaint Order at 61,405 P 23.
Moreover, “[a]llowing repeated re-studies for possible
speculative events occurring after a project joins the queue
unfairly delays the ability of projects to receive financing and
commence construction.” Rehearing Order at 63,009 P 23.
Petitioners’ observation that the interconnection service
agreement “locks in the actual cost” is in a sense true but in a
more important sense circular. As time moves on data are
commonly known with more precision, but the argument
assumes that the costs to be “locked in” are those that the
interconnection would cause if made in light of all events
intervening between application and the agreement. But the
Commission has offered concerns militating in favor of an
earlier date—concerns that petitioners never confront, much
less show to be so weightless as to render FERC’s decision
unworthy of deference. On this record, therefore, we can
hardly say that the Commission’s interpretation of the tariff
was unreasonable.

Petitioners’ opening brief points to the Commission’s
disregard of language in the PJM Manual that they say favors
their view of the tariff, and to the Commission’s reliance in
the Complaint Order on the policy judgments the Commission
made in Order No. 2003, which was adopted after it approved
the tariff. But these problems (if they are problems) were
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apparent as of the Complaint Order, yet petitioners failed to
raise them in their petition for rehearing and clarification.
Accordingly, the objections are barred by § 313(b) of the
Federal Power Act, 16 U.S.C. § 825l(b). Cf. Columbia Gas
Transmission Corp. v. FERC, 477 F.3d 739 (D.C. Cir. 2007).
Petitioners argue in their reply brief that they couldn’t have
raised these issues on rehearing because the Complaint Order
had “misled [them] into believing that the upgrades could still
be charged to Neptune when it applied for transmission
service.” But the Complaint Order was perfectly clear on the
relevant points: it rejected petitioners’ theory as to the
permissibility of restudies and it limited Neptune’s
responsibility for costs based on the interconnection process
to the $4.4 million shown in the second system impact study.
Accordingly, the Manual and Order No. 2003 issues are not
before us.

* * *

Petitioners raise one additional argument that requires
comment—that FERC violated § 202 of the Federal Power
Act by failing to provide appropriate notice of these
proceedings to state commissions. Section 202 authorizes
FERC “to divide the country into regional districts for the
voluntary interconnection and coordination of facilities for the
generation, transmission, and sale of electric energy,” but
requires that “[b]efore establishing any such district and fixing
or modifying the boundaries thereof the Commission shall
give notice to the State commission of each State situated
wholly or in part within such district . . . .” 16 U.S.C.
§ 824a(a). Petitioners assert here that FERC’s orders “de
facto increased” PJM’s geographic scope to include Long
Island, New York, and did so without giving notice to all the
state commissions participating in PJM and in the destination
district.
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It would be a stretch—and, as we shall see, too great a
one—to say that petitioners made this argument below.
Indeed, § 202 is mentioned below only in the request by
petitioner Pennsylvania Public Utility Commission
(“PaPUC”) for rehearing; even there, the request merely noted
the alleged error in a single opaque sentence:

The Order has failed to afford the State commission of
each affected state a reasonable opportunity to present
their views and recommendations, and the Commission
has failed to receive and consider such views and
recommendations, contrary to Section 202 of the Federal
Power Act, 16 U.S.C. § 824a.

PaPUC Request for Rehearing at 5. Petitioner made no
argument to substantiate the allegation of error, never
confronted the language of § 202, offered no analysis, and
cited no legal authority (other than the stark reference to
§ 202). It therefore comes as no surprise that FERC dismissed
the § 202 claim with little more than an observation that the
participation of PaPUC and three other state agencies belied
any notion that it had withheld notice or a reasonable
opportunity to comment. Rehearing Order, 111 FERC
¶ 61,455 at 63,010 P 32.

Section 313(b) of the Federal Power Act, 16 U.S.C.
§ 825l(b), makes articulation of an “objection” on petition for
rehearing a predicate to judicial review: “No objection to the
order of the Commission shall be considered by the court
unless such objection shall have been urged before the
Commission in the application for rehearing.” See also
§ 313(b)’s equivalent—§ 19(b) of the Natural Gas Act, 15
U.S.C. § 717r. In review of decisions of the Commission and
its predecessor, we, of course, insist that a party claiming
statutory error have identified the substance of the claim. See,
e.g., North Carolina v. Federal Power Comm’n, 533 F.2d
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702, 706 (D.C. Cir.) (declining to review alleged illegality of
use of water for pollution dilution, and neglect of possible use
of National Wild and Scenic Rivers System, for failure to
articulate claim in petition for rehearing), vacated on other
grounds, 429 U.S. 891 (1976). And in a case involving
application of the “price squeeze” doctrine we established the
proposition that “the Commission cannot be asked to make
silk purse responses to sow’s ear arguments.” City of Vernon
v. FERC, 845 F.2d 1042, 1047 (D.C. Cir. 1988).

The advent of heightened deference under Chevron
sharpens the need for reasonable articulation of a statutory
claim. Such articulation gives the agency an opportunity to
respond and thus, guided by its familiarity with the statute and
policy context, to exercise the discretion contemplated by
Chevron to find a deference-worthy interpretation. Cf. Rhode
Island Consumers’ Council v. Federal Power Comm’n, 504
F.2d 203, 212 (D.C. Cir. 1974) (“The purpose of [§ 313(b)] is
to insure that the Commission has an opportunity to deal with
any difficulties presented by its action before the reviewing
court intervenes.”). But when a party advances a wholly
undeveloped claim—as here—the agency has little occasion
to present a reasoned explanation. Under these circumstances,
full appellate review would unfairly undermine the agency’s
ability to rely on Chevron deference before an appellate court.

We note our practice in this court: When petitioners or
appellants present no arguments to substantiate a claim of
error, we normally decline to entertain the issue. See
Carducci v. Regan, 714 F.2d 171, 177 (D.C. Cir. 1983)
(“[A]ppellate courts do not sit as self-directed boards of legal
inquiry and research, but essentially as arbiters of legal
questions presented and argued by the parties before them.
Thus, [the Federal Rules] require[] that the appellant’s brief
contain ‘the contentions of the appellant with respect to the
issues presented, and the reasons therefor, with citations to the
 14

authorities, statutes and parts of the record relied on.’ . . .
[W]here counsel has made no attempt to address the issue, we
will not remedy the defect . . . .”) (internal citation omitted).
Simply put, it is not “the court’s duty to identify, articulate,
and substantiate a claim for the petitioner.” National
Exchange Carrier Ass’n v. FCC, 253 F.3d 1, 4 (D.C. Cir.
2001).

The same hesitation to declare the law prematurely
counsels against reading § 313(b) to allow petitioners’ one-
sentence cry of protest as an “objection” requiring an exegesis
of § 202 from the Commission. Thus, finding PaPUC’s
inarticulate exclamation insufficient to satisfy § 313(b), we do
not reach the merits.

In closing, we also note Neptune’s argument that
petitioners lack standing to raise the § 202 claim because
PaPUC is a party to this proceeding and three more state
agencies participated below. We need not reach the question
of standing because our decision rests on a different
“threshold, non-merits” ground. See Sinochem Int’l Co. Ltd.
v. Malaysia Int’l Shipping Co., 127 S. Ct. 1184 (2007); see
also Steel Co. v. Citizens for Better Environment, 523 U.S. 83,
100-101 n.3 (1998) (holding that a federal court has leeway to
choose among threshold grounds for declining to consider a
case on the merits).

Affirmed.