Louisiana Public Service Commission v. Federal Energy Regulatory Commission

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued November 2, 2007 Decided April 15, 2008

No. 05-1462

LOUISIANA PUBLIC SERVICE COMMISSION,
PETITIONER

v.

FEDERAL ENERGY REGULATORY COMMISSION,
RESPONDENT

ARKANSAS PUBLIC SERVICE COMMISSION, ET AL.,
INTERVENORS

Consolidated with
06-1054, 06-1057

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

John Longstreth argued the cause for petitioner Arkansas
Electric Energy Consumers, Inc. On the briefs were Brian C.
Donahue and Stacy M. Hazell. Donald A. Kaplan entered an
appearance.
 2
Michael R. Fontham argued the cause for petitioner
Louisiana Public Service Commission. With him on the briefs
were Paul L. Zimmering and Noel J. Darce.

Mary W. Cochran argued the cause for petitioners
Arkansas Public Service Commission and Mississippi Public
Service Commission. With her on the briefs were Paul
Randolph Hightower, Ted J. Thomas, and George M.
Fleming.

Lona T. Perry, Senior Attorney, Federal Energy
Regulatory Commission, argued the cause for respondent.
With her on the brief was Robert H. Solomon, Solicitor.

J. Wayne Anderson argued the cause for intervenor
Entergy Services, Inc. With him on the brief was William S.
Scherman.

Mary W. Cochran, Paul Randolph Hightower, Ted
Thomas, Clinton A. Vince, J. Cathy Fogel, Paul E.
Nordstrom, George M. Fleming, Brandon J. Harrison, Andy
Adams, Brian C. Donahue, and Stacy M. Hazell were on the
brief for intervenors Arkansas Public Service Commission, et
al. in support of respondent. Donald A. Kaplan, John
Longstreth, and Emma F. Hand entered appearances.

Earle H. O’Donnell, Zori G. Ferkin, Daniel A. Hagan,
Michael R. Fontham, Paul L. Zimmering, and Noel J. Darce
were on the brief for intervenors Louisiana Public Service
Commission and Occidental Chemical Corporation.

Before: SENTELLE, Chief Judge, and GARLAND and
GRIFFITH, Circuit Judges.

Opinion for the court filed PER CURIAM.
 3

PER CURIAM: We consider three consolidated petitions
for review of two orders of the Federal Energy Regulatory
Commission (“FERC” or “the Commission”), La. Pub. Serv.
Comm’n v. Entergy Servs., Inc. et al., 111 F.E.R.C. & 61,311
(2005) (“Opinion No. 480”), and La. Pub. Serv. Comm’n v.
Entergy Servs., Inc., 113 F.E.R.C. & 61,282 (2005) (“Opinion
No. 480-A”). In the orders under review, the Commission
held that the production costs of the five operating companies
in the Entergy power system must be “roughly equalized” in a
+/- 11 percent bandwidth around System average each year.
The Commission further found that production costs
associated with the Vidalia hydropower plant in Vidalia,
Louisiana should not be included in the +/- 11 percent
bandwidth calculation. The Commission ordered that the
remedy be implemented prospectively on January 1, 2006
without refunds due to any of the Entergy operating
companies.

Petitioners contest the Commission’s jurisdiction to order
the bandwidth remedy, the rationality of its decision, the
timing of the implementation of its remedy, and its denial of
refunds. We conclude that the Commission had jurisdiction to
reallocate production costs, that its +/- 11 percent bandwidth
remedy was not arbitrary or capricious or contrary to law, and
that its exclusion of the Vidalia hydropower plant was
supported by substantial evidence. However, we grant the
petition with respect to the Commission’s decisions to deny
refunds and to implement a prospective remedy commencing
in 2007 based on 2006 data, and we remand the matter to the
Commission for further proceedings on those issues
consistent with Part V of this opinion.
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I. BACKGROUND

The dispute before us stems from disparities in
production costs among the five operating companies in the
Entergy System which have resulted from Entergy’s system-
wide approach to locating generation capacity, a spike in the
price of natural gas, and a phased-in rate schedule associated
with an inefficient hydropower plant near Vidalia, Louisiana.

A. The Entergy System

1. System-wide Planning Approach

Entergy Corporation is a public utility holding company
that sells electricity, both wholesale and retail, in Arkansas,
Louisiana, Mississippi, and Texas. It does so through five
operating companies named after their respective
jurisdictions: Entergy Arkansas, Inc., Entergy Louisiana, Inc.,
Entergy Mississippi, Inc., Entergy Gulf States, Inc., and
Entergy New Orleans, Inc. The Entergy System has been
highly integrated for over fifty years, with transactions within
the System governed by a System Agreement. The current
System Agreement was filed in 1982.

The System Agreement acts as an interconnection and
pooling agreement for the energy generated in the System and
provides for the joint planning, construction and operation of
new generating capacity in the System. The System
Agreement assigns the task of coordinating the addition of
new generating capacity to a systemwide operating committee
that is composed of a representative from Entergy
Corporation and each of its operating companies. Miss. Indus.
v. FERC, 808 F.2d 1525, 1529 (D.C. Cir. 1987). The
operating committee makes “the major decisions concerning
general timing, location and size of plant additions, in view of
 5
the overall needs of the system, while accommodating
individual company needs wherever possible.” Id. at 1556
(internal quotations omitted).

In adding generating capacity, the committee follows
both a system-planning approach, which ensures that
“generation facilities are planned, constructed and operated
for the benefit of the whole system,” and a rotational
approach, which adds new capacity on a rotating basis to the
jurisdictions in the System. 111 F.E.R.C. at 61,351; 113
F.E.R.C. at 62,132. Because an operating company is
responsible for the costs of the generation plants in its
jurisdiction, id., the rotation of new plants throughout the
System historically had the effect of roughly evening out
investment costs over time among the operating companies,
Miss. Indus., 808 F.2d at 1531.

Within this scheme, in the 1950s and 1960s, the
operating committee tended to add new generating units in
Louisiana to take advantage of its inexpensive oil and gas
reserves. Id. In the late 1960s and early 1970s, the operating
committee decided to shift away from oil and gas generation
and to add nuclear and coal capacity. Id. at 1556. A
company’s ability to construct oil- and gas-fired units
generally depended on the existence of sufficient natural
resources within its service area, while the ability to build
coal and nuclear units was less restricted. Id. at 1555. In
accordance with the rotational scheme of asset additions,
much of the coal capacity was constructed in Arkansas. 111
F.E.R.C. at 62,352. As before, production costs among the
operating companies remained “roughly equal.” 113 F.E.R.C.
at 62,133.

The investment in nuclear generation, on the other hand,
proved prohibitively expensive and catastrophically
 6
uneconomical. Miss. Indus., 808 F.2d at 1531–32. The Grand
Gulf nuclear plant in Port Gibson, Mississippi, for example,
was initially projected to cost $1.2 billion for two generating
units, but ended up costing more than $3 billion for one unit.
Id. at 1531. After it became apparent that Entergy Mississippi,
then named Mississippi Power & Light, could not bear the
cost of the Grand Gulf facility, the System formed a
generating subsidiary to finance and run the Grand Gulf plant.
Id. at 1533. The costs of Grand Gulf were allocated to the
operating companies through an addendum to the 1982
System Agreement. Id. at 1554.

The Commission considered the proposed allocation of
nuclear investment costs in proceedings initiated by the
System in 1982. Id. at 1534. The Commission found that the
System Agreement requires that production costs be “roughly
equal” among the operating companies. 111 F.E.R.C. at
62,351. It further found that the “great disparities in installed
nuclear investment costs disrupted the rough equalization of
production costs that had existed on the system and thereby
produced undue discrimination” in violation of Section 206 of
the Federal Power Act. Id. The Commission concluded that
equalizing responsibility for the nuclear investment costs
among the operating companies would remedy the undue
discrimination. Id.; Miss. Indus., 808 F.2d at 1553. On
petition for review, this Court agreed that the System
Agreement showed an intent to roughly equalize capacity
costs among the operating companies, id. at 1554–55, that the
Commission “could properly conclude that the tremendous
disparities in nuclear capacity costs among the operating
companies disrupt[ed] the System’s historical pattern of
roughly equalizing capacity costs,” id. at 1557, and that the
Commission=s choice to order nuclear investment equalization
to remedy the problem was both rational and within its
discretion, id. at 1565.
 7

2. The Rising Cost of Natural Gas and its Effect on the
Entergy System

After implementation of the nuclear investment remedy,
rough production cost equalization was “maintained from
1986–1999, with variations from year-to-year, but without
any long-term large bias for any one company or another.”
111 F.E.R.C. at 62,352. During the three years prior to the
nuclear investment remedy, the production costs of the
Entergy operating companies had deviated from System
average by 35.15, 25.32, and 32.9 percent. Id. at 62,355.
During the fourteen years after the nuclear investment
remedy, the deviations on the System moderated, ranging
from a low of 7.71 percent in 1995 to a high of 22.2 percent
in 1987. Id.

The picture changed in 2000 when there was a spike in
the price of natural gas. 111 F.E.R.C. at 62,352. The increase
“had a dramatically disproportionate effect on [Entergy
Louisiana]’s relatively large amount of gas-fired generation,
as compared to [Entergy Arkansas]’s relatively large amount
of cheaper coal base load capacity.” Id. In 2000, Entergy
Louisiana had production costs that were 12 percent above
System average, while Entergy Arkansas’s costs were 17
percent below average. La. Pub. Serv. Comm’n v. Entergy
Servs., Inc., et al., 106 F.E.R.C. & 63,012, 65,110 (2004)
(“Initial Decision”). Similarly, in 2001, when Entergy
Louisiana had costs that were 10 percent above average,
Entergy Arkansas’s costs were 14 percent below, and in 2002,
when Entergy Louisiana’s were 11 percent above average,
Entergy Arkansas’s costs were 15 percent below. Id. The total
deviations of all of the operating companies around System
average accordingly rose, with deviations of 33.26 percent in
 8
2000, 39.79 percent in 2001, and 27.6 percent in 2002. 111
F.E.R.C. at 62,355.

3. The Vidalia Hydropower Plant

In addition to the high cost of gas, Entergy Louisiana was
also bearing the escalating costs associated with the Vidalia
Hydroelectric Power Plant built forty miles south of Vidalia,
Louisiana. The plant was developed in the mid-1980s to
harness the power of overflow water from the Mississippi and
Red Rivers as it is diverted into the Atchafalaya River
through a series of channels built by the Army Corps of
Engineers. 106 F.E.R.C. at 65,115. The plant was constructed
with six bulb turbines and a total peak capacity of 192
megawatts. Id. But, as a “run-of-the-river hydroelectric
project,” it depends on the flow of the rivers and has generally
produced a smaller capacity of about 84 megawatts. Id. at
65,115–16.

The vast majority of the capacity from Vidalia is used by
Entergy Louisiana pursuant to a long-term contract that its
predecessor — Louisiana Power & Light — entered into in
1985 in which it agreed to purchase up to 94 percent of the
output of the Vidalia plant. Id. at 65,116. The Louisiana
Public Service Commission (“LPSC”), which then regulated
Louisiana Power & Light and now regulates Entergy
Louisiana, approved a phased-in rate schedule for the costs of
the plant, which limited its costs to Entergy Louisiana
initially, but then increased them until they leveled off at the
end of the long-term contract. Id. at 65,117. As a result,
during the early years of Vidalia’s operation, the Vidalia
energy cost $65/MWh, but by 2004 it cost $145/MWh and
was scheduled to increase each year thereafter until it reaches
a high of $205/MWh during the years 2010–2013. 111
 9
F.E.R.C. at 62,374. The cost will then decrease each year
until it levels off at $150/MWh for the years 2016–2031. Id.

B. The Proceedings Below

1. The ALJ’s Initial Decision

In June 2001, LPSC filed a complaint against Entergy
with the FERC, asserting that the cost allocation among the
Entergy operating companies had become unjust,
unreasonable, and unduly discriminatory in violation of
Sections 205 and 206 of the Federal Power Act, 16 U.S.C.
§§ 824d(b), 824e(a). The case was assigned to presiding
administrative law judge (“ALJ”) Lawrence Brenner. The
Arkansas Public Service Commission (“APSC”), which
regulates Entergy Arkansas, and the Mississippi Public
Service Commission (“MPSC”), which regulates Entergy
Mississippi, disputed LPSC’s claim. Based on an evidentiary
record involving 6,218 transcript pages and over 390 exhibits,
ALJ Brenner decided the following four issues which are
pertinent to this petition.

a. Disruption of Rough Equalization. First, ALJ Brenner
found that the cost allocations among the Entergy operating
companies had become unduly discriminatory in violation of
the Federal Power Act because the production costs among
the companies were no longer “roughly equal.” 106 F.E.R.C.
at 65,109–10. He explained that, “[b]eginning with 2000, the
increase in natural gas prices and the dependence of [Entergy
Louisiana] on gas-fueled generation has caused its production
costs to rise dramatically in relation to System average.” Id. at
65,110. “[L]ooking at the history back to 1986, it is clear that
prior to the current period beginning with 2000, there was no
period where an Operating Company was hammered like
[Entergy Louisiana] has been with double-digit percentage
 10
deviations above System average for each of the past four
years (2000–2003), while [Entergy Arkansas] has enjoyed
greater than mirror image double-digit disparities below
System average.” Id. at 65,111. He further found that “2000,
or even 2000–2003, cannot be chalked off as an aberrational
temporary period,” id. at 65,110, given price forecasts which
left “no reasonable prospect of the situation self-correcting
under the existing mechanisms of the System Agreement.” Id.
at 65,112.

b. Bandwidth Remedy. ALJ Brenner decided that a
numerical bandwidth was the appropriate remedy to bring the
Entergy System into “rough production cost equalization.”
106 F.E.R.C. at 65,113. He thought “it appropriate to impose
a limit measured over a rolling multi-year average” and to
also “impose a higher annual limit to achieve some relief for
the first year, to limit large swings in future individual years,
and to start the multi-year rolling average towards smoother,
achievable results.” Id. To this end, he ordered a +/- 5 percent
bandwidth to apply to a rolling three-year average and a +/-
7.5 percent bandwidth to apply annually. Id.

c. Vidalia Hydropower Plant. ALJ Brenner found that,
when calculating production costs for the bandwidth remedy,
the costs of the Vidalia hydropower plant should be included.
Id. at 65,118. Entergy had argued that the plant was not a
System resource, but was built “with an eye . . . towards
satisfying the political and economic policy needs of the State
of Louisiana, at the direction of the LPSC.” Id. at 65,117. ALJ
Brenner found that there was “sufficient evidence to conclude
that Vidalia was planned as a resource for the benefit of the
Entergy System” because “[a]fter Vidalia went into service, it
provided energy that was ultimately used to serve the loads on
the System.” Id. at 65,118.
 11
d. Implementation of Remedy. ALJ Brenner ordered that
his +/- 7.5 percent annual remedy “be effective beginning
with all of the previous calendar year of 2003,” 106 F.E.R.C.
at 65,113, so that “for each calendar year beginning with
2003, no Entergy Operating Company is more than +/-7.5%
relative to System average,” id. at 65,115.

2. FERC’s Opinion No. 480

The interested parties filed exceptions to the ALJ’s
decision with the Commission. The Commission made the
following four findings pertinent to this petition.

a. Disruption of Rough Equalization. The Commission
agreed with ALJ Brenner that the Entergy System was no
longer in rough production cost equalization. 111 F.E.R.C. at
62,350. It explained that “[w]hile history shows that
production cost disparities have always existed, large
disparities among the Operating Companies started to arise in
2000 and appear likely to continue into the future.” Id. at
62,354. According to the Commission, “[t]he large and
increasing disparities among the Operating Companies are
now arising because the rotational scheme has been inactive
for a lengthy period and rising gas prices have adversely
impacted [Entergy Louisiana], which relies heavily on gas-
fired production facilities.” Id.

The Commission looked to historical data in determining
whether rough production cost equalization had been
disrupted. For the period from 1983 through 1985, prior to the
nuclear investment equalization remedy, the total deviation of
the operating companies from System average was about 31
percent. Id. After the Commission=s remedy, the System
“remained in rough production cost equalization for the next
fourteen years, with total deviations ranging from 7.71 to
 12
22.20 percent.” Id. Deviations then “jumped significantly” to
33.26 in 2000, 39.79 in 2001, and 27.6 in 2002. Id. at 62,354–
55. The Commission reasoned that because the 2000–2002
deviations are greater than those “which spurred the
Commission to act in 1985,” they required a finding that the
System is not in a state of rough equalization. Id.

b. Bandwidth Remedy. The Commission agreed with
ALJ Brenner that, “[w]ith actual gas prices remaining high
and no indication that this is likely to change,” a remedy was
required to pull the System into rough production cost
equalization. 111 F.E.R.C. at 62,357; see id. at 62,354–57.
The Commission further agreed with the “use of a bandwidth
as a remedial device,” but reversed the ALJ’s “determination
on the appropriate bandwidth in favor of a broader bandwidth
that eases the severity of the remedy’s impact.” Id. at 62,350.
The Commission eliminated the three-year rolling average
requirement in its entirety, finding it “overly complex, vague
and unworkable,” id. at 62,371, and ordered an annual
bandwidth of +/- 11 percent, allowing for a maximum 22-
percent spread in production costs between operating
companies, id. at 62,372.

The Commission based its +/- 11 percent bandwidth on
data from 1986–1999, the period following the nuclear
investment equalization remedy, when the companies
deviated from System average in amounts ranging from 7.71
percent to 22.2 percent. 111 F.E.R.C. at 62,371–72. Finding
that the nuclear investment remedy created rough production
cost equalization and recognizing that the highest total
deviation during that period was 22.2 percent, the
Commission reasoned that a 22 percent disparity in costs
should be the highest deviation allowable in the System
during a period of “rough production cost equalization.” Id. at
62,372. A +/- 11 percent bandwidth would then apply if the
 13
System exceeded historical cost disparities, but would
otherwise allow the System to maintain the flexibility that it
had traditionally enjoyed. Id.

c. Vidalia Hydropower Plant. The Commission reversed
the ALJ’s finding that the Vidalia hydropower plant was a
System resource based on four “distinguishing factors” about
the Vidalia plant that it found established its status as a
Louisiana-specific resource. Id. at 62,350, 62,376. First,
FERC found that the Vidalia contract “was the product of a
unique accommodation between the Louisiana Commission
and [Entergy Louisiana] meant to facilitate the local
economic and political objectives of Louisiana.” Id. at 62,375.
FERC pointed to the unusual structure of the contract,
including the guaranteed flow through of the total power costs
to Entergy Louisiana ratepayers by varying the fuel cost in
monthly fuel adjustment charges, and the fact that no non-
Louisiana retail regulator or other operating company was
given the opportunity to determine whether the Vidalia
contract was prudent. Id. at 62,376. Second, FERC noted that
the costs of Vidalia, if included in the bandwidth calculation,
would force operating companies other than Entergy
Louisiana to bear the high costs of the plant, which would
produce significant cost shifts among the operating
companies and greatly impact retail rates. Id. at 62,377. Third,
FERC pointed out that, in contrast to the System-wide
strategy adopted by the committee when it decided to add
nuclear generation to the System, “there is no evidence in this
record that Vidalia was part of any centralized and deliberate
plan to increase the use of hydroelectric power for the benefit
of the system as a whole.” Id. at 62,377. Fourth, the
Commission pointed to LPSC’s settlement with Entergy
Louisiana, under which accelerated tax deductions over the
remaining life of the Vidalia contract would flow directly and
exclusively to the retail customers of Louisiana. Id. Together,
 14
the four factors showed a focus on Louisiana, rather than on
the System, and led the Commission to conclude that Vidalia
was planned and operated as a Louisiana resource, not a
System resource. Id.

d. Implementation of Remedy. The Commission found
that its bandwidth remedy should not apply to calendar year
2003 as recommended by the ALJ, but should apply
prospectively in calendar year 2006. 111 F.E.R.C. at 62,372–
73. Any reallocation of costs prior to the Commission’s June
1, 2005 decision would require the payment of refunds among
the operating companies because data from 2003 and 2004
showed deviations among the companies that were greater
than the +/- 11 percent bandwidth range. Id. at 62,373. The
Commission reasoned that it could not, therefore, implement
a retroactive bandwidth because it had previously found that
refunds among Entergy operating companies are precluded by
Section 206(c) of the Federal Power Act. Id. at 62,372 (citing
La. Pub. Serv. Comm’n, et al. v. Entergy Corp., 106 F.E.R.C.
& 61,228 (2004)).

3. FERC’s Opinion No. 480-A

The Commission considered, and denied, requests for
reconsideration of its decision. With respect to the four issues
pertinent to this petition, it made the following findings.

a. Disruption of Rough Equalization. The Commission
again found that “significant deviations experienced since
2000 demonstrate that the system is out of rough production
cost equalization.” 113 F.E.R.C. at 62,134. Because the
disparities since 2000 “are far more than the system
experienced for the 14 previous years, and are comparable to
the disparities experienced from 1983 through 1985, when the
Commission previously found that the system was not in
 15
rough production cost equalization,” the Commission
reasoned that the System was out of rough equalization and
again required a remedy. Id.

b. Bandwidth Remedy. The Commission denied
rehearing on its imposition of a +/- 11 percent bandwidth. Id.
at 62,139. Recognizing that neither the Commission nor the
courts had ever “identified a percentage that would define
with precision rough production cost equalization,” the
Commission concluded that its resolution of the issue
appropriately balanced interests in “preventing undue
discrimination” and in “not dramatically disrupting the
system’s historical operations and the states’ settled interests
and expectations . . . .” Id. at 62,138. It further found that its
inflexible symmetrical bandwidth with upper and lower limits
would keep the System “roughly balanced” while ensuring
that no operating company was given “an undue preference or
undue discrimination.” Id. at 62,139.

c. Vidalia Hydropower Plant. The Commission denied
rehearing on its finding that the Vidalia plant is not a System
resource. Id. at 62,142. It again pointed to evidence in the
record that Vidalia was not planned by the Entergy operating
committee in a manner similar to other System resources and
that tax and rate benefits associated with the project were
retained exclusively by Entergy Louisiana. Id. at 62,143–44.

d. Implementation of Remedy. The Commission denied
rehearing regarding its decision to implement the bandwidth
remedy prospectively only. Id. at 62,140–41. The
Commission again found that it was “prohibited by statute
from ordering refunds,” so was required to implement a
prospective remedy. Id. at 62,141. The Commission clarified
that, by ordering a 2006 implementation date for the
 16
bandwidth, it was ordering that equalization payments be
made in 2007 based on 2006 data. Id. at 62,140.

The present petitions for review from the Louisiana,
Arkansas, and Mississippi Public Service Commissions
followed.

II. THE JURISDICTION OF THE COMMISSION

The first issue in the petitions for review is whether
FERC had jurisdiction to regulate the allocation of production
costs among the Entergy operating companies. The
Commission found that it had jurisdiction based on this
Court’s decision in Mississippi Industries v. FERC, 808 F.2d
1525 (D.C. Cir. 1987). We agree.

A.

In Mississippi Industries, 808 F.2d at 1553, we held that
the Federal Power Act “clearly” provides the Commission
with jurisdiction to modify the allocation of capacity costs of
an Entergy System resource from that provided in the System
Agreement. Section 201(b)(1) of the Federal Power Act gives
the Commission jurisdiction over the “transmission of electric
energy in interstate commerce[,] . . . the sale of electric
energy at wholesale in interstate commerce,” and the facilities
used for such transmissions and wholesale transactions, but
excludes “jurisdiction, except as specifically provided in this
subchapter and subchapter III of this chapter, over facilities
used for the generation of electric energy . . . .” 16 U.S.C.
§ 824(b)(1). Section 206 of the Act requires the Commission
to set the “just and reasonable rate” where it finds that “any
rate, charge, or classification, demanded, observed, charged,
or collected by any public utility for any transmission or sale
subject to the jurisdiction of the Commission, or that any rule,
 17
regulation, practice, or contract affecting such rate, charge, or
classification is unjust, unreasonable, unduly discriminatory
or preferential.” 16 U.S.C. § 824e(a).

In Mississippi Industries, we held that the Commission
had jurisdiction under Sections 201(b)(1) and 206 to modify
the allocation of capacity costs for an Entergy System nuclear
plant even though it was a generating facility. It was
undisputed that the nuclear capacity from the plant was sold
at wholesale in interstate commerce because it was sold to
Entergy operating companies in the multi-state system. Miss.
Indus., 808 F.2d at 1540. And, because the multi-state system
was so highly integrated, we held that the costs borne by each
operating company with respect to that generating facility
“significantly affect[ed] the wholesale price” at which the
capacity is sold in interstate commerce to the other operating
companies in the System. Id. at 1541. Therefore, we
concluded that Section 206 of the Federal Power Act provides
the Commission jurisdiction to modify the capacity cost
allocation in the System Agreement because that allocation
affects the rate charged for wholesale transmissions within the
jurisdiction of the Commission under Section 201(b)(1). Id.
Also, we held that the generating facility exception of Section
201(b)(1) did not eliminate the Commission=s jurisdiction
because it does not apply where jurisdiction is specifically
provided for in certain specified sections of the Act, including
Sections 201 and 206. Id. at 1543. Therefore, because
Sections 201(b)(1) and 206 provide jurisdiction to set rates
for capacity costs that affect the price of energy sold at
wholesale in interstate commerce and because the capacity
costs of the Entergy nuclear generating plant affected such
interstate wholesale rates, we concluded that the Commission
had “clear” authority to reallocate the plant’s capacity costs.
Id. at 1544–45, 1553.
 18
B.

Arkansas Electric Energy Consumers, Inc. (“AEEC”)
asks this Court to distinguish or overrule our decision in
Mississippi Industries and find that the Commission lacked
jurisdiction to reallocate production costs among the Entergy
operating companies. We cannot.

AEEC first asserts that the Commission improperly
asserted jurisdiction over a “generating facility” in violation
of Section 201(b)(1) of the Federal Power Act. We decided
this question in Mississippi Industries, where we considered
the precise statutory language and caselaw argued by AEEC
and concluded that the Commission had “undisputed
authority over the wholesale rates of electric generating
facilities in interstate commerce, which includes . . . the
authority to reallocate the costs of [an Entergy system
resource] across the system.” Miss. Indus., 808 F.2d at 1544;
see also Transmission Access Policy Study Group v. FERC,
225 F.3d 667, 696 (D.C. Cir. 2000) (“FERC’s assertion of
jurisdiction over all wholesale transmissions, regardless of the
nature of the facility, is clearly within the scope of its
statutory authority.”). We, of course, are without authority to
overturn a decision by a prior panel of this Court. See, e.g.,
Nat’l Mining Ass’n v. Fowler, 324 F.3d 752, 760 (D.C. Cir.
2003).

AEEC next asks us to distinguish Mississippi Industries,
which involved the allocation of nuclear capacity costs from a
plant run by a generating subsidiary, from this case, which
involves the allocation of the gas production costs from
facilities run by an operating subsidiary. Our decision in
Mississippi Industries, however, did not hinge on the nature
of the particular generation or subsidiary at issue, but on the
fact that all generating capacity on the System had been built
 19
and planned on an integrated basis by the System in order to
meet the collective needs of the System. See Miss. Indus., 808
F.2d at 1542. The System remains highly integrated, with the
gas capacity at issue here built and operated by the System to
meet its collective needs. Thus, the gas production costs here,
like the nuclear costs in Mississippi Industries, affect the
wholesale price at which capacity is sold in interstate
commerce to other operating companies in the System and
fall within the remedial jurisdiction of the Commission. We
deny the petition as to this issue.

III. THE REMEDY

Petitioners attack FERC’s bandwidth remedy on several
fronts. We review FERC’s decision to impose a bandwidth
remedy under the arbitrary and capricious standard, 5 U.S.C.
§ 706(2)(A); Sithe/Independence Power Partners, L.P. v.
FERC, 165 F.3d 944, 948 (D.C. Cir. 1999), treating FERC’s
factual findings as conclusive if supported by substantial
evidence in the record, 16 U.S.C. § 825l(b). FERC’s remedial
choice is lawful if the agency has “examine[d] the relevant
data and articulate[d] a . . . rational connection between the
facts found and the choice made.” Motor Vehicle Mfrs. Ass’n
v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983)
(internal quotation marks omitted). For the reasons set forth
below, we conclude that FERC has met that standard.

A.

As an initial matter, APSC, MPSC, and AEEC suggest
that the Entergy System has achieved and maintained rough
cost equalization among its five participants. Were this true,
FERC’s bandwidth remedy would be unnecessary — a
solution in search of a problem. Substantial evidence in the
record, however, supports FERC’s finding that System costs
 20
were out of rough equalization and in need of correction. As
FERC explained, “[w]hile history shows that production cost
disparities have always existed, large disparities among the
Operating Companies started to arise in 2000 and appear
likely to continue into the future.” 111 F.E.R.C. at 62,354.
Between 1986 and 1999, the System’s largest production-cost
deviation was approximately 22 percent. Since then, the
deviation has increased dramatically, averaging more than 33
percent between 2000 and 2002. In fact, the deviations in the
System after 2000 were of comparable magnitude to the
deviations that led to the remedy upheld in Mississippi
Industries. Given this factual context, it cannot reasonably be
disputed that the Entergy System is no longer in rough cost
equalization.

AEEC argues that the current cost disparities are
permissible because the System operating companies are not
similarly situated, and each is ultimately responsible for
financing and operating its own generation facilities. In
Mississippi Industries, however, we explained that “[g]iven
the degree of integration on the [System], FERC could
properly conclude that the tremendous disparities in nuclear
capacity costs among the operating companies disrupt the
System’s historical pattern of roughly equalizing capacity
costs and thus constitute discrimination under section 206 of
the Federal Power Act.” Miss. Indus., 808 F.2d at 1557.
Likewise, FERC could properly conclude in this matter that
the large deviations in production costs among the operating
companies have undermined the System’s history of rough
equalization. As mentioned above, the current cost deviations
are numerically similar to the “tremendous disparities” that
were present in Mississippi Industries. Id. Consequently, the
determination that a remedy is needed is as reasonable now as
it was then.
 21
APSC, MPSC, and AEEC next criticize FERC for
calculating rough cost equalization by measuring the total
production cost deviations in the System. They contend that
other metrics, such as deviations measured in cents per
kilowatt hour, would have shown that the System still enjoys
rough equalization. In a case like this, which calls upon FERC
to make fact-intensive judgment calls on the basis of its
superior technical expertise, we will only disturb FERC’s
selection of one methodology over another if its choice is not
the product of reasoned decisionmaking. Cf. El Paso Natural
Gas Co. v. FERC, 96 F.3d 1460, 1464 (D.C. Cir. 1996)
(“Because this inquiry is fact intensive, it is appropriate to
give significant deference to the Commission’s choice of a
valuation methodology.”). ALJ Brenner rejected petitioners’
proposed methodologies after concluding that they were
potentially misleading, ill-suited to revealing relative
differences, and inferior as a means of making comparisons
over time, see 106 F.E.R.C. at 65,111, and FERC affirmed the
ALJ’s determination of the appropriate methodology, see 111
F.E.R.C. at 62,353; 113 F.E.R.C. at 62,134. We have no
reason to interfere with FERC’s reasoned choice of
methodology and so defer to its expertise.

AEEC also contends that, even if the System is no longer
roughly equalized, no remedy is necessary because Entergy’s
Strategic System Resource Plan (“SSRP”) will return the
System to rough equalization. The SSRP, Entergy’s long-term
plan to satisfy customer demand, spreads among the operating
companies the burden of providing generation. 113 F.E.R.C.
at 62,135. This burden-sharing will, according to AEEC,
distribute production costs across the companies, thereby
reducing cost deviations within the System. FERC reasonably
found that the SSRP did not eliminate the need for a remedy
that would return the System to rough equalization. Even
under Entergy’s most optimistic projections, the SSRP would
 22
have only reduced the total production-cost deviation to 31
percent in 2003, 27 percent in 2004, and 18 percent in 2005.
111 F.E.R.C. at 62,356. Moreover, the SSRP is merely
aspirational; there is no assurance that it will work as
intended, especially with the steady and sustained upward
march of natural gas prices. Id.

Lastly, AEEC argues that FERC arbitrarily and
capriciously neglected to assess the rough equalization of
production costs using a “life of the contract” standard, which
AEEC contends the agency has applied in similar cases.
Under this standard, the agency must consider the distribution
of burdens and benefits between contracting parties over the
full term of the agreement, and must not assess costs at one
particular point in time. To support this proposition, AEEC
cites FERC’s decision in Pontook Operating Limited
Partnership v. Public Service Co. of New Hampshire, 94
F.E.R.C. ¶ 61,144 (2001). In that case, FERC held that “the
proper time frame to use in determining the justness and
reasonableness of a long-term, fixed-rate contract is over the
‘life of the contract,’ not a ‘snapshot in time.’ ” Id. at 61,552.
FERC did not act arbitrarily and capriciously, however,
because the cases in which the agency has applied the
contested standard differ from this case in at least one
important respect: FERC applies the life of the contract
standard where the parties have agreed to a “fixed-rate
contract,” id., but the Entergy System Agreement is not such
a contract. Under a fixed-rate contract, parties relinquish their
right unilaterally to request a rate change from FERC. See
Me. Pub. Utils. Comm’n v. FERC, 454 F.3d 278, 283 (D.C.
Cir. 2006); Potomac Elec. Power Co. v. FERC, 210 F.3d 403,
405 (D.C. Cir. 2000). The System Agreement, by contrast,
allows individual companies to seek unilateral rate changes.
See Entergy System Agreement § 4.12 (“Each Company
reserves the right to unilaterally seek amendments or changes
 23
in the terms and conditions of service and increases or
decreases in the rates and charges provided in any of the
Service Schedules from any regulatory body having or
acquiring jurisdiction thereover.”). Applying a life of the
contract standard in this instance, where the contract does not
include a fixed-rate provision, would undermine a clear
purpose of the contract: to allow for incremental rate
adjustments that might not occur if that decision hinged on
considering the distribution of benefits and burdens over the
entire term of the agreement. And even if the life of the
contract standard were to apply, FERC did not base its
decision on a “snapshot” of production costs at one particular
point in time, but instead took into account two decades of the
System Agreement’s history. See 111 F.E.R.C. at 62,370–71.1

B.

FERC concluded that the right remedy to return Entergy
to rough equalization of its System production costs was a
fixed and symmetrical +/- 11 percent bandwidth. LPSC,
APSC, and MPSC disagree. LPSC believes that a narrower
bandwidth is necessary, while APSC and MPSC suggest
either a bandwidth with no lower boundary, or else one that is
more flexible. We owe FERC great deference in reviewing its
selection of a remedy, for “the breadth of agency discretion is,
if anything, at zenith when the action assailed relates
primarily . . . to the fashioning of policies, remedies and
sanctions.” Niagara Mohawk Power Corp. v. FPC, 379 F.2d
153, 159 (D.C. Cir. 1967); see also Ariz. Corp. Comm’n v.
1
We also reject AEEC’s argument that the System Agreement has
become unconscionable. Even if FERC was obliged to allow
Arkansas consumers to enjoy the fruits of their “investment” in
certain generation facilities, its +/- 11 percent bandwidth remedy
provides significant latitude for some operating companies to enjoy
lower production costs before redistribution begins.
 24
FERC, 397 F.3d 952, 956 (D.C. Cir. 2005) (noting that FERC
“wields maximum discretion” when choosing a remedy).
Because we find that FERC has not abused its ample
discretion, we uphold its selection of the +/- 11 percent
bandwidth. See La. Pub. Serv. Comm’n v. FERC, 174 F.3d
218, 225 (D.C. Cir. 1999) (“[W]e will set aside FERC’s
remedial decision only if it constitutes an abuse of
discretion.”).

LPSC argues that FERC’s bandwidth is too broad and
does not do enough to eliminate cost discrimination within
the System. In Mississippi Industries, however, we concluded
that “the Commission’s chosen remedy is sufficient to remedy
the undue discrimination on the System; that is, the
Commission could properly conclude that the remaining cost
disparities do not constitute unlawful discrimination.” 808
F.2d at 1565. Here, too, FERC could have done more to
eliminate cost disparities within the System, but it need not
have done more to eliminate undue disparities. As the
Commission noted, it “is charged with eliminating undue
discrimination, [but] it does not have to eliminate all forms of
discrimination.” 111 F.E.R.C. at 62,360. Moreover, in
Mississippi Industries we were especially deferential to
FERC’s remedy because it was the product of a difficult
policy choice:

In deciding whether to order production cost
equalization or nuclear investment equalization, the
Commission confronted a major policy choice.
Though both alternatives would remedy undue
discrimination, the former would represent a dramatic
disruption of the System’s historical operations and of
the states’ settled interests and expectations.
Accordingly, FERC chose the latter alternative. We
 25
hold that the Commission’s decision was both rational
and within its discretion.

808 F.2d at 1565. Faced with a similar predicament here,
FERC again reasonably selected a remedy that would
minimize the likelihood of disrupting the System. 113
F.E.R.C. at 62,138. We must respect this reasoned choice.

APSC and MPSC argue that the bandwidth should have
had no lower boundary, such that no operating company
could be more than 11 percent above the System average of
production costs, but companies could be more than 11
percent below the System average. Alternatively, they argue
that the bandwidth should have been more flexible — i.e.,
instead of being triggered when at least one company is either
above or below 11 percent of the System average of
production costs, the remedy should be invoked only if the
maximum deviation of production costs in the System is
greater than 22 percent. They contend that FERC’s
symmetrical and fixed bandwidth is unduly discriminatory,
impairs cost-cutting incentives, and prevents Entergy
Arkansas and Entergy Mississippi from reaping the full
benefits of their already paid-for and highly-depreciated coal
and nuclear capacity.

In rejecting APSC and MPSC’s argument, the
Commission stated:

[W]e disagree with the Arkansas and Mississippi
Commissions’ argument that the Commission erred in
adopting an inflexible symmetrical bandwidth.
Entergy’s system is highly integrated, and therefore
Entergy’s planning and operation affects the cost
disparities among its five Operating Companies. . . .
Our decision to impose the 11 percent bandwidth . . .
 26
allows Operating Companies to deviate up to 11
percent from the system average. A symmetrical
remedy ensures that the system remains roughly
balanced and does not instill an undue preference or
undue discrimination on any operating company.

113 F.E.R.C. at 62,139. The Commission was well within the
bounds of its discretion in choosing a fixed and symmetrical
bandwidth, because the operating companies are collaborators
in the Entergy System functioning for their mutual benefit. A
bandwidth that was not fixed and symmetrical would allow
instances in which a low-cost company may be greatly
advantaged, or a high-cost company greatly disadvantaged.
Imagine, under the petitioners’ proposed bandwidth without a
lower boundary, that the highest-cost company is 10 percent
above the System average while the lowest-cost company is
15 percent below average. Or imagine, under the petitioners’
proposed flexible bandwidth, that the highest-cost company is
15 percent above average while the lowest-cost company is
5 percent below average. In either circumstance, no remedial
measures would apply, despite the fact that one of the
companies bears costs that lie well outside the System
average. Either result would be inconsistent with the nature of
the System.

Because we find FERC’s adoption of the +/- 11 percent
bandwidth to be within its discretion, we deny the petition as
to this issue.

IV. THE VIDALIA HYDROPOWER PLANT

LPSC challenges FERC’s ruling that the Vidalia
hydropower plant (“Vidalia”) should not be treated as an
Entergy System resource. Relying on four “distinguishing
factors” that set the plant apart from System resources, FERC
 27
found that Vidalia was built to benefit Louisiana and that the
plant’s production costs should stay in Louisiana. 111
F.E.R.C. at 62,375; 113 F.E.R.C. at 62,141. LPSC argues that
the Vidalia contract was intended to benefit the System as a
whole and that the plant’s production costs should be
included in the System’s bandwidth calculations. Such
inclusion would push the System further from rough
equalization and shift some of the costs associated with the
project onto other members. Because substantial record
evidence supports FERC’s decision, we deny the petition for
review as to this issue.

We review FERC’s findings regarding Vidalia under the
substantial evidence standard. 16 U.S.C. § 825l(b) (“The
finding of the Commission as to the facts, if supported by
substantial evidence, shall be conclusive.”). This deferential
standard of review “requires more than a scintilla, but can be
satisfied by something less than a preponderance of the
evidence.” FPL Energy Main Hydro LLC v. FERC, 287 F.3d
1151, 1160 (D.C. Cir. 2002). While there may be evidence
supporting petitioner’s position, we must determine “not
whether record evidence supports [petitioner]’s version of
events, but whether it supports FERC’s.” Fla. Mun. Power
Agency v. FERC, 315 F.3d 362, 368 (D.C. Cir. 2003). LPSC
argues that “FERC was required under the law to provide
deference to the findings of the [administrative law judge.]”
LPSC Br. at 30. Although the Commission must give
“attentive consideration” to an administrative law judge’s
findings, those findings are not entitled to any special
deference. Greater Boston Television Corp. v. FCC, 444 F.2d
841, 853 (D.C. Cir. 1970). Rather, they are treated as “part of
the record” to which we look to ensure that the Commission’s
decision is supported by substantial evidence. Id. In other
words, the Commission’s decision cannot depart from the
administrative law judge’s findings without support from the
 28
record, but “in the last analysis, it is the agency’s function,
not the [administrative law judge’s], to make the findings of
fact and select the ultimate decision, and where there is
substantial evidence supporting each result it is the agency’s
choice that governs.” Id.

LPSC challenges each of the four distinguishing factors
upon which FERC relied in deciding that Vidalia was not a
System resource. First, LPSC argues that the Vidalia contract
is no different than those of other System resources, asserting
that local operating companies always obtain local retail rate
recovery, and that local retail regulators and operating
companies never review the prudence of new resources built
or acquired in other jurisdictions. Second, as to the significant
cost shifts that would result from including Vidalia in the
System’s bandwidth calculation, LPSC asserts that this is the
real reason for the Commission’s decision, and an invalid
one. In response to FERC’s third distinguishing factor — the
finding that Vidalia was not part of an overall System plan —
LPSC contends that hydropower fit within the System’s
broader efforts to move away from dependence on natural
gas-fired generation. LPSC also points to Vidalia’s inclusion
in the Load and Capability Forecast2 and the MSS-13 as

2
Entergy explains that the Load and Capability Forecast is a tool
that helps the System operating committee to plan future resource
acquisitions by determining how much energy is available to the
individual operating companies. 106 F.E.R.C. at 65,117.
3
The MSS-1 is one of seven service schedules in the System
Agreement used to equalize costs among the members. “MSS-1 is
designed to allocate costs for maintaining the reserve responsibility
capacity among the Operating Companies.” 111 F.E.R.C. at 62,361.
To equalize reserve capacity among the operating companies, the
MSS-1 requires “that the ‘short’ companies make payments to the
‘long’ companies under a formula based on the ‘long’ companies’
 29
evidence that Vidalia was approved by the Entergy operating
committee and planned as part of the System. Fourth, with
regard to Vidalia’s local tax benefits, LPSC claims that tax
benefits for System resources are always recorded on the
local operating company’s books and reflected in its retail
rates, making the Vidalia contract indistinguishable from that
of any other System resource.

We conclude that FERC’s ruling was supported by
substantial evidence. LPSC’s arguments fail to show that
FERC’s decision departed from the record. LPSC contends
that local rate recovery of costs is common to System
resources, but FERC pointed to the unique nature of the
Vidalia contract, which required full recovery of power costs
from Louisiana ratepayers. LPSC points out that other retail
regulators never review the prudence of new resources built
or acquired in other jurisdictions, but given the unusual
manner in which Vidalia was planned and built, and the
Commission’s concern that potential litigation by individual
retail jurisdictions might result if Vidalia’s costs were
allocated to the System, FERC acted reasonably in taking into
account the lack of opportunity for non-Louisiana retail
regulators to review the Vidalia contract. LPSC also argues
that it is improper to take account of the cost shifts associated
with Vidalia. But the costs of the Vidalia project were high,
and the capacity to generate power low. For Louisiana, these
costs would be partly offset by job creation and tourism
resulting from the plant, but, as FERC explained, Vidalia’s
high-cost energy “would hardly be of any interest to the
Entergy system as a whole.” 111 F.E.R.C. at 62,377. In this
light, the fact that significant cost shifts would occur within
the System if Vidalia were included supports FERC’s

prior year’s cost of gas and oil-fired steam generation.” 106
F.E.R.C. at 65,105.
 30
conclusion that Vidalia was not intended as a System
resource.

The record also supports the Commission’s conclusion
that Vidalia was a local affair. LPSC was deeply involved in
the planning of the project, approving the contract and
guaranteeing full recovery of its costs through Louisiana
ratepayers. Entergy, on the other hand, was involved
minimally, if at all. The Entergy System did not initiate the
planning or the purchase of Vidalia. 111 F.E.R.C. at 62,374.
The System had no centralized and deliberate plan to increase
reliance on hydropower by building resources like Vidalia,
even if it were the case, as LPSC asserts, that hydropower
somehow fit within the System’s broader trend of seeking
diverse sources of power. LPSC’s settlement with Entergy
Louisiana granting the latter exclusive retention of Vidalia’s
accelerated tax deductions for the remaining life of the
contract further supports FERC’s ruling that Vidalia was built
as an Entergy Louisiana-only resource. The Commission
addressed and rejected LPSC’s argument that Vidalia’s
unique tax settlement did not distinguish it from other
resources. 113 F.E.R.C. at 62,144. Especially in view of the
other evidence that Vidalia was a local project, we agree with
the Commission that Entergy Louisiana’s exclusive retention
of the tax benefits “strongly suggests that Vidalia is an
[Entergy Louisiana]-only resource.” 111 F.E.R.C. at 62,378.
In view of these considerations, and based on the record,
FERC reasonably concluded that it would be inappropriate
“[t]o allow Louisiana to shift the escalating costs of the
Vidalia contract to other states on the Entergy System and not
accept responsibility for its own decision making.” Id. at
62,375.

The inclusion of the Vidalia plant in the Load and
Capability forecast and the MSS-1 provides the strongest
 31
support for LPSC’s argument that Vidalia was planned as a
System resource. LPSC argues that these actions show that
the Entergy System operating committee approved Vidalia.
But Entergy explained that Vidalia’s inclusion in the Load
and Capability Forecast did not signify System approval of
the resource. Rather, it indicates that Entergy was planning
for something it did not control. The Forecast is used to
project how much power will be available to individual
operating companies so that the System can measure needs
and make appropriate plans for resource acquisition. 106
F.E.R.C. at 65,117. As to Vidalia’s assignment of credit in the
MSS-1, FERC explained:

This credit simply acknowledges that Vidalia provides
a measurable but negligible contribution to System
capacity. It only shows that Vidalia exists and can
serve load. It does not prove why or for whom it was
planned, and the fact that Entergy recognizes the
existence of Vidalia and provides a capacity credit is
no reason for shifting the Vidalia costs to other
Operating Companies.

113 F.E.R.C. at 62,143. Because LPSC does not refute these
explanations, and our review is deferential, we see no reason
to upset FERC’s ruling based on Vidalia’s inclusion in the
Load and Capability Forecast and MSS-1. FERC’s
determination that Vidalia was not planned as a System
resource is supported by substantial record evidence. We
deny the petition as to this issue.

V. IMPLEMENTATION

Petitioner LPSC raises two final contentions: (1) that
FERC acted arbitrarily in declining to order retroactive
refunds for the cost disparities Louisiana ratepayers
 32
experienced when the Entergy System was not in rough
equalization; and (2) that FERC impermissibly delayed the
implementation of the bandwidth remedy. In response, FERC
contends that neither issue is ripe for review. Because
“[r]ipeness is a justiciability doctrine” that is “ ‘drawn both
from Article III limitations on judicial power and from
prudential reasons for refusing to exercise jurisdiction,’ ” we
consider it first. Nat’l Park Hospitality Ass’n v. Dep’t of the
Interior, 538 U.S. 803, 807–08 (2003) (quoting Reno v.
Catholic Soc. Servs., 509 U.S. 43, 57 n.18 (1993)).
Thereafter, because we conclude that both issues are ripe for
review, we address the merits of LPSC’s arguments.

A.

“Determining whether administrative action is ripe for
judicial review requires us to evaluate (1) the fitness of the
issues for judicial decision and (2) the hardship to the parties
of withholding court consideration.” Id. at 808. FERC’s
ripeness argument concerns only the fitness element. “Among
other things, the fitness of an issue for judicial decision
depends on whether it is ‘purely legal, whether consideration
of the issue would benefit from a more concrete setting, and
whether the agency’s action is sufficiently final.’ ” Atl. States
Legal Found., Inc. v. EPA, 325 F.3d 281, 284 (D.C. Cir.
2003) (quoting Clean Air Implementation Project v. EPA, 150
F.3d 1200, 1204 (D.C. Cir. 1998)).

Although FERC’s orders in this case addressed and
resolved both its ability to order retroactive refunds and the
timing of its bandwidth implementation, see Opinion No. 480,
111 F.E.R.C. at 62,371–72; Opinion No. 480-A, 113 F.E.R.C.
at 62,140–41, FERC nevertheless asserts that the orders are
insufficiently final to be fit for review. They are not final,
FERC insists, because the Commission has recently
 33
announced that it will again address those issues in the
compliance proceeding in this docket, see La. Pub. Serv.
Comm’n v. Entergy Servs., Inc., 119 F.E.R.C. & 61,095, 2007
WL 1232249, at *1, *6 (2007), in light of our holding in a
different case involving the inclusion of interruptible load in
the calculation of peak load on the Entergy system, see La.
Pub. Serv. Comm’n v. FERC, 482 F.3d 510, 520 (D.C. Cir.
2007) (LPSC II) (remanding to FERC for reconsideration of
its determination that “it could not make the finding necessary
to order some of the Entergy Operating Companies to make
refunds to other Entergy Operating Companies in order to
compensate them for costs unjustly or unreasonably allocated
to them”). According to FERC, neither issue will be ripe until
it has entered, in the compliance proceeding, a “subsequent
order on refunds . . . [that will] address the LPSC’s
entitlement to retroactive relief for years prior to 2006 . . .
[and] the LPSC’s ‘timing’ argument.” FERC Supplemental
Br. at 2.

To buttress this claim, FERC points to cases in which we
have found that petitioners would not suffer an injury-in-fact
until the Commission resolved a compliance filing.4 But
unlike this case, those cases dealt with orders that were
clearly contingent on subsequent proceedings or events.
Accordingly, we postponed review until a time when the
“agency’s action [became] sufficiently final.” Clean Air
Implementation Project, 150 F.3d at 1204 (quoting Natural
Res. Def. Council, Inc. v. EPA, 22 F.3d 1125, 1133 (D.C. Cir.
1994)). Opinions No. 480 and No. 480-A, by contrast, are not
4
See, e.g., N.M. Att’y Gen. v. FERC, 466 F.3d 120, 122 (D.C.
Cir. 2006); DTE Energy Co. v. FERC, 394 F.3d 954, 960–61 (D.C.
Cir. 2005); see also Amoco Prod. Co. v. FERC, 271 F.3d 1119,
1123 (D.C. Cir. 2001); N. Ind. Pub. Serv. Co. v. FERC, 954 F.2d
736, 740 (D.C. Cir. 1992).
 34
conditional. To the contrary, those orders make clear that
FERC had conclusively resolved the refund and timing issues
presented by LPSC. See Opinion No. 480, 111 F.E.R.C. at
62,371–72 (“The Commission addressed this same issue (i.e.,
the reallocation of costs among Entergy Operating
Companies) in another Entergy proceeding and held
unambiguously that refunds . . . were prohibited. . . . Thus,
[the bandwidth] we order here [will become] effective for the
calendar year 2006.”); Opinion No. 480-A, 113 F.E.R.C. at
62,140 (“[A]doption of a remedy that would involve prior
years would necessarily result in refunds, which . . . we are
specifically prohibited from providing under section 206(c) of
the FPA . . . .”). FERC’s recent announcement that it will
again address those issues in the compliance proceeding in
light of our decision in LPSC II cannot transform long-final
orders into conditional ones. We therefore hold that the
refund and timing issues are ripe for review and move to the
merits of petitioner’s argument.

B.

Section 824e(b) of the FPA authorizes FERC to “order
refunds of any amounts paid . . . in excess of those which
would have been paid under the just and reasonable rate,
charge, classification, rule, regulation, practice, or contract
which the Commission orders to be thereafter observed and in
force.” 16 U.S.C. § 824e(b). Section 824e(c), however,
curtails this refund authority by “prohibit[ing] the
Commission from ordering one subsidiary of a holding
company to refund monies to a sister subsidiary unless the
Commission determines the holding company will not
experience any reduction of revenue because of the payor
subsidiary’s ‘inability . . . to recover such increase in costs’
from its ratepayers.” LPSC II, 482 F.3d at 515 (alteration in
original) (quoting 16 U.S.C. § 824e(c)).
 35

In this case, petitioner LPSC asked FERC to order a
retroactive refund to redress cost imbalances that Louisiana
ratepayers suffered during the years in which the Entergy
System was out of rough equalization. FERC declined to
order such refunds, relying solely on the Commission’s
holding in Louisiana Public Service Commission v. Entergy
Corp., Opinion No. 468, 106 F.E.R.C. ¶¶ 61,228, at 61,805–
06 (2004) (LPSC I), that retroactive refunds are prohibited by
Section 824e(c). See Opinion No. 480, 111 F.E.R.C. at
62,371–72; Opinion No. 480-A, 113 F.E.R.C. at 62,140. In
LPSC II, however, we held that the Commission’s order in
LPSC I had failed to offer a reasoned explanation for why the
cost of Commission-ordered refunds by one group of Entergy
subsidiaries to another could not be recovered, and hence for
why they are barred by § 824(e). See LPSC II, 482 F.3d at
520. Our holding in LPSC II thus squarely rejects the only
rationale upon which FERC relied for denying refunds in this
case. We therefore grant the petition for review on this issue
and remand to FERC for further proceedings.

C.

Finally, we turn to LPSC’s claim that FERC
impermissibly delayed the implementation of the bandwidth
remedy. In Opinion No. 480, decided on June 1, 2005, FERC
declared that the remedy would become “effective for the
calendar year 2006.” 111 F.E.R.C. at 62,372. LPSC sought
rehearing and requested that the bandwidth remedy take effect
in 2005 to remedy the undue discrimination that occurred
from June 1, 2005 forward. Delaying implementation until
2006, LPSC argued, would be arbitrary and capricious. It
would also, LPSC maintained, run contrary to FERC’s
statutory mandate, upon finding rates unduly discriminatory,
 36
to determine the rate “to be thereafter observed and in force,
and . . . fix the same by order.” 16 U.S.C. § 824e(a).

In its Order on Rehearing, FERC elaborated on the
rationale for the timing of the bandwidth remedy. The
Commission explained that it would implement the
bandwidth:

on a prospective basis, as required by section 206 of
the FPA, after a full calendar year of data becomes
available. . . . [T]he use of the first calendar year of
data following the issuance of Opinion No. 480 is
the most appropriate and equitable way and time to
implement the bandwidth remedy. . . . Moreover,
adoption of a remedy that would involve prior years
would necessarily result in refunds, which . . . we are
specifically prohibited from providing under section
206(c) of the FPA, in any event.

Opinion No. 480-A, 113 F.E.R.C. at 62,140. FERC stated that
it would collect cost disparity data from January 1, 2006 to
December 31, 2006 — the first full calendar year after June 1,
2005 — and order payments in 2007. See La. Pub. Serv.
Comm’n v. Entergy Servs., Inc., 119 F.E.R.C. ¶ 61,095, 2007
WL 1232249, at *6 (2007).

FERC’s belief that “adoption of a remedy that would
involve prior years would necessarily result in refunds,”
Opinion No. 480-A, 113 F.E.R.C. at 62,140, was apparently
based on the assumption that compensating LPSC for the six
months of the calendar year that post-date June 1, 2005 would
require it to reach back to January 1, 2005 — a time that pre-
dates June 1, 2005 — in order to collect a full calendar year
of cost data. Cf. FERC Supplemental Br. at 2 (“The
bandwidth remedy is applied once a year. . . . Because
 37
Opinion No. 480 found that FPA § 206(c) precluded
retroactive relief, the Commission imposed the annual
bandwidth prospectively beginning with 2006, the first full
year following its orders.”); Oral Arg. Recording at 1:56:03–
1:57:42. But even if FERC is correct that granting LPSC’s
requested relief “would necessarily result in refunds,” that
would only justify delayed implementation if FERC were also
correct that it is “specifically prohibited” from ordering
refunds. Opinion No. 480-A, 113 F.E.R.C. at 62,140. And as
we held in LPSC II, FERC has so far failed to offer a
reasoned explanation for why it is prohibited from ordering
one Entergy subsidiary to pay refunds to another.

At oral argument, FERC’s counsel noted that Opinion
480-A contains another reason for delay, namely that using
“the first calendar year of data following the issuance of
Opinion No. 480 is the most appropriate and equitable way
and time to implement the bandwidth remedy.” Id. (emphasis
added). But that is not a reason; it is a conclusion. Nothing in
Opinion 480-A explains why FERC believes that the first
calendar year is the most appropriate and equitable time.
Hence, it does not rebut LPSC’s contention that it is an abuse
of discretion for the Commission to delay implementation of
a remedy until 2007, having found on June 1, 2005 that the
System Agreement’s rates were unduly discriminatory.
Indeed, confronting a similar FERC decision in LPSC II, we
held that the Commission had acted arbitrarily and
capriciously “by allowing Entergy to phase interruptible load
out of its calculation of peak load over the course of a year,”
thereby permitting it to “continue to bill for costs the
Commission has determined may not be justly and reasonably
recovered.” 482 F.3d at 518.

In the absence of a reasonable explanation for FERC’s
decision to delay implementation of the bandwidth remedy,
 38
we grant the petition for review on this issue as well and
remand for further proceedings.

VI. CONCLUSION

For the foregoing reasons, we deny the petitions in part,
grant them in part, and remand the matter to the Commission
for reconsideration of its decision to deny retroactive refunds
and to delay implementation of the bandwidth remedy.

So ordered.