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Old Dominion Electric Cooperative v. Federal Energy Regulatory Commission

United States Court of Appeals, District of Columbia Circuit

June 15, 2018

Old Dominion Electric Cooperative, Petitioner
Federal Energy Regulatory Commission, Respondent Duke Energy Corporation, et al., Intervenors

          Argued October 24, 2017

          On Petition for Review of Orders of the Federal Energy Regulatory Commission Adrienne Elizabeth Clair argued the cause for petitioner. With her on the briefs was Dennis Lane.

          Susanna Y. Chu, Attorney, Federal Energy Regulatory Commission, argued the cause for respondent. With her on the brief were Robert H. Solomon, Solicitor, and Elizabeth E. Rylander, Attorney.

          Joseph W. Mayes was on the brief for intervenor-movant Independent Market Monitor for PJM in support of respondent.

          Before: Tatel, Griffith and Millett, Circuit Judges.

          Millett, Circuit Judge

         The weather conditions giving rise to this case may have been out of the ordinary, but the legal principles controlling its resolution are decidedly routine. In January 2014, a period of exceptionally cold temperatures, commonly referred to as a "Polar Vortex, " descended on the Eastern United States. As temperatures plunged, the demand for electricity soared. In working to help meet that demand, Old Dominion Electric Cooperative, an electricity generator and provider, found that its operational costs outstripped the amounts it could charge for electricity under the governing tariff. Old Dominion then asked the Federal Energy Regulatory Commission to waive provisions of the governing tariff retroactively so that it could recover its costs. The Commission declined on the ground that such retroactive charges would violate the filed rate doctrine and the rule against retroactive ratemaking. The Commission was right to do so, and we accordingly deny Old Dominion's petition for review. We also deny the motion of the Independent Market Monitor to intervene, but will accord it amicus curiae status.



         The Federal Power Act charges the Commission with ensuring that "[a]ll rates and charges made, demanded, or received by any public utility for or in connection with the transmission or sale of electric energy subject to the jurisdiction of the Commission * * * shall be just and reasonable." 16 U.S.C. § 824d(a). To effectuate those goals, regulated utilities must file with the Commission and keep open for public inspection a schedule of the rates they intend to charge ratepayers. Id. § 824d(c), (d). While the Act permits regulated utilities to set their filed rate unilaterally and record it in a tariff, see id. § 824d(c), the rates actually charged may not exceed those on file with the Commission, Towns of Concord, Norwood, and Wellesley Mass. v. FERC, 955 F.2d 67, 68 (D.C. Cir. 1992).

         The Act also empowers the Commission to fix or change rates and charges, but only prospectively. 16 U.S.C. § 824e(a). When a utility wishes to alter the rates it charges, it must provide sixty-days' notice to the Commission and file new rate schedules "stating plainly the change or changes to be made in the schedule or schedules then in force and the time when the change or changes will go into effect." Id. § 824d(d). The Commission may waive the sixty-day notice requirement for good cause, but the Commission has no authority under the Act to allow retroactive change in the rates charged to consumers. See id.; Columbia Gas Transmission Corp. v. FERC, 895 F.2d 791, 795-796 (D.C. Cir. 1990) (Columbia III); see also Consolidated Edison Co. v. FERC, 958 F.2d 429, 434 (D.C. Cir. 1992).

         Those rules mandating the open and transparent filing of rates and broadly proscribing their retroactive adjustment are known collectively as the "filed rate doctrine." At bottom, that doctrine means that "a regulated seller of [power]" is prohibited "from collecting a rate other than the one filed with the Commission, " and "the Commission itself" cannot retroactively "impos[e] a rate increase for [power] already sold." Arkansas Louisiana Gas Co. v. Hall, 453 U.S. 571, 578 (1981).

         In a similar vein, the rule against retroactive ratemaking "prohibits the Commission from adjusting current rates to make up for a utility's over- or under-collection in prior periods." Towns of Concord, 955 F.2d at 71 n.2. That otherwise categorical prohibition against retroactively charging rates that differ from those that were on file during the relevant time period yields in only two limited circumstances: (i) when a court invalidates the set rate as unlawful, and (ii) when the filed rate takes the form not of a number but of a formula that varies as the incorporated factors change over time. See West Deptford Energy, LLC v. FERC, 766 F.3d 10, 22-23 (D.C. Cir. 2014) (compiling cases). Neither of those exceptions apply to this case.[1]


         PJM Interconnection, LLC ("PJM") is a Regional Transmission Organization and Independent System Operator that exercises operational control over, but not ownership of, the electrical transmission facilities belonging to its participating members. See Midwest ISO Transmission Owners v. FERC, 373 F.3d 1361, 1364 (D.C. Cir. 2004). The Commission has tasked PJM, as a Regional Transmission Organization, with supervising and coordinating the movement of electricity throughout its market area, 18 C.F.R. § 35.34, which comprises thirteen states and the District of Columbia, see Hughes v. Talen Energy Mktg., LLC, 136 S.Ct. 1288, 1292-1293 (2016).

         One way that electricity is transferred throughout the PJM market is through competitive auctions. See Hughes, 136 S.Ct. at 1293. In same-day auctions, generators bid to provide the immediate delivery of electricity needed to slake sudden spikes in demand. In next-day auctions, generators bid to satisfy anticipated near-term demand. And in a "capacity auction, " generators make bids that, if accepted, bind them to providing needed electricity in the longer term. See id.

         Old Dominion Electric Cooperative is a not-for-profit electrical generation and transmission utility that participates as both a generator and a load-serving entity (that is, a public utility) in the PJM market. This case involves three of Old Dominion's natural-gas-fired electrical power plants in Maryland and Virginia: Marsh Run, Louisa, and Rock Springs. Each of those facilities is a "generation capacity resource, " which means that Old Dominion contractually committed itself to offer all of those units' available generation capacity into PJM's daily market and to generate electricity whenever called upon by PJM. Old Dominion Elec. Coop., 151 FERC ¶ 61, 207 at P 2 n.2 (2015).

         PJM fulfills its oversight and market management responsibilities through rules prescribed in (1) the PJM Open Access Transmission Tariff and (2) the PJM Operating Agreement, to which participating generators like Old Dominion subscribe. Several provisions of those instruments bear on the dispute in this case.

         First, the Operating Agreement empowers PJM to take "measures appropriate to alleviate an Emergency, in order to preserve reliability" in the electricity market and to meet consumer need. Agreement § 1.6.2(vii). That authority includes directing generators "to start, shutdown, or change [the] output levels of [their] generations units[.]" Agreement § 1.7.20(b). According to Old Dominion, generators "understand[] PJM dispatch instructions to be determinations with which [they are] expected to comply" under the PJM Tariff § 1.8.2(a). J.A. 56 n.2.

         Second, generation capacity resources "must offer" capacity into the same-day and day-ahead auctions. Agreement § 1.10.1A(d). That "must offer" requirement commands generators to submit offers for all "available capacity" of any designated capacity generation facilities. Tariff § 1.10.1A(d).

         Third, the Tariff caps the prices at which generators may offer their capacity into the day-ahead market at $1, ...

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