S.C. Pub. Serv. Auth. v. FERC - 412 U.S. App. D.C. 41, 762 F.3d 41 (2014)

Rule:

The authority and obligation that Congress vested in the Federal Energy Regulatory Commission to remedy certain practices is broadly stated and the only question is what limits are fairly implied under Federal Power Act § 206 (16 U.S.C.S. § 824e). The word "practices" is a word of sufficiently diverse definitions that the only realistic approach to determining Congress's plain meaning, if any, is to regard the word in its context. The case law has distinguished an overly expansive interpretation of the word "practices" from Commission action to effect a reformation of some practice in a more traditional sense of actions habitually being taken by a utility in connection with a rate found to be unjust or unreasonable.

Facts:

Pursuant to the Federal Power Act, 16 U.S.C. § 791a et seq., the Federal Energy Regulatory Commission (“Commission”) adopted reforms of electric transmission planning and cost allocation, wherein the Commission required each transmission owning and operating public utility to participate in regional transmission planning that would satisfy specific planning principles designed to prevent undue discrimination and preference in transmission service, and that would produce a regional transmission plan. The Final Rule also required each planning process to have a method for allocating ex ante among beneficiaries the costs of new transmission facilities in the regional transmission plan, and the method must satisfy six regional cost allocation principles. Forty-five petitioners and sixteen intervenors (hereinafter "petitioners") challenged the Commission's authority to adopt these reforms. Petitioners further argued that the Final Rule was arbitrary and capricious and unsupported by substantial evidence.

Issue:

1. Did the Commission have authority to adopt the reforms in electronic transmission planning and cost allocation?
2. Were the Final Rules arbitrary and capricious?

Answer:

1) Yes. 2) No.

Conclusion:

The Court held that the Federal Energy Regulatory Commission had authority under 16 U.S.C.S. § 824e to require electricity transmission providers to participate in a regional planning process. According to the court, neither the reference to coordination in 16 U.S.C.S. § 824a(a) nor the federalism principle recognized in 16 U.S.C.S. § 824 restricted that authority. The court also held that a theoretical threat from inadequate existing practices was a sufficient basis for rate regulation. The court held that the Commission had authority under Section 206 of the Federal Power Act to require removal of federal rights of first refusal provisions upon determining they were unjust and unreasonable practices affecting rates, and that determination was supported by substantial evidence and was not arbitrary or capricious. The court further averred that the Commission reasonably relied upon a reciprocity condition to encourage non-public utility transmission providers to participate in the regional planning process and adequately justified a policy change. Accordingly, the court denied the petitions for review.