Am. Mun. Power, Inc. v. Fed. Energy Regulatory Comm'n

86 F.4th 922

AMERICAN MUNICIPAL POWER, INC., et al., Petitioners v. FEDERAL ENERGY REGULATORY COMMISSION, RespondentAmerican Transmission Systems Incorporated, et al., Intervenors

No. 20-1449

Consolidated with 21-1006

Consolidated with 21-1090

Consolidated with 21-1108

Consolidated with 21-1173

Consolidated with 21-1246

United States Court of Appeals, District of Columbia Circuit

Argued November 9, 2022

Decided November 17, 2023

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

Erin E. Murphy argued the cause for Stakeholder Petitioners. On the joint briefs were Gerit F. Hull, Michael R. Engleman, Christina Switzer, Robert A. Weishaar, Jr., Kenneth R. Stark, Regina A. Iorii, Adrienne E. Clair, Rebecca L. Shelton, Stefanie A. Brand, T. David Wand, Sandra Mattavous-Frye, Karen R. Sistrunk, Anjali G. Patel, Barry Cohen, David Yost, Attorney General, Office of the Attorney General for the State of Ohio, Werner L. Margard III, Assistant Attorney General, Arthur W. Iler, Matthew J. Platkin, Acting Attorney General, Office of the Attorney General for the State of New Jersey at the time the brief was filed, and Paul Youchak, Deputy Attorney General. Christine C. Ryan entered an appearance.

David M. Gossett argued the cause for Transmission Owner Petitioners. With him on the briefs were John Longstreth, Donald A. Kaplan, Richard P. Sparling, MaryAnn T. Almeida, Morgan E. Parke, Evan K. Dean, Stacey Burbure, Molly Suda, Christopher R. Jones, Miles H. Kiger, Daniel E. Frank, Allison E. Speaker, Steven M. Nadel, and Gary E. Guy.

Susanna Y. Chu, Attorney, Federal Energy Regulatory Commission, argued the cause for respondent. With her on the brief were Matthew R. Christiansen, General Counsel, and Robert H. Solomon, Solicitor.

John Longstreth argued the cause for respondent-intervenors. With him on the joint brief were David M. Gossett, Richard P. Sparling, MaryAnn T. Almeida, Donald A. Kaplan, Morgan E. Parke, Evan K. Dean, Stacey Burbure, Christopher R. Jones, Daniel E. Frank, Allison E. Speaker, Molly Suda, Gary E. Guy, Cara J. Lewis, Steven M. Nadel, and Regina Y. Speed-Bost. Richard L. Roberts entered an appearance.

Before: Rao and Childs, Circuit Judges, and Tatel, Senior Circuit Judge.

Childs, Circuit Judge:

Petitioners, consisting of transmission owners, consumer-side stakeholders, state public utility commissions, and other entities located within the service territory of the PJM Interconnection, LLC (PJM), filed petitions, now consolidated, seeking review of seven underlying orders of the Federal Energy Regulatory Commission (the Commission). These orders address a series of issues flowing from an initial request by PJM to revise Attachment M-3 of its Open Access Transmission Tariff (Tariff) to provide for the identification and inclusion of asset management projects with specific reference to the planning and implementation for "end-of-life" (EOL) needs. First and foremost, Stakeholder Petitioners challenge the Commission's acceptance of the Attachment M-3 revision, but also contend that many other aspects of the Commission's decisionmaking was arbitrary and capricious, including its rejection of a Stakeholder-supported proposal regarding EOL transmission project planning. Separately, Transmission Owner Petitioners seek to overturn the Commission's finding of ambiguity regarding the identification of entities responsible for EOL needs as specified in the relevant governing documents.

For the reasons set forth below, the court dismisses the petition of Transmission Owner Petitioners and denies Stakeholder Petitioners' petitions for review.

I.

A.

The Federal Power Act of 1920, 16 U.S.C. §§ 791a-828c (the Act), vests the Commission with regulatory authority over the "transmission of electric energy in interstate commerce and . . . the sale of electric energy at wholesale in interstate commerce," id. § 824(b)(1), and requires all rates subject to the Commission's jurisdiction to "be just and reasonable," id. § 824d(a).

Regional transmission organizations, or RTOs, "are independent organizations that manage the transmission of electricity over the electric grid and ensure electricity is reliably available for consumers." Advanced Energy Mgmt. All. v. FERC, 860 F.3d 656, 659 (D.C. Cir. 2017). RTOs "serve several functions, including operating the electrical grid in a defined geographic area, balancing energy supply and demand, establishing markets for the sale and purchase of electricity, and ensuring the reliable transmission of electricity." Citadel FNGE Ltd. v. FERC, 77 F.4th 842, 848 (D.C. Cir. 2023) (citation omitted). Using its authority under the Act, the Commission has encouraged the creation of RTOs by requiring all transmission facilities "to participate in an RTO or to explain their failure to do so." Braintree Elec. Light Dep't v. FERC, 550 F.3d 6, 8 (D.C. Cir. 2008) (per curiam) (citing, e.g., Regional Transmission Organizations, 65 Fed. Reg. 810, 812 (Jan. 6, 2000) (Order No. 2000)).

B.

PJM is a familiar party to this court. "Formed in 1927, PJM is the oldest and largest" RTO. Pub. Serv. Elec. & Gas Co. v. FERC, 783 F.3d 1270, 1271 (D.C. Cir. 2015) (citation omitted). Today, PJM "oversees [an] electric grid covering all or parts of thirteen Mid-Atlantic and Midwestern states and the District of Columbia." Advanced Energy Mgmt., 860 F.3d at 659. "PJM takes its name from Pennsylvania, New Jersey, and Maryland, the first three states in which it operated, but its territory now extends as far west as Illinois." Long Island Power Auth. v. FERC, 27 F.4th 705, 709 (D.C. Cir. 2022). "As an RTO, PJM coordinates the movement of electricity across the region" and "operates transmission facilities owned by member utilities, approves the construction of new facilities, and files tariffs allocating among its members the costs of the facilities." Id.

PJM carries out its duties in conformity with policies set forth in its governing agreements, which include PJM's Operating Agreement, the Consolidated Transmission Owners Agreement (Owners Agreement), and the Tariff on file with the Commission. See Pub. Serv. Elec., 783 F.3d at 1271. PJM's authority to oversee and operate the electrical grid is limited to that granted to it by transmission owners in the Owners Agreement. Transmission owners are "Member[s] that own[ ] or lease[ ] with rights equivalent to ownership Transmission Facilities and is a signatory to the . . . Owners Agreement." Tariff, OATT Definitions — T — U — V (J.A. 2254). Transmission owners expressly retain all "[r]ights not specifically transferred . . . to PJM pursuant to [the Owners] Agreement or any other agreement." Owners Agreement § 5.6 (J.A. 2359).

C.

On June 12, 2020, the Transmission Owners Agreement Administrative Committee (TOA-AC) filed a proposal (June Proposal), accompanied by a cover letter written by counsel, with the Commission on behalf of certain transmission owners pursuant to § 205 of the Act, 16 U.S.C. § 824d. The transmission owners sought to revise and expand the scope of Attachment M-3 of the Tariff, which

sets forth the procedures that the Transmission Owners employ to plan Supplemental Projects, which are expansions and enhancements to the Transmission System that are not required to satisfy certain PJM regional planning criteria, in a manner that satisfies the requirements of Order No. 890 for openness and transparency.¹

Cover Letter of June Proposal at 2-3 (J.A. 0003). Through counsel, the transmission owners explained the revision to Attachment M-3 would expand it "from solely prescribing procedures governing the planning of Supplemental Projects," id. at 2 (J.A. 0002), to also include "planning procedures [for] asset management projects that affect PJM's modeling of the transmission system, which will enhance transparency and the opportunity for stakeholder review of these projects," id. at 11 (J.A. 0011).

In the June Proposal, "asset management projects" were defined as

any modification or replacement of a Transmission Owner's Transmission Facilities that results in no more than an Incidental Increase in transmission capacity undertaken to perform maintenance, repair, and replacement work, to address an EOL Need, or to effect infrastructure security, system reliability, and automation projects the Transmission Owner undertakes to maintain its existing electric transmission system and meet regulatory compliance requirements.

J.A. 32. Relevant to this definition, an "Incidental Increase" was defined as "an increase in transmission capacity achieved by advancements in technology and/or replacement consistent with current Transmission Owner design standards, industry standards, codes, laws or regulations, which is not reasonably severable from an Asset Management Project." J.A. 33. However, "[a] transmission project that results in more than an Incidental Increase in transmission capacity is an expansion or enhancement of Transmission Facilities." J.A. 33.

The transmission owners' counsel conveyed that asset management projects included, but were not limited to:

(i) maintenance, repair and replacement activities, including but not limited to capital additions; (ii) work on infrastructure at the end of its useful life; (iii) work to satisfy compliance requirements; (iv) infrastructure security; (v) system reliability and automation; (vi) information technology; (vii) work requested by others (including generator interconnection); and (viii) increases in transmission capacity that are incidental to, and not reasonably severable from, the asset management project or activity.

Cover Letter of June Proposal at 5 (J.A. 0005) (citation omitted).

The transmission owners also sought to address in the June Proposal the coordination of EOL needs with the Regional Transmission Expansion Plan (RTEP), as outlined in Schedule 6 of the Operating Agreement, "when a single solution would address both the EOL need and the need to plan for a Required Transmission Enhancement under the...