Tenaska Clear Creek Wind, LLC v. Fed. Energy Regulatory Comm'n

108 F.4th 858

TENASKA CLEAR CREEK WIND, LLC, Petitioner v. FEDERAL ENERGY REGULATORY COMMISSION, RespondentBright Canyon Energy Corporation, et al., Intervenors

No. 22-1059

Consolidated with 22-1336

Consolidated with 23-1076

United States Court of Appeals, District of Columbia Circuit

Argued April 9, 2024

Decided July 19, 2024

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

David A. Super argued the cause for petitioner. With him on the briefs were Tyler S. Johnson and Stephen J. Hug.

Beth G. Pacella, Deputy Solicitor, 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. Matthew W. Estes, Attorney, entered an appearance.

Matthew J. Binette argued the cause for respondent-intervenors. With him on the brief were Marnie A. McCormick, Mark Strain, Peter K. Matt, Jecoliah R. Williams, Elizabeth P. Trinkle, William R. Hollaway, Ph.D., Lucas C. Townsend, and Max E. Schulman.

Before: Childs and Garcia, Circuit Judges, and Ginsburg, Senior Circuit Judge.

Childs, Circuit Judge:

Petitioner Tenaska Clear Creek Wind, LLC ("Clear Creek") wants to generate energy by wind turbine for sale to parts of Missouri, southeast Iowa, and northeast Oklahoma. In these consolidated petitions for review of orders of the Federal Energy Regulatory Commission ("Commission"), Clear Creek maintains that the Commission acted arbitrarily, capriciously, and contrary to precedent when it allowed Southwest Power Pool, Inc. ("SPP"), a regional transmission organization ("RTO"), to assign costs of more than $100 million to Clear Creek to pay for upgrades required on SPP's system to accommodate the interconnection of Clear Creek's wind turbine-powered electrical generation project (the "Project"). For the reasons set forth below, the court denies Clear Creek's 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). As part of the enforcement of the "just and reasonable" requirement, "section 205 [of the Act] requires that utilities file tariffs reflecting their rates and service terms with the Commission for review." Green Dev., LLC v. FERC, 77 F.4th 997, 1000 (D.C. Cir. 2023) (citing 16 U.S.C. § 824d(c)). "A negatively affected party may challenge a Commission-approved rate by filing a complaint with the Agency, and it carries the burden of demonstrating that the rate is unjust or unreasonable." Constellation Mystic Power, LLC v. FERC, 45 F.4th 1028, 1035 (D.C. Cir. 2022).

When a power generator like Clear Creek builds a new facility, it must connect that location to the power grid. Green Dev., 77 F.4th at 1001. To create a new connection to the electric grid, the power generator asks to "interconnect" to the transmission system by submitting an interconnection request to a transmission system operator, at which point the generator is assigned a position in a queue. Standardization of Generator Interconnection Agreements & Procs. ("Order No. 2003"), 104 FERC ¶ 61,103 at P 35 (July 24, 2003). Transmission system operators review the requests in the queue in chronological order, either individually or in clusters. During the review process, the transmission system operator conducts studies to assess the impact of the new energy source on the preexisting electric grid. These studies identify any new facilities and equipment that may be needed to accommodate the new interconnection. In some instances, the interconnection has an impact beyond the local system. When this occurs, an affected system operator will conduct a study to evaluate the impact of the interconnection on its system. Throughout this entire process, a study may be revised or redone if the generator cancels its proposed project, thereby impacting the upgrades required for the other proposed projects in the queue.

When completing an interconnection request, power generators are required to choose the level of interconnection service they require. There are two levels for interconnection service that power generators may choose from: Network Resource Interconnection Service ("NRIS"), or "firm" service, and Energy Resource Interconnection Service ("ERIS"), or "non-firm" or "interruptible" service. As we have previously explained,

Electric utilities often distinguish between "firm" service, under which customers can demand power or transmission at any time, and "interruptible" service, which the utility is entitled to shut off at any point when there is not enough excess capacity beyond that required to guarantee the needs of the utility's firm customers. Interruptible service is typically offered at a significant discount because the utility's ability simply to cut off service at peak demand periods alleviates its need to plan for and finance additional capacity to offer the service.

Fort Pierce Utils. Auth. v. FERC, 730 F.2d 778, 785-86 (D.C. Cir. 1984).

B.

The Project is a 242-megawatt facility in northwest Missouri and comprises 111 Vestas turbines across approximately 31,000 acres. Prior to beginning operation, Clear Creek sought to connect the Project to the electric grid. It submitted an interconnection request to transmission system operator Associated Electric Cooperative, Inc. ("AECI"), an electric generation and transmission cooperative based in Springfield, Missouri that provides wholesale power to parts of Missouri, southeast Iowa, and northeast Oklahoma. The level of interconnection service Clear Creek requested was NRIS.

While conducting its interconnection study, AECI identified two RTOs,¹ SPP and Midcontinent Independent System Operator, Inc. ("MISO"), that could be affected by Clear Creek's interconnection.² AECI directed Clear Creek to coordinate affected system studies with SPP and MISO. On August 20, 2018, Clear Creek asked SPP to conduct an affected system study of the interconnection.³ SPP informed Clear Creek that the affected system study should take between four to five weeks to complete.

SPP's interconnection study procedures are outlined in its Tariff. See SPP, Open Access Transmission Tariff, attach. V ("Tariff"). When an interconnection request is submitted to SPP, SPP assigns an initial queue position and evaluates all valid interconnection requests submitted in the same 180-calendar-day window in a Definitive Interconnection System Impact Study ("DISIS") cluster. Requests in the same DISIS cluster are evaluated together at equal priority for SPP to determine if upgrades are needed to fulfill the requests. To perform each study, SPP evaluates the base case and transfer case. The base case shows SPP's system before any interconnection is done, while the transfer case shows SPP's system after the interconnection.

If the transfer case indicates constraints and that network upgrades are necessary to alleviate those constraints to accommodate the interconnection of a project or projects, SPP determines the cost allocation of those network upgrades and assigns costs to each interconnection customer that contributed to the need for a specific network upgrade on a pro rata basis.

Order Granting in Part and Denying in Part Complaint, 177 FERC ¶ 61,200 at P 2 (Dec. 16, 2021) ("Complaint Order") (JA222).

SPP performs the study of each interconnection request on the level of interconnection service the requester asked for from the host system, ERIS or NRIS. After the studies are completed, SPP "assigns responsibility for network upgrades needed to mitigate a constraint based on whether an interconnection request impacts the constraint by at least the applicable [transfer distribution factor (TDF)] threshold and if the transmission facility is overloaded greater than 100% of its line rating." Order Addressing Arguments Raised on Rehearing and Denying Motion for Stay, 182 FERC ¶ 61,084 at P 9 (Feb. 16, 2023) ("Rehearing Order") (JA575). The TDF threshold is based on the customer's request on the host system for ERIS or NRIS service. "If the impact of an interconnection request is below the TDF threshold, then SPP considers the generating facility's impact de minimis (even if a transmission line is overloaded beyond its line rating) and does not assign network upgrades for that transmission facility to the interconnection customer." Id.

SPP issued its first affected system impact study regarding Clear Creek on October 5, 2018, identifying $31.2 million in upgrades required on its system using 2017 integrated transmission planning (ITP) models. On November 5, 2018, SPP issued a revised study, which did not make any substantive changes to the results of the first study. Thereafter, SPP issued affected system studies on February 12, 2019 ($16.3 million in upgrades), March 21, 2019 ($33.017 million in upgrades), and April 8, 2019 ($33.535 million in upgrades).

Clear Creek requested NRIS on the AECI transmission system, so SPP conducted the study under both ERIS and NRIS as was their practice for those requests. SPP did not find any NRIS-related network upgrades in their initial study, only upgrades related to ERIS. Believing the system studies were ending, Clear Creek began construction of the Project in the spring of 2019.

On November 1, 2019, SPP notified Clear Creek that SPP was going to restudy the Project using 2019 ITP models because of the withdrawal of several higher-queued projects in the cluster. At this point, Clear Creek had already installed 50 wind turbines and committed $266 million pursuant to their belief the studies were ending. On November 2, 2020, SPP provided the initial results of the restudy, which stated system upgrade costs of $763 million. "The dramatic increase in...