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Missouri River Energy Services v. Federal Energy Regulatory Commission

United States Court of Appeals, District of Columbia Circuit

March 15, 2019

Missouri River Energy Services, Petitioner
Federal Energy Regulatory Commission, Respondent Basin Electric Power Cooperative, et al., Intervenors

          Argued February 6, 2019

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

          Lawrence G. Acker argued the cause for petitioner. With him on the briefs were Philip W. Mone and Gabriel L. Tabak.

          Jared B. Fish, Attorney, Federal Energy Regulatory Commission, argued the cause for respondent. With him on the brief were James P. Danly, General Counsel, and Robert H. Solomon, Solicitor. Carol J. Banta, Attorney, entered an appearance.

          William D. Booth argued the cause for intervenors. With him on the joint brief was David D'Alessandro. Jonathan P. Trotta and Marie Denyse Zosa entered appearances.

          Before: Garland, Chief Judge, Srinivasan, Circuit Judge, and Silberman, Senior Circuit Judge.


          Srinivasan, Circuit Judge

         Srinivasan, Circuit Judge: In 2015, Missouri River Energy Services, a collection of municipal entities, became a member of the Southwest Power Pool. Missouri River claimed it should be exempt from certain charges assessed by the Pool, and the parties submitted the dispute to the Federal Energy Regulatory Commission. FERC sustained the charges, and Missouri River now petitions for review of FERC's decision. We conclude that FERC's determination was not arbitrary and capricious and thus deny Missouri River's petition for review.


         Missouri River Energy Services is an organization of 61 municipal utilities in the Upper Midwest. Missouri River helps its member municipal electric systems source power. To that end, in the 1970s, Missouri River teamed up with other energy-related entities to construct the Laramie River Station (a power plant) and various transmission facilities.

         In 1977, those entities entered into a contract with Nebraska Public Power District, under which Missouri River and its partners agreed to help defray Nebraska Power's construction and operation costs for new transmission facilities. In exchange, Nebraska Power agreed to allow the entities to use the new facilities to transmit some of the power from the Laramie River Station. For the last four decades, Missouri River has used that arrangement under the 1977 Contract to help move electricity generated by the Laramie River Station part of the way from the power plant to Missouri River's member utilities.

         In 2008, Nebraska Power asked to join the Southwest Power Pool, a Regional Transmission Organization that "provides transmission service to approximately 6 million households across portions of eight states." Okla. Gas & Elec. Co. v. FERC, 827 F.3d 75, 77 (D.C. Cir. 2016). (A Regional Transmission Organization oversees electricity grids on a regional scale and coordinates transmission service to ensure reliable and efficient transmission. See Morgan Stanley Capital Grp. v. Pub. Utility Dist. No. 1, 554 U.S. 527, 535-37 (2008).) As part of the process of accepting Nebraska Power into the Southwest Power Pool, the Pool filed proposed revisions of its bylaws and Tariff. Those revisions included adding the 1977 Contract to the Pool's list of Grandfathered Agreements, which meant that service under the 1977 Contract would be exempt from certain provisions of the Tariff. In late 2008, FERC approved the proposed revisions, Nebraska Power became a member of the Pool, and Missouri River's transmission service under the 1977 Contract continued unchanged.

         Four years later, the Pool decided to implement a new Integrated Marketplace that included energy markets in which Pool members could bid for energy services. As part of that implementation, the Pool proposed imposing additional charges on its members to account for energy loss due to transmission and transmission congestion. A number of parties, including Missouri River, protested the imposition of those charges on transmission covered by Grandfathered Agreements (including the 1977 Contract).

         The Pool stated that it would not impose additional charges on Missouri River's reservation under the 1977 Contract because Missouri River was outside the footprint of the Pool. Missouri River then withdrew its protest. The Pool proceeded to settlement negotiations with the other protesting parties, and those negotiations produced a Carve-Out Settlement that identified specific Grandfathered Agreements that were eligible for exemption (i.e., eligible to be carved out) from the congestion and marginal loss charges. In particular, § 2.2 of the Carve-Out Settlement stated that Schedule 1 of the Carve-Out Settlement "constitutes the exclusive list of eligible 'Carved-Out GFAs,' meaning that only those agreements and the megawatts associated with them identified on Schedule 1 are eligible for carve-out treatment." J.A. 377. And ...

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