Report of the Judicial Review Committee

Article excerpt

This report summarizes cases reviewing decisions by the Federal Energy Regulatory Commission (FERC) and other cases pertinent to energy regulation. The time frame covered by this report is January 2012 through December 2012.*

I. ADMINISTRATIVE LAW

A. Standing

In Occidental Permian Ltd. v. FERC, the D.C. Circuit dismissed a challenge to the Federal Energy Regulatory Commission's (FERC) orders granting negotiated rate authority to Tres Amigas LLC (Tres Amigas) based upon a finding that the petitioners, Occidental Permian Ltd. (Occidental) and its subsidiaries, lacked standing to bring the challenge.1 The case involved an energy transmission project Tres Amigas proposed to develop in New Mexico "to tie together all three of the independent electrical grids in the United States" - the Eastern Interconnection, the Western Electricity Coordinating Council, and the Electric Reliability Council of Texas.2 Currently "power [does not] automatically flow between [the three electrical grids and] must be converted at each interchange."3 The Tres Amigas facility is designed to address this problem and to facilitate the movement of power across the country. The project was proposed as a stand-alone interconnection facility and regional utilities will have to expend the funds to build any new transmission lines connecting to the Tres Amigas project.4

Historically, the FERC has relied upon cost-of-service models in reviewing and approving the rates charged by public utilities for electric transmission service under the Federal Power Act (FPA). However, the FERC has permitted merchant transmission developers, which "have no preexisting transmission network in which costs can be determined . . . and no captive . . . customers," to request authority to charge negotiated rates, rather than cost-based rates.5 The FERC has required project developers seeking negotiated rate authority to satisfy criteria to ensure that negotiated rates charged are just and reasonable. Specifically, "the developer must have no captive customers, must not have the ability to exercise monopoly power, and must bear the full market risk of the project failing."6

Tres Amigas's application to the FERC for negotiated rate authority stated that the project would have no captive customers and would not be located in a transmission network in which costs could be recovered. Therefore, the application contended, cost-based rates would be infeasible.7 In its protest of the application, Occidental claimed that Tres Amigas failed to meet the criteria to qualify for negotiated rate authority because the developer would have "captive customers and would exercise monopoly power while bearing none of the project's risk."8 The FERC rejected Occidental's arguments and approved the request for negotiated rate authority.9 Occidental subsequently filed a petition with the D.C. Circuit seeking review of the FERC orders approving Tres Amigas's negotiated rate authority.10

The court did not reach the merits of Occidental's challenge to the FERC's orders because it found that Occidental lacked standing to bring the challenge inasmuch as it had failed to demonstrate "a concrete injury that has either transpired or is 'imminent,' that is causally connected to the agency action, and that will likely be redressed by a favorable decision from [the court]."11 The court considered and rejected three bases for standing alleged by Occidental.

First, Occidental claimed that public utilities near the Tres Amigas project would be required to pay the cost of constructing transmission lines to interconnect with the project and that those utilities would in turn recover the costs of that construction from regional energy consumers, including Occidental's subsidiaries. Occidental alleged that the negotiated rate authority granted by the FERC would lead to higher costs for its subsidiaries as consumers.12 The court rejected this argument as "far too speculative to represent a 'concrete' injury to Occidental. …

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