[00:00:00] Speaker 06:
We'll begin with the tri-state case, and this has been a work in progress.

[00:00:06] Speaker 06:
Five petitions for review that we then sorted into two argument slots of our six cases, and now it is distilled further, consolidated into one argument, which makes sense.

[00:00:18] Speaker 06:
We appreciate the Council's help in getting it in a way that we can resolve it the easiest and hear the arguments the best.

[00:00:28] Speaker 06:
So my understanding is that the way that this will proceed is tri-state will lead off and has 25 minutes allotted, of which it wants to try to reserve three minutes.

[00:00:42] Speaker 06:
Sometimes that works, sometimes it doesn't.

[00:00:45] Speaker 06:
Then five minutes for intervener petitioner based in electric, 25 minutes for FERC, and five minutes for intervener respondent united power.

[00:00:54] Speaker 06:
If I got it right, anybody raise your hand if I'm

[00:00:57] Speaker 06:
Out to lunch, and you raised your hand, but you were taking your purse off.

[00:01:02] Speaker 06:
I won't count that one.

[00:01:06] Speaker 06:
That being the case, I think we are ready to proceed.

[00:01:09] Speaker 06:
And so, Council, when you're ready, we're ready for you.

[00:01:17] Speaker 02:
Thank you, Your Honor.

[00:01:17] Speaker 02:
Mischa Tsetlan for the petitioner.

[00:01:19] Speaker 02:
I am going to try to reserve five minutes for rebuttal, but we'll

[00:01:22] Speaker 02:
See how that goes.

[00:01:23] Speaker 06:
Understood.

[00:01:24] Speaker 02:
I represent Tri-State, a non-for-profit generation and transmission cooperative.

[00:01:29] Speaker 02:
And I'm here speaking for our cooperative members who serve customers in western states.

[00:01:36] Speaker 02:
Our cooperative members each contractually agreed to take all the requirements of their power from Tri-State until 2050.

[00:01:45] Speaker 02:
These long-term commitments are the backbone of our cooperative, as this court explained in this shown case.

[00:01:54] Speaker 02:
In setting a contractual termination payment methodology, FERC entirely failed to set a just and reasonable rate under the Federal Power Act for three fundamental reasons that I will discuss today.

[00:02:09] Speaker 02:
First, FERC's methodology gives no weight and pays no account to the fact that these are long-term contractual commitments.

[00:02:19] Speaker 02:
That is a fundamental violation of the Federal Power Act and the APA.

[00:02:23] Speaker 02:
Clearly, the fact that these are long-term commitments is an important consideration.

[00:02:28] Speaker 02:
And the fact that FERC's methodology gives us no weight, gives the exact same number, regardless of whether the West has three years left on it or 40,

[00:02:38] Speaker 02:
is just a clear error of law requiring vacatur on that basis alone.

[00:02:44] Speaker 02:
Second, the methodology that FERC adopted, which is a single-minded focus on a snapshot of our balance sheet, current balance sheet, unquestionably shifts costs to remaining members.

[00:02:59] Speaker 02:
Now, while there is some disagreement around the margins here, most of the points in this aspect of the case are undisputed.

[00:03:07] Speaker 02:
They do not dispute that a methodology is not just and reasonable if it shifts costs.

[00:03:15] Speaker 02:
Further, they do not dispute that two-thirds of our costs are not reflected on our debt, on our balance sheet.

[00:03:22] Speaker 02:
So they do not account for two-thirds of our cost.

[00:03:25] Speaker 02:
Their only answer for ignoring two-thirds of our cost is that we'll be able to right-size away, which is

[00:03:33] Speaker 02:
operationally change to get rid of some but not all of those costs.

[00:03:39] Speaker 02:
Now, you know, how much some but not all we can debate, but since it's undisputed that at least some costs can't be right sides of the way, and it's further undisputed that adjusted reasonable methodology must not shift costs.

[00:03:53] Speaker 02:
That is a clear error that requires vacature on that basis alone.

[00:03:56] Speaker 06:
When you're talking about this two-thirds of costs, what do you mean by costs?

[00:04:00] Speaker 06:
Are you talking about debt?

[00:04:02] Speaker 02:
No, so one third is debt.

[00:04:05] Speaker 02:
That's the part that they account for, although with regard to transmission debt, they kind of messed that up too by things that I can discuss later.

[00:04:13] Speaker 02:
But for the two thirds, this is environmental mediation, labor costs, safety and training, systems operations, maintenance, compliance.

[00:04:21] Speaker 02:
They do not account for it at all in their calculations.

[00:04:25] Speaker 02:
Again, their only, only answer is this right-sizing point.

[00:04:30] Speaker 02:
But they don't, in their orders or in their brief, say that we can right-size away all the costs.

[00:04:34] Speaker 02:
Obviously, some can be right-sized, some can't.

[00:04:37] Speaker 02:
And since it is undisputed, as I read the orders under review in their brief, that some of the costs, the two-thirds, can't be right-sized away, that's a cost shift that they don't account for.

[00:04:47] Speaker 02:
They admit that Adjusting Reason Methodology cannot shift costs, and that's reason alone to set aside the orders under review.

[00:04:55] Speaker 02:
And the third point is that they, by adopting this balance sheet approach, they did something with us and with our contracts that they've never done with any other cooperative or any other contract that they can point to.

[00:05:11] Speaker 02:
So adopting a methodology different for one set of contracts

[00:05:15] Speaker 02:
and one cooperative than you do for anyone else.

[00:05:18] Speaker 02:
That violates the APA unless you can give a good reason.

[00:05:22] Speaker 02:
And the only two reasons they give for this methodology that they're adopting in their briefing and the orders are just red herrings.

[00:05:31] Speaker 02:
They say, well, there's an issue with patronage capital.

[00:05:36] Speaker 02:
Patronage capital needs to be refunded under any approach.

[00:05:39] Speaker 02:
So that's a red herring as to why you'd want

[00:05:41] Speaker 02:
balance sheet approach versus loss for any other approach or any other approach.

[00:05:45] Speaker 02:
That doesn't justify doing something different as to us.

[00:05:48] Speaker 02:
And their other point is that the departed member could still take some of the transmission services.

[00:05:55] Speaker 02:
That doesn't justify adopting the balance sheet approach.

[00:05:58] Speaker 02:
We accounted for that in our approach.

[00:06:00] Speaker 02:
It could be accounted for in a different approach.

[00:06:02] Speaker 02:
And in fact, the way they did the transmission with the crediting is just a complete mess, as we talk about in both sets of appeals.

[00:06:10] Speaker 06:
How does the open access transmission, how does that relate to the costs?

[00:06:17] Speaker 06:
In other words, if the departing members do indeed avail themselves of that, does that weaken or undermine your argument about the two-thirds cost?

[00:06:27] Speaker 02:
No, no.

[00:06:27] Speaker 02:
So the open access aspect, as it relates to the credit as well, that has to do with the portion that they're paying,

[00:06:39] Speaker 02:
for our debt to build the transmission wires and the substations and things of that sort.

[00:06:47] Speaker 02:
So that is not accounted for.

[00:06:51] Speaker 02:
And that's not the two-thirds that we're saying is unaccounted for.

[00:06:55] Speaker 02:
We do have a very significant problem with how they've changed the transmission credit.

[00:06:59] Speaker 02:
So even with regard to that one-third, it's not even close to one-third with the way they've structured the credit, but that's downstream of if the court approves their overall methodology that I'm happy to talk about.

[00:07:10] Speaker 02:
But the two-thirds is not that.

[00:07:12] Speaker 02:
That's the transmission debt and things of that sort that deals with the one-third.

[00:07:16] Speaker 06:
From your comment, as I understood it, you're not saying that lost revenues is the only just and reasonable approach.

[00:07:22] Speaker 06:
You're just saying that the particular approach chosen here is not just and reasonable.

[00:07:28] Speaker 02:
We certainly believe that the fundamental principles underlying the lost revenue approach, which is that you need to keep

[00:07:37] Speaker 02:
remaining members whole.

[00:07:39] Speaker 02:
And by whole, you have to see what the revenue stream could be expected, minus the amounts that can be mitigated.

[00:07:45] Speaker 02:
We do think that that is required.

[00:07:48] Speaker 02:
Having said that, if the court thinks that's not right, we still prevail, because there's two aspects of FERC's orders here.

[00:07:57] Speaker 02:
One is the 205 order, which is they rejected what we submitted.

[00:08:01] Speaker 02:
And that was our burden to prove that that was just a misnomer.

[00:08:03] Speaker 06:
Is that challenge, by the way, the rejection of that?

[00:08:07] Speaker 02:
We challenge their rejection of the lost revenue approach methodology.

[00:08:15] Speaker 02:
We do not challenge every specific criticism they had of the specific variant of the lost revenue approach that we submitted to FERC.

[00:08:25] Speaker 02:
So we're asking the court here today for an order setting aside both these orders and directing that they adopt the exact

[00:08:33] Speaker 02:
with all the commas and periods of our lost revenue approach.

[00:08:38] Speaker 02:
We are asking, however, that the court make clear that the principles underlying the lost revenue approach must govern a just and reasonable methodology.

[00:08:48] Speaker 03:
If this court is not willing to go there, at least set aside... Wasn't it Burke's position that the reason that they didn't use the lost revenues

[00:08:59] Speaker 03:
is because your contract, unlike the contracts in many of the other cases, allowed for withdrawal from the cooperative without, well, with calculated penalties.

[00:09:14] Speaker 03:
And so a breach of contract theory like lost revenues, FERC decided was not appropriate here.

[00:09:23] Speaker 02:
Well, I will say I don't read their orders to say that our Wesks allow for early quitting of the Wesk.

[00:09:31] Speaker 02:
But if Your Honor reads their orders that way, that that would just be very clearly wrong.

[00:09:37] Speaker 02:
I would ask the court to look at our Wesks.

[00:09:39] Speaker 02:
It's on volume one appendix 101 through 111.

[00:09:44] Speaker 02:
It is clear as day that that says,

[00:09:47] Speaker 02:
You have to take all your requirements until 2050.

[00:09:50] Speaker 02:
Then you can give two years notice and no longer be part of the contract.

[00:09:54] Speaker 02:
If you're reading their orders as saying that there is no requirement to stay in that contract to 2050, and I don't read their orders that way, but if that's what they're saying, then that would be yet another reason to vacate their orders on review.

[00:10:06] Speaker 02:
Because there is just no way, no way possible to read the West as saying anything like that.

[00:10:12] Speaker 06:
To follow up with Judge McHugh's question, are you saying that there's a breach of contract?

[00:10:17] Speaker 02:
No, Your Honor, just like in the Norwood litigation that went to the First Circuit, the parties here, just like the New England power company in Norwood, came to FERC to resolve

[00:10:32] Speaker 02:
how to get out of the contract in a just and reasonable manner.

[00:10:36] Speaker 02:
So you don't need a breach of contract methodology.

[00:10:38] Speaker 02:
And I think the verbiage, I think that the breach of contract verbiage tends more to obscure than to enlighten.

[00:10:46] Speaker 02:
You can put aside that wording and say it's reliant, contracts for reliance interests.

[00:10:51] Speaker 02:
It all leads to the same result.

[00:10:53] Speaker 06:
Different parties, different contract, and Norwood, it's not exactly an overlap here.

[00:10:59] Speaker 02:
The principle is the same though.

[00:11:01] Speaker 02:
The first circuit says in Norwood, the fact that the methodology approved by FERC, just and reasonable, looks like it damages calculation under contract is not a problem.

[00:11:14] Speaker 02:
That's what the first circuit said.

[00:11:16] Speaker 02:
So, you know, I don't want to get wrapped up around the axle of saying this is a damages or things of that sort.

[00:11:22] Speaker 02:
The bottom line is that, and for conceits, a just reasonable methodology has to avoid cost shift.

[00:11:29] Speaker 02:
In a cooperative context, as this court well explained in Shoshone, cooperative context, not shifting costs means honoring the expectations of the other members of the cooperative.

[00:11:42] Speaker 05:
Council, if you're relying on contractual principles and saying that the commission failed to honor your contractual principles, where in your bylaws or the energy services contract should we look to to extract these principles?

[00:11:55] Speaker 05:
Because I looked, I may have missed it, to see if there was anywhere written down that spoke to a methodology for a termination payment.

[00:12:03] Speaker 02:
Right.

[00:12:03] Speaker 02:
So the WESCs, which I just spoke about, do not

[00:12:09] Speaker 02:
allow for an exit before 2050.

[00:12:12] Speaker 02:
After 2050, if you give two years notice.

[00:12:14] Speaker 05:
What about the bylaws?

[00:12:15] Speaker 02:
The bylaws allow an exit from the cooperative.

[00:12:19] Speaker 02:
And in fact, the bylaws say that even if the board approves your exit, you still have to honor your contracts.

[00:12:28] Speaker 02:
So under the bylaws, the West isn't terminated.

[00:12:31] Speaker 02:
Now, as a practical matter, the board, which is the counterparty of this contract, has in fact negotiated

[00:12:38] Speaker 02:
in tandem with member exits, a reasonable way to allow members to get out of their West contracts.

[00:12:47] Speaker 03:
But as a matter of the plain text of the bylaws... Is there anywhere in the bylaws or the West contract where it requires the lost revenues methodology?

[00:12:59] Speaker 02:
No, Your Honor.

[00:13:00] Speaker 02:
That has to be a just and reasonable methodology.

[00:13:03] Speaker 02:
And FERC concedes, in its brief here,

[00:13:07] Speaker 02:
and in the order is that a justice methodology must not shift costs to our meeting members.

[00:13:14] Speaker 02:
They concede that.

[00:13:15] Speaker 02:
They then concede that their balance sheet approach does not account for two-thirds of our costs.

[00:13:22] Speaker 02:
Their only answer is, rightsizing will deal with some of the two-thirds of that, which means that some of that two-thirds, we think most of that two-thirds, is not accounted for.

[00:13:31] Speaker 02:
That's a cost shift.

[00:13:34] Speaker 03:
You admit that rightsizing will account for some of them.

[00:13:37] Speaker 02:
For some of them, and in our methodology, we have some mitigation measures.

[00:13:45] Speaker 02:
In the more complex formula we first submitted to FERC, we had even more mitigation.

[00:13:52] Speaker 02:
And they turned that down because they said, well, that was too hard to understand.

[00:13:56] Speaker 02:
But certainly on remand.

[00:13:57] Speaker 02:
FERC can adopt a methodology that doesn't shift costs, that includes more mitigation than we submitted in our simplified lost revenue approach.

[00:14:09] Speaker 02:
But what they absolutely can't do is say, we're going to adopt a methodology that only accounts for one third of your yearly costs.

[00:14:16] Speaker 02:
Then for the two thirds of costs, we're going to wave our hands and say, you can right size some of those, so that's not a problem.

[00:14:23] Speaker 02:
In their brief here, they say, well, they can right size

[00:14:26] Speaker 02:
many of their costs away.

[00:14:28] Speaker 02:
They're careful lawyers.

[00:14:29] Speaker 02:
Those have recently said many, because they know they can't say all.

[00:14:33] Speaker 02:
And we think it's not even close to all, and we think it's not even close to most.

[00:14:37] Speaker 02:
But regardless of what that is, they have shifted costs to us by adopting this completely unprecedented myopic methodology that only focuses on one third of our yearly cost.

[00:14:49] Speaker 02:
That's a cost shift.

[00:14:50] Speaker 02:
Now, with regard to contracts, it is true, Your Honor, and this is an independent argument from my cost shift argument, that we don't have a contractual term here that allows for an error of determination, which means that you can't terminate.

[00:15:05] Speaker 02:
So in order to allow for getting out of the most important term of the contract, which is the years, the FERC had to pay due respect

[00:15:16] Speaker 02:
to contractual principles.

[00:15:20] Speaker 02:
And that's under the Morgan Stanley case.

[00:15:21] Speaker 02:
That doesn't mean they have to adopt a damages methodology.

[00:15:24] Speaker 02:
But they have to give that due respect.

[00:15:26] Speaker 02:
They gave that no respect, no weight whatsoever.

[00:15:31] Speaker 02:
You get the exact same calculation for your exit fee under FERC's methodology.

[00:15:36] Speaker 02:
If you've got 40 years left on your West or three years, they give that no weight.

[00:15:40] Speaker 02:
And giving no weight to a mandatory

[00:15:43] Speaker 02:
consideration, as announced by the US Supreme Court, is a clear violation of the Federal Power Act, and it's also textbook arbitrary and capricious rulemaking under State Farm.

[00:15:56] Speaker 02:
State Farm says that if there's an important aspect of the problem, you must reasonably consider it.

[00:16:02] Speaker 02:
Surely, and this court's decision should show and well shows, the length of the commitment, which is the fundamental commitment that allows us to plan in the future both

[00:16:11] Speaker 02:
to taking on debt to construct generation and transmission facilities and to fund those yearly two-thirds operations is the length of the contract.

[00:16:21] Speaker 02:
To give that not some way, not weight compared to other factors, but to give that zero weight, to have a methodology that doesn't care about that, is a clear violation of the Federal Power Act.

[00:16:33] Speaker 02:
and the APA.

[00:16:36] Speaker 02:
And on remand, if they want to try something, if they want to give a shot at something else, not lost revenue, not BSA, we can take a look at that.

[00:16:45] Speaker 02:
But what that can't do is give no weight to the long-term nature of these agreements.

[00:16:49] Speaker 05:
Council, one of the responses of the commission is that, or purposes of their methodology as they explain it, and as I understand it, is they're concerned that Tri-State is essentially going to receive a windfall.

[00:17:03] Speaker 05:
or more than would be otherwise gained without determination.

[00:17:10] Speaker 05:
And I hear your argument to be that their methodology is not just going to not make you whole, but it's not going to make you close to whole.

[00:17:16] Speaker 02:
That's right.

[00:17:16] Speaker 05:
So that's a pretty large gap here in the methodology.

[00:17:19] Speaker 05:
So can you help me understand why the commission is wrong about their concern or purpose of tri-state receiving more than would otherwise be due?

[00:17:28] Speaker 02:
I mean, I think ultimately their problem isn't the lost revenue approach in that case.

[00:17:33] Speaker 02:
I think they're just not happy with how we calculated both the default and the mitigation on that.

[00:17:41] Speaker 02:
I think, and I'll hear what they have to say on rebuttal.

[00:17:43] Speaker 02:
I think if the revenues that were expected are fully calculated,

[00:17:51] Speaker 02:
and then the mitigation measures that we reasonably can take are fully calculated.

[00:17:55] Speaker 02:
It can't be said that we have a windfall.

[00:17:58] Speaker 02:
Now in the first version of the last revenue approach... Let me stop you there.

[00:18:03] Speaker 03:
Didn't the ALJ calculate that if every member were to withdraw, tri-state would generate 9.1 billion, nearly double its total assets of 4.9 billion,

[00:18:17] Speaker 03:
and nearly double its total liabilities of $4.9 billion.

[00:18:22] Speaker 03:
And it would nearly triple its total debt of $3.97 billion.

[00:18:27] Speaker 03:
I mean, it seems to me one of your problems here is maybe you reached too far on your first proposal.

[00:18:37] Speaker 03:
And A1J found that it was not reasonable, just and reasonable.

[00:18:42] Speaker 02:
A couple of responses to that.

[00:18:44] Speaker 02:
One is this hypothetical of everyone withdrawing from a cooperative.

[00:18:47] Speaker 02:
There's no cooperative then.

[00:18:48] Speaker 02:
It doesn't exist anymore.

[00:18:49] Speaker 02:
We're just done.

[00:18:50] Speaker 02:
We don't have an independent existence.

[00:18:52] Speaker 02:
We're a non-profit.

[00:18:53] Speaker 02:
But to the extent that the ALJ has a point there,

[00:18:57] Speaker 02:
And then we overreached or whatever, especially in our second submission where we had to take out our mitigation measures because they thought they were too complicated.

[00:19:04] Speaker 02:
Well, then we'll lose our 205 case, but we certainly win our 206 case.

[00:19:08] Speaker 02:
We certainly, if what we submitted was reaching too far, didn't build in enough mitigation, had the rates at too high, didn't sufficiently account for the variability in the demand that the departed member would have.

[00:19:22] Speaker 02:
have ruled against us on the 205 appeal, but then we absolutely must win under the 206 appeal.

[00:19:27] Speaker 02:
Even if we overreach in our submission, it then, under 206, becomes FERC's responsibility to propose a just and reasonable methodology.

[00:19:35] Speaker 02:
And you can't have a just and reasonable methodology that ignores two-thirds of our cost and doesn't even purport to claim any solution for them.

[00:19:43] Speaker 02:
Now, I only have a minute and a half before my rebuttal.

[00:19:45] Speaker 02:
I would like to

[00:19:47] Speaker 02:
talk for just very briefly about the transmission crediting issue.

[00:19:52] Speaker 02:
The transmission crediting issue deals with, if the court disagrees with me on my fundamental submissions here, what the transmission credit

[00:20:00] Speaker 02:
makes sense for is that when the exit body member has to pay under their approach the debt for the transmission debt that we got, they shouldn't have to pay again if they take transmission service and that portion of that service that pays for that same debt.

[00:20:21] Speaker 02:
We don't dispute that within the context of the flawed approach.

[00:20:27] Speaker 03:
But what can't happen?

[00:20:28] Speaker 03:
And that would be only in network, right?

[00:20:31] Speaker 03:
Yes.

[00:20:32] Speaker 03:
Only in network.

[00:20:34] Speaker 03:
Right.

[00:20:36] Speaker 03:
I'm trying to understand your argument is that with respect to the out of network costs, that there's no chance of double recovery.

[00:20:47] Speaker 02:
No judges of recovery, and that's our argument in the second case.

[00:20:51] Speaker 02:
And we have a different but related problem in the first case, is they're allowing them to use the credit for the portion of the transmission payment that relates to services and not debt.

[00:21:04] Speaker 02:
So they're messing up both halves of the equation.

[00:21:06] Speaker 02:
So we have a methodology here that accounts for only one third of our costs.

[00:21:10] Speaker 02:
And then within that, it essentially guts what we're going to get paid for transmission debt, which is 40% of the one-third.

[00:21:18] Speaker 02:
If I may reserve the balance of my time?

[00:21:22] Speaker 06:
You may.

[00:21:27] Speaker 01:
Good morning, Your Honors.

[00:21:28] Speaker 06:
Good morning.

[00:21:29] Speaker 01:
May it please the Court, my name is Jessie Halpern, and I represent Basin Electric Power Cooperative, intervener in support of Tri-State Generation and Transmission Association, Inc., in these proceedings.

[00:21:41] Speaker 01:
Tri-State's counsel has already framed the case for the court, and I would like during this time to focus on the two, the eastern interconnection aspects of the methodology the commission established.

[00:21:57] Speaker 01:
The order on initial decision is, as Tri-State has explained, arbitrary and capricious, and as the commission itself has acknowledged, in its order on the initial decision, incomplete.

[00:22:09] Speaker 01:
which means it cannot be the product of reason decision making.

[00:22:12] Speaker 01:
In the order on initial decision, the commission states that it order, and I quote, leaves tri-state and withdrawing members in a situation where an eastern interconnection member would have no resolution.

[00:22:24] Speaker 01:
Despite that recognition that its order was incomplete, the commission nonetheless directed tri-state to use the commission's established methodology and provide binding contract termination payment estimates

[00:22:38] Speaker 01:
to all members, starting with the 2024 annual update.

[00:22:43] Speaker 01:
Given that the commission declined to address the issue of the Basin Electric tri-state contract, that directive was an impossibility for tri-state.

[00:22:52] Speaker 01:
Even if you ignore the procedural challenges to the subsequent orders, the fact remains that none of them provide an actionable process by which tri-state could calculate the exit payment owed by a withdrawing member in the eastern interconnection.

[00:23:06] Speaker 01:
And this court should not permit the commission to place utilities or their customers in such an uncertain and unstable position.

[00:23:15] Speaker 05:
Council, can you help me understand how your position here as an intervener overlaps with what I understand to be ongoing litigation before the D.C.

[00:23:23] Speaker 05:
Circuit?

[00:23:26] Speaker 01:
The two proceedings are separate.

[00:23:29] Speaker 01:
The case before this court addresses tri-state contract termination payment methodology.

[00:23:34] Speaker 01:
and whether the commission's orders establish a just and reasonable methodology, whether it's well-reasoned or arbitrary and capricious, the orders before the D.C.

[00:23:44] Speaker 01:
Circuit are, according to the commission, needed only to determine whether a reduction in tri-state's requirements following a northwest rural exit would cause tri-state to breach the eastern interconnection contract with Basin Electric.

[00:24:00] Speaker 01:
And in

[00:24:02] Speaker 01:
The D.C.

[00:24:02] Speaker 01:
Circuit, the commission has stated that it did not need to determine what the terms of section nine, which we've referenced in some of our briefs, should require, only that the reasonable terms and conditions didn't preclude tri-state from implementing an exit methodology.

[00:24:23] Speaker 06:
Oh, please, after you, Judge McHugh.

[00:24:27] Speaker 03:
Aren't these sort of inextricably intertwined in the sense that in order to determine the methodology, it's pretty relevant whether it's a breach, isn't it?

[00:24:39] Speaker 03:
I mean, you might have a good argument for a lost revenues methodology if in fact they're a breach.

[00:24:48] Speaker 01:
I would agree with that, but I would note that the commission could have established a process for addressing this issue that was transparent

[00:24:56] Speaker 01:
and workable for tri-state, its members, and for Basin Electric, but elected not to do so here.

[00:25:03] Speaker 01:
And so the commission early on in these proceedings determined that the Basin Electric tri-state contract was irrelevant and simply declined to deal with it until you move on to the second set of orders that we're discussing today.

[00:25:17] Speaker 01:
And like the first set of orders,

[00:25:20] Speaker 01:
Those rely on, those are problematic and they're problematic because they rely on post hoc rationalization and they also fail to afford full weight to certain key provisions of the Basin Electric tri-state contract.

[00:25:38] Speaker 01:
That the commission, while attempting to rationalize the methodology it previously established in the order on initial decision and related rehearing order, the commission failed to consider the reasonable terms

[00:25:49] Speaker 01:
and conditions language, and in saying that the decision in the complaint order was relevant, the commission contradicts its own discussion in the complaint order.

[00:26:05] Speaker 01:
My time is almost up, so I'd just like to finish by saying that this case begs for a complete reset.

[00:26:12] Speaker 01:
Vacating and remanding these proceedings would allow FERC the opportunity to reach a thoughtful and reasoned decision on an appropriate and actionable contract termination payment methodology that takes into consideration the totality of the relevant facts.

[00:26:28] Speaker 06:
Thank you, Council.

[00:26:29] Speaker 01:
Thank you, Your Honors.

[00:26:37] Speaker 00:
Good morning.

[00:26:38] Speaker 00:
May it please the Court?

[00:26:39] Speaker 00:
Good morning.

[00:26:39] Speaker 00:
Carol Banta for the Federal Energy Regulatory Commission.

[00:26:43] Speaker 00:
We've agreed to share, as you noted earlier, five minutes with Mr. Bay for United Power.

[00:26:48] Speaker 00:
I would like to begin with going back to the tri-state argument because it is the bulk of the case.

[00:26:57] Speaker 00:
And I want to bring the focus back to

[00:27:00] Speaker 00:
the Commission's role and responsibility under the Federal Power Act, and in particular, the necessary emphasis on cost causation.

[00:27:07] Speaker 00:
And I think this will tie to many of the Court's questions to Tri-States Council, because I want to talk briefly about cost causation and cost shifts.

[00:27:19] Speaker 00:
When the Commission talks about cost shifts, it means that a withdrawing member must pay the cost incurred or obligated for its benefit, and that is its pro rata share.

[00:27:30] Speaker 00:
of the collective costs.

[00:27:33] Speaker 00:
If other members end up paying some of that, it's a cost shift, and that would not be just and reasonable.

[00:27:37] Speaker 00:
So that goes to the debt, which is not merely a snapshot.

[00:27:42] Speaker 00:
It encompasses the entire history up to that point and represents the pro rata share of all the debt that has been undertaken to that point and some of the obligations for the future.

[00:27:56] Speaker 00:
My friend talks about cost shifts.

[00:27:59] Speaker 00:
He's talking about the remaining members' shared operational costs going forward for service that they would still be receiving.

[00:28:07] Speaker 00:
So those costs may be spread over a smaller denominator.

[00:28:12] Speaker 00:
If a party is allowed to leave, which is another issue I want to discuss, once we've determined that a member can leave,

[00:28:20] Speaker 00:
then there may be fewer members, and to the extent that costs are shared throughout the cooperative, the denominators will be smaller, just as when members join, the denominator gets larger and the costs go down.

[00:28:31] Speaker 00:
But they're not paying for the withdrawing member's share of anything, because the withdrawing member is not causing those costs going forward.

[00:28:40] Speaker 00:
Tricity's theory of causation is if you would have been there,

[00:28:43] Speaker 00:
contributing in that denominator, and now you're not.

[00:28:46] Speaker 00:
That's cost causation, and that's no definition of cost causation that the commission has used.

[00:28:51] Speaker 00:
You're not causing it, except by your absence, they're sharing them differently.

[00:28:57] Speaker 00:
But that doesn't go to the Federal Power Act's cost causation principle.

[00:29:04] Speaker 00:
So that's why we seem to be talking past each other when the commission says this won't shift costs, and the petitioners say, well, our denominator's going to be smaller.

[00:29:12] Speaker 00:
So of course the cost might go up to the extent, of course, again, it's very important that there is a two-year period, which didn't exist in Norwood or any of the other previous cases.

[00:29:24] Speaker 00:
There's a two-year notice period in which everyone can adjust how they're going to

[00:29:29] Speaker 00:
operate going forward.

[00:29:31] Speaker 00:
And the ALJ took witness testimony from all the parties and considered a lot of the evidence and cited that evidence, certainly more than a scintilla, certainly meets the standard for substantial evidence.

[00:29:43] Speaker 00:
And the commission explicitly relied on the work that its administrative law judge had done in corralling all that evidence and considering it and saying that you can right-size your operations in two years, which again, the two-year period is something that Tri-State itself had proposed.

[00:29:59] Speaker 00:
that a two-year notice period would let everybody get a lot of work done in that time.

[00:30:04] Speaker 00:
And that goes to the other issue I wanted to address, one of the other issues I wanted to address about the ability to leave.

[00:30:10] Speaker 00:
And the suggestion that this case is about the commissions deciding that a member can leave the cooperative.

[00:30:16] Speaker 00:
That ship sailed a long time ago.

[00:30:18] Speaker 00:
Those are previous orders.

[00:30:20] Speaker 00:
I mean, that's already being talked about in the show cause order that gave rise to this proceeding that we discussed in the background of both of our briefs, the hearing order that set this for the administrative law judge.

[00:30:31] Speaker 00:
When Tri-State chose and actually worked pretty hard to become FERC jurisdictional, FPA jurisdictional, one of the things that the commission

[00:30:44] Speaker 00:
came to early on is your bylaws say that you can leave, but they don't say how.

[00:30:48] Speaker 00:
And one of the requirements of the Federal Power Act is transparency.

[00:30:52] Speaker 00:
You have to have procedures that are clear, and you have to have a calculation methodology that is clear and predictable so that parties can understand whether it's in their interest to leave, members can understand whether it's in their interest to leave or not.

[00:31:05] Speaker 00:
And maybe they wouldn't have had to do any of that if they weren't for jurisdictional, because when we talk about the cooperative model, and the commission did talk about this, and I do want to point to a couple places in our order

[00:31:14] Speaker 00:
in the commission's order, obviously.

[00:31:18] Speaker 00:
For instance, in what we've called the methodology rehearing order, the May 23, 2024 order, paragraph 23, which we did cite, we may not have mentioned this sentence, the last sentence cites back to something that's also in the first order, you can cross-reference it there, where the commission had found in yet another tri-state case that isn't before this court, that when we're talking about

[00:31:44] Speaker 00:
the cooperative economic model and the sharing of those costs.

[00:31:49] Speaker 00:
The Commission has found that the characteristics of the cooperative business model itself do not justify departure from the well-established cost causation principles.

[00:32:00] Speaker 00:
So, yes, cooperatives can be a different animal, and Congress recognized that 80 years ago

[00:32:06] Speaker 00:
when it exempted them from the Federal Power Act and the rural distribution cooperatives.

[00:32:12] Speaker 00:
And I'll note that all the parties in the case except FERC are rural cooperatives.

[00:32:16] Speaker 00:
It's not just Tri-State United Power is as well and the other interveners on the commission side.

[00:32:22] Speaker 00:
They're all, all those distribution cooperatives and public power districts are exempt from having to meet.

[00:32:29] Speaker 00:
the cost causation standards under the Federal Power Act.

[00:32:31] Speaker 00:
And Congress had its reasons for that.

[00:32:34] Speaker 00:
But occasionally, a generation and transmission cooperative is a larger collective of the small ones.

[00:32:40] Speaker 00:
And as long as all the members are non-jurisdictional, so is the generation and transmission cooperative.

[00:32:48] Speaker 00:
But for reasons that go beyond this case and into quite some history,

[00:32:52] Speaker 00:
Sometimes a cooperative like Tri-State decides it would rather be FERC jurisdictional and it does something here.

[00:32:58] Speaker 00:
They let in members that don't qualify.

[00:33:01] Speaker 00:
So they took themselves out of the FPA jurisdiction.

[00:33:05] Speaker 00:
Well, now they're subject to the FPA standards and FERC does cost causation all the time and courts do cost causation all the time.

[00:33:13] Speaker 00:
It's not an aspirational principle.

[00:33:15] Speaker 00:
It is a core requirement of just and reasonable rates under the Federal Power Act.

[00:33:20] Speaker 00:
And the fact that you might have been able to do something that wouldn't meet those requirements under the cooperative model, well, if you're exempt from the Federal Power Act, we're not having this conversation at all.

[00:33:29] Speaker 05:
Council, can I ask, you just said that, you know, applying the cost causation principle is something FERC does all the time.

[00:33:36] Speaker 05:
But yet, as I read the briefs here, the methodology you came up with, I think, was for the first time.

[00:33:42] Speaker 05:
So how can we square the argument or position that this is sort of rudimentary commission work with now saying we're going to apply this new methodology that even though we've never said you can't do it, we've never done it before.

[00:33:56] Speaker 05:
This seems to be something new.

[00:33:58] Speaker 00:
Sure.

[00:33:58] Speaker 00:
And I didn't mean to suggest we've done this methodology all the time.

[00:34:01] Speaker 00:
I mean, certainly the commission does have extensive expertise with the financing and operation of transmission and generation and all of that.

[00:34:10] Speaker 00:
It's just that I was making the point that when we're talking about cost causation principles, which the commission gave a lot of thought and spilled a lot of ink on in this case, how to apply it here.

[00:34:22] Speaker 00:
And it is an unusual case.

[00:34:23] Speaker 00:
We don't have a lot of cases where we're setting an exit fee methodology for the kind of entity that most of the time is not within our jurisdiction, but this one is.

[00:34:32] Speaker 00:
So we're applying the principles that we always apply.

[00:34:35] Speaker 00:
And that's why the commission talked a lot about

[00:34:38] Speaker 00:
And going back to what I was saying about what cost shifts are.

[00:34:43] Speaker 00:
And the commission talked a lot about trying to balance, making sure there isn't over recovery and under recovery.

[00:34:53] Speaker 00:
These are all the principles that the commission uses all the time.

[00:34:55] Speaker 00:
So yes, this is an unusual situation.

[00:34:57] Speaker 00:
We don't have a precedent for this.

[00:34:59] Speaker 00:
And none of the cases that tri-state cited are presidential, uh, precedential for this because none of them were setting an exit fee, a uniform exit fee methodology

[00:35:08] Speaker 00:
to be put in an FPA jurisdictional tariff going forward.

[00:35:12] Speaker 00:
But that doesn't mean the principles aren't the same, and it doesn't mean that the Commission's expertise and its administrative law judges' careful work doesn't apply a lot of the same things.

[00:35:22] Speaker 00:
Certainly, the Commission understands regulatory accounting, its reliance on its standardized form that I think pretty much possibly all of the FERC-regulated entities use.

[00:35:35] Speaker 00:
It talked a lot about

[00:35:38] Speaker 00:
We want to make sure that the withdrawing member isn't overpaying.

[00:35:45] Speaker 00:
It's not just that.

[00:35:46] Speaker 00:
The commission also talked about even if it's not that withdrawing member overpaying, does this result in tri-state over-recovering its costs in general?

[00:35:55] Speaker 00:
But also under-recovering.

[00:35:57] Speaker 00:
That was a huge part of the commission's analysis here, was also making sure that tri-state doesn't under-recover its costs.

[00:36:05] Speaker 00:
And that's why there's the emphasis

[00:36:07] Speaker 00:
on making sure the withdrawing member pays its pro rata share of all the debts and obligations, both generation and transmission, and dealing with that.

[00:36:16] Speaker 05:
Council, one of the principles that comes up in the briefs, particularly on tri-state, is the idea that they need to be made whole.

[00:36:22] Speaker 05:
I'm going back to the first point you were discussing about when the denominator changes in the number of members, then the cost will differ.

[00:36:29] Speaker 05:
Does the commission first as a principle agree with this made whole?

[00:36:33] Speaker 05:
argument, which I think I know the answer to, but I'll let you say it.

[00:36:38] Speaker 00:
No.

[00:36:39] Speaker 00:
I mean, it is a model of breach damages, which the Commission explicitly found doesn't apply.

[00:36:45] Speaker 00:
It's not about making sure that no remaining member ever pays a dime more than they would have if you had stayed.

[00:36:51] Speaker 00:
It's about making sure that the costs that the withdrawing member caused, the debts that were taken on to serve it, that it does not dump those costs on someone else.

[00:37:02] Speaker 00:
it bears those costs.

[00:37:03] Speaker 05:
The Tri-State, I think, is arguing that within the contractual relationship between the cooperative and its members, that if you look at the bylaws and energy services contracts, that you have to extract from that this made whole principle and that the commission needs to respect that.

[00:37:19] Speaker 05:
So why is that argument?

[00:37:22] Speaker 00:
Right.

[00:37:23] Speaker 00:
Well, as Your Honor noted, there isn't language

[00:37:26] Speaker 00:
that actually specifically requires that.

[00:37:28] Speaker 00:
But I would point to what the commission did say here.

[00:37:31] Speaker 00:
And this is in the first order we're talking about, the methodology order, the order on initial decision.

[00:37:37] Speaker 00:
Paragraphs 28 through 230 is really where the commission grappled with that.

[00:37:41] Speaker 00:
And it looked at a section of what we're calling the WESCs, the requirements contracts.

[00:37:47] Speaker 00:
Section 8 does not directly address the fee that a withdrawing member should pay.

[00:37:53] Speaker 00:
But it does mention paying a prorata portion of outstanding indebtedness on the notes, as well as other obligations.

[00:38:01] Speaker 00:
And then in paragraph 229, the commission looks at the bylaws.

[00:38:07] Speaker 00:
And again, when Tri-State became jurisdictional, these bylaws that had just existed among the cooperatives now needs to be a tariff.

[00:38:16] Speaker 00:
It needs to be something that is public and transparent

[00:38:21] Speaker 00:
and approved by the commission.

[00:38:23] Speaker 00:
So we're looking at the bylaws in paragraph 229.

[00:38:25] Speaker 00:
Oh, I'm sorry, we're actually still on the West.

[00:38:28] Speaker 00:
I think the bylaws may be in a different place.

[00:38:33] Speaker 00:
But in the, yes, the preamble in paragraph 229, the preamble to these requirements contracts that the commission was looking at, where it specifically mentions the financing of facilities.

[00:38:49] Speaker 00:
being a shared obligation.

[00:38:51] Speaker 00:
So this is where the commission comes to the understanding that you cannot shift the costs of your pro rata share of the debt.

[00:39:00] Speaker 00:
You have to pay your pro rata share of the debt.

[00:39:03] Speaker 00:
And so the commission did look at all of that.

[00:39:09] Speaker 03:
So I don't want to run out of time before we also talk about the second gauge.

[00:39:16] Speaker 03:
And with respect to that,

[00:39:19] Speaker 03:
Isn't it a decent argument that there will be no double recovery on the out of network expenses?

[00:39:32] Speaker 03:
Because yes, they would get double recovery if they continue on the in-network, but not on the out of network.

[00:39:43] Speaker 03:
So why is it appropriate to credit that

[00:39:49] Speaker 00:
Yes, yes and and where the Commission really addressed that is in the last order we're discussing discussing that what we called the compliance rehearing order of April 29th 2025 in paragraphs 28 and 29 and and that's where the Commission and and we pointed in our brief that that Actually, let me take you to a different order if you'll indulge me the

[00:40:20] Speaker 00:
the initial order that I was just talking about in a different part of it.

[00:40:29] Speaker 00:
In paragraphs, actually, we're leaping around among all these orders, it's the methodology rehearing order, the May 23rd, 2024, that has language about, well, it's one of these two orders that has the language about united power having

[00:40:47] Speaker 00:
raised concerns, and the commission said these concerns, and in our brief we laid out, we said there were always two concerns.

[00:40:53] Speaker 00:
And one was a withdrawing member having to pay twice.

[00:40:57] Speaker 00:
But the other concern, well, we have three concerns, because it's a balance.

[00:41:01] Speaker 00:
And as I said, we're always concerned about making sure that Tri-State doesn't under-recover the no-stranded costs.

[00:41:07] Speaker 00:
That concern is on this side of the balance.

[00:41:09] Speaker 00:
But the commission said that there are two concerns on the other side of the balance.

[00:41:14] Speaker 00:
And one is that the withdrawing member doesn't

[00:41:16] Speaker 00:
And I did find that it is in the first order, and it is paragraph 564.

[00:41:22] Speaker 00:
And the commission was responding to United Power, because United Power, of course, is concerned about the we're not double paying part.

[00:41:30] Speaker 00:
But the commission says, divides this into two things.

[00:41:36] Speaker 00:
There's recovering the costs twice, and that could be from anyone.

[00:41:40] Speaker 00:
And the second is making sure that the withdrawing member

[00:41:45] Speaker 00:
gets the full benefit of its prepayment so that it hasn't overpaid.

[00:41:49] Speaker 00:
So from the start, there were two concerns.

[00:41:53] Speaker 00:
And I know I'm actually maybe making this more confusing.

[00:41:57] Speaker 00:
It's not just about the withdrawing member paying twice.

[00:41:59] Speaker 00:
It's that you also are getting money from other places.

[00:42:01] Speaker 00:
And that's where we go to the last order where I actually had started with the compliance rehearing order at paragraphs 28, 29.

[00:42:15] Speaker 00:
And the last sentence of paragraph 28 in particular, when the commission says, if you didn't credit the non-network amounts back, you would permit Tri-State to recover on debt on the non-network facilities, both from the withdrawing member and from its remaining members and its member rates, because they're continuing to pay those going forward.

[00:42:37] Speaker 00:
And so you still could end up in a situation where Tri-State

[00:42:45] Speaker 00:
is double recovery.

[00:42:46] Speaker 00:
And it's not double recovering, like recovering more than just the actual costs that we want to make sure they don't under recover.

[00:42:59] Speaker 03:
It is very confusing.

[00:43:01] Speaker 03:
A bit of a windfall to the withdrawn member?

[00:43:05] Speaker 00:
No.

[00:43:05] Speaker 03:
First of all, they only get credit for something that they're not double paying.

[00:43:12] Speaker 00:
Well, they did pay it up front.

[00:43:14] Speaker 00:
And even if it's not in their OAT, I hate to use the acronyms, their open access bills, they are still, if they're getting any credit at all, they are still using the facilities.

[00:43:30] Speaker 00:
And they have paid for some of the facilities that they needed to serve themselves, they paid directly for those.

[00:43:37] Speaker 00:
That's addressed in pair F29 as well.

[00:43:40] Speaker 00:
So, first of all, you don't... No, they're still benefiting from the non-network, is my understanding.

[00:43:53] Speaker 03:
Right.

[00:43:59] Speaker 03:
Well, this is...

[00:44:06] Speaker 03:
Tristate is going to receive a double payment from them for the non, the out of work facilities.

[00:44:16] Speaker 00:
And it's not... Am I understanding that correctly?

[00:44:23] Speaker 00:
I think you're understanding the arguments correctly, but it is not about double recovering it from the withdrawn member.

[00:44:29] Speaker 00:
It's about double recovering it at all.

[00:44:33] Speaker 00:
So you recovered

[00:44:35] Speaker 00:
the withdrawn member's share of that lump sum of the non-network transmission debt.

[00:44:40] Speaker 00:
And there's no argument that that is included in the prepayment, and certainly Tri-State was not confused about including it when it calculated, for instance, United Powers withdrawal.

[00:44:52] Speaker 00:
But those amounts are still being collected in the member rates that the members are paying.

[00:45:01] Speaker 00:
So it is confusing.

[00:45:03] Speaker 00:
And it is also a bit of the tail wagging the dog because the numbers in the briefs reveal that the network facilities are something like four-fifths of that upfront payment.

[00:45:15] Speaker 00:
The non-network is a relatively small compared to the network facility number.

[00:45:23] Speaker 00:
And I do have those numbers if the court wants them.

[00:45:26] Speaker 00:
But I think it was something like

[00:45:30] Speaker 00:
nearly a billion of the total transmission debt for network and then like 300 million, 200 or 300 million for the non-network.

[00:45:44] Speaker 00:
I love some, not what one member is prepaying.

[00:45:47] Speaker 00:
Yes?

[00:45:48] Speaker 05:
The tri-state's beginning argument was that they are under recovering under your methodology because two-thirds of the costs don't show up on their balance sheet, what I'll call O and M, operation and maintenance type cost.

[00:45:59] Speaker 00:
Well, what they're talking about, I don't know if that number is right, but I think it's probably right.

[00:46:06] Speaker 00:
But that is costs going forward, operating costs each year.

[00:46:11] Speaker 00:
It doesn't account for the fact that the withdrawn member paid its pro rata share of the debt.

[00:46:20] Speaker 00:
before it left.

[00:46:21] Speaker 00:
This would be the amount that the remaining members are paying each year going forward.

[00:46:26] Speaker 00:
And again, that goes to the right sizing issue and the ability to reduce those costs with a couple years of lead time.

[00:46:34] Speaker 00:
But in addition, when I started with the cost shifts, if those ordinary costs of running the system and the insurance and whatever, whatever costs couldn't be right sized, are being shared among the members who are benefiting from those services going forward,

[00:46:50] Speaker 00:
But the denominator of how many members are sharing those costs has gotten smaller.

[00:46:56] Speaker 00:
That is not a cost shift.

[00:46:58] Speaker 00:
That is, in the commission's language, that's a function of membership.

[00:47:02] Speaker 00:
That just means the denominator goes up when you get more members and goes down when you get fewer members.

[00:47:07] Speaker 00:
But those costs of serving the system

[00:47:11] Speaker 00:
a couple years after a member withdraws aren't caused by that member.

[00:47:16] Speaker 00:
Tri-State's theory is that it's caused by that member's absence of not being there to be in the denominator, and that's back to where we started.

[00:47:25] Speaker 03:
Does the withdrawing member pay all their program share of all costs incurred before they withdraw?

[00:47:34] Speaker 00:
Yes, that is a lump sum payment.

[00:47:36] Speaker 00:
I believe it's on the date of withdrawal.

[00:47:38] Speaker 00:
They're given their exit fee amount when they give notice.

[00:47:45] Speaker 00:
And then they spend two years ironing out a lot of things, tri-state downsizes or right sizes.

[00:47:53] Speaker 00:
And the parties nail down exactly what they're doing about power purchase agreements, which is something that has not come up in this case, but was dealt with extensively before the commission.

[00:48:04] Speaker 00:
And at the end of the two years, you pay your lump sum amount, which is quite substantial.

[00:48:10] Speaker 00:
And if you continue taking service as a customer, then over decades

[00:48:19] Speaker 00:
you get some of that back.

[00:48:21] Speaker 00:
Although I do want to make another point about the transmission crediting mechanism I didn't mention earlier.

[00:48:25] Speaker 00:
It's quite easy to forfeit some of that because it is apportioned monthly.

[00:48:31] Speaker 00:
But if your monthly bill is less than the amount of your credit, the commission said that's forfeited, that Tri-State keeps that.

[00:48:41] Speaker 00:
But yes, you pay on the date that you leave.

[00:48:44] Speaker 06:
On the issue of the credit,

[00:48:46] Speaker 06:
Not a lot of citation there to the record as far as what the substantial evidence would be.

[00:48:52] Speaker 06:
It just is there, the credit.

[00:48:55] Speaker 06:
Can you respond to that and say why we should say that there is substantial evidence to support the credit?

[00:49:01] Speaker 00:
Yeah, and I think that was largely United Power's argument in its petition that it withdrew because it didn't especially like this either.

[00:49:13] Speaker 00:
In the first order, the commission talked about that the ALJ had taken proposals from everyone.

[00:49:19] Speaker 00:
And I believe only, I know trial staff had proposed including transmission debt up front.

[00:49:26] Speaker 00:
Not all the parties before the administrative law judge wanted to include transmission debt at all.

[00:49:31] Speaker 00:
They were just talking about generation-related debt.

[00:49:33] Speaker 00:
And the administrative law judge said, no, you've got to include all debt.

[00:49:37] Speaker 00:
But we do have this potential for over recovery, which we don't have with the generation assets, because you paid your share of that.

[00:49:45] Speaker 00:
Nobody else is using your share of that.

[00:49:48] Speaker 00:
There's no issue with that.

[00:49:49] Speaker 00:
But with transmission, there is an issue of potential over recovery.

[00:49:53] Speaker 00:
And so the trial staff had proposed something that the commission just found too convoluted.

[00:49:57] Speaker 00:
It wasn't workable.

[00:49:58] Speaker 00:
It involved making projections into the future that just weren't- The offset.

[00:50:02] Speaker 00:
Yeah, the offset.

[00:50:04] Speaker 00:
So what we had in the record was everything about including transmission debt and having to find some way to prevent over recovery.

[00:50:12] Speaker 00:
And I think that the commission's determination was largely based on just understanding the principles and mechanics of over recovery and under recovery and trying to balance those concerns.

[00:50:24] Speaker 00:
And it came up with something that, again, you can forfeit the credit if you don't use enough of the service going forward.

[00:50:32] Speaker 00:
That's balanced against the fact that you get the credit, but it takes decades because it's amortized over time.

[00:50:38] Speaker 00:
So it's a bit of maybe a rough balancing, but it was to solve a problem that no one had solved in a workable way.

[00:50:45] Speaker 00:
And some of the parties weren't even proposing something to resolve.

[00:50:50] Speaker 00:
But I do think that the potential weakness of the commission having come up with it itself was largely United Power's now withdrawn petition for review.

[00:51:01] Speaker 00:
I know I didn't get to base, but I think the court understands the issue well and that the DC Circuit has exclusive jurisdiction of the orders, which really did get into more than just there not being a breach.

[00:51:16] Speaker 00:
And the commission here was just saying, don't treat these

[00:51:20] Speaker 00:
Don't treat the exit fee as being based on a breach and follow what we've found in the other proceeding, which the Commission knew about as early as the rehearing order, methodology rehearing order.

[00:51:38] Speaker 03:
Judge McHugh.

[00:51:43] Speaker 05:
Just quickly, my understanding from, I don't remember which brief, is that maybe on the seventh compliance filing now at this point, in the second two consolidated appeals, we're reviewing, as I understand, orders from the second and third compliance filings.

[00:51:57] Speaker 05:
So if this process is continuing to be ongoing, I guess I'm just asking for our purposes because we're going to have to decide and write an opinion.

[00:52:05] Speaker 05:
Do you anticipate these additional compliance filings and all this shifting this litigation at all?

[00:52:14] Speaker 00:
I think if the court were to affirm the commission's orders in the cases before you today, my understanding is I think the disputes would largely go away.

[00:52:28] Speaker 00:
I would note there's yet another pair of cases

[00:52:31] Speaker 00:
before the court right now.

[00:52:34] Speaker 00:
Case number, I want to say 259583 and 9594, but I'm not positive I'm right about that, that are in abeyance because I think everyone understands that they will be largely governed if not entirely resolved by what the court does here.

[00:52:49] Speaker 00:
But yes, that goes to

[00:52:51] Speaker 00:
how much time, this was really a process where the commission put out a lot of orders considering all aspects of this, but also has had to tell Tri-State a number of times when we met, when we said all the full amount of the debt and the full time value and including the non-network, we meant it the first, second, and third time.

[00:53:17] Speaker 03:
And my question is a little bit,

[00:53:20] Speaker 03:
sort of is the same, but a little more specific than Judge Satterico's, which is if the D.C.

[00:53:27] Speaker 03:
Circuit were to rule that it is in fact a breach of the base and contract to withdraw before 2050, would you have to go back to the drawing board and redo everything again?

[00:53:47] Speaker 00:
I think that would only apply to Eastern Interconnection members, so it would be an unusual... I don't think it has to affect this case because here the issue was whether the commission had addressed the issue and the commission understood that there was a separate proceeding where that would get handled.

[00:54:07] Speaker 00:
If it got remanded to the commission, then the commission would look at it again.

[00:54:11] Speaker 00:
The Eastern Interconnection members have always been in a little different position because they have no generation debt

[00:54:18] Speaker 00:
They're not making the kind of large payment upon exit that was really the bulk of the concern here.

[00:54:25] Speaker 00:
And that was always the tricky thing about it.

[00:54:27] Speaker 00:
It is going to be about that contract.

[00:54:29] Speaker 00:
But I don't think it has to affect this case, even if it could affect what the methodology would be for some Eastern Interconnection members.

[00:54:44] Speaker 00:
I think that's my understanding.

[00:54:47] Speaker 06:
Thank you, Council.

[00:54:49] Speaker 06:
Thank you.

[00:55:15] Speaker 04:
Good morning.

[00:55:16] Speaker 04:
May it please the court.

[00:55:17] Speaker 04:
My name is Norman Bay, and I represent United Power.

[00:55:21] Speaker 04:
United Power is a member-owned, not-for-profit rural distribution electric cooperative located in the northwest of Denver in the Front Range and has a service territory of 900 square miles.

[00:55:37] Speaker 04:
So I'd like to provide United Power's perspective on these proceedings.

[00:55:42] Speaker 04:
First,

[00:55:43] Speaker 04:
United Power exited pursuant to rate schedule number 281, which is a tri-state tariff, right?

[00:55:51] Speaker 04:
So United Power did not breach a contract and said it sought to exit pursuant to the procedures delineated in rate schedule number 281.

[00:56:03] Speaker 04:
So there was no breach of contract, and that's why breach of contract damages are not applicable.

[00:56:09] Speaker 04:
Because rate schedule number 281 involved a rate

[00:56:13] Speaker 04:
FERC had the obligation under the Federal Power Act to ensure that the process and the rate itself were just and reasonable.

[00:56:22] Speaker 04:
So in order to do that, FERC relied upon a fundamental principle, which is to say the principle of cost causation.

[00:56:30] Speaker 04:
Here what FERC said was that tri-state should be compensated

[00:56:36] Speaker 04:
for the cost it had incurred to serve the member or was obligated to incur to serve the exiting member.

[00:56:46] Speaker 04:
So that's the principle that FERC applied.

[00:56:51] Speaker 04:
And what Tri-State then did, though, was to propose a variety of ways of basically receiving compensation from the exiting member.

[00:57:03] Speaker 04:
In its brief, it insisted that the only possible path forward was based on the lost revenues approach.

[00:57:11] Speaker 04:
But in fact, in April 2020, Tri-State's first proposal was called the mark-to-market make-hole methodology, which it rejected after FERC criticized it.

[00:57:23] Speaker 04:
I mean, Tri-State withdrew it.

[00:57:26] Speaker 04:
And then it proposed what it called the modified contract termination payment approach.

[00:57:32] Speaker 04:
had the loss revenues approach, the debt covenant obligation, or the hire of those two approaches, although in this appeal, as Judge Phillips noted, they aren't even trying to defend the DCO or the hire of approach, even though they had presented an integrated methodology to the commission.

[00:57:50] Speaker 04:
In other words, Your Honor, they're cherry picking.

[00:57:53] Speaker 04:
They've changed the proposal they originally

[00:57:55] Speaker 04:
submitted to FERC.

[00:57:58] Speaker 04:
And as Judge McHugh noted, there is overreaching here because the total amount of payment would be $9 billion if all 42 members exited.

[00:58:09] Speaker 04:
You know, if you were just to look at the members that did exit, for United Power, it would have been $1.6 billion.

[00:58:16] Speaker 04:
For La Plata Electric Association, it would have been almost half a billion.

[00:58:20] Speaker 04:
And for Mountain Park Electric, it would have been $167 million.

[00:58:28] Speaker 04:
The total amount from those three members alone would have been $2.25 billion, which was 60% of the total debt of Tri-State.

[00:58:39] Speaker 04:
So yes, was there overreaching?

[00:58:41] Speaker 04:
Yes.

[00:58:41] Speaker 04:
And that's what the commission was reacting to.

[00:58:44] Speaker 04:
So what the commission did instead was to adopt an approach that it wanted to be transparent,

[00:58:50] Speaker 04:
Replicable and formulaic okay, and there's a very important note here And why because transparency is very important and tri-state had been unwilling to provide the exit fee to members who wanted to depart okay, and so what for came up with was looking at

[00:59:10] Speaker 04:
the debt on FERC form number one.

[00:59:13] Speaker 04:
So it's, in other words, it's data that's publicly available, reported by tri-state, and then figuring out each departing member's pro rata share of that debt.

[00:59:22] Speaker 04:
Again, so that's transparent, replicable, and formulaic.

[00:59:26] Speaker 04:
When you look at the commission's April 29, 2025 order,

[00:59:31] Speaker 04:
The commission says this, Tri-State, and this is in paragraph 32, Tri-State has repeatedly failed to comply with the commission's compliance directives and provided incorrect CT estimates to its members.

[00:59:45] Speaker 04:
And then it says Tri-State's approach would potentially require further commission proceedings each year to verify the allocation factors.

[00:59:56] Speaker 04:
The commission notes essentially that the administrative burden would also not be limited to the initial adoption of the CGP methodology.

[01:00:06] Speaker 04:
In other words, there would have been this enormous administrative burden if each time Tri-State came out with a number, there was collateral litigation, both at the commission and ultimately in the court of appeals.

[01:00:18] Speaker 04:
And so the commission came up with

[01:00:20] Speaker 04:
its approach, the balance sheet approach.

[01:00:23] Speaker 04:
Again, transparent, replicable, and formulaic.

[01:00:29] Speaker 04:
Now Tri-State has made a number of arguments saying that it could not downsize or right-size its system, but that's why the Commission agreed to Tri-State's proposal that there be this two-year notice period.

[01:00:45] Speaker 04:
That was Tri-State's proposal.

[01:00:48] Speaker 04:
That notice period was to give Tri-State the opportunity to right-size its system.

[01:00:54] Speaker 04:
Tri-State did provide evidence at the hearing before the ALJ that said that about

[01:01:01] Speaker 04:
Two-thirds of their costs were fixed costs, and one-thirds were O&M operations and maintenance-related costs, which was your question, Judge Phillips.

[01:01:10] Speaker 04:
Like, what are these costs about, right?

[01:01:13] Speaker 04:
Tri-State's saying that the two-thirds number was fixed costs.

[01:01:16] Speaker 04:
But you know, in the Seventh Circuit decision, MCI, the Seventh Circuit noted that in the long run, there are no fixed costs.

[01:01:23] Speaker 04:
All fixed costs are variable costs.

[01:01:25] Speaker 04:
What does the Seventh Circuit mean by that?

[01:01:28] Speaker 04:
United Powers witnessed, Gafford testified

[01:01:31] Speaker 04:
And so this is all in the record, that what you do if you have a plant that's not recovering O&M is you either ramp back operations or you retire it or you accelerate its retirement.

[01:01:45] Speaker 04:
If a member has left, you don't go out and get a power purchase agreement to buy power for a member that's not there.

[01:01:52] Speaker 04:
There are things that you can do to reduce your fixed costs.

[01:01:56] Speaker 04:
You optimize your fleet.

[01:01:58] Speaker 04:
And the record also showed that

[01:02:00] Speaker 04:
of the eight power plants that Tri-State owned, three were going to close in the latter half of the 2020s or the 2030s.

[01:02:10] Speaker 04:
Only one plant was estimated to still be running by 2050.

[01:02:16] Speaker 04:
So some of these plants were old.

[01:02:18] Speaker 04:
And by the way, there was a fourth plant that had a number of units, most of which were going to retire in the 2030s.

[01:02:23] Speaker 04:
So again, this is Tri-State's own evidence that they submitted to the commission before the ALJ.

[01:02:29] Speaker 04:
And so what do you do then if you've got these fixed costs?

[01:02:33] Speaker 04:
Well, you start doing what United Power's expert testified you would do.

[01:02:38] Speaker 04:
You start downsizing.

[01:02:40] Speaker 04:
You start basically mothballing units that are no longer economic, particularly if the power is no longer needed.

[01:02:48] Speaker 04:
Let me turn to the second issue, and that is the transmission credit.

[01:02:55] Speaker 04:
Let me just interrupt you.

[01:02:56] Speaker 06:
You are over time, however.

[01:02:58] Speaker 06:
I thought five minutes was awfully slim for United.

[01:03:03] Speaker 06:
We'll make it up to you on the backside with the rebuttal time.

[01:03:07] Speaker 06:
So please continue.

[01:03:08] Speaker 04:
Thank you, Judge Phillips.

[01:03:11] Speaker 04:
So now, United Power has made a payment of $627 million, even under the Commission's methodology, $296 million of that amount

[01:03:24] Speaker 04:
was for transmission-related debt, for both oat debt and the non-oat debt.

[01:03:33] Speaker 04:
The commission had encouraged exiting members either to buy their non-oat facilities, which are the radial facilities, the lower voltage facilities, or to enter into use agreements.

[01:03:45] Speaker 04:
United Power bought its radial facilities.

[01:03:48] Speaker 04:
It paid $75 million.

[01:03:50] Speaker 04:
So for it not to get a full credit would have resulted in double counting.

[01:03:54] Speaker 04:
It'd be like buying a car, paying off the debt, and then buying the car again.

[01:04:00] Speaker 04:
And so there had to be some sort of allowance for that use of the payments that United Power had made.

[01:04:08] Speaker 04:
But I also want to make a more important point, actually an overarching point about this transmission crediting mechanism.

[01:04:14] Speaker 04:
Again, the commission was trying to come up with something that was relatively straightforward.

[01:04:22] Speaker 04:
And it was not just trying to

[01:04:26] Speaker 04:
address this issue of double recovery of debt.

[01:04:31] Speaker 04:
That misstates the commission's order.

[01:04:34] Speaker 04:
The commission was clear that it recognized that the exiting member was making this big payment and so wanted the exiting member to receive the full benefit of its payment.

[01:04:44] Speaker 04:
It uses that phrase repeatedly in its orders.

[01:04:48] Speaker 04:
But what does Tri-State get out of it?

[01:04:50] Speaker 04:
It gets this huge upfront payment.

[01:04:52] Speaker 04:
It has

[01:04:54] Speaker 04:
a much lower risk that its facilities would be stranded, right?

[01:04:59] Speaker 04:
Because one thing the commission was worried about is once a member exits, would those tri-state facilities be stranded?

[01:05:07] Speaker 04:
Well, by giving this big transmission credit, right, the member has every incentive to continue to use the tri-state facilities, which is important because for the

[01:05:17] Speaker 04:
non-oat facilities or radio facilities, typically those only serve the exiting member, right?

[01:05:23] Speaker 04:
So the commission was actually mindful of Tri-State's concerns, just trying to balance a number of considerations.

[01:05:29] Speaker 04:
It also gave Tri-State the benefit of the fact that the credit is forfeited if it's not entirely used.

[01:05:37] Speaker 06:
Okay, counsel, 30 seconds to wrap up, please.

[01:05:39] Speaker 04:
Okay, so what I would say, Judge Phillips, is that this court and the Supreme Court have

[01:05:45] Speaker 04:
long noted that rate making is not a science.

[01:05:48] Speaker 04:
It's part science, but it's also part art.

[01:05:51] Speaker 04:
And the commission here was trying to come up with a process balancing a number of concerns in which its final rate would be just and reasonable.

[01:06:02] Speaker 04:
And the law is clear.

[01:06:04] Speaker 04:
A just and reasonable rate doesn't have to be a perfect rate.

[01:06:08] Speaker 04:
It doesn't have to be the best rate.

[01:06:10] Speaker 04:
It just has to be within the zone of reasonableness.

[01:06:13] Speaker 04:
And that's what the commission achieved by formulating this transparent, replicable,

[01:06:20] Speaker 04:
Formulate process.

[01:06:21] Speaker 06:
Thank you your honor any questions.

[01:06:23] Speaker 06:
I should ask Thank you council All right before you get started council, let's adjust your clock and I think to be fair and equal on the time And you I'm not saying you need to use it or that you want to use it change it to 11 minutes

[01:06:46] Speaker 02:
Thank you, Your Honor.

[01:06:46] Speaker 02:
It's very generous.

[01:06:47] Speaker 02:
I've got five points.

[01:06:49] Speaker 02:
I don't think it'll take 11 minutes unless there's questions from the bench.

[01:06:52] Speaker 02:
First, this absolutely remarkable effort to redefine what cost shifts have meant in every other context that Frick says.

[01:07:01] Speaker 02:
I mean, Norwood, that involved a tariff, an exit tariff, Wabash, an exit from a cooperative, and then broader reasoning, American Wind Energy.

[01:07:13] Speaker 02:
Cost shift always means leaving the remaining

[01:07:16] Speaker 02:
party no worse off.

[01:07:19] Speaker 02:
This artificial distinction that council makes about cost shifts versus those that are remaining doesn't make sense.

[01:07:28] Speaker 02:
Let me give you all an example.

[01:07:30] Speaker 02:
Let's say in an effort to right sides because a lot of our members leave, we've got to shut down a mine or we've got to shut down a power plant.

[01:07:37] Speaker 02:
That's going to have environmental remediation costs.

[01:07:40] Speaker 02:
That's going to have

[01:07:41] Speaker 02:
compliance costs, that's going to have regulatory costs.

[01:07:43] Speaker 02:
Under their approach, our remaining members who didn't leave, who are not the reason this plant or mine is shutting down, they have to pay all of it.

[01:07:52] Speaker 02:
United, who gets out

[01:07:55] Speaker 02:
times it gets its windfall, you have to pay none of it.

[01:07:59] Speaker 02:
Those facilities were built in part to serve United.

[01:08:04] Speaker 02:
United leaves, we have to shut them down because they left.

[01:08:08] Speaker 02:
Our members who didn't leave, who are left holding the bag, have to pay all of that.

[01:08:12] Speaker 02:
They're paying none of it.

[01:08:14] Speaker 06:
Is that established that that's the reason that the plants would be shutting down?

[01:08:18] Speaker 02:
Well, that's what right-sizing means.

[01:08:19] Speaker 02:
They're telling us, they're telling the court, that don't worry about the fact that we covered our eyes to two-thirds of their costs because there's going to be right-sizing.

[01:08:29] Speaker 02:
Well, first of all, and they were very careful, they're not saying it can all be right-sized away.

[01:08:33] Speaker 02:
But even the right-signing itself, it's not costless.

[01:08:36] Speaker 02:
There's environmental remediation.

[01:08:38] Speaker 02:
There's compliance costs, regulatory costs.

[01:08:40] Speaker 02:
Their formula accounts for not one bit.

[01:08:44] Speaker 02:
And I'm going to say that again.

[01:08:45] Speaker 02:
Their formula accounts for not one penny.

[01:08:48] Speaker 05:
Council, I just thought I heard United Powers say that this hypothetical that you just proposed wouldn't actually happen because you wouldn't be left holding the bag to close down because they were still either going to use it or that they bought them.

[01:09:05] Speaker 05:
Maybe I misunderstood that.

[01:09:07] Speaker 02:
I don't think that's what he was saying, but for example, we can talk about things that are on the record, we had to shut down a mine.

[01:09:12] Speaker 02:
That was used to get coal to serve them in part.

[01:09:18] Speaker 02:
There was significant environmental remediation on that.

[01:09:21] Speaker 02:
They paid not a penny for that.

[01:09:23] Speaker 02:
Our remaining members paid a penny.

[01:09:24] Speaker 02:
That's what the two-thirds is.

[01:09:26] Speaker 02:
It's stuff that the system was built to serve them.

[01:09:29] Speaker 02:
They were 20% of it.

[01:09:31] Speaker 02:
And now, all the stuff, both the right-sizing we can do, they can't do, the risk of downsizing, the remaining members are holding the entire bag.

[01:09:40] Speaker 02:
Meanwhile, they get to have their own thing, and they already made the economic decision that they're better off doing their own thing rather than honoring their 50-year contract.

[01:09:49] Speaker 02:
And then next, this right-sizing thing.

[01:09:52] Speaker 02:
Again, you heard Council for FERC say there's a lot of work that can be done in the two years.

[01:09:57] Speaker 02:
Yeah, there's a lot of work that's done for planning for what we do, for example, shutting down the mines, all the different, shutting down whatever plants we have.

[01:10:05] Speaker 02:
That's going to happen in the long tail.

[01:10:07] Speaker 02:
But the actual shutdowns, the rightsizing, the risks of shutdowns, rightsizing, those are the two thirds of the costs that they're not accounting for one bit, that they get a free ride for, that we built the system to serve them in part.

[01:10:22] Speaker 02:
They get out, only pay one third, leave the remaining members, the ones too small,

[01:10:28] Speaker 02:
The ones that are not serving the rich growing suburbs of Denver, the ones serving folks in New Mexico, rural folks, they're left holding the bag while the rich folks in the suburbs of Denver get to get out and don't have to pay any of those two-thirds costs.

[01:10:44] Speaker 02:
I didn't hear a word from FERC or from United about the first point I raised, which is that the methodology here doesn't account at all.

[01:10:55] Speaker 02:
at all for the number of years left on their voluntary, sophisticated commitment.

[01:11:01] Speaker 02:
Not saying it has to be exactly breach of contract damages, although I will note that the First Circuit in Norwood said that that's not a problem if the exit fee approximates that.

[01:11:11] Speaker 02:
But it is surely textbook arbitrary capricious rulemaking to take a very important consideration.

[01:11:18] Speaker 02:
This was the core consideration that this court talked about, which is the number of years remaining, and give it zero weight.

[01:11:24] Speaker 02:
Not give it some weight, we use our discretion to give it 25% weight, but to give it absolutely no weight, to have the exact same

[01:11:31] Speaker 02:
payment calculation if you're leaving three years left or 40 years left.

[01:11:36] Speaker 02:
They didn't give that any way that is clear arbitrary and capricious and a sufficient basis to vacate.

[01:11:44] Speaker 06:
Didn't give it any weight in the sense that it never came up and it wasn't considered or you just think that it deserved more attention than it got?

[01:11:51] Speaker 02:
They do not account for it in any respect in their formula, in any respect.

[01:11:55] Speaker 06:
But was aware of it?

[01:11:56] Speaker 02:
It was aware of it and it gave it, it just, they created a methodology that gives it no weight.

[01:12:03] Speaker 02:
And the reason doesn't make sense for giving it no weight.

[01:12:06] Speaker 02:
For treating, and we put our hypothetical in our brief that they didn't respond to.

[01:12:11] Speaker 02:
You all can look at it.

[01:12:11] Speaker 02:
It just shows how absurd it is to give that very important consideration no weight in how the formula actually plays into practice.

[01:12:18] Speaker 05:
What was their reason?

[01:12:20] Speaker 02:
They didn't give reason.

[01:12:23] Speaker 02:
They said we want to do this other thing because it's more transparent or something, and because they didn't like the numbers.

[01:12:28] Speaker 05:
I just thought a moment ago you said their reason for not taking an account didn't make sense.

[01:12:33] Speaker 02:
So I'm wanting to know if you could... Yeah, so the reason is... Well, the reason that they shifted to the balance sheet approach, which doesn't take it on account by definition, was patronage capital and the fact that they'll still be taking transmission.

[01:12:45] Speaker 02:
That's not a reason not to take it on account.

[01:12:47] Speaker 02:
That doesn't have anything to do with anything.

[01:12:49] Speaker 02:
You know, if you look at their brief,

[01:12:51] Speaker 02:
They say it in their brief.

[01:12:52] Speaker 02:
The reason that we went the balance sheet approach, which is a balance sheet approach doesn't take this into account.

[01:12:58] Speaker 02:
The reason we went for it is because of patronage capital and because of the taking of the transmission credit debt, the transmission service after we leave.

[01:13:07] Speaker 02:
That has nothing at all to do with why you would not take this consideration into account.

[01:13:11] Speaker 02:
It's completely orthogonal.

[01:13:13] Speaker 02:
Then briefly on the credit.

[01:13:16] Speaker 02:
They're saying, they quote this language in the order on ID that says that you should get the full benefit of the credit, of the payment that they made.

[01:13:30] Speaker 02:
But that's just another way of saying that they shouldn't

[01:13:33] Speaker 02:
have to pay for transmission debt.

[01:13:36] Speaker 02:
That's what full credit means.

[01:13:38] Speaker 02:
And their only answer is, well, you might be able to forfeit it.

[01:13:42] Speaker 02:
Well, that just means that the big boys like United, who have the big payments, who take a lot of transmission, are going to get the free ride, and maybe the smaller ones, the ones not serving growing suburban Denver are going to take some loss.

[01:13:59] Speaker 02:
The saying that you should get the full benefit of the transition credit, why not give them the full benefit of the payment they made on generation then and let them credit away their entire payment.

[01:14:08] Speaker 02:
It makes no sense.

[01:14:08] Speaker 02:
It's just an assertion.

[01:14:10] Speaker 02:
And finally, I'd like to end kind of where my friend for United ended, which is just and reasonable.

[01:14:17] Speaker 02:
Taking a step back.

[01:14:18] Speaker 02:
We have a cooperative here.

[01:14:20] Speaker 02:
Everybody, including United, committed that they were going to take all the requirements for 50 years.

[01:14:27] Speaker 02:
That was to fund not only the one third that's debt, but the other two thirds and all the risks in between.

[01:14:32] Speaker 02:
There's no sense of just and reasonable where the

[01:14:37] Speaker 02:
remaining rural members in New Mexico get left holding the bag for those two-thirds costs with their only answer from FERC being, well, some of it will be able to be riot-sized.

[01:14:49] Speaker 02:
That is not just and reasonable.

[01:14:51] Speaker 02:
If the court doesn't like, doesn't think that things that we overreached or whatever don't rule for us in our 205 appeal.

[01:14:57] Speaker 02:
But surely, on the 206 appeal, what was adopted here is not in the universe of just and reasonable.

[01:15:03] Speaker 02:
And for that reason, I would ask your honors to vacate the orders on review.

[01:15:06] Speaker 06:
Any questions?

[01:15:10] Speaker 06:
All right.

[01:15:10] Speaker 06:
Thank you, counsel.

[01:15:11] Speaker 06:
And thank all of you, counsel, for your helpful and excellent arguments.

[01:15:16] Speaker 06:
The case is submitted.

[01:15:17] Speaker 06:
Counselor excused.