[00:00:01] Speaker 03:
Case number 16-1193, Arkansas Public Service Commission petitioner versus Federal Energy Relatory Commission.

[00:00:09] Speaker 03:
Mr. Lane for the petitioner, Ms.

[00:00:10] Speaker 01:
Banta for the respondent.

[00:01:10] Speaker 01:
Good morning.

[00:01:12] Speaker 01:
I've asked to reserve two minutes for a rebuttal.

[00:01:15] Speaker 01:
I want to talk about the rightness issue first.

[00:01:18] Speaker 01:
The Commission argues that the Court should wait and see whether EIA owes $67.8 million or some other amount before it decides this case.

[00:01:32] Speaker 01:
We asked and the Commission agreed that

[00:01:37] Speaker 01:
the commission had issued a final, had taken final agency action on this issue of whether EIA is liable for these further bandwidth payments post withdrawal.

[00:01:52] Speaker 01:
The commission

[00:01:54] Speaker 01:
as you may recall, did this in a hearing order where they were setting up a hearing for factual matters in this case.

[00:02:04] Speaker 01:
They did not say that there was any factual issues that needed to be developed at the hearing related to the legal question of EIA's post-withdrawal liability.

[00:02:18] Speaker 01:
They didn't say that there was any need for further development to crystallize the issue.

[00:02:24] Speaker 01:
They just said it was final agency action.

[00:02:27] Speaker 01:
There's no reason for you to wait.

[00:02:29] Speaker 01:
This case is right now.

[00:02:33] Speaker 01:
And we would urge you to go forward with it.

[00:02:36] Speaker 04:
On the merits.

[00:02:43] Speaker 04:
was not notice of liability, this liability issue from the 2014 orders, and why that isn't when the challenge should have been made, and so this is more collateral attack.

[00:02:55] Speaker 04:
As you said, the order of review was just setting up a settlement proceeding.

[00:02:59] Speaker 04:
It was sort of a logistical administrative order, not a liability determination.

[00:03:03] Speaker 04:
That had already been made through sort of the tag team of the

[00:03:07] Speaker 04:
2005 Louisiana Public Service decision and then the 2014 decisions which made clear that Entergy Arkansas's liability in particular was going to continue post-withdrawal.

[00:03:20] Speaker 04:
So I'm back on the jurisdictional argument they originally made.

[00:03:22] Speaker 01:
I think a simple way to see that Judge Malan is if you have the joint appendix, if you could

[00:03:36] Speaker 01:
We could start on page 16 of the joint appendix and discuss and go from there.

[00:03:50] Speaker 01:
Because what's not clear in this case may not be clear.

[00:03:58] Speaker 01:
I think it was clear to us.

[00:04:03] Speaker 01:
Energy Arkansas paid $156 million and you can see on page 16, the chart, the bottom chart there, that payment receipt as of December 2011,

[00:04:21] Speaker 01:
was 156 million and then to the left of that there's 167 million so what we're really talking about and actually if you go over

[00:04:35] Speaker 01:
to page 18.

[00:04:37] Speaker 01:
I don't want to go through all the calculations, but you'll see that there was a payment made at the time.

[00:04:43] Speaker 01:
That was the time of that order.

[00:04:46] Speaker 01:
And we're not challenging that payment.

[00:04:50] Speaker 01:
We're not asking for that payment to be given back.

[00:04:55] Speaker 04:
It was clear since the Louisiana decision that energy Arkansas was going to have

[00:04:59] Speaker 04:
liability under this bandwidth procedure.

[00:05:04] Speaker 04:
So that was already established, and the only question was whether it was going to continue after withdrawal.

[00:05:08] Speaker 04:
And the 2014 orders, identifying Energy Arkansas, after it had already withdrawn, after the end of December 2013, after that point, says here's what you owe.

[00:05:22] Speaker 04:
And so that answered the liability question, did it not?

[00:05:25] Speaker 04:
And that wasn't the issue in this settlement proceeding that's under review here.

[00:05:31] Speaker 04:
It was already decided before that, was it not?

[00:05:34] Speaker 01:
No, I don't think so, Your Honor.

[00:05:35] Speaker 01:
I think we challenged the 2014 hearing order when this came up.

[00:05:42] Speaker 01:
This is where this came up.

[00:05:44] Speaker 01:
This came up, Entergy made, this is the compliance filing, what you were looking at right now on page 16.

[00:05:52] Speaker 01:
And we challenged that to say, look, no, EIA has withdrawn.

[00:05:59] Speaker 01:
That was the first time that they withdrew.

[00:06:02] Speaker 01:
The $156 million was the earlier order.

[00:06:05] Speaker 01:
And that was in 2011 when EIA was still in the agreement.

[00:06:12] Speaker 01:
And so we didn't challenge that.

[00:06:18] Speaker 01:
I think the order that you're talking about is actually found at the, kind of confusing here, but it's found at the end of the JA.

[00:06:30] Speaker 02:
I thought there were two orders that they were relying on for this collateral attack.

[00:06:37] Speaker 02:
One is they both issued on February 28, 2014.

[00:06:41] Speaker 02:
order-rejecting compliance filing an order on re-hearing.

[00:06:44] Speaker 02:
Is that right?

[00:06:45] Speaker 01:
Those are the two.

[00:06:47] Speaker 01:
We brought re-hearing of the February, the hearing order.

[00:06:54] Speaker 01:
We protested that.

[00:06:56] Speaker 01:
Our protest is

[00:06:58] Speaker 01:
in the in the j and the commission then issued an order it then issued its order we filed for re-hearing timely and the commission issued the order on re-hearing and that was protesting your liability correct it was a hundred and fifty six on j six one one and then they added interest on in the next one and you didn't seek judicial review of that order we didn't seek judicial review because

[00:07:28] Speaker 01:
EIA was still in the, under the system agreement.

[00:07:33] Speaker 01:
That was 2011 order.

[00:07:35] Speaker 01:
No, it's the 20th of February.

[00:07:36] Speaker 01:
February 2014.

[00:07:38] Speaker 01:
Okay.

[00:07:39] Speaker 04:
I don't... It's like JDA 611, which is the first of the two orders.

[00:07:44] Speaker 04:
Right there on the chart, clear as day, Energy Arkansas owns $156 million, I guess, and that is after withdrawal.

[00:07:53] Speaker 04:
And then as you noted, the other February 28th order on rehearing says, and we're adding interest on top of that.

[00:08:01] Speaker 04:
uh... so energy arkansas liability all is already determined february twenty eight twenty fourteen and he didn't seek judicial review of that instead we're here reviewing an order on some administrative no uh... okay uh... i'd i think that the well the february twenty eighth order

[00:08:30] Speaker 01:
did not raise any question about post-withdrawal liability.

[00:08:36] Speaker 01:
And whether there was interest on the $156 million, there isn't.

[00:08:42] Speaker 01:
OK, maybe that's where.

[00:08:45] Speaker 01:
If you go back to 16, you'll see that now it's $167 million that they are claiming that.

[00:08:57] Speaker 01:
EIAOs, and that difference is the amount that we're talking about.

[00:09:03] Speaker 01:
We didn't challenge the 156 million, because that was actually paid in 2011.

[00:09:12] Speaker 01:
That's what, if you turn over and you look at JAA 21,

[00:09:21] Speaker 01:
And this is where there's a whole, you can see they're making interest calculations.

[00:09:27] Speaker 01:
And you can see in the middle of the page, there's just one figure, and it's 156 million.

[00:09:34] Speaker 01:
They paid that.

[00:09:35] Speaker 01:
And that was in December 2011.

[00:09:37] Speaker 01:
So they paid it.

[00:09:39] Speaker 01:
They were under the system agreement at that time and we didn't challenge that.

[00:09:43] Speaker 04:
What we're challenging is if you go... At least the rehearing order says you still owe more, you owe interest.

[00:09:51] Speaker 04:
Correct.

[00:09:52] Speaker 04:
Do that interest run?

[00:09:54] Speaker 04:
Did that interest stop the end of December 2013?

[00:09:57] Speaker 01:
No, you can see on the column.

[00:09:59] Speaker 04:
It keeps going.

[00:10:01] Speaker 01:
You can see in the column, right, on 21, just to the left of where the 156 is, that column is the monthly interest calculation.

[00:10:11] Speaker 04:
So why wasn't that a determination of your post withdrawal continuing liability

[00:10:19] Speaker 04:
four obligations incurred while you were still within the system.

[00:10:24] Speaker 04:
Why wasn't that decided in February 2014?

[00:10:27] Speaker 01:
Because it didn't say anything about post withdrawal liability.

[00:10:32] Speaker 04:
It said here's a bill, post withdrawal.

[00:10:36] Speaker 00:
So I guess your argument is, it's indisputably true that the bill, the amount, was dictated post-withdrawal.

[00:10:44] Speaker 00:
It actually happened post-withdrawal.

[00:10:46] Speaker 00:
The withdrawal had already happened, and then the order comes down.

[00:10:49] Speaker 00:
Correct.

[00:10:50] Speaker 00:
Right?

[00:10:50] Speaker 00:
So it definitely happened post-withdrawal.

[00:10:53] Speaker 00:
So your argument is that even if it actually happened post-withdrawal, it didn't take into account the legal argument that our withdrawal should have eliminated our liability.

[00:11:03] Speaker 01:
Exactly.

[00:11:04] Speaker 00:
That's your argument.

[00:11:06] Speaker ?:
Exactly.

[00:11:06] Speaker 00:
It just becomes a question of whether that was inherently taken into account because you actually had withdrawn.

[00:11:13] Speaker 00:
So was the commission operating on the assumption that this is your liability?

[00:11:20] Speaker 00:
Yes, you've withdrawn.

[00:11:21] Speaker 00:
Everybody knows you've withdrawn, because that's a fact about the world that nobody can dispute.

[00:11:25] Speaker 00:
And therefore, here's your liability, given the fact that you've withdrawn.

[00:11:28] Speaker 00:
And if that was true, then it seems like judicial review could have happened from that order.

[00:11:35] Speaker 01:
I don't think the order at JA 611 contemplated what you just stated.

[00:11:42] Speaker 02:
The order of 611, I don't understand why that's relevant at all.

[00:11:45] Speaker 02:
In that order, the Commission rejected Energy's compliance filing.

[00:11:51] Speaker 02:
It rejected Energy's compliance filing.

[00:11:57] Speaker 02:
It doesn't do anything to you.

[00:11:59] Speaker 02:
It just rejected the filing.

[00:12:01] Speaker 01:
Yes, and we asked that it be rejected.

[00:12:03] Speaker 02:
Right, so it didn't compel you to do anything.

[00:12:05] Speaker 02:
Isn't that your answer to that one?

[00:12:08] Speaker 01:
That was our answer, yes, below.

[00:12:11] Speaker 01:
And that's what we argued.

[00:12:13] Speaker 01:
And the commission conceded in their brief that we didn't have to seek re-hearing.

[00:12:23] Speaker 04:
At the time, this was all being briefed and presented to the commission.

[00:12:30] Speaker 04:
It looks like the second half of 2013.

[00:12:32] Speaker 04:
Am I right on that?

[00:12:40] Speaker 04:
You're saying you weren't on notice that we should say we can't be obligated to paint anything after December 2013?

[00:12:49] Speaker 04:
Do you have any idea that would be coming?

[00:12:54] Speaker 01:
We were, everybody was on notice from 2005 that EIA was going to withdraw in December of 2013.

[00:13:02] Speaker 04:
I'm asking a different question about what you were, what notice were you on in late 2013 when this was pending before the commission and filings were being made on rehearing that they were talking about interest obligations that you might have to pay in 2014 that would cover your time while you were still under the contract, pre-2013.

[00:13:24] Speaker 04:
when they talked about interest, did you think the interest was going to stop the end of December 2013?

[00:13:30] Speaker 01:
Yes.

[00:13:31] Speaker 01:
I mean, our position is yes, the interest should have stopped with the payments.

[00:13:38] Speaker 01:
If there were no principal, there would be no interest with the payments after withdrawal.

[00:13:43] Speaker 01:
That was our position.

[00:13:45] Speaker 04:
Did you communicate that to the Commission?

[00:13:48] Speaker 01:
We filed a protest

[00:13:51] Speaker 01:
And that started, we filed a protest and said, no, you can't, there's no post-withdrawal liability for EIA, and that started the process.

[00:14:03] Speaker 01:
And then there was the commission's hearing order we filed for rehearing.

[00:14:07] Speaker 04:
So they were on notice of your argument about this, and they nonetheless, in February 2014, functionally sent you a bill for interest.

[00:14:18] Speaker 01:
The commission, I think it's a little different.

[00:14:24] Speaker 01:
Now I think I understand perhaps where.

[00:14:28] Speaker 01:
All right, so Entergy made a compliance filing.

[00:14:34] Speaker 01:
They didn't include interest.

[00:14:36] Speaker 01:
That's the order at 611.

[00:14:39] Speaker 01:
And the commission said, oh, you have to do interest on this compliance.

[00:14:45] Speaker 01:
They rejected that compliance filing.

[00:14:47] Speaker 01:
As Chief Judge Garland said, it was rejected.

[00:14:51] Speaker 01:
It was a nullity.

[00:14:52] Speaker 01:
There was nothing.

[00:14:53] Speaker 01:
They had to come back with a new filing in which they included interest.

[00:14:58] Speaker 01:
And that's what we see on page 16.

[00:15:02] Speaker 01:
They came back.

[00:15:02] Speaker 01:
They put in the interest.

[00:15:05] Speaker 01:
That's when this compliance filing came in.

[00:15:11] Speaker 01:
That's when the interest question came in post $156 million.

[00:15:20] Speaker 01:
and additional amounts another 11 million in principle plus the interest came in, and we protested that and said, no, they're not liable.

[00:15:32] Speaker 01:
They have withdrawn.

[00:15:34] Speaker 01:
That's the part we're talking about.

[00:15:37] Speaker 01:
And then we sought re-hearing.

[00:15:40] Speaker 04:
Can I ask one fact question?

[00:15:42] Speaker 04:
Because I know this has been about the seven months in 2005.

[00:15:46] Speaker 04:
Would the ruling in this case implicate

[00:15:50] Speaker 04:
obligations on energy arkansas play it makes some more payments for doesn't think so i mean i had a lot of time but i don't want to stay here is it just alright well uh... let me

[00:16:05] Speaker 01:
To answer that question, you sort of have to know how the system agreement works on the bandwidth payment.

[00:16:11] Speaker 01:
And just to make it really simple.

[00:16:13] Speaker 01:
It's just a fact question.

[00:16:14] Speaker 04:
Do you have to pay more in other years as well?

[00:16:16] Speaker 01:
So what happens is, and if you look on page, I'm looking on page 20 of the JA, but you could look at, so what happens is,

[00:16:34] Speaker 01:
Entergy says to you, these are the bandwidths in May of the year.

[00:16:40] Speaker 01:
And then you have to pay, and you can look in the column on page 20, and you'll see that they were supposed to make six, it's over, I think, a six-month period, seven-month period.

[00:16:53] Speaker 01:
You're supposed to make the payments at that time.

[00:16:57] Speaker 01:
So EIA has made those payments for all the years in which they were

[00:17:06] Speaker 01:
under the system agreement.

[00:17:09] Speaker 01:
Then there are hearings, and basically the hearings are like this situation, where they're arguing, oh, those bandwidth payments weren't enough.

[00:17:19] Speaker 01:
I mean, basically, it's always EIA paying more.

[00:17:22] Speaker 01:
I mean, and so what we're arguing is about the paying more.

[00:17:27] Speaker 01:
We're not asking the commission or the court to say,

[00:17:33] Speaker 01:
No, we didn't owe any of the bandwidth payments.

[00:17:36] Speaker 01:
The parts that we paid, like the $156 million during the time that we were under the agreement, we're not asking for that to come back.

[00:17:47] Speaker 01:
We're just asking for, just to use the example from 16 for the $11 million plus any interest related to that because that amount

[00:18:02] Speaker 01:
was determined after the system agreement was terminated.

[00:18:07] Speaker 02:
I'm sorry, go ahead.

[00:18:09] Speaker 00:
One factual question is, once the notice of intent to withdraw is filed in 2005, does that mean that withdrawal is definitely going to happen?

[00:18:19] Speaker 01:
Yes.

[00:18:20] Speaker 00:
It does.

[00:18:21] Speaker 00:
And once that happens, there's nothing that can happen to unring the bell that in eight years withdrawal is going to happen.

[00:18:27] Speaker 01:
There's no subsequent step.

[00:18:32] Speaker 01:
I don't know, technically, whether there's a way out.

[00:18:36] Speaker 01:
I don't believe that there is.

[00:18:37] Speaker 01:
And certainly, factually, there was no question, but that EIA was going to withdraw in December.

[00:18:44] Speaker 00:
There's no subsequent step that is required to effectuate the rest of it.

[00:18:49] Speaker 01:
No, that's what you found in New Orleans, that all you had to do was put the eight-year notice.

[00:18:55] Speaker 01:
There were no other

[00:18:56] Speaker 02:
obligations if that's what what your question no you found in New Orleans that the eight-year notice was the only requirement for for leaving on the merits your argument is that once you draw you don't you don't know anymore is that right that's right that even even for

[00:19:24] Speaker 02:
cases where other parties performed during the time when you hadn't withdrawn.

[00:19:32] Speaker 01:
Is that right?

[00:19:35] Speaker 02:
Was that your position?

[00:19:38] Speaker 01:
The answer is yes, that's our position, but other parties... Remember, this is about bandwidth payments.

[00:19:45] Speaker 01:
and what the bandwidth payments are about the production cost.

[00:19:49] Speaker 01:
And to just simplify it, EIA had a lot of coal production.

[00:19:57] Speaker 01:
and the other companies had natural gas.

[00:20:00] Speaker 01:
And during the time period when the bandwidth got out of whack, natural gas prices, as you probably recall, were very high.

[00:20:11] Speaker 01:
So the bandwidth is just trying to get that back to rough.

[00:20:15] Speaker 02:
Unfortunately, I've sat on these cases, so I do pretty well understand.

[00:20:21] Speaker 01:
The way you phrased it, Chief Judge Garland, was to suggest that somehow people provided us with service.

[00:20:29] Speaker 01:
You know, they sold us electricity, they sold us capacity, whatever.

[00:20:33] Speaker 01:
No, they didn't.

[00:20:33] Speaker 01:
This was just, as you know, a rough way, the bandwidth was a rough way to get those production costs back in

[00:20:45] Speaker 02:
you know, but in a way it was part of the consideration for the whole Entergy system to continue going during that period.

[00:20:52] Speaker 01:
It was, indeed it was, and our argument is those kind of equitable principles which you're making the argument that the Commission did in its order.

[00:21:03] Speaker 02:
It said, hey... Yeah, I know, I'm just trying to be clear.

[00:21:07] Speaker 02:
You're saying that the background

[00:21:09] Speaker 02:
principle is it has to be in the agreement.

[00:21:12] Speaker 01:
Exactly, exactly right.

[00:21:14] Speaker 02:
In the Uniform Commercial Code it says, on termination all obligations which are still executory on both sides are discharged, but any right based on prior breach or performance survives.

[00:21:26] Speaker 02:
And that is without regard to what's actually in the document.

[00:21:31] Speaker 02:
Why isn't that the background principle here?

[00:21:34] Speaker 01:
I think in our view, because

[00:21:39] Speaker 01:
this court said in New Orleans, the commission said over and over again that there was no obligation other than the eight-year notice.

[00:21:50] Speaker 02:
It says no exit fees, is that what you mean?

[00:21:52] Speaker 01:
It didn't, I think if you, we've quoted a number of the, yes, it said no exit fees, but it also said no obligation, no payment.

[00:22:01] Speaker 01:
It wasn't just exit fees, and we could debate what exit fees are, but,

[00:22:10] Speaker 02:
Well, so if your only background principle is one that you think we established, I guess it's something else.

[00:22:16] Speaker 01:
No, no.

[00:22:17] Speaker 01:
I'm sorry.

[00:22:19] Speaker 01:
I lost my train of thought, and it did occur to me.

[00:22:22] Speaker 01:
We pointed out in our briefs, we quoted other cases where

[00:22:34] Speaker 01:
The parties specifically agreed that when you withdraw, you have to pay up all your accrued obligations.

[00:22:43] Speaker 01:
There's nothing like that here.

[00:22:46] Speaker 02:
Right.

[00:22:46] Speaker 02:
But the question is whether that's required.

[00:22:49] Speaker 02:
That is, whether it has to say in an agreement that once the agreement is over, you still owe for the things that you did during the agreement.

[00:22:59] Speaker 02:
And the fact that some parties sometimes do that or don't doesn't really establish what the answer is.

[00:23:05] Speaker 02:
The question is, what is the background principle in the absence of saying anything one way or the other?

[00:23:10] Speaker 01:
And what we're saying, the Commission said that's the Nolte brothers' case.

[00:23:18] Speaker 01:
And the Commission said, yes, look at Nolte brothers.

[00:23:20] Speaker 01:
Nolte brothers didn't turn on the silence.

[00:23:26] Speaker 01:
To the extent there was silence in Nolte Brothers, what the court said was, oh, yes, there's silence, and maybe that does mean that you have to arbitrate.

[00:23:39] Speaker 01:
Because remember, it wasn't about the accrued obligations.

[00:23:42] Speaker 02:
I'm even less interested in Nolte Brothers itself, but rather in terms of just general background understandings in contract law.

[00:23:50] Speaker 02:
So if I make an agreement with my law clerks that they will get paid once a month

[00:23:56] Speaker 02:
they work.

[00:23:58] Speaker 02:
And it provides me with the opportunity to end their term of service after one year or two years.

[00:24:06] Speaker 02:
And I decide

[00:24:09] Speaker 02:
Not at all because of bad work by my law clerks.

[00:24:12] Speaker 02:
But Justice, it's time for a fresh group.

[00:24:14] Speaker 02:
They can't take the fur cases.

[00:24:16] Speaker 02:
Too many fur cases.

[00:24:17] Speaker 02:
Maybe that's it.

[00:24:17] Speaker 02:
Good point.

[00:24:19] Speaker 02:
And I'm going to say we're going to stop on June 1st.

[00:24:23] Speaker 02:
And they still haven't been paid yet, even though they worked all of May.

[00:24:27] Speaker 02:
Is your position that they are not entitled to be paid for what they worked?

[00:24:33] Speaker 02:
If the contract didn't say that's the Osco brush case, Your Honor, exactly the Osco brush case was... So they should have held out for a contract that says, if I do all of my work for you perfectly, and you haven't paid me at the end of the contract, you still have to pay me.

[00:24:52] Speaker 02:
They should have.

[00:24:53] Speaker 02:
I see.

[00:24:53] Speaker 02:
OK.

[00:24:54] Speaker 02:
Go ahead.

[00:24:54] Speaker 02:
I'm sorry.

[00:24:55] Speaker 02:
I think I interrupted.

[00:24:56] Speaker 00:
No, I had a similar question.

[00:24:57] Speaker 00:
I'm just not familiar with that being a background assumption of contract law.

[00:25:00] Speaker 00:
In fact, I thought the background assumption typically is the opposite, that of course, parties can specify that payment is owing based on past performance.

[00:25:10] Speaker 00:
But in the absence of specification, the expectation on, the normal expectation on parties, part of parties entering into an agreement is that if there's performance, there's going to be performance on the other side too, notwithstanding withdrawal.

[00:25:25] Speaker 01:
I guess we just read the cases differently, that if you look at the cases the commission relied on, they look for specific contract language, Nolte, Osco, Brush, John Wiley.

[00:25:39] Speaker 02:
Is there any case that in the absence of such language said performance isn't required?

[00:25:46] Speaker 01:
There was none cited by the commission and we didn't raise any, no.

[00:25:50] Speaker 01:
Okay.

[00:25:52] Speaker 01:
All right, we'll hear from... Thank you, Your Honor.

[00:26:11] Speaker 03:
Good morning.

[00:26:11] Speaker 03:
I'm Carol Banta for the Commission.

[00:26:14] Speaker 03:
Ms.

[00:26:14] Speaker 02:
Banta, could you start with this collateral attack issue, this question of whether they needed to have, I take it the government is not pressing that argument and you gave us an idea of what your position is?

[00:26:27] Speaker 03:
We did make the decision not to pursue that in our brief.

[00:26:30] Speaker 03:
I would point out that collateral attack is

[00:26:33] Speaker 03:
both statutory and jurisdictional.

[00:26:35] Speaker 03:
So the commission cannot waive it.

[00:26:37] Speaker 03:
The interveners raised it, and they argued it.

[00:26:40] Speaker 02:
Are you not pressing it because you just don't want to, or because you don't think that this is a jurisdictional bar at this point, that this is not really a collateral attack?

[00:26:52] Speaker 03:
I thought it was a very close call.

[00:26:54] Speaker 03:
Sometimes being an agency that's acting in the public interest, we don't make the most aggressive jurisdictional argument that we could.

[00:27:03] Speaker 03:
I'm.

[00:27:05] Speaker 04:
I'm.

[00:27:06] Speaker 04:
I'm.

[00:27:14] Speaker 04:
As to what happened here.

[00:27:16] Speaker 03:
I should say, commission counsel, it's on me.

[00:27:17] Speaker 03:
It was a strategic decision that it seemed like an aggressive argument.

[00:27:22] Speaker 04:
What do you think the right jurisdictional answer is?

[00:27:24] Speaker 04:
What do you think the correct jurisdictional answer is?

[00:27:26] Speaker 03:
I think the correct jurisdictional answer is that everyone in this band of litigation understood that Arkansas was in the mix.

[00:27:34] Speaker 03:
If you look at the math.

[00:27:35] Speaker 00:
How does that relate to jurisdiction?

[00:27:39] Speaker 03:
That they understood when they said that the

[00:27:43] Speaker 03:
the 2011 compliance filing was made in the remand proceeding which went on and was affirmed by this court in August, that you're going to pay for 2005.

[00:27:55] Speaker 03:
When the commission rejected the

[00:27:59] Speaker 03:
It took until 2014 because there were overlapping proceedings going on.

[00:28:03] Speaker 03:
The remand proceeding was held in abeyance to wait for something else to happen.

[00:28:07] Speaker 03:
That's why it took the commission until 2014 to rule on the 2011 compliance filing.

[00:28:11] Speaker 03:
It rejected it.

[00:28:12] Speaker 03:
The petitioner's position is, well, we didn't have any reason to believe we'd be included in the next one.

[00:28:18] Speaker 03:
But if you look at the math for 2005,

[00:28:23] Speaker 03:
Entergy Arkansas was the only entity that had to pay the other entities.

[00:28:28] Speaker 03:
It was the only entity that the holding on interest would apply to.

[00:28:31] Speaker 02:
Which order do you think this is a collateral attack on?

[00:28:36] Speaker 03:
It's a collateral attack on the compliance order.

[00:28:40] Speaker 02:
Which one?

[00:28:41] Speaker 03:
That is JA 607.

[00:28:43] Speaker 02:
That's an order rejecting a compliance filing.

[00:28:46] Speaker 03:
It is, and requiring it to be refiled.

[00:28:48] Speaker 03:
But it is in the context of an ongoing proceeding where the Commission had already determined that payments were going to be made for 2005.

[00:28:56] Speaker 03:
This is just the how.

[00:28:57] Speaker 04:
And they were only going to be made by Energy Arkansas.

[00:29:00] Speaker 03:
That's what the math for 2005 was.

[00:29:01] Speaker 03:
The rejection was just the numbers that were used.

[00:29:03] Speaker 03:
That's exactly right.

[00:29:04] Speaker 00:
Because nobody doubts that Energy Arkansas could have sought judicial review of that order.

[00:29:08] Speaker 03:
Right.

[00:29:09] Speaker 03:
Entergy itself sought re-hearing of the interest.

[00:29:12] Speaker 02:
They couldn't have sought re-hearing of an order rejecting it.

[00:29:18] Speaker 02:
Entergy did.

[00:29:19] Speaker 02:
Entergy did.

[00:29:21] Speaker 03:
And there's a re-hearing order on that which is in the supplemental appendix that the interveners submitted.

[00:29:27] Speaker 03:
That is at

[00:29:30] Speaker 03:
i a uh... one seventy six that is the order denying re-hearing that was on the interest issue now energy raise the interest issue both in the remand orders and the compliance orders they filed i think one request for re-hearing in both dockets the commission answered it in both sets of orders

[00:29:46] Speaker 03:
I think they didn't appeal that.

[00:29:48] Speaker 03:
The remand orders did come to this court, but that was on an objection by Louisiana.

[00:29:53] Speaker 03:
I think Entergy, oh, no, actually, Entergy also objected to it in the first bandwidth proceeding, which, and this court upheld the requirement of interest in that 2015 decision that's in the federal appendix rather than the federal reporter.

[00:30:08] Speaker 03:
I know it's in our brief.

[00:30:09] Speaker 03:
I can get that sent for you if you'd like.

[00:30:10] Speaker 03:
It was a memorandum of opinion.

[00:30:11] Speaker 03:
That's actually where this court upheld Entergy having to pay interest.

[00:30:16] Speaker 00:
So if you think, if one were to think that there is a jurisdictional problem, let's just pretend that you did make the argument.

[00:30:21] Speaker 00:
And then you would have made the argument and you would have said that what should have happened is that the withdrawal issue should have been raised when?

[00:30:32] Speaker 03:
On rehearing of the order rejecting compliance filing at JA 607.

[00:30:38] Speaker 02:
as the interviewers argued, again... Could they have raised it if they hadn't... This is on rehearing.

[00:30:44] Speaker 02:
Wouldn't they have to have raised it even before that then?

[00:30:49] Speaker 02:
Their argument is, for the time in which we're out, you can't make us pay.

[00:30:55] Speaker 02:
That's not an... And if that's a new argument, they couldn't have made it on rehearing.

[00:31:02] Speaker 03:
Well, the Commission entertained the interest argument on rehearing, so they didn't even try.

[00:31:05] Speaker 03:
But again, these are some of the calculations

[00:31:08] Speaker 00:
I thought you could raise arguments on rehearing if they only come about as a result of the order, right?

[00:31:14] Speaker 00:
So you can – even if you haven't raised the argument before, you can raise it on rehearing if the argument they're raising is caused by the order that you're seeking rehearing of.

[00:31:22] Speaker 03:
Right.

[00:31:22] Speaker 00:
And here I guess the question would be, as I understand the timing, the withdrawal didn't happen until – December 2013.

[00:31:31] Speaker 00:
Right, so the first time post-withdrawal an argument could have been made about withdrawal would have been on rehearing of the compliance order.

[00:31:40] Speaker 05:
Yes.

[00:31:41] Speaker 00:
Now, I guess everybody knew that withdrawal was going to happen.

[00:31:45] Speaker 00:
Right.

[00:31:46] Speaker 00:
So even pre-withdrawal, an argument could have been made about the consequence of the withdrawal that we knew was coming.

[00:31:53] Speaker 03:
Right.

[00:31:54] Speaker 03:
And I would point out, as we did in our brief,

[00:31:56] Speaker 03:
every single bandwidth filing continued in litigation after withdrawal.

[00:32:06] Speaker 03:
So there are a lot of orders going on in a lot of different proceedings.

[00:32:08] Speaker 03:
Like I said, Entergy raised the interest argument in at least three different places.

[00:32:14] Speaker 00:
And what your brief says is, nevertheless, that on 20, the 2014 compliance order did not explicitly address the issue presented on review, Entergy's pre-withdrawal liability at that time.

[00:32:25] Speaker 00:
So I take it that if

[00:32:27] Speaker 00:
The reason you didn't press the jurisdictional argument in your brief is because you would have thought that that was enough, that because the withdrawal liability issue wasn't specifically addressed, that didn't need to be raised in seeking rehearing of the compliance order.

[00:32:44] Speaker 03:
I think that's right.

[00:32:47] Speaker 03:
I think I lost track.

[00:32:50] Speaker 02:
We're very pleased to hear that even FERC counsel can't completely keep FERC in her mind.

[00:32:58] Speaker 02:
Makes us feel way better.

[00:33:00] Speaker 03:
Although I enjoy these a little more than you do.

[00:33:03] Speaker 00:
It's informative.

[00:33:06] Speaker 00:
I guess the question, a broader way to ask the question is, if you were going to reach the conclusion that there is no jurisdictional problem and that this can be raised now and didn't have to be,

[00:33:18] Speaker 00:
sought as part of the rehearing order, as part of seeking rehearing of the compliance order, the argument would be that the compliance order didn't specifically address the withdrawal question.

[00:33:32] Speaker 03:
That is really the only reason against the, right, because certainly the commission said they could have sought re-hearing, they should have known as a sophisticated entity and experienced participant in these proceedings, and looking at the math for 2005.

[00:33:46] Speaker 03:
But yes, the order, that's exactly why I thought the argument was, I didn't want to.

[00:33:53] Speaker 04:
That's why I'm confused, because your brief said it wasn't explicit.

[00:33:56] Speaker 04:
Right.

[00:33:57] Speaker 04:
But that's never been the test.

[00:33:59] Speaker 04:
The test is not whether it's explicit, it's whether they had sufficient notice.

[00:34:06] Speaker 04:
I get your position on explicitness, what is your position on sufficient notice?

[00:34:11] Speaker 03:
I would say there was sufficient notice.

[00:34:14] Speaker 03:
And the commission thought there was.

[00:34:16] Speaker 03:
And yes.

[00:34:17] Speaker 03:
And like I said, although we didn't raise the argument, we also can't waive it because it is statutory and jurisdictional.

[00:34:23] Speaker 03:
So if the court finds it persuasive, I'm not here to talk you out of that.

[00:34:27] Speaker 02:
Can we talk about it?

[00:34:28] Speaker 02:
But I could use some more help on FERC.

[00:34:30] Speaker 02:
I have actually written, I think, three of these cases with respect to collateral problems.

[00:34:35] Speaker 03:
Plus a few you've forgotten.

[00:34:37] Speaker 02:
Plus, a few I've forgotten.

[00:34:38] Speaker 02:
And none of them are in this context.

[00:34:41] Speaker 02:
That is, it seemed like the closest is Southern companies.

[00:34:47] Speaker 02:
And in that case, the question is whether they were on sufficient notice that the rule that they are challenging had been decided.

[00:34:59] Speaker 02:
Sufficient notice of the rule to which Southern now objects.

[00:35:03] Speaker 02:
Now, the rule to which they're objecting here is that they're liable after withdrawal.

[00:35:10] Speaker 02:
And there's no opinion of FERC has ruled on that question specifically.

[00:35:17] Speaker 02:
And perhaps it's the fault of the other side that they didn't put that question to FERC.

[00:35:23] Speaker 02:
That is, no one made the argument, we're not liable because we withdrew, and FERC said, yes, you are.

[00:35:30] Speaker 02:
That's what happened in the case before us now.

[00:35:32] Speaker 02:
That is not what happened in any of the other cases.

[00:35:36] Speaker 02:
So is there any case where we have held or any other court that it is a collateral attack

[00:35:46] Speaker 02:
where they only should have raised the argument before, not that they did raise the argument before.

[00:35:54] Speaker 03:
I don't know the answer to that.

[00:35:56] Speaker 03:
And to be candid, since we didn't raise the collateral attack argument, I did not come prepared to fully argue the case law.

[00:36:05] Speaker 02:
I think we're beating you up too much already.

[00:36:07] Speaker 02:
It's very unfair.

[00:36:08] Speaker 02:
We appreciate it.

[00:36:09] Speaker 02:
Go ahead.

[00:36:09] Speaker 02:
Go on with the rest of your argument.

[00:36:10] Speaker 03:
I'll make one quick note on the rightness argument that we did raise.

[00:36:13] Speaker 03:
We did that just to put before the court, for all the bandwidth cases there have been, it's really for the court to decide how piecemeal we want to do this.

[00:36:26] Speaker 03:
The court has already considered the remand that says there will be liability for 2005.

[00:36:32] Speaker 03:
There's this case on whether Arkansas has to pay.

[00:36:34] Speaker 03:
There's the case that we cited that's pending as to the methodology, the calculations, and there's actually another one.

[00:36:41] Speaker 02:
Can I ask the same question about this?

[00:36:42] Speaker 02:
Do you think this is jurisdictional or prudential?

[00:36:44] Speaker 03:
It is prudential.

[00:36:45] Speaker 03:
It is just the court.

[00:36:47] Speaker 03:
Putting the court on notice that there are, I said two pieces, confessing another mistake, there's actually another.

[00:36:54] Speaker 02:
But on this one, the commission says it's final, right?

[00:36:58] Speaker 03:
This one, the commission actually says it's final.

[00:37:01] Speaker 02:
There aren't going to be more facts or anything relevant to this case.

[00:37:04] Speaker 02:
It's only a question of law.

[00:37:06] Speaker 03:
That's right.

[00:37:07] Speaker 02:
Is there a background rule or isn't there a background rule, really, in the end?

[00:37:10] Speaker 02:
That's right.

[00:37:11] Speaker 04:
And with the passage of time, with interest out there, I'm just not sure if there's still principle on which more interest, would what they owe increase over time?

[00:37:22] Speaker 04:
If we could just resolve everything right now, it would be number, one number.

[00:37:25] Speaker 04:
If we have to wait five years, it will be a higher number.

[00:37:28] Speaker 03:
I think so.

[00:37:29] Speaker 03:
I mean, a lot of what's going on before the commission is disputes over the exact methodology and the dollar figures.

[00:37:36] Speaker 03:
I'm not aware that they're a one-way.

[00:37:38] Speaker 03:
And I believe that with each compliance filing, Entergy makes the payments among the companies.

[00:37:49] Speaker 03:
I think any number you've already seen has already been paid, but I would think that interest would continue to improve.

[00:37:56] Speaker 03:
Paid by Entergy, do you mean the big Entergy or by Entergy Arkansas?

[00:38:00] Speaker 03:
The big Entergy flows the payments among the affiliates, so it would be paid by Entergy Arkansas.

[00:38:05] Speaker 03:
In all the filings you see where Entergy Arkansas is paying someone, those payments have been made, but the litigation over what the dollar amount

[00:38:13] Speaker 03:
should have been goes on.

[00:38:14] Speaker 03:
And I think it can go up or down.

[00:38:18] Speaker 04:
You know, Angie, my energy Arkansas is in here.

[00:38:20] Speaker 04:
This is all about them not having to pay money.

[00:38:21] Speaker 04:
And I've just been kind of shocked that they seem not to care at all about paying these millions and millions and millions of dollars.

[00:38:27] Speaker 03:
Well, and I can't speak for energy.

[00:38:30] Speaker 03:
My understanding of the energy system, at least when we're talking about the energy bandwidth agreement world, they're all in the mid-continent ISO now.

[00:38:40] Speaker 03:
So I don't know if it's the same.

[00:38:41] Speaker 03:
Because they're operating affiliates owned by a holding company, I think in most instances, except they did appeal the interest issue,

[00:38:51] Speaker 03:
As far as Entergy is concerned, it's somewhat a zero-sum game.

[00:38:55] Speaker 03:
It's one affiliate paying another affiliate.

[00:38:58] Speaker 03:
And throughout the history, not just of the bandwidth, but the Entergy system agreement litigation, it has quite often been the various state commissions, because the Entergy companies operate in, I believe, five different retail regulators' jurisdictions.

[00:39:14] Speaker 03:
So Entergy might not care whether Entergy Arkansas is paying Entergy Louisiana, but the Arkansas Commission and the Louisiana Commission care a lot.

[00:39:21] Speaker 03:
So much of the other entities are the Mississippi Commission, the Texas Commission, and the Council of New Orleans, because home rule, they have retail jurisdiction.

[00:39:31] Speaker 03:
So the real interest in these cases is often the Arkansas Commission representing its rate payers versus the Louisiana Commission representing its rate payers and so on.

[00:39:42] Speaker 00:
Can I just ask an informational question, which is, before the argument was made in seeking rehearing of the April compliance order,

[00:39:52] Speaker 00:
the April compliance filing.

[00:39:54] Speaker 00:
Was there any reason to anticipate that there was going to be an argument that an argument was in the offing to the effect that withdrawal means no responsibility to make payment?

[00:40:05] Speaker 03:
I'm not aware of anything.

[00:40:07] Speaker 00:
No, no, there's no other proceeding in which that issue No, it was a surprise.

[00:40:13] Speaker 00:
It was a it was a surprise to the Commission that that argument was being made I believe so in April.

[00:40:19] Speaker 03:
Yes in the I was involved in in the litigation of the termination in the New Orleans case and

[00:40:28] Speaker 03:
where there was talk about continuing obligation for bandwidth payments, and from what Louisiana and New Orleans sought there and what the Commission was discussing and what we were contemplating when we were litigating it, the understanding was always that Louisiana and New Orleans wanted Arkansas to have to continue paying in 2014, 2015, 2016, and that was what the Commission understood it was cutting off.

[00:40:48] Speaker 03:
So even having worked on that termination case, I don't know that anyone knew this was coming.

[00:40:55] Speaker 03:
I just want to add a couple points on the merits.

[00:40:59] Speaker 03:
The commission did not talk about equitable considerations.

[00:41:04] Speaker 03:
It never used the word equitable.

[00:41:05] Speaker 03:
We never used that word in our brief.

[00:41:06] Speaker 03:
It talks about contract performance.

[00:41:08] Speaker 02:
Totally.

[00:41:09] Speaker 02:
Equity is not of interest to FERC.

[00:41:10] Speaker 03:
Is that what you're saying?

[00:41:13] Speaker 03:
Oh, no, it is.

[00:41:13] Speaker 03:
No, just kidding.

[00:41:14] Speaker 03:
Just kidding.

[00:41:14] Speaker 02:
Of course it is.

[00:41:15] Speaker 03:
That was a joke.

[00:41:17] Speaker 03:
Yes.

[00:41:17] Speaker 03:
In this case, we actually had contract principles and didn't have to rely on

[00:41:22] Speaker 03:
I have something.

[00:41:23] Speaker 03:
Got it, got it.

[00:41:24] Speaker 03:
Basic contract principles.

[00:41:25] Speaker 03:
A quick word on the RTO cases, the regional transmission operation cases.

[00:41:30] Speaker 03:
I think we've pointed this out in our brief.

[00:41:32] Speaker 03:
Every single one of those, the Mysote case, First Energy, Duquesne, Louisville, it's always about going forward.

[00:41:38] Speaker 03:
It's like cost shared transmission project allocations, then you want to leave the RTO.

[00:41:42] Speaker 03:
One of the cases involved forward capacity commitments that had been made.

[00:41:47] Speaker 03:
It's always about what are you going to pay in

[00:41:50] Speaker 03:
the year, either as a lump sum to exit or in the year after you left and the year after that for things that, for capital expenditures and things like that that were allocated to you on a going forward basis.

[00:42:05] Speaker 03:
None of those cases talk about something like Judge Garland's example of paying your law clerks.

[00:42:12] Speaker 02:
Let's not broadcast that, please.

[00:42:15] Speaker 03:
I had a similar analogy involving a lease, but it's much more relatable to everyone in the courtroom, I think, to talk by clerks.

[00:42:23] Speaker 02:
So unless the court has any further questions, I'd... Is it clear that FERC would have entertained an argument, this argument about withdrawal of liability in those earlier cases?

[00:42:37] Speaker 03:
In which earlier?

[00:42:38] Speaker 02:
In the ones that you now say might be a collateral attack.

[00:42:41] Speaker 03:
Well, on the compliance order, as I said, Entergy, even though the commission rejected the compliance filing, Entergy raised its argument against interest, against having to pay interest on rehearing.

[00:42:55] Speaker 03:
And the commission did answer that in a rehearing order.

[00:42:58] Speaker 03:
So I think there is, from what we know here, there is reason to believe that the commission would have answered that in a rehearing order.

[00:43:03] Speaker 03:
If it didn't, then there certainly would be no basis to argue a collateral attack if the commission rejected it as an improper

[00:43:10] Speaker 04:
When they said there was going to be interest for 2005 and for other years as well, for this 2005 period there was going to be interest, is there any entity in the world that was going to have to pay that interest other than Energy Arkansas?

[00:43:24] Speaker 03:
No.

[00:43:26] Speaker 02:
But what I'm asking is, isn't a compliance filing attack on one limited to challenging the issues that are in that?

[00:43:34] Speaker 02:
So there it was about calculation of interest and whether interest was owed.

[00:43:38] Speaker 02:
Would they have been able to challenge on the ground, hey, we withdrew, we're not liable at all anyway?

[00:43:43] Speaker 03:
Well, since they didn't try, I can't answer that.

[00:43:47] Speaker 03:
I do know that in this case, FERC did maybe go out of its way to answer the interest issue in two different

[00:43:54] Speaker 03:
proceedings when that was raised.

[00:43:58] Speaker 03:
So the commission certainly thought that it was something that should have been raised and that it would have answered.

[00:44:02] Speaker 04:
Why would they send it back for a new compliance filing if there was going to be nothing to comply with after December 2013?

[00:44:09] Speaker 03:
Well, exactly.

[00:44:10] Speaker 03:
When I refer to the math from 2005.

[00:44:11] Speaker 03:
For 2005, Entergy Arkansas is the only entity paying money to anyone.

[00:44:17] Speaker 03:
So why make another compliance filing if it doesn't include Entergy Arkansas?

[00:44:22] Speaker 03:
I don't know.

[00:44:24] Speaker 03:
Thank you.

[00:44:35] Speaker 02:
I think he's out of time, but we'll give him another two minutes.

[00:44:39] Speaker 01:
I just want to go to a couple of points that you raised.

[00:44:52] Speaker 01:
We didn't address it in our reply reading because we thought that since the commission hadn't brought up the argument.

[00:45:00] Speaker 01:
In our initial brief, we did raise the question of what you could seek in the hearing and to answer to Judge Garland's question.

[00:45:10] Speaker 01:
In a compliance filing, you can only address, the commission was very clear, we had raised in the compliance filing

[00:45:19] Speaker 01:
some issues.

[00:45:20] Speaker 01:
And the commission said, no, no, you can't raise those issues.

[00:45:24] Speaker 01:
You actually did raise them in another re-hearing of a different substantive order.

[00:45:29] Speaker 01:
But you can't raise them here.

[00:45:30] Speaker 01:
You can only talk about what's in the compliance filing itself.

[00:45:35] Speaker 04:
So you just said that you had raised your liability post-withdrawal?

[00:45:38] Speaker 01:
No, we didn't raise it.

[00:45:40] Speaker 01:
It was a different, totally different issue.

[00:45:42] Speaker 01:
I didn't mean to suggest that.

[00:45:45] Speaker 01:
I'm just saying that

[00:45:47] Speaker 01:
If you read the order, if you read the order, it's in our brief, in our initial brief, I think we argued this at 25 to 28.

[00:45:55] Speaker 01:
If you, you'll see there's a quote from the commission.

[00:45:59] Speaker 01:
In a challenging compliance order, you can only challenge the compliance order.

[00:46:05] Speaker 01:
You can't raise these other questions.

[00:46:07] Speaker 01:
And so we're quick.

[00:46:08] Speaker 01:
We're pushing that off Arkansas Commission.

[00:46:12] Speaker 01:
It was totally different issues, not this issue, but we're pushing that off and you raised them in the hearing of this other order and we're going to hold a hearing on that.

[00:46:23] Speaker 01:
it it it is uh... it isn't a free for all their regulation that governs what can be raised on the complaints for him i don't recall off-hand i remember the commission that's pretty clear that one sounded like you were already we're already addressing that somewhere else so we don't need to address it here too which is a different

[00:46:50] Speaker 01:
They sort of put that as a secondary.

[00:46:58] Speaker 01:
They first said you can't raise it here, but by the way, you've raised it somewhere else and we're going to address it there.

[00:47:06] Speaker 01:
So I don't want you to think that

[00:47:09] Speaker 01:
It was the reverse order.

[00:47:10] Speaker 01:
I think the sentence is pretty clear about, and it's quoted in our brief, and I don't remember it exactly, but you can only raise issues about the compliance filing when you challenge it.

[00:47:28] Speaker 01:
Just want to make one other point on the RTO.

[00:47:32] Speaker 01:
We've quoted the language.

[00:47:34] Speaker 01:
You can read what the language says.

[00:47:37] Speaker 01:
It says accrued obligations.

[00:47:39] Speaker 01:
It doesn't say future obligations.

[00:47:41] Speaker 01:
It says accrued obligations.

[00:47:45] Speaker 01:
When you withdraw, you'll be liable for accrued obligations.

[00:47:48] Speaker 01:
That is what we have here.

[00:47:52] Speaker 02:
OK.

[00:47:52] Speaker 02:
Thank you very much.

[00:47:53] Speaker 02:
We'll take the matter under submission.

[00:47:54] Speaker 02:
We'll take a brief break while the next group of lawyers moves up.