[00:00:02] Speaker 01:
Case number 16-1133, Duke Energy Corporation and L Petitioners vs. Federal Energy Regulatory Commission.

[00:00:10] Speaker 01:
Mr. Fitzgerald for the petitioners, Ms.

[00:00:12] Speaker 01:
Rylander for the respondent, and Mr. Mays for the intervener.

[00:00:55] Speaker 06:
May it please the court, Matt Fitzgerald for Duke Energy.

[00:00:59] Speaker 06:
This is not a typical FERC case.

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This is a contract interpretation case that centers on an indemnity provision.

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There is no deference in the interpretation here.

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There is only an unambiguous contract term.

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So the background here is that Duke did everything right.

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There's no allegation of negligence.

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There's no allegation of bad faith.

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And PJM, though it's on the other side of this case, clearly would want to do exactly the same thing under these circumstances as it did here.

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So it starts, of course, with the polar vortex, which is an unprecedented cold weather emergency.

[00:01:44] Speaker 03:
And under those emergency circumstances... You have to be unprecedented given your reading of the tariff indemnification provision.

[00:01:52] Speaker 06:
It does not have to be unprecedented, no, Your Honor, but it's important that it's an emergency circumstance because in the declared emergency, that triggers PJM's powers to, quote, direct the operations of market participants, which includes Duke.

[00:02:08] Speaker 03:
So on the morning of- Why is this more directive than every day?

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They say, hey, here's what we need, bid in.

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So what they do on their- Business is all hands on deck, but it's the same process, fundamentally.

[00:02:19] Speaker 06:
No, Your Honor, so it's totally different.

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And the difference is what PJM does every day is essentially say turn on, it clears the market and it says turn on and turn off when it needs the energy put into the grid.

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What it did on this day that's so unique is it specifically ordered the purchase of natural gas by Duke.

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And that's not something that PJM does with any frequency.

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Well, FERC found that it didn't.

[00:02:49] Speaker 06:
Well, Your Honor, there's no subs.

[00:02:51] Speaker 05:
And that's a, that's a, that, if Serk's right about that, do you agree that you lose?

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Yes.

[00:02:58] Speaker 05:
Yeah, okay, so why don't you focus on that?

[00:03:01] Speaker 06:
Sure.

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So the key here, we have these communications, these phone calls in the record, Your Honor, at 142 to 146, I believe.

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And there are three phone calls in rapid succession between Duke and PJM.

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And the key is this statement that the securing of gas is not economic today.

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Every day, when Duke secures gas, it is up to Duke, and it is an economic decision by Duke whether to buy gas, when to buy gas.

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The whole gas buying process is normally up to Duke, and it's absolutely economic, and everybody understands that.

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And so when on this day they say,

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You know, we advise you to secure gas today.

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This is not economic.

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This is a reliability issue.

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That's the real signal to Duke.

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This is a special.

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This is something that we must immediately obey from PJM.

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And so that's what they did.

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And so there's only one affidavit in the record about this.

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We have the phone calls, and then we have the affidavit of Mr. Cecil from Duke.

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And he explains that that's what happened, that's what he understood.

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He says, quote, I called Mr. Maher to confirm that PJM was instructing Duke to secure gas without regard to economics.

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He confirmed that my understanding of the situation was accurate.

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And that's at page 134 of the record.

[00:04:24] Speaker 03:
You have competing views of what the implications of those phone calls were.

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Is that a type of almost factual determination that we ask just whether there is substantial evidence to support Ferck's conclusion, or is that a legal ruling?

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If there is ultimately a, if there were a clear factual finding by FERC, these conversations did not mean go out and buy gas, then that would be subject to the substantial evidence standard.

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And it's in our brief that way because we have to protect against the possibility that FERC's orders will be read that way.

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But really,

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when we look at FERC's orders, what they're actually doing, I believe, is they're actually interpreting the tariff.

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And so what they say several times is, we find the PJM indemnification provision should not be interpreted to guarantee reimbursement.

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That's at page 29 of the joint appendix.

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They say at page 31, this is not a directive within the meaning of the indemnification provision.

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So there are snippets of FERC's orders that seem to

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lean towards some factual finding, but I don't think that's the best way to read their orders.

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But in any case, we address it in our brief because we have to take that chance.

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So the scenario here – so what FERC actually did say here is a couple of things.

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First, they said this is not the right kind of loss under this tariff provision.

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But the provision refers to any and all losses, any and all damages, losses, claims, and all other obligations to third parties.

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There's no texture.

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That's got no textual limitation for polar vortexes.

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That could happen.

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You could do this every day.

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It could happen every day.

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It's a broad term, yes, Your Honor.

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But it doesn't happen every day.

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And the key to this not happening every day.

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You don't lose some money other days?

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Do we lose money other days?

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Sure, it can happen.

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And so all those would be compensable under your reading.

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No, no, not at all, Your Honor.

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So normally speaking, on ordinary days, on normal days, most virtually all days, PJM's instructions to Duke are turn on and turn off.

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And it is the purchase of fuel under those circumstances is still up to Duke.

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It's still in Duke's judgment.

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Is the turn on, turn off a directive?

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It could be, Your Honor.

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Yes, the tariff suggests that it could be.

[00:06:58] Speaker 03:
Well, then doesn't the directive to turn on mean you better have some gas when you turn it on?

[00:07:05] Speaker 06:
No, Your Honor, because a couple of reasons.

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So first of all, the ordinary, so it's a staged series of communications where first it clears its bid into the market, and then it clears the market.

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So that's when PJM essentially says, looks like we're going to need you.

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And then there is a notice given in the amount of time that Duke has asked for before the unit is actually needing to run on this turn on turn off signal.

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So as these communications happen, it remains up to Duke whether to buy fuel, when to buy fuel, how to arrange its affairs to be ready to turn on like that.

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And so what's really unique about this case and really important is that PJM actually steps out of its lane and it says, we need you to buy fuel.

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Because that's what PJM never does.

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When Duke buys fuel in its own judgment, then it's on Duke whether it makes money.

[00:07:59] Speaker 04:
I guess I don't understand why it is that PJM isn't also telling Duke Energy to buy fuel when it says turn on.

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What's the distinction here?

[00:08:11] Speaker 06:
Well, I guess it's difficult because it's a stage series of communication.

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So the turn on signal is a dispatch signal.

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It's an electronic thing that happens every five minutes.

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It is a part in time and space and the judgment of Duke from the process of buying fuel.

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So I mean, keep in mind, this provision applies to all of the generation owners in PJM.

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There are some of these that are run by coal.

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There are some that are run by nuclear, which have totally different fuel type situations.

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So it isn't that

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put it this way, I wouldn't say that in response to the electronic dispatch signal turn on, that it is implementing or complying with that order for Duke, you know, 16 hours later or a day earlier to have made a decision to purchase fuel or not.

[00:09:04] Speaker 03:
So another textual question, before your time is up, and that is, it talks about the, this is all indemnification by a transmission customer, so this doesn't sound like it's supposed to be,

[00:09:15] Speaker 03:
PJM relationship, which is governed by other things under the contract.

[00:09:21] Speaker 06:
Right.

[00:09:21] Speaker 06:
The indemnification is ultimately by the transmission customer.

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And the transmission customer is the load serving entity.

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Essentially, a transmission customer is probably the company that sends you your personal electric bill.

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Ultimately, the ratepayers, the transmission customers would collect it from the ratepayers.

[00:09:43] Speaker 06:
Yes, your honor.

[00:09:44] Speaker 06:
And so, but the reason PJM Settlement in particular is sued here is that PJM Settlement is the entity that exists to connect generation owners like Duke to transmission customers.

[00:09:56] Speaker 03:
I guess the advocateer of provision seems to think the transmission customer that does the indemnification here is distinct from PJM settlement or PJM is from the transmission provider and yet you're saying they're the ones that got to get you the indemnification and they can figure out on their own how to get themselves repaid.

[00:10:13] Speaker 06:
Well, by by figure out on their own, they would they would be billing the transmission customer for this.

[00:10:18] Speaker 06:
The money will come from the transmission customer and then in the long run from the rate payers, presumably.

[00:10:24] Speaker 06:
And that's how when the transmission customer owes something, the way that a generation owner gets money from a transmission customer is to go through PJM settlement.

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And you can see FERC's order didn't, I believe that's an argument made by the interveners, not one that's in FERC's order.

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So FERC, it seems, doesn't have a problem with going after PJM Settlement as a way to get money from the transmission customer.

[00:10:46] Speaker 06:
That is a proper path.

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So if I may, I'd like to save the remainder of my time.

[00:10:52] Speaker 06:
Okay, thank you.

[00:11:07] Speaker 02:
Good morning.

[00:11:08] Speaker 02:
May it please the court, Elizabeth Rylander for the commission.

[00:11:11] Speaker 02:
I'd like to start out by agreeing with Duke's counsel on a couple of important points.

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First, is that Duke did do everything right here.

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Duke was obligated to be available to PJM on January 28th under the terms of the tariff and its obligations as a generation capacity resource.

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Duke purchased gas and made itself available.

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Second thing is that counsel has conceded that if PJM did not order Duke

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purchase gas, then regardless of one's interpretation of tariff section 10.3 do not prevail here.

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The Commission did in fact find that there was no directive from PJM to purchase gas.

[00:11:46] Speaker 03:
Do you agree with their reading of customer as well?

[00:11:49] Speaker 03:
So that's not a problem with their interpretation of the tariff?

[00:11:52] Speaker 02:
Their reading of transmission customer, Your Honor?

[00:11:54] Speaker 03:
For purposes of indemnification provision.

[00:11:57] Speaker 02:
The Commission did not reach that issue because it found that tariff provision as a whole did not apply.

[00:12:07] Speaker 02:
And it focused principally on this question of whether there was a directive under the tariff.

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So I'm not able to... I'm just trying to understand then.

[00:12:17] Speaker 03:
So if, just hypothetically, there were a disagreement with the Commission's decision as to

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Directive there would have to be a remand to address the customer issue or in fact is that not something that the Commission thinks is a barrier?

[00:12:34] Speaker 02:
Your honor if I could be sure that I'm following you correctly

[00:12:38] Speaker 03:
Just assuming.

[00:12:39] Speaker 03:
Just an assumption question.

[00:12:41] Speaker 02:
No, no.

[00:12:41] Speaker 03:
So I disagree on directive.

[00:12:43] Speaker 02:
I guess I'll have mine.

[00:12:44] Speaker 02:
We disagree on directive.

[00:12:45] Speaker 02:
So if the court were to find that there was a directive, then you want to know what happens in terms of the reading of customer.

[00:12:51] Speaker 02:
The commission did not parse the word, the term transmission customer.

[00:12:56] Speaker 02:
It is defined in the tariff.

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But what the commission then said, working backwards, that this provision isn't applicable

[00:13:07] Speaker 02:
legally because this is part of a larger tariff and it does not apply to the situation that Duke finds itself in.

[00:13:17] Speaker 02:
Then factually, the commission also responded to Duke's arguments concerning the directive and said there was no directive here.

[00:13:26] Speaker 02:
I would not say the commission made a particular representation as to what transmission customer means.

[00:13:38] Speaker 04:
So go back to the finding of directive.

[00:13:43] Speaker 04:
Why is this not a directive?

[00:13:45] Speaker 02:
Why is this not a directive, Your Honor?

[00:13:48] Speaker 02:
It is not a directive for a couple of reasons.

[00:13:51] Speaker 02:
The first one is that Duke is obliged as a generation capacity resource to be available to PJM every day.

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It must come up with some way to be able to turn its generation on and turn it off as instructed.

[00:14:03] Speaker 03:
Is that 100% they have to be ready

[00:14:06] Speaker 03:
100%?

[00:14:07] Speaker 02:
Yes, your honor.

[00:14:08] Speaker 03:
That's the contract.

[00:14:09] Speaker 02:
Accepted, I believe there's an exception for forced outages, but there's no allegation that there was an exception that was applicable here.

[00:14:19] Speaker 05:
Given that obligation, why would there ever be an order to buy gas, to buy fuel?

[00:14:28] Speaker 02:
There never would be, your honor.

[00:14:29] Speaker 02:
There would be no need.

[00:14:30] Speaker 05:
Yeah, that's what I thought.

[00:14:34] Speaker 04:
What's the purpose of this exchange?

[00:14:37] Speaker 04:
Why did PGM say, this isn't economics, do it?

[00:14:43] Speaker 02:
So what Duke describes in his opening briefs is that it's able to, in some cases, to time the purchase of gas and to time its availability, which I, Duke's counsel can explain this more clearly than me, but I imagine that would be to take advantage of

[00:15:00] Speaker 02:
of the pipeline service as Duke has contracted for it, or of prices as they fluctuate during the day.

[00:15:11] Speaker 02:
So, but what happened on the morning of January 27th, which is a day prior to the emergency.

[00:15:17] Speaker 05:
So, excuse me for interrupting here, but do you read all of these statements?

[00:15:23] Speaker 05:
I'm looking at the transcript of these conversations.

[00:15:26] Speaker 05:
All of these conversations between these two people

[00:15:30] Speaker 05:
things like we want all units available for tomorrow.

[00:15:35] Speaker 05:
He goes on and on.

[00:15:37] Speaker 05:
Do you view this, does FERC view all of this as just a reminder that it has an obligation to do this already?

[00:15:44] Speaker 02:
Yes, Your Honor.

[00:15:45] Speaker 05:
In other words, it's going to be really cold tomorrow.

[00:15:47] Speaker 05:
You better have everything going.

[00:15:49] Speaker 02:
Yes, Your Honor.

[00:15:50] Speaker 02:
I would view it that way.

[00:15:51] Speaker 05:
That's all this is?

[00:15:52] Speaker 02:
Yes.

[00:15:53] Speaker 05:
So when they say, so when he says, when he says,

[00:15:58] Speaker 05:
If you can secure gas, we would advise you to secure gas for your units.

[00:16:08] Speaker 05:
FERC is saying that you're obligated to have these units going, so you better get gas, right?

[00:16:14] Speaker 02:
Correct, Your Honor.

[00:16:16] Speaker 02:
PGM describes in its opening briefs and constraints in the pipeline.

[00:16:22] Speaker 04:
What would a directive look like if this isn't a directive?

[00:16:24] Speaker 04:
Give me an example of a directive.

[00:16:28] Speaker 02:
There's a reliability directive which has a specific meaning and I believe that has to be identified as a reliability directive because that is pursuant to a separate set of rules.

[00:16:43] Speaker 02:
But I would

[00:16:44] Speaker 02:
look for PJM more informally to use a word that isn't advised.

[00:16:50] Speaker 02:
I would look for PJM to say, we want you to buy gas.

[00:16:53] Speaker 02:
We instruct you to buy gas.

[00:16:54] Speaker 02:
We direct you to buy gas.

[00:16:57] Speaker 02:
What PJM said was, if you can get gas, we think you're probably going to need it.

[00:17:04] Speaker 02:
We expect to need you, but we cannot guarantee that you're going to be on.

[00:17:09] Speaker 02:
So Duke here took a casualty.

[00:17:12] Speaker 03:
That was a non-ordinary type of statement.

[00:17:16] Speaker 03:
Was it not?

[00:17:17] Speaker 05:
When they say this is not an economic issue, you commission fine support in that, correct?

[00:17:27] Speaker 05:
They're just saying, well, this has nothing to do with money.

[00:17:29] Speaker 05:
You have a reliability obligation here.

[00:17:31] Speaker 02:
So if I could take your honors question.

[00:17:33] Speaker 02:
Is that what that means?

[00:17:34] Speaker 02:
If I could take your honors questions together,

[00:17:38] Speaker 02:
Judge Tatel, I do think on an average day when it's not this cold and there are more, there are more resources available, PJM and Duke are both able to consider the economics of the dispatch decision.

[00:17:53] Speaker 02:
The economics come into play more so than they do here.

[00:17:57] Speaker 02:
Getting to Judge Moleste's question,

[00:18:00] Speaker 02:
I get it.

[00:18:01] Speaker 02:
OK.

[00:18:01] Speaker 02:
This is unusual because there is so little capacity available.

[00:18:06] Speaker 02:
PJM says we're getting needed all.

[00:18:07] Speaker 02:
It doesn't matter what it costs.

[00:18:10] Speaker 02:
That is not a normal case.

[00:18:12] Speaker 02:
If that was a normal case, we would certainly have had a case something like this in the past.

[00:18:18] Speaker 03:
So what would be a direct?

[00:18:20] Speaker 02:
What would be a directive?

[00:18:22] Speaker 02:
I think, so again, there is a NERC reliability directive which is made pursuant to, NERC is the North American Electric Reliability Corporation.

[00:18:32] Speaker 02:
That requires, those are specific instructions, and PJM has denied that it issued a special reliability directive here.

[00:18:41] Speaker 02:
I'm not entirely sure what it would look like, but if PJM was just calling to give it an instruction other than turn on, turn off,

[00:18:51] Speaker 02:
I would look for it to say, we want you to buy gas.

[00:18:53] Speaker 02:
We instruct you to buy gas.

[00:18:55] Speaker 02:
We direct you to buy gas, something like that.

[00:18:57] Speaker 03:
This was pretty close to we instruct you to buy gas.

[00:19:01] Speaker 02:
Respectfully, Your Honor, I disagree.

[00:19:03] Speaker 02:
This is a tariff.

[00:19:05] Speaker 02:
The obligation for a generation capacity resource to be available is stated in the tariff.

[00:19:10] Speaker 02:
It's there every day.

[00:19:12] Speaker 03:
and the cause between Duke and PJM.

[00:19:21] Speaker 02:
It's not even necessarily by gas now, Your Honor, because again the emergency situation PJM was anticipating is at least 24 hours away.

[00:19:30] Speaker 02:
The emergency procedures broadcast was issued on the morning of January 27th for the day and evening periods of January 28th.

[00:19:39] Speaker 02:
And PJM states in the record.

[00:19:41] Speaker 03:
I don't get what the timing has to do with whether it's a directive.

[00:19:44] Speaker 03:
I mean, the vortex went on for a few days, and they got a plan ahead when they see something really, really, really bad coming weather-wise, and they said this is exceptional.

[00:19:56] Speaker 02:
Your honor, I would direct your attention to the paragraph 24 of the initial order, which is on J8 page 13.

[00:20:04] Speaker 02:
PJM says that it wouldn't give a reliability directive 36 to 48 hours in advance.

[00:20:10] Speaker 02:
And if there was any such directive, it would have informed Duke that PJM needed to shed load.

[00:20:15] Speaker 02:
Shedding load is more commonly known as a brownout, dropping load to match the amount of generation there is.

[00:20:23] Speaker 02:
PJM says it just wouldn't have done that.

[00:20:29] Speaker 04:
Okay, great.

[00:20:30] Speaker 04:
Thank you very much.

[00:20:31] Speaker 04:
We'll have you here.

[00:20:31] Speaker 04:
We'll hear from the interviewer.

[00:20:41] Speaker 00:
Thank you.

[00:20:41] Speaker 00:
So I knew it.

[00:20:42] Speaker 00:
This, I guess I'll be the only one saying may it please the court.

[00:20:45] Speaker 00:
My name is Jeffrey Mays, General Counsel for Modern Analytics, LLC, Independent Market Monitor, PJM.

[00:20:52] Speaker 00:
And I want to explain why no kind of equitable relief is appropriate in this case.

[00:20:57] Speaker 00:
The Duke seeks an expansive interpretation of this indemnity provision primarily based on arguments about bad weather and about statements from PJM, and I see those mainly as equitable arguments.

[00:21:10] Speaker 00:
Fairness requires that the request be denied.

[00:21:14] Speaker 00:
PJM markets have been restructured for competition, consistent with a lot of your earlier questions here.

[00:21:19] Speaker 00:
Regulation through competition is consistent with the law and economics principle that risk should be assigned to the party most able to manage them.

[00:21:27] Speaker 00:
Suppliers make money when they manage full procurement well.

[00:21:31] Speaker 00:
Suppliers lose money when they do not manage full procurement well.

[00:21:35] Speaker 00:
Suppliers who do not manage full procurement well lose out to competitors who do.

[00:21:40] Speaker 00:
And so, Duke would not offer to ship, I think a lot of the questions I'm going to this earlier, Duke is not offering to share the benefits of when it makes favorable gas purchases.

[00:21:49] Speaker 00:
Why would it think that it could come to customers and ask for compensation when it makes less favorable gas purchases?

[00:21:57] Speaker 00:
Suppliers can take a lot of maintenance.

[00:21:59] Speaker 03:
Because the tariff says they can do it if they incur losses from complying with the directive.

[00:22:03] Speaker 03:
That's why.

[00:22:03] Speaker 03:
Right?

[00:22:05] Speaker 00:
I disagree.

[00:22:05] Speaker 00:
I don't think it says that at all.

[00:22:07] Speaker 00:
One is I don't think they received any directive.

[00:22:09] Speaker 00:
They appointed to no provision that authorizes PGM to direct Duke to buy gas.

[00:22:14] Speaker 00:
Duke did not believe that PGM had that authority.

[00:22:16] Speaker 00:
Duke did not, after it received that phone call that it characterized as a directive, it did not in fact buy gas, it waited.

[00:22:24] Speaker 00:
During that time, the price of gas rose significantly.

[00:22:28] Speaker 00:
About half of the losses or so can be contributed.

[00:22:30] Speaker 03:
Well, the directive was be ready tomorrow.

[00:22:32] Speaker 03:
What they do between the phone call and tomorrow is up to them, but be ready tomorrow.

[00:22:35] Speaker 00:
Well, what they initially received was a maximum generation emergency alert.

[00:22:39] Speaker 00:
And that is not that uncommon.

[00:22:41] Speaker 00:
In the period 2014 to the half of 2015, there were about 10 such maximum generation alerts issued by PJM.

[00:22:49] Speaker 00:
This was one of them.

[00:22:50] Speaker 00:
And so when that was issued, Duke apparently had done an analysis saying it did not expect that it was going to need gas tomorrow.

[00:22:58] Speaker 00:
It asked PJM why.

[00:22:59] Speaker 00:
It received a differing forecast from PJM.

[00:23:04] Speaker 00:
It was reminded about reliability.

[00:23:06] Speaker 00:
And that's the key concern that PJM Dispatches have, is they're looking at the weather tomorrow.

[00:23:10] Speaker 00:
This PJM Dispatcher thinks tomorrow's going to be a bad day, and he's concerned about reliability.

[00:23:17] Speaker 00:
He's not authorized to direct Duke to purchase gas.

[00:23:20] Speaker 00:
I don't think anyone believes that a PJM Dispatcher is authorized to order it if it doesn't do anything like that.

[00:23:25] Speaker 00:
There's no authority in the terror for that.

[00:23:27] Speaker 00:
So the claim that

[00:23:29] Speaker 00:
that there was a directive in the sense of that PJM can order a duke to buy gas just is false.

[00:23:38] Speaker 04:
Thank you very much.

[00:23:39] Speaker 00:
And so we talked a little bit about the reliability obligations.

[00:23:43] Speaker 04:
Excuse me.

[00:23:44] Speaker 04:
You're on your time.

[00:23:45] Speaker 04:
We have your argument.

[00:23:46] Speaker 04:
Thank you very much.

[00:23:48] Speaker 04:
Mr. Fitzgerald, we'll give you back two minutes.

[00:23:55] Speaker 03:
I just wanna think, would your reading of the tariff include you to get not just the cost of gas, but any other operational costs you have that day?

[00:24:03] Speaker 06:
No, Your Honor, because the directive that was given to us was to secure gas.

[00:24:09] Speaker 06:
So everything else, everything else that is ordinarily up to Duke and remained up to Duke on that day to make us ready to operate is... Was it to secure gas and be ready to operate in all cylinders?

[00:24:22] Speaker 05:
Could you just say, I'm sorry, could you just say,

[00:24:25] Speaker 05:
once more, pointing to the actual language.

[00:24:28] Speaker 05:
What's your best evidence that you were directed to buy gas, keeping in mind that our standard here is we're reviewing FERC's decision for substantial evidence, right?

[00:24:40] Speaker ?:
Yes, Your Honor.

[00:24:41] Speaker ?:
You have to convince us that there was not substantial evidence to support FERC's decision that you were not given such an order.

[00:24:48] Speaker 05:
So what's the best?

[00:24:50] Speaker 05:
What's your best evidence for that?

[00:24:52] Speaker 06:
Several things, Your Honor.

[00:24:53] Speaker 05:
So first- We're always asking for the best one.

[00:24:55] Speaker 06:
OK, the best one is either going to be at page 143 of the record, the second of the three phone conversations, the paragraph where Mr. Maher says, if he's not securing gas based on economics, this is not an economic decision.

[00:25:12] Speaker 06:
We want all units available.

[00:25:13] Speaker 06:
If he doesn't like that, he can call my manager.

[00:25:16] Speaker 06:
All right, what's the other one?

[00:25:17] Speaker 06:
And then the other one is the affidavit filed by Mr. Cecil, who is the Duke employee here, which is the sole affidavit in the record of this case about this phone conversation and what these guys actually meant to be communicating and how he understood it at that time.

[00:25:32] Speaker 06:
The third one may be a statement made by PJM, which is in the record at 191, and that's where they said, PJM agrees Duke was reasonable in relying on its communications with PJM Dispatch and in good faith made arrangements to secure gas.

[00:25:49] Speaker 06:
Okay, thanks.

[00:25:50] Speaker 03:
So, just... To my question, so that was, so all units must be available, which sounds to me like more than just get the gas.

[00:25:56] Speaker 03:
You can have people and other things ready to go, too.

[00:26:01] Speaker 06:
Well, so available is really not the central word here, Your Honor.

[00:26:09] Speaker 06:
Available in the tariff sense is available capacity.

[00:26:14] Speaker 06:
And what that really means is, so put it this way, Duke is available in the tariff sense if it says we need 20 hours notice and we don't have any fuel.

[00:26:22] Speaker 06:
We'll take the 20 hours to get the fuel that we may need.

[00:26:25] Speaker 06:
But Duke is perfectly available and perfectly within its rights under the tariff to say, great, we're available.

[00:26:32] Speaker 06:
We put 20 hours notice on all of this generation.

[00:26:34] Speaker 06:
So if you want us, that gives us plenty of time to get the fuel during that time.

[00:26:38] Speaker 06:
And of course, had that happened, it would have worked out perfectly.

[00:26:41] Speaker 06:
And so

[00:26:43] Speaker 06:
That is not what they're really talking about.

[00:26:45] Speaker 06:
These three phone conversations are talking about buying gas and buying gas.

[00:26:50] Speaker 06:
If you're not securing gas based on economics, which essentially means if you're not securing gas because in your judgment.

[00:26:56] Speaker 04:
Remind me, who initiated the phone calls?

[00:26:58] Speaker 06:
The first phone call was from Duke to PJM.

[00:27:01] Speaker 06:
And so, but then PJM calls back, Your Honor, several minutes later and says, essentially says it much more clearly at that point.

[00:27:09] Speaker 06:
And then Duke

[00:27:10] Speaker 06:
because he hadn't gotten the same fellow on the phone called back to confirm again.

[00:27:14] Speaker 06:
But so all of these happened within about six minutes on this morning, just a few minutes after the maximum generation.

[00:27:21] Speaker 04:
And who was the first one to ask the question about the need to secure gas?

[00:27:27] Speaker 06:
So the first one to ask the question was Duke.

[00:27:30] Speaker 06:
Yes, Your Honor.

[00:27:32] Speaker 06:
And the key order comes in a second conversation, I would say, which is when PJM calls back to say it is essentially like they hang up.

[00:27:40] Speaker 06:
Just two minutes goes by and he says, you know what, I'm going to call them back because I'm not sure they're understanding what's going on here.

[00:27:46] Speaker 06:
I'm going to tell them it's not an economic decision today, even though every day it's economic.

[00:27:51] Speaker 06:
Every day it's up to Duke and it's economic.

[00:27:53] Speaker 06:
And Duke has allowed these long lead times, but that's not what they want to know.

[00:27:56] Speaker 04:
I think we have your argument.

[00:27:57] Speaker 04:
Thank you very much.

[00:27:58] Speaker 04:
The case is submitted.