[00:00:02] Speaker 00:
Case number 15-1323, El Paso National Gas Company LLC petitioner versus Federal Energy Regulatory Commission.

[00:00:11] Speaker 00:
Mr. Nelson for petitioner, Mr. Vance, Ms.

[00:00:13] Speaker 00:
Nathan for the respondent.

[00:00:53] Speaker 02:
May it please the court, my name is Howard Nelson and I represent the petitioner in this case.

[00:00:58] Speaker 02:
I would like to reserve four minutes for rebuttal.

[00:01:01] Speaker 02:
I would first like to address the issues on the merits and then turn to the commission's argument on standing unless the court would like to hear argument on standing first.

[00:01:12] Speaker 04:
I'd like to hear the argument on standing first, because if you don't have standing, I don't have to listen to the argument.

[00:01:18] Speaker 02:
Very well.

[00:01:19] Speaker 02:
Your Honor, the Commission's position in this case is that because the orders under review did not change the rates in the underlying proceeding and merely set precedent,

[00:01:32] Speaker 02:
to be applied in a subsequent case that there is no cognizable injury in standing.

[00:01:39] Speaker 02:
But this court has made clear that petitioners will have standing if the order in the review caused them imminent harm and immediate prospect of future injury

[00:01:49] Speaker 02:
or a looming unavoidable threat of harm.

[00:01:52] Speaker 02:
And in this case, the harm was imminent, the prospect of future injury was immediate, and the threat of harm was looming and unavoidable.

[00:02:00] Speaker 02:
Prior to the issuance of the orders under review, El Paso had, in fact, filed its subsequent rape case, referred to as the 2011 case.

[00:02:09] Speaker 04:
By the time the commission issued the first order under review... And in the second rape case,

[00:02:17] Speaker 04:
uh, that's now pending on some re-hearing requests?

[00:02:24] Speaker 02:
That's correct, Your Honor.

[00:02:26] Speaker 04:
Okay.

[00:02:26] Speaker 04:
And then, but the Commission has decided, uh, several, uh, for example, in Southern, they, they already decided the re-hearing request.

[00:02:36] Speaker 02:
In Southern?

[00:02:38] Speaker 04:
Yeah.

[00:02:38] Speaker 04:
Southern Natural Gas.

[00:02:40] Speaker 02:
Which, the Southern Natural Gas, you mean the Alabama Municipal Gas case?

[00:02:46] Speaker 04:
Southern, or Southwest, I'm sorry.

[00:02:49] Speaker 02:
Oh, Southwest.

[00:02:50] Speaker 02:
No, the Southwest case actually was the appeal of the Southwest.

[00:02:54] Speaker 02:
That was actually dismissed.

[00:02:57] Speaker 02:
There were two appeals filed from that case.

[00:02:59] Speaker 02:
One was dismissed and one was held in abeyance.

[00:03:02] Speaker 04:
Right.

[00:03:03] Speaker 04:
But that's part of this second rape proceeding, isn't it?

[00:03:07] Speaker 02:
But it has nothing to do with the capital structure issue.

[00:03:10] Speaker 04:
Well, I know that.

[00:03:11] Speaker 04:
I know that.

[00:03:13] Speaker 04:
So Southwest files a petition for judicial review, and we hold it in abeyance pending the commission's disposition of all the other re-hearing events.

[00:03:25] Speaker 02:
That's correct.

[00:03:27] Speaker 04:
Right.

[00:03:27] Speaker 04:
And their monthly or whatever reports being filed with our court.

[00:03:31] Speaker 02:
That's correct.

[00:03:32] Speaker 04:
So my question to you then is why shouldn't we follow the same procedure with respect to your case and not get into whether it's right now or whether you're in it and just hold it in advance pending the commission's disposition of all the re-hearing and then consolidate it with the petition for judicial review from the commission?

[00:03:53] Speaker 02:
Well, if we're talking about righteous, Your Honor, the law is clear that if the Commission's position is crystallized, which it is in this case, and there's no need for further factual development, there's no reason to await a subsequent case, as Your Honor suggested.

[00:04:11] Speaker 02:
Here, the Commission doesn't claim that there's anything further to do in the second case.

[00:04:18] Speaker 02:
In fact,

[00:04:19] Speaker 02:
The commission has already applied the ruling from the orders under review to the balances in question, to the two non-rate-based assets in question.

[00:04:29] Speaker 04:
In your re-hearing the question, you raised the same issues that you're raising here.

[00:04:35] Speaker 02:
Well, all we did is preserve our rights.

[00:04:37] Speaker 02:
But the only thing the Commission did in the second case was to apply its rulings and the cases under review to those balances.

[00:04:45] Speaker 02:
You know, the Mountain States case and the, I guess, Southwest PowerPoint case, they suggest that unless there's a reason to postpone review, when the Commission's, when the rulings under review have crystallized or concrete and are final,

[00:05:01] Speaker 02:
There's nothing to be gained.

[00:05:03] Speaker 02:
The record, the comprehensive record exists in this case.

[00:05:07] Speaker 02:
There is really no record to speak of in the second case, because all they did was apply their, their rulings to, to the, to the balance.

[00:05:13] Speaker 04:
Is there any indication that the commission is not deciding the rehearing request in the second rate case, because it's waiting to see what this court decides in fiscal?

[00:05:25] Speaker 02:
I have no idea what, what, you know, what's behind the timing of the commission's decisions.

[00:05:30] Speaker 04:
Because they've been pending for more than a year.

[00:05:33] Speaker 02:
Yes, I believe that's the commission's decision in or opinion 528, I believe was in 2016.

[00:05:43] Speaker 02:
But its orders in this case took two and a half years from the initial decision to the time of its order on rehearing.

[00:05:51] Speaker 02:
So I don't know if I would expect that anytime soon.

[00:05:55] Speaker 02:
Turning to the merits of the issue, the facts of this case are fairly straightforward.

[00:06:01] Speaker 02:
El Paso's total capitalization exceeds the amount of assets in its regulated rate base.

[00:06:07] Speaker 02:
It is not disputed, however, that El Paso does not earn a regulated return on the non-rate-based assets that are associated with that excess capitalization.

[00:06:18] Speaker 02:
So the issue is not whether El Paso should be permitted to earn a regulated return on assets that are not devoted to jurisdictional service.

[00:06:26] Speaker 02:
They're not.

[00:06:27] Speaker 02:
The issue is whether inclusion of some of the excess capitalization to calculate a capital structure, distort that capital structure for purposes of setting a return on rate base.

[00:06:42] Speaker 02:
In the orders under review, the commission required El Paso to remove two non-rate-based assets solely from the equity component of capital structure.

[00:06:52] Speaker 02:
$565 million in a loan or in a balance that had accrued under a firm-approved

[00:07:17] Speaker 02:
under a FERC approved cash management program where El Paso and its affiliates pool their funds.

[00:07:24] Speaker 02:
And then another $145 million in earnings of, undistributed earnings of one of its subsidiaries.

[00:07:32] Speaker 02:
There are two lines of cases that support the proposition that what the Commission did is contrary to both court and FERC precedent.

[00:07:39] Speaker 02:
The first line of cases, which has its genesis in a 1971 Fifth Circuit opinion, holds that removal of non-rate-based assets from the equity component of capitalization is only appropriate if the financing source of those assets

[00:07:57] Speaker 02:
could be distinctly identified and surely isolated to equity, and in the words of subsequent commission cases, traced to equity.

[00:08:06] Speaker 02:
This requirement comports with common sense.

[00:08:08] Speaker 02:
If the source of a non-rate-based asset cannot be traced to equity, as is the case here, where the source of both the loan balance and the subsidiary earnings was revenues derived from operations,

[00:08:22] Speaker 02:
then there's no reason to assume that the use of the company's total capitalization will distort capital structure.

[00:08:30] Speaker 02:
It's only if the non-rate-based asset was sourced in a different debt equity proportion that rate base is the capital structure distorted.

[00:08:41] Speaker 02:
So what is FERC's response to these cases?

[00:08:43] Speaker 02:
we suggest they're internally inconsistent and are arbitrary and capricious.

[00:08:48] Speaker 02:
Importantly, FERC concedes that to remove a non-rate-based asset from equity, it must be attributed to equity.

[00:08:56] Speaker 02:
In fact, in the rehearing order in this case, the commission found that $50 million of the loan balance was traceable to a debt issuance, and it allowed that $50 million to be reduced from debt, not equity.

[00:09:12] Speaker 02:
So putting aside the Commission's unexplained distinction that it attempts to draw between the requirement to attribute an asset to equity, but not necessarily trace the asset to equity, FERC has done neither.

[00:09:26] Speaker 02:
It is not disputed that the loan balance and the subsidiary earnings were generated from revenues derived from operations.

[00:09:35] Speaker 02:
Thus, by definition, those funds have been commingled into El Paso's financial affairs and cannot be traced to either debt or equity.

[00:09:45] Speaker 02:
In fact, the Commission has refused to remove a loan specifically from equity because it had not been traced to equity, and that's the Mountain Fuel case.

[00:09:56] Speaker 02:
So in sum, the first position seems to be, if you can trace an asset to equity, it can be removed from equity.

[00:10:03] Speaker 02:
If you can trace it to debt, it can be removed from debt.

[00:10:07] Speaker 02:
But if you can't trace it to either equity or debt, we still remove it from equity.

[00:10:12] Speaker 02:
We think that's arbitrary and capricious.

[00:10:15] Speaker 02:
FERC also acknowledges that it is only if the excess capitalization changes the debt equity mix of the company's investment and rate base is the company's capital structure distorted in a way that requires an adjustment.

[00:10:30] Speaker 02:
But FERC has not shown in this record that either the existence of a loan balance or the undiscriminated subsidiary earnings changes that mix.

[00:10:40] Speaker 02:
They make a number of assertions that are basically unexplained.

[00:10:44] Speaker 02:
They argue that the loan balance offsets the parent stake in the business and changes the company's financial realities.

[00:10:54] Speaker 02:
But those assertions do not show change in the mix of investment and rate base.

[00:11:00] Speaker 02:
Again, that could only be shown if the non-rate-based assets were funded in a different proportion, a different debt equity proportion, than the financing underlying rate base.

[00:11:12] Speaker 02:
The FERC also makes a number of arguments along the lines of, well, if we don't remove these assets from equity, El Paso's equity ratio will be higher, and that raises the rates to ratepayers.

[00:11:24] Speaker 02:
But again, that's not an explanation of a change in the mix of debt equity.

[00:11:29] Speaker 02:
And there's no indication that the use of total capitalization in this case results in rates that do not reflect the cost of capital.

[00:11:37] Speaker 02:
The second line of cases, which are very key here, is the Opinion 414 series in the transcript proceedings, with the commission held that there are valid business reasons for either a pipeline or a parent to establish a specific equity ratio on capital structure.

[00:11:53] Speaker 02:
The commission found that there were close financial, managerial, and operational ties between the subsidiary and its parent.

[00:12:01] Speaker 02:
And therefore, the commission found and changed its policy and said, we're no longer going to look at the motivation behind the setting of a certain capital structure

[00:12:09] Speaker 02:
even if the parent intentionally increased the equity ratio to raise the rates of the regulated company.

[00:12:16] Speaker 02:
As long as the pipeline does its own financing and the resulting equity ratio is reasonable in the sense that it's within an acceptable range of equity ratios approved by the commission in the past and of the proxy group.

[00:12:30] Speaker 03:
Before you sit down on your opening, can I just return to the threshold question?

[00:12:35] Speaker 03:
Because on a slightly different tack than Judge Randolph,

[00:12:39] Speaker 03:
It just seems that our precedent in Wisconsin, the Wisconsin case, suggests that if this doesn't have an effect on the 2008 rate case, then there's no standing here.

[00:12:54] Speaker 03:
So how would you distinguish the Wisconsin case?

[00:12:56] Speaker 02:
In a few ways, Your Honor.

[00:12:57] Speaker 02:
In that case, they were really three parties.

[00:13:00] Speaker 02:
There was an independent system operator that the commission allowed to pass through administrative costs to a transmission owner.

[00:13:07] Speaker 02:
And the transmission owner, in a subsequent proceeding, would attempt to pass through that cost to its customers.

[00:13:14] Speaker 02:
So it was the third party, the customers of the transmission owner, that claimed that sought review.

[00:13:21] Speaker 02:
And we don't have that in our situation.

[00:13:23] Speaker 03:
That's true, but the language in Wisconsin, at least, does suggest the fact that a petitioner may be agreed by other related orders does not cure a failure to show an injury in fact caused by the order actually under review.

[00:13:37] Speaker 02:
But the injury, in fact, can be imminent.

[00:13:39] Speaker 02:
And it could be a future injury, as long as it's imminent, it's unavoidable, and it's looming.

[00:13:45] Speaker 02:
And I would point, Your Honor, to the A&R case.

[00:13:47] Speaker 02:
where in that case the commission increased a rate, it decreased the rate to A&R and it decreased, well actually it changed the allocation of costs so that the rate would be higher for one party and lower for other parties.

[00:14:02] Speaker 02:
But the pipeline in that case could not increase the rates due to the file rate doctrine, so it would have to file another rate case to do that.

[00:14:10] Speaker 02:
And the same argument was made in that case.

[00:14:13] Speaker 02:
Well, the petitioner, A&R, was not harmed until that second case.

[00:14:17] Speaker 02:
But the court found it was unavoidable that Great Lakes, the pipeline in that case, was going to file that case.

[00:14:23] Speaker 04:
There's an opinion by then-judge Scalia in this circuit, the FCC case.

[00:14:36] Speaker 04:
It wasn't joined by the other two judges, but it's had an effect afterwards on other cases in the circuit.

[00:14:45] Speaker 04:
And he makes the following point that I'd like you to respond to.

[00:14:51] Speaker 04:
What you are complaining about is essentially the collateral estoppel within the agency.

[00:15:02] Speaker 04:
having reached a decision in this case, it's going to feel bound in the second rate case to follow that decision and won't reconsider it.

[00:15:12] Speaker 04:
I mean, that's your point, right?

[00:15:15] Speaker 04:
But Justice Scalia said that that does not confer standing or rightness because there's no collateral estoppel effect on the court.

[00:15:29] Speaker 00:
Yes.

[00:15:30] Speaker 04:
So the court in the second rate case, if you petition for judicial review, and it's pending, I realize now in the hearing, that there is nothing to prevent this court from dealing with your merits arguments that you're making now.

[00:15:48] Speaker 02:
Yes, Your Honor, there are a number of cases that say the collateral estoppel effect alone, just like the mere presidential effect alone, is not sufficient.

[00:15:58] Speaker 02:
But we don't have just that here.

[00:16:00] Speaker 02:
We have harm.

[00:16:02] Speaker 02:
Not only do we have imminent harm, we have harm that has already occurred

[00:16:07] Speaker 02:
prior to the orders becoming final in this case.

[00:16:11] Speaker 02:
Because the commission applied the order, the rulings on capital structure in the orders under review, they've already applied them to El Paso in the subsequent rate case.

[00:16:21] Speaker 02:
And so it's not a question of just mere precedent alone, and then we don't know what's going to happen later.

[00:16:28] Speaker 04:
bring a petition for review in the second rate case where you're harmed.

[00:16:32] Speaker 04:
You're not harmed.

[00:16:36] Speaker 04:
The ruling had no effect on your rate from the first rate case.

[00:16:41] Speaker 04:
It only because of its precedential collateral estoppel effect that it had an impact in the second rate.

[00:16:48] Speaker 02:
But Your Honor, that rules, that's the ruling that would read away all the cases that say you don't have to suffer a harm, immediate harm from that case.

[00:16:58] Speaker 02:
If it's an imminent harm, if it's a looming, unavoidable harm, a threat of harm, it doesn't have to be harm.

[00:17:04] Speaker 02:
It has to be a looming, unavoidable threat of harm.

[00:17:08] Speaker 02:
Under those cases, we have standing.

[00:17:10] Speaker 02:
And under the rightness doctrine, this proceeding is the appropriate proceeding.

[00:17:16] Speaker 02:
It's the more fit proceeding for review, because there's nothing further to be done.

[00:17:21] Speaker 02:
There is no reason to delay the case.

[00:17:24] Speaker 03:
I see.

[00:17:25] Speaker 03:
Thank you.

[00:17:25] Speaker 03:
We'll give you some time on rebuttal.

[00:17:26] Speaker 02:
Thank you.

[00:17:39] Speaker 01:
Good morning.

[00:17:40] Speaker 01:
Good morning.

[00:17:40] Speaker 01:
Honored this one often for the Commission.

[00:17:43] Speaker 01:
Just very briefly on jurisdiction, I'll just add to what's already been said.

[00:17:49] Speaker 01:
As your owners are aware, the subsequent rate proceeding is still for the agency.

[00:17:54] Speaker 01:
A petition for review that has been filed has been held in advance.

[00:17:58] Speaker 04:
That's the southern California?

[00:18:02] Speaker 01:
I think it's the southwest gas.

[00:18:04] Speaker 04:
Oh, no, you're absolutely right.

[00:18:08] Speaker 01:
That's correct, Your Honor.

[00:18:09] Speaker 01:
It is the Southern California Petition.

[00:18:11] Speaker 01:
So that's the one that's been held in abeyance.

[00:18:14] Speaker 01:
El Paso, I think, has indicated that they may have an interest in filing a petition for review upon the conclusion of that proceeding.

[00:18:26] Speaker 04:
Let me ask you something.

[00:18:29] Speaker 04:
Supposedly, a rehearing order comes down tomorrow by FERC.

[00:18:37] Speaker 04:
The parties to the proceeding are pretty dispersed.

[00:18:43] Speaker 04:
There's no requirement that a petition for judicial review from that second great case be filed in this circuit, is it?

[00:18:52] Speaker 01:
No, I don't believe that the petition would have to be filed in this circuit.

[00:18:59] Speaker 04:
It could be wherever the principal place of business is about Paso, for example, or where it's incorporated.

[00:19:05] Speaker 01:
I think that's absolutely right, Your Honor.

[00:19:07] Speaker 04:
Now, does that venue requirement continue to apply in the face of what we already have, one,

[00:19:18] Speaker 04:
petition for review were holding in abeyance from that very proceeding.

[00:19:25] Speaker 04:
Does that mean that all petitions for review there after have to come to this circuit as opposed to scattered throughout the country?

[00:19:35] Speaker 01:
Well, I don't believe that

[00:19:42] Speaker 01:
further petitions would have to come to this circuit.

[00:19:45] Speaker 01:
But I think that, I believe you were asking, you were pointing out the cases with respect to harm predicated on collateral estoppel.

[00:19:55] Speaker 01:
And so to the extent that this court were to dismiss the case on jurisdictional grounds,

[00:20:02] Speaker 01:
I think that's from Alabama municipal as well as ExxonMobil, that dismissal on jurisdictional grounds would not collaterally have stopped petitioners like El Paso from petitioning for review in a future rate proceeding and challenging both that order on review as well as these orders that are now before this Court.

[00:20:28] Speaker 04:
Aside from questions of precedent, what is the rationale for saying if a ruling has viral stop effect within an agency that it does not amount to harm?

[00:20:47] Speaker 04:
I mean, I can understand the argument, and Petitioner's Council, I think, makes this very forcefully, that I can understand the argument that, well, it's in the future.

[00:20:57] Speaker 04:
You don't know when it's going to happen.

[00:20:58] Speaker 04:
That's all hypothetical.

[00:20:59] Speaker 04:
But we don't have that here.

[00:21:02] Speaker 04:
And we know it's having an effect because it was applied in the second great case.

[00:21:08] Speaker 04:
What's the rationale?

[00:21:11] Speaker 04:
Forget about precedent for the moment.

[00:21:14] Speaker 01:
I think the rationale is that if it's been applied in the subsequent rate proceeding, we wait until that rate proceeding is actually resolved, because any number of things can happen in that proceeding.

[00:21:26] Speaker 01:
The parties could end up agreeing to a settlement that resolves the dispute entirely.

[00:21:30] Speaker 01:
And so that saves the court dismissing now, rather than hearing a petition now,

[00:21:36] Speaker 01:
saves the court the time and resources of weighing in on a controversy that has not yet materialized and may never materialize.

[00:21:45] Speaker 01:
And I think that the Wisconsin Power case that Judge Kavanaugh pointed to, in that proceeding, the subsequent proceeding

[00:21:54] Speaker 01:
uh... for kind of proof that passed through charge while the case the underlying case was on review before before this court and the court still found that even if there's agreement to uh... petitioners from that future order that still doesn't create agreement in the orders that are now actually under review there's the part of the exam possibility agency that's exactly right i think that uh...

[00:22:24] Speaker 01:
I think that, as you mentioned, there's any number of ways this can go, and so I think this Court's precedent has been pretty consistent that we wait until those proceedings are fully resolved, and then to the extent that the parties like El Paso choose to file a petition for review, they can do so, and the Court would still have the ability to review both those later orders as well as any earlier related orders.

[00:22:46] Speaker 04:
One way is to write an opinion of the sort that you're requesting and then dismiss this case.

[00:22:53] Speaker 04:
The other is just to hold this case in abeyance pending the completion of the agency's proceeding.

[00:23:01] Speaker 01:
I think that's right, Judge Randolph.

[00:23:02] Speaker 01:
I think the only issue is that I'm not sure there'd be any benefit to this court or to the parties for holding this petition in abeyance, because if the results do turn out that, let's say, the parties settle the subsequent case,

[00:23:16] Speaker 01:
this petition that's being in this hypothetical being held in abeyance would have to be dismissed anyway.

[00:23:22] Speaker 01:
And so there would be no harm in dismissing because the parties would still have the opportunity if they choose to, after the conclusion of that proceeding, to file another petition.

[00:23:31] Speaker 04:
So let me suggest to you one benefit.

[00:23:35] Speaker 04:
The benefit of holding it in abeyance is that the case has been fully briefed and it wouldn't have to be redone.

[00:23:48] Speaker 01:
Well, I think that that's a fair point, Judge Randolph, although upon conclusion of the subsequent proceedings, assuming there's another petition, I think the parties would probably continue to brief this issue.

[00:24:03] Speaker 01:
I'm not sure they would refer back to the briefing on the petition being held in advance.

[00:24:08] Speaker 01:
So I'm just not sure I see any practical benefit to the parties or to the court in holding the petition in advance as opposed to just dismissing it.

[00:24:20] Speaker 01:
If there are no further questions on jurisdiction, I can just briefly turn to the merits.

[00:24:25] Speaker 01:
I think there was some discussion earlier about this sort of distinction between attributing an asset to equity versus tracing it to equity, and I just want to make sure we're being precise about how we're using the language here, and specifically the questions that the Commission has attempted to answer when using those terms.

[00:24:45] Speaker 01:
The first question is, from the commission's perspective, is whether assets should be included in the pool of funds for which a pipeline may earn a regulated return on equity.

[00:24:59] Speaker 01:
And so that's what it means by is an asset attributable to equity in that is it attributable to the equity component of a pipeline's capital structure.

[00:25:09] Speaker 01:
That's a different question from whether a specific type of asset

[00:25:14] Speaker 01:
can be traced back to an issuance of stock, otherwise known as equity.

[00:25:21] Speaker 01:
And as far as the tracing issue, the Commission's only applied that with respect to a very specific type of asset that's not an issue here, and that's investments in pipeline subsidiaries.

[00:25:31] Speaker 01:
But the rule that the commission follows and has followed for some time, as your owners are aware, is that assets that are not devoted to jurisdictional use need to be removed from a pipeline's capital structure.

[00:25:45] Speaker 01:
And in this case, as my friend from the other side noted, these assets at issue came from operations.

[00:25:51] Speaker 01:
And so as the commission explained in its orders, revenue that comes from operations is, generally speaking, available for the pipeline to dispose of at its discretion.

[00:26:00] Speaker 01:
When those funds are not made available for jurisdictional operations or for the benefit of ratepayers, the commission, as a policy matter, chooses to exclude those funds from the equity side of capital structure.

[00:26:13] Speaker 01:
That is, it's ensuring that ratepayers are not paying a return on equity that includes funds not devoted to jurisdictional use.

[00:26:24] Speaker 01:
Happy to answer any other questions.

[00:26:25] Speaker 01:
If not, I will cede the rest of my time.

[00:26:28] Speaker 03:
OK, thank you.

[00:26:36] Speaker 02:
Thank you, Your Honor.

[00:26:37] Speaker 02:
I would like to point out a couple of things about the Wisconsin case that's been discussed here.

[00:26:41] Speaker 02:
I think the main difference between that case and this case is that it was uncertain what would happen in the subsequent case in Wisconsin, but it's very certain what would happen here because it had already happened.

[00:26:53] Speaker 02:
In the Wisconsin case, the transmission owner actually requested in the first case that the Commissioner approve pass-through.

[00:27:01] Speaker 02:
And the commission said, the commission instead reserved the issue for future proceedings explaining that it lacked a concrete proposal for a pass-through, and the issue is therefore not right for consideration.

[00:27:12] Speaker 02:
And in the subsequent case, pasture was only permitted once the transmission owner affirmably demonstrated that the charges were otherwise not being recovered.

[00:27:23] Speaker 02:
So there were things left to be done.

[00:27:25] Speaker 02:
And therefore, the harm to the customers, the transmission owners, was not known or it was uncertain.

[00:27:31] Speaker 02:
In this case, it was very certain.

[00:27:34] Speaker 02:
And in response to Judge Randall's question about couldn't the commission change their mind, well, there's no indication anywhere

[00:27:42] Speaker 02:
that this is not a concrete and final ruling.

[00:27:46] Speaker 02:
I mean, anything can happen, but there's no indication that the Commission is going to change its mind.

[00:27:51] Speaker 04:
Is your client in any kind of settlement discussion?

[00:27:55] Speaker 02:
No, Your Honor.

[00:27:55] Speaker 02:
I mean, the cases have been decided at the Commission level, and it's just before then when we hear it.

[00:28:01] Speaker 02:
So the rightness doctrine goes to the issue of which proceeding is the most fit proceeding for judicial review to occur, and this one is that.

[00:28:15] Speaker 02:
I just want to also mention the commission's rationale here.

[00:28:20] Speaker 02:
The primary rationale is that these assets were not available for investment in rate base.

[00:28:26] Speaker 02:
It's our position that that rationale both proves too much and is really not the right question.

[00:28:32] Speaker 02:
Whether an asset is available for and used to provide a jurisdictional service, that determines whether it's in rate base and as such qualifies for a return.

[00:28:43] Speaker 02:
Whether it's available for investment in rate base has nothing to do with capital structure, which goes to the debt equity mix, the financing of rate base.

[00:28:53] Speaker 02:
And so the rationale, I think, is arbitrary and capricious.

[00:28:56] Speaker 03:
Thank you.

[00:28:57] Speaker 03:
Thank you cases submitted.