[00:00:01] Speaker 00: Case number 15 at 1452 at L, NRG Power Marketing LLC at L Petitioners versus Federal Energy Regulatory Commission. [00:00:10] Speaker 00: Mr. Sheppard for the petitioners. [00:01:03] Speaker 03: Good morning, and may it please the court. [00:01:04] Speaker 03: Good morning. [00:01:05] Speaker 03: In its orders below, FERC destroyed an overwhelmingly supported stakeholder compromise by directing PJM to make a so-called compliance filing that imposed the opposite of what PJM actually filed. [00:01:14] Speaker 03: The orders are reflected by three fundamental errors, each of which independently warrants reversal. [00:01:18] Speaker 03: First, FERC failed to comply with the statutory scheme of using its role under FPA Section 205 and depriving market participants of their right to notice and comment a rate that was completely different from the one FERC imposed. [00:01:31] Speaker 03: Second, FERC substituted hopelessly circular reasoning for any analysis of the evidence, which was almost uniformly ignored. [00:01:37] Speaker 03: And third, FERC never analyzed or even pretended to analyze the cumulative impact of piling one exemption upon another, including those they were meant to replace. [00:01:46] Speaker 03: Indeed, there was no substantial evidence supporting that patchwork Frankenstein that FERC imposed because it was the opposite of what PJM did. [00:01:52] Speaker 05: The source, particularly the first, but as to all, if PJM consented to what FERC did, [00:02:00] Speaker 05: Do you have a case from there on? [00:02:02] Speaker 03: Yes, Your Honor, we do. [00:02:05] Speaker 03: Perk and PJM will tell us that none of the decisions of this court in Winfield, et cetera, matter, because PJM has gone full imperial with respect to its relationship to the other participants, deciding that it's the only entity that really matters for decision-making purposes here. [00:02:22] Speaker 03: The city of Winfield, the very case they're turning to for the acquiescence exemption, [00:02:28] Speaker 03: pre-saged exactly the situation. [00:02:30] Speaker 03: And what does it say? [00:02:31] Speaker 03: And I would direct you to 744F2 and 876, very fulsome paragraph in the court, explaining that there are other valid concerns and that the acquiescence to a materially different rate can only be stretched up to the point where it begins to violate the notice and comment. [00:02:48] Speaker 03: values that 205 imposes by way of a complete hearing. [00:02:54] Speaker 03: And the court emphasizes, in its citation to Portland Cement or his Ruckelhaus, that it's critically important that you get the opportunity to notice and comment before it makes its decision, not scrambling 30 days after after for issues of decision to try to address the problem on rehearing. [00:03:10] Speaker 05: Well, why? [00:03:12] Speaker 05: Nobody got rehearing at that point, right? [00:03:16] Speaker 03: Well, yes, of course, they're re-hearing what Sutton Winfield wouldn't have been able to make. [00:03:19] Speaker 03: No, no, in this case. [00:03:21] Speaker 03: In this case, we saw re-hearing. [00:03:22] Speaker 03: Indeed, we saw re-hearing. [00:03:23] Speaker 05: Did you appeal from the denial or petition this court from the denial? [00:03:29] Speaker 03: Re-hearing? [00:03:30] Speaker 03: Yes, sir, that's the sole reason that we're here. [00:03:32] Speaker 05: When did you file this? [00:03:35] Speaker 05: We're hearing that we're talking about now. [00:03:36] Speaker 05: When was it filed to 2013? [00:03:38] Speaker 03: Your honor? [00:03:39] Speaker 03: Yes, we're we just celebrated the four year anniversary. [00:03:42] Speaker 05: How long ago was the order from which you're asking? [00:03:46] Speaker 03: The order was four years ago. [00:03:47] Speaker 03: The rebearing order was somewhat more recently. [00:03:49] Speaker 05: J. M. Did not think of it. [00:03:51] Speaker 03: No, Your Honor, this PGM did not seek for hearing, and it did not make a compliance filing. [00:03:55] Speaker 03: I think it is fair that everyone... It made a compliance filing. [00:03:59] Speaker 03: It made a compliance filing, right? [00:04:00] Speaker 03: Of course it did. [00:04:01] Speaker 03: It was directed to. [00:04:01] Speaker 03: I think everyone, including PGM, interpreted this as a 206 command to file exactly what were told in the command. [00:04:08] Speaker 03: Now, several years later, we have a re-hearing order that attempts in paragraphs 22 and 23 to clarify what it is that Burke actually meant to do and say, no, you had options. [00:04:17] Speaker 03: Actually, it would make you do this. [00:04:19] Speaker 03: You really could have resisted our command. [00:04:21] Speaker 05: Isn't it true that they didn't make them do that? [00:04:23] Speaker 05: They simply said, we will approve the order and hold her man up. [00:04:31] Speaker 05: you're changing two things in it. [00:04:34] Speaker 05: So as far as you can tell from the record, it could have gone on with the prior rate if they did nothing, right? [00:04:44] Speaker 03: They did not file a compliance filing. [00:04:47] Speaker 03: It would have left us exactly where we want to be. [00:04:49] Speaker 03: And where we want to be is a reversal of FERC's orders so that we can be restored to our original bargaining position, which has been destroyed by FERC's orders, and move forward with a comprehensive fix to all the problems with these exemptions in light of not only the errors identified in this case, but also the many number of other things that have happened since then. [00:05:09] Speaker 03: Judge Brown and yourself, just for example, sat through the capacity performance case [00:05:12] Speaker 03: Valentine's Day, I believe it was. [00:05:15] Speaker 03: So it's clear that there are a lot of issues that need to be dealt with. [00:05:17] Speaker 03: But we are not going to be able to move forward with a comprehensive solution that stakeholders can support unless we go back to a bargaining position. [00:05:25] Speaker 03: And we can't do that without getting these orders reversed. [00:05:28] Speaker 03: We think we're entitled to win under the 205 proceeding. [00:05:30] Speaker 03: Just until I hear your question to be focusing very much on the question of acquiescence. [00:05:34] Speaker 03: make it easier for you. [00:05:35] Speaker 03: I don't want to test acquiescence. [00:05:37] Speaker 03: No one can test acquiescence. [00:05:39] Speaker 03: PGM has, as I said, gone full imperial and said, we're the only people who make a difference here. [00:05:44] Speaker 03: So I'm encouraging you to go back, read City of Winfield at page 876, look at the middle paragraph on that page, which forecasts exactly this situation. [00:05:53] Speaker 03: Acquiescence is not enough if the rate change is so dramatic [00:05:56] Speaker 03: that no one really had the opportunity to have noticing comment on the rape was ultimately proposed. [00:06:01] Speaker 03: Here, it's the opposite of what was proposed. [00:06:04] Speaker 03: So, this is the perfect case for application of the very question that was reserved in one field. [00:06:11] Speaker 03: I'd like to move on now to... If you're... I'll let you, you're fine. [00:06:18] Speaker 03: Thank you. [00:06:19] Speaker 03: I don't see a lot more questions on that. [00:06:22] Speaker 03: I'm not reading the bench to need more discussion of the statutory point. [00:06:25] Speaker 03: So, reason decision-making. [00:06:27] Speaker 03: The funnest part of the case to discuss, because there are so many strange mistakes in first orders. [00:06:34] Speaker 03: I'd like to break it up into unit-specific exemption, the categorical exemptions, and then look at the total effect third. [00:06:41] Speaker 03: So, the petitioners and several others come in to come in to PJM and explain, and PJM itself come in to explain the unit civic review is a complete failure, it's opaque, and it's allowing in units that are coming in well well well below cost. [00:06:58] Speaker 03: FERC's answer to that evidence in that general line of argument is a stunning non-sequitur. [00:07:03] Speaker 03: And it merits reading what FERC said. [00:07:06] Speaker 03: It required PJM to keep the unit-specific exemption because it found the unit-specific review, quote, yields benefits that warrant its retention. [00:07:13] Speaker 03: Now, that's actually irrelevant in a 205 case, because the imputative reasonableness of an old rate has no bearing whether that could be replaced in a 205. [00:07:22] Speaker 03: But what is the specific benefit that they identify? [00:07:26] Speaker 03: Because it could allows resources into the market that likely would not have qualified for either of PJ's proposed exemptions. [00:07:33] Speaker 03: But this is this is not a straight answer to our question. [00:07:36] Speaker 03: Our claim is, you know, civic redemption. [00:07:38] Speaker 03: The unit civic exemption is broken. [00:07:40] Speaker 03: It's allowing in below cost resources. [00:07:42] Speaker 03: Their answer is. [00:07:44] Speaker 03: No, we need to have the ability to let in those resources, leaving out the sort of below cost piece of that entire puzzle. [00:07:50] Speaker 03: That's not a straight answer to our question. [00:07:52] Speaker 03: There's no doubt these people came in below cost, a third problem I'll get to. [00:07:57] Speaker 03: But next on this justification point, what is FERC's second rationale for finding that these units must have been economic? [00:08:05] Speaker 03: This is the answer we get, and for a place to look for this, FERC's brief at 32. [00:08:10] Speaker 03: FERC argues that the New Jersey and Maryland resources must be economic because they pass unit-specific review. [00:08:16] Speaker 03: That is Ken arguing that steroid screening works because no one's been caught. [00:08:21] Speaker 03: That is not an answer to our question. [00:08:24] Speaker 03: We're saying, your system is broken. [00:08:26] Speaker 03: Their answer is, no, our system's not broken because it's not catching anyone. [00:08:30] Speaker 03: So this is why it's a third problem that Burke just ignored the numbers. [00:08:34] Speaker 03: What did we show? [00:08:36] Speaker 03: By the way, based on not information we could get from PJM, but on information we had to glean from discovery and decisions and preemption cases proceeding entirely parallel to this one, [00:08:46] Speaker 03: FERC never explains how units using a mature technology is important. [00:08:49] Speaker 03: This is gas-fired technology. [00:08:50] Speaker 03: There's nothing special about the units they allowed in. [00:08:53] Speaker 03: We're allowed to come in at 41% or 53% of the net cost of new entry, which is supposed to be the cost that people are coming in. [00:09:00] Speaker 03: Neither FERC nor anyone cites evidence to show that these generators, who are charging as little as 41% of net cone, could even break even, much less that they were in the market. [00:09:10] Speaker 03: So unless there are further questions about the gigantic flaws in the unit-specific review defense that FERC put on, I'd like to move on to categorical exemptions. [00:09:19] Speaker 04: Didn't they say that eliminating that would force some generators to bid at an artificially high price? [00:09:25] Speaker 03: I'm saying it again? [00:09:26] Speaker 04: Didn't they say that eliminating that would force some generators to bid at an artificially high price? [00:09:32] Speaker 03: Eliminating that would force some generators to bid at an artificially high price? [00:09:37] Speaker 03: Eliminating that. [00:09:39] Speaker 03: submit it here meaning you disagree with that but they will i think what you mean that is not that it wasn't been artificially high-priced but there were allegations that net com set too high sort of getting at the same place but it's different this isn't a case about it they're playing people think that net com needs to be adjusted some down some up it's really not a square answer to to to to answer [00:10:00] Speaker 03: These guys are coming in way below net cone, which is the standard you said is the right standard. [00:10:05] Speaker 03: But then say, well, some people think that the standard's wrong. [00:10:08] Speaker 03: OK, fix the standard. [00:10:09] Speaker 03: But that's not before you in this case. [00:10:10] Speaker 03: We're supposed to be thinking that the standard that you've set here is actually the right standard. [00:10:15] Speaker 03: And if people are deviating from it, then we go fix that in a different 205 case, which is about a different subject, not this one. [00:10:20] Speaker 03: It's, again, not a straight answer. [00:10:23] Speaker 03: Have I answered your question just now? [00:10:25] Speaker 06: Thank you. [00:10:25] Speaker 03: All right. [00:10:26] Speaker 03: Moving to the categorical exemptions. [00:10:28] Speaker 03: And it shouldn't be any surprise that there are unexplained inconsistencies that pervade Burke's defense here. [00:10:33] Speaker 03: Self-supply. [00:10:35] Speaker 03: NRG, in particular, came in with very strong evidence that the net short and net long limits that PJM had proposed were far too generous and that anyone could satisfy them. [00:10:46] Speaker 03: PJM reached a different conclusion. [00:10:48] Speaker 03: Burke decided to defer to PJM. [00:10:50] Speaker 03: But Burke didn't explain why. [00:10:52] Speaker 03: Again, we're not [00:10:53] Speaker 03: There's no quarrel about whether or not Burke deferred to PG&M's analysis. [00:10:56] Speaker 03: And that's fine. [00:10:58] Speaker 03: They can pick between experts. [00:10:59] Speaker 03: But they are still obligated to explain why. [00:11:01] Speaker 03: And that's a particularly glaring problem here because [00:11:05] Speaker 03: Mr. Stoddard, the NRG expert, gave a point-by-point rebuttal of everything in PGM's evidence, and PGM itself gave no response. [00:11:13] Speaker 03: So it's not even clear what FERC could defer to. [00:11:15] Speaker 03: It's saying, we agree with PGM, but PGM didn't explain what was wrong with Dr. Stoddard's analysis. [00:11:19] Speaker 03: It's just like a weird system of deferring to an empty sack. [00:11:24] Speaker 03: The competitive entry exemption. [00:11:29] Speaker 03: I think there's been a fundamentally misunderstood the objection on this front. [00:11:34] Speaker 03: Burke defends the new entry exemption, the competitive entry exemption on the grounds that it's not Burke's job to defend [00:11:41] Speaker 03: to defend new entrants from themselves, to bring the market at a nonsensable price. [00:11:47] Speaker 03: But that really wasn't the objection that was brought to them. [00:11:50] Speaker 03: NRG made it very plain. [00:11:51] Speaker 03: Their problem was not with irrational exuberance in terms of punishing the people who make really bad bids. [00:11:58] Speaker 03: The problem was instead what it does that pollutes the market, how it hurts other people. [00:12:03] Speaker 03: That has always been the gravamen of NRG's very specific objection to this proposal. [00:12:08] Speaker 03: And while the analogy is not perfect, [00:12:10] Speaker 03: I'd analogize it, for example, to speeding laws. [00:12:13] Speaker 03: Yes, a purpose of speeding laws is to protect bad drivers against themselves. [00:12:18] Speaker 03: In some jurisdictions, it may actually be a revenue-generating measure. [00:12:21] Speaker 03: But really, what we're all supposed to think is that the purpose of speeding laws is really to protect us from irresponsible other drivers. [00:12:28] Speaker 03: as much at least as it is to protect them against themselves. [00:12:32] Speaker 03: And that's really why there needs to be some form of review. [00:12:36] Speaker 03: If we want to look at an example of how bad this could be, and I'm pointing you to only the things that we're able to find in the record here. [00:12:43] Speaker 03: The initial filing by one of the resources that were typically challenging here, the one in Maryland, came to 13% of net tone, which caused PJM and the PJM admin both to say, well, that's just ludicrous. [00:12:57] Speaker 03: It has to be rationed up. [00:12:58] Speaker 03: So they make much of the fact that they increased their amount by 400%. [00:13:02] Speaker 03: Well, that's fine if you're starting from 10% of net tone and you get into the 40s or you get into the 50s. [00:13:07] Speaker 03: But that's an irrational offer. [00:13:09] Speaker 03: And no one has any idea what's going on in the sausage factory that is the PJM and PJM-IMM analyses. [00:13:17] Speaker 03: Indeed, just to recall, the PJM-IMM, the PJM independent market monitor filed a complaint against PJM during the auction because of their dispute over these very numbers. [00:13:29] Speaker 03: Ultimately, he withdrew it, saying, well, it looks like they would have been inframarginal anyway. [00:13:32] Speaker 03: There are important reasons why that is not sufficient. [00:13:35] Speaker 03: But there are, in fact, very significant problems with competitive entry exemption. [00:13:39] Speaker 03: Finally. [00:13:41] Speaker 03: There's the reason decision-making problem with combined impact. [00:13:45] Speaker 03: Or I elucidate that point. [00:13:47] Speaker 03: FERC claims that we've waived that, apparently, because we didn't use the words of total effect in our headings or something in our pleadings. [00:13:57] Speaker 03: But for all the reasons that are set forth in our reply brief at 24, we think it's very clear that we never waived this argument. [00:14:02] Speaker 03: We may have used other substitutes for total effect, like a delicate interplay among the various exemptions, but I think it's pretty clear what we were arguing. [00:14:11] Speaker 03: So what is wrong with what FERC did here? [00:14:14] Speaker 03: Again, I don't think anyone can seriously dispute that what FERC told PGM to file was very different than what PGM actually filed. [00:14:23] Speaker 03: It's hard to even describe it as just the opposite, because it went all the way through 180 degrees and then added on some more here. [00:14:29] Speaker 03: So it's like a 270 degree off directive. [00:14:34] Speaker 03: And there is no analysis at all of that combined [00:14:40] Speaker 03: And there was no, more importantly, from a statutory perspective, back to the very beginning, no statutory opportunity for anyone to ever go after this. [00:14:53] Speaker 04: Well, I thought they said the unit-specific exemption was needed. [00:14:58] Speaker 04: In part because the other two exemptions were alone gonna have problems without also having the unit specific exemption now that you may say that's Ridiculous reasoning, but I thought that was there What I think I think I'm pretty representing. [00:15:14] Speaker 03: They'll of course correct me They say it yields benefits that warrant its retention again as I said before that's irrelevant under a 205 analysis when PJM comes in with the 205 support of all its stakeholders and [00:15:25] Speaker 03: and has several pages of its filing devoted to the notion that the unit-specific review exemption is broken, we're not obligated to explain why it's just and reasonable. [00:15:36] Speaker 03: We do not have to defend the just and reasonable list of something that we're getting rid of. [00:15:40] Speaker 04: But they said it was unjust and unreasonable, correct me if I'm wrong, without having the unit-specific exemption. [00:15:46] Speaker 03: Yes, Your Honor. [00:15:46] Speaker 03: They clarified in their rehearing order what we really meant to say was, [00:15:50] Speaker 03: that it's not just unreasonable for you to remove this exemption. [00:15:54] Speaker 04: So we have to take that. [00:15:56] Speaker 03: And if that's true... I think if you accept their papering over of the standard, and I will point you to a specific language, which is the reason why I think that those paragraphs add nothing but more confusion, specifically [00:16:09] Speaker 03: After saying they weren't acting under FPA section 206, okay, what's the next sentence? [00:16:13] Speaker 03: We cannot conclude based on the record before us that review of individual units, costs, and revenues is an unjust and unreasonable method of determining rates. [00:16:20] Speaker 03: That is straightforward 206 reasoning. [00:16:22] Speaker 03: So we're not acting under 206, but here we're gonna tell you a 206 threshold. [00:16:25] Speaker 03: And it doesn't really matter. [00:16:27] Speaker 03: It is it is a statutory violation for to be flipping around the burdens here that is really a problem in and of itself, but it really doesn't matter because their decision making here is so bad when we turn to what it is we're talking about the the the individual the individual review exemption. [00:16:42] Speaker 04: I think what they're saying is we have these two exemptions that PGA and AMMA proposes, and we, FERC, think it's unjust and unreasonable to have those two without the third. [00:16:55] Speaker 04: And why? [00:16:56] Speaker 04: Why was that? [00:16:56] Speaker 04: I know. [00:16:57] Speaker 04: But on the box, let me hold on. [00:17:00] Speaker 04: But on the box checking of the analysis of how they have to go through the analysis, I think they did that. [00:17:05] Speaker 04: Now, your burden, therefore, is to show, well, that's [00:17:09] Speaker 04: that they should have actually accepted the two without adding the third, and that it was arbitrary and capricious or unreasonable or something for them to insist on the third. [00:17:22] Speaker 03: Yep. [00:17:23] Speaker 03: Right? [00:17:23] Speaker 03: And we believe we've done that, because we think specifically there are significant holes in each of these exemptions. [00:17:28] Speaker 05: But to get back to this- Just one minute before you get away from that, it would be your position that they can't do that under an 05 as opposed to- That's what I'm trying to get. [00:17:36] Speaker 03: That was exactly what I was saying, Your Honor. [00:17:38] Speaker 03: What I want to bring you back to the statutory point, which is, regardless of how you think Burke has or has not successfully papered over its burden shifting mess here, we go back to what would happen in a 205 proceeding. [00:17:51] Speaker 03: Could PJM have gotten the so-called compliance filing through the stakeholder process? [00:17:55] Speaker 03: No way. [00:17:57] Speaker 03: If they had filed this directly under FPA section 205, what would have happened? [00:18:01] Speaker 03: Everybody, including people who support it now, would have come in as a protester. [00:18:05] Speaker 03: That's why it's so important to do it. [00:18:06] Speaker 03: City of Winfield instructions say, look, if your rate is this wildly different, you are now compromising the right, you can't just acquiesce and walk away from it. [00:18:13] Speaker 03: You've now compromised the right of people to put in evidence before the fact, [00:18:17] Speaker 03: that about this particular rate, and it's before you make your decision. [00:18:20] Speaker 04: And your point on that is the rehearing process is not sufficient to cure that, and that's your point there. [00:18:27] Speaker 03: It isn't, and I could talk about all the differences. [00:18:30] Speaker 03: A per-traversal rate of itself on rehearing is infinitesimally low. [00:18:34] Speaker 03: So is ours. [00:18:39] Speaker 03: That's true. [00:18:41] Speaker 03: That's true. [00:18:41] Speaker 03: That's true. [00:18:42] Speaker 03: That's true. [00:18:43] Speaker 03: All right. [00:18:44] Speaker 03: I see that I'm well into my reply time. [00:18:48] Speaker 03: So unless there are further questions, I'll go. [00:18:51] Speaker 07: Thank you. [00:19:02] Speaker 01: Good morning. [00:19:03] Speaker 01: Carol Banta for the commission. [00:19:05] Speaker 01: Starting with the last point, I'll start with the first order, not the rehearing order. [00:19:09] Speaker 01: Paragraph 26 at JA 680 to 81, also echoed at JA 141 on JA 716. [00:19:17] Speaker 01: The commission said these exemptions. [00:19:20] Speaker 04: Can you point me? [00:19:21] Speaker 04: I'm going to follow along with you. [00:19:22] Speaker 04: Where are you pointing us now? [00:19:23] Speaker 01: OK, well, I'll start with 26. [00:19:25] Speaker 01: It's sort of echoed in 141. [00:19:26] Speaker 01: We can go that later. [00:19:27] Speaker 01: Paragraph 26? [00:19:28] Speaker 01: Yes, JA 680. [00:19:28] Speaker 01: OK. [00:19:31] Speaker 01: Where the commission says, we find your exemptions, they appropriately identify the entry you're trying to do. [00:19:38] Speaker 01: They do what you're trying to do. [00:19:40] Speaker 01: So we get to about halfway through the paragraph on that page, or actually by targeting. [00:19:45] Speaker 01: So first, we're targeting the resources most likely to raise suppression concerns. [00:19:49] Speaker 01: That's a separate part of this order that limited the rule to gas, excluded some other resources. [00:19:57] Speaker 01: Number two, adopting exemptions for competitive entry and self-supply and retaining the unit-specific process. [00:20:03] Speaker 01: Actually, I should jump to 141 because this is more of the total effect. [00:20:08] Speaker 01: The J&R finding, I'll jump ahead to 141 where we said this is not J&R. [00:20:12] Speaker 01: The exemptions, standing alone. [00:20:14] Speaker 01: They are not J&R. [00:20:15] Speaker 01: We would not approve them under 205. [00:20:17] Speaker 05: Just and reasonable. [00:20:18] Speaker 01: I'm sorry, yes. [00:20:19] Speaker 05: No, we get plenty enough packer numbers in abbreviations. [00:20:23] Speaker 05: I don't want to add one. [00:20:25] Speaker 05: I won't go into Judge Silverman on that. [00:20:27] Speaker 05: I've been told before, try to speak English. [00:20:30] Speaker 01: I'm very sorry. [00:20:31] Speaker 01: That's one that it doesn't occur to me. [00:20:33] Speaker 01: It is. [00:20:34] Speaker 01: It is an acronym. [00:20:35] Speaker 01: It is not just and reasonable, these exemptions. [00:20:38] Speaker 01: And it says why at the end of paragraph 141. [00:20:41] Speaker 01: there may be resources that have lower competitive costs than the default floor. [00:20:47] Speaker 01: And they should have an opportunity to show that they're coming in on a cost-based bid. [00:20:51] Speaker 05: Assume that is correct and it's not just unreasonable as the 205 filing begins. [00:20:59] Speaker 05: Can you, under 205 as opposed to 206, make this kind of a modification [00:21:06] Speaker 05: I know you're going to say that they didn't make a modification. [00:21:08] Speaker 05: They gave me the option of complying, but that brings us to the city of Winfield. [00:21:15] Speaker 05: Does this present the city of Winfield research question? [00:21:18] Speaker 05: And if it does, how do you win under that? [00:21:22] Speaker 01: Well, I think we do in under Winfield, and I'll explain. [00:21:24] Speaker 01: What the Commission said is these exemptions are great, they do what you want them to do, they could miss some. [00:21:31] Speaker 01: And that's where the risk of over mitigation comes in. [00:21:33] Speaker 01: A resource that could actually show that its costs are lower than the default bid could be, as Judge Kavanaugh, as your question phrased it, forced to bid higher at the default bid without an opportunity to justify a lower cost. [00:21:46] Speaker 01: So what do we do about that? [00:21:47] Speaker 01: We say this is a flaw in the exemptions and it's an over mitigating flaw. [00:21:51] Speaker 01: What do we do about that? [00:21:53] Speaker 01: Well, the existing just and reasonable process that was previously approved is the unit-specific review. [00:21:59] Speaker 01: And indeed, if we just rejected it flat out under 205, a very rigid reading of 205 that says, if it's not just and reasonable, it's out, the status quo ante that we return to is unit-specific review for everyone, including the self-suppliers that could be able to come in under the exemption. [00:22:16] Speaker 05: And if FERC thinks that's not just and reasonable, FERC could then initiate a 206 procedure. [00:22:21] Speaker 05: Yes, it could. [00:22:22] Speaker 05: And if there were two or six proceedings, what would be the opportunity of the suppliers or anyone else, the stakeholders, to participate at that point? [00:22:35] Speaker 05: Well, if it were throwing out the existing process to start over, everyone could come in, but we're still... Yeah, well, do they have that same right when FERT makes this modification or whatever it made any two or five proceedings? [00:22:49] Speaker 05: Or have they been finessed out of a right they would have had under 206? [00:22:53] Speaker 01: Well, they had lengthy requests for re-hearing that raised many of the same arguments they did on comments. [00:22:57] Speaker 01: So I don't think that this particular part of the order was expert heavy or evidence heavy. [00:23:06] Speaker 01: But PJM comes in with a filing of these exemptions it would like to do that streamline the process. [00:23:11] Speaker 05: Yeah, but you're looking only at PJM. [00:23:14] Speaker 05: I'm asking about the rights of the stakeholders, whether this is [00:23:18] Speaker 05: They're the ones, PJM is not who's objecting here, this is the stakeholder. [00:23:23] Speaker 01: But it's PJM's 205 filing. [00:23:25] Speaker 01: Yes, I know that. [00:23:26] Speaker 05: We've got that behind us. [00:23:28] Speaker 05: We're now saying that they have the same rights, the stakeholders have the same rights to bring their differing position into the process at that point that they would have had had FERC initiated the same changes under 206. [00:23:45] Speaker 01: I think they did have the same opportunity. [00:23:47] Speaker 05: And if PJM did not want... Well, what opportunity did they have beyond the rehearing opportunity? [00:23:52] Speaker 01: Well, let's look at what PJM... No, no, no, let's answer that question. [00:23:55] Speaker 01: Well, no, I think the answer to that is what the Commission said is what you've brought to us is not just unreasonable. [00:24:01] Speaker 01: You can either fix it or we throw it out. [00:24:04] Speaker 01: If we throw it out and go back to the status quo ante of unit-specific review for everyone, they start over. [00:24:12] Speaker 01: I suppose if PJM, we said you have to have an opportunity to show your costs. [00:24:18] Speaker 05: I suppose if PJM... Are you still talking about PJM or are you including the people who are complaining today? [00:24:25] Speaker 01: Well, if PJM wanted to do something different than its status quo ante, I think it probably would have to deal with its stakeholders in proposing something different. [00:24:32] Speaker 01: I think the reason it fits in city of Winfield is not just the consent, because Winfield wasn't just about consent. [00:24:39] Speaker 01: And conversely, the fatal flaw in Western resources was not just, well, it may not have just been consent. [00:24:47] Speaker 01: The court did hint that perhaps consent would have made it OK. [00:24:51] Speaker 01: But in Winfield, the commission had [00:24:55] Speaker 01: set a different rate than the one the utility asked for, but using the existing methodology. [00:25:02] Speaker 01: So it wasn't drawn just out of thin air. [00:25:04] Speaker 01: Whereas in Western resources, the court felt that it was, that the commission had not only rejected what the pipeline had come up with, it invented something completely new. [00:25:14] Speaker 01: Well, that's not what the commission did here. [00:25:16] Speaker 01: The commission said, these exemptions leave a gap that is not just unreasonable. [00:25:21] Speaker 01: It is over-mitigating because it's not allowing someone to show their costs. [00:25:26] Speaker 01: Your existing process that we have previously found just and reasonable does exactly that. [00:25:32] Speaker 01: So fix your not just and reasonable filing by just filling in anyone that falls through those cracks. [00:25:42] Speaker 01: The vast majority of resources are going to fall in those cracks. [00:25:45] Speaker 04: I didn't mean to interrupt. [00:25:47] Speaker 01: No, I was at the end of the thought. [00:25:49] Speaker 04: Okay. [00:25:50] Speaker 04: To pick up on Judge Centell's point though, our decision in Winfield says that the process matters and the early notice matters that would come through the usual process rather than just the rehearing. [00:26:03] Speaker 04: And I think [00:26:04] Speaker 04: Your burden is to tell us that actually there was no difference in effect in terms of the stakeholders' rights, the way it has transpired and the way it could have transpired as they proposed. [00:26:20] Speaker 01: I think that the stakeholders' rights are only in peril if you believe that the Commission has concocted something entirely [00:26:28] Speaker 01: new and radically different, and it hasn't. [00:26:30] Speaker 01: It has approved what was proposed. [00:26:32] Speaker 04: Well, it is new to put them all together this way. [00:26:34] Speaker 01: I think that's not the way to look at it. [00:26:37] Speaker 04: You used to use this, and you're proposing these two, and so we're going to put all three together and say that's not new, but that is new to have all three together. [00:26:44] Speaker 01: I think the way to look at it is with the minimum offer price rule, [00:26:48] Speaker 01: Anyone who is any new resource that comes in that is subject to the rule is measured against the benchmark, which is also the same number that's used for the default bid, the net cost of new entry. [00:27:00] Speaker 01: And you have to justify why you should be able to bid lower than that. [00:27:06] Speaker 01: In the past, everybody who wanted to bid under that had to justify it on a unit-specific basis showing their costs. [00:27:14] Speaker 01: Under the new exemptions, [00:27:16] Speaker 01: Someone who wants to bid below that benchmark and to whom the rule is applicable, so only new resources, only et cetera, can prove that they fit an exemption. [00:27:27] Speaker 01: So you can almost view it as like a couple of safety nets that you can, I don't even know if that's the right metaphor, but you can justify why you should be under that rule this way. [00:27:38] Speaker 01: But there's a gap in them that lets someone who could show that they're cost-based [00:27:44] Speaker 01: fall between that. [00:27:45] Speaker 01: So rather than viewing it as three things that are creating some new rate, I look at it as more like a trapeze net. [00:27:52] Speaker 01: except it doesn't catch everyone. [00:27:53] Speaker 01: You have to make your case. [00:27:55] Speaker 01: Someone who doesn't make the two exemptions and falls through can still fall through entirely. [00:27:59] Speaker 01: So it really is hardly going to, it's only going to apply to the very small number, if any, of resources that don't qualify for the exemptions but can make a cost-based justification. [00:28:12] Speaker 01: And because this is all about cost-based bidding, the commission said it's just not reasonable [00:28:17] Speaker 01: to categorically preclude someone from bidding at their costs and to force them to bid at a theoretical rate that we use as a benchmark without any opportunity to show that it should not apply to them. [00:28:31] Speaker 01: And this isn't something where you [00:28:33] Speaker 01: You just skate by. [00:28:35] Speaker 01: You bring in your numbers to the market monitor, the independent market monitor, and PJAM, both of whom the Commission has, because they're independent players, the Commission has given them discretion as to a lot of these kinds of calls within the market. [00:28:50] Speaker 01: And I think this Court has recognized that, such as in the New England Power Generators case. [00:28:55] Speaker 01: that PJAM and the Independent Market Monitor have a special role in this market. [00:29:00] Speaker 01: So you have to come in with all of the numbers that go into your cost-based bid, which include projections of energy market revenues, your land costs, your labor costs, all sorts of things, which may differ from the ones that go into the generic benchmark, which PJAM sets it as well as it can, and it's a good number. [00:29:20] Speaker 01: But it's not written in stone. [00:29:23] Speaker 01: And if you have a resource where you could, and just to be clear, when you come in, you cannot come in and say the state subsidy factors into my costs. [00:29:32] Speaker 01: You have to come in and show the market monitor and PJM that the costs you're factoring in are the ones legitimate under the tariff, not the state subsidies. [00:29:45] Speaker 01: The bid you end up with isn't just a number you chose. [00:29:48] Speaker 01: It is a mitigated bid that was carefully analyzed by the market monitor with review from PJM. [00:29:53] Speaker 01: And it is mitigation. [00:29:55] Speaker 01: It is a mitigated bid. [00:29:56] Speaker 01: It's just not the default offer bid or the default benchmark price. [00:30:00] Speaker 05: There may not be an answer to this, and it may not even be a proper question. [00:30:03] Speaker 05: I'm going to do it anyway. [00:30:05] Speaker 05: To what extent has it become a norm that FERC would condition approvals under 205 as opposed to 206? [00:30:14] Speaker 05: The argument here, as I understand it, is that this has been treated like a 206 because PERC is originating something in it. [00:30:22] Speaker 01: Right, and we disagree that it's originating something. [00:30:24] Speaker 05: I understand you disagree, but to what extent is it a norm that PERC would put conditions on a 205 approval? [00:30:31] Speaker 01: I think it's fairly common to put minor conditions. [00:30:34] Speaker 01: I mean, the commission is very aware of the wind field and the Western resources, and those actually get cited quite a bit. [00:30:40] Speaker 01: So I think it's very conscious of those bounds. [00:30:43] Speaker 01: But again, and looking to what the court recognized in wind field, these aren't just, I want to raise my rate from $5 to $6. [00:30:51] Speaker 01: Again, going back to the capacity performance design, there were a ton of moving parts. [00:30:57] Speaker 01: Here, there are many parts to this [00:30:58] Speaker 01: The commission approved almost the entire filing. [00:31:01] Speaker 01: It said that the exemptions were not just unreasonable unless they were fixed. [00:31:07] Speaker 01: And it rejected the three-year mitigation outright. [00:31:11] Speaker 01: It approved everything else. [00:31:13] Speaker 01: And that includes, lest we characterize this as a one-sided deal, this includes things that the petitioners supported, like region-wide application instead of just in constrained areas, and also raising the benchmark to 100% of the net cost of new entry, where it had been at 90%. [00:31:28] Speaker 01: The commission approved nearly PJM's entire filing, except for the outright rejection of one and the conditioning of another. [00:31:34] Speaker 01: But it's complicated. [00:31:35] Speaker 04: And you refer to that as minor? [00:31:37] Speaker 01: This one, in the sense that the commit, first of all, I don't care if I agree. [00:31:40] Speaker 04: Because our cases use the phrase minor. [00:31:42] Speaker 04: Our cases use the phrase minor, and you said the norm is minor changes in response to Judge Santel. [00:31:49] Speaker 04: Would you call this minor? [00:31:51] Speaker 01: I would, because the court cases talk about significant materially different. [00:31:58] Speaker 01: Here we have a situation where the commission was willing to approve the exemptions. [00:32:04] Speaker 01: there was a gap in them. [00:32:07] Speaker 01: And it happens that the gap can be filled by the existing. [00:32:10] Speaker 04: We've said we appreciate that minor deviations may be handled. [00:32:15] Speaker 01: Yes. [00:32:17] Speaker 04: And so I'm just probing whether this is really minor. [00:32:22] Speaker 01: I mean, we certainly wouldn't do this without consent. [00:32:24] Speaker 01: I think this is one we're very clear about PJM's consent to it and [00:32:29] Speaker 01: I keep coming back to the fact that we did not make up some new condition. [00:32:33] Speaker 01: It had been the existing, just and reasonable, continuing lawful tariff provision since the 2011 orders. [00:32:42] Speaker 01: In fact, I'm not sure that part was, I could be wrong, I don't think that part was even appealed in the massive Third Circuit case that dealt with so many other issues. [00:32:51] Speaker 01: There were some issues about the unit specific review as it applied to self-supply, but the actual [00:32:57] Speaker 01: unit specific review process. [00:32:58] Speaker 01: I don't remember that being appealed, and if it was, they affirmed everything that they didn't think this would. [00:33:04] Speaker 01: So that is the existing status quo ante. [00:33:06] Speaker 01: So the commission is not reaching into the air to find a number or to come up with a new process that it thinks would be great. [00:33:13] Speaker 01: It's actually looking at what you already had, which you used to have to do for anyone. [00:33:17] Speaker 01: Now you'll just have to do it if there's someone who falls through these cracks. [00:33:21] Speaker 01: And with consent, we do characterize that. [00:33:24] Speaker 01: as not a significantly different or substantially different condition on the filing. [00:33:32] Speaker 01: And again, if we had rejected it, it would be unit-specific review for everybody. [00:33:40] Speaker 01: If the court doesn't have questions about anything else, thank you. [00:33:44] Speaker 07: Thank you. [00:33:57] Speaker 02: May it please the court, Paul Flynn, for PJM and Patrick. [00:34:02] Speaker 02: PJM got most of what it's wanting from these orders of the letter. [00:34:06] Speaker 02: We wanted to get these clear, transparent categorical exemptions and further prove that. [00:34:11] Speaker 02: We also asked that they eliminate [00:34:13] Speaker 02: the unit-specific exemption, because in our view, it allowed us too much discretion, and it wasn't transparent, because it had to be confidential. [00:34:21] Speaker 02: But as a practical matter, from PGM's perspective, since they gave us the categorical exemptions, that was greatly mitigating the relevance and need to rely on the unit-specific. [00:34:32] Speaker 02: So we were content, which is why we acquiesced. [00:34:36] Speaker 02: The alternative would have been to say, no, Ferg, we don't want it. [00:34:40] Speaker 02: those categorical exemptions that we and our stakeholders labored to create for many months. [00:34:46] Speaker 02: We fought over every single word of those. [00:34:49] Speaker 02: And instead, we're gonna go back to square one. [00:34:52] Speaker 02: We thought it much preferable to go ahead and get those two clear categorical exemptions into place and let them essentially occupy the PGA. [00:34:59] Speaker 02: And that's what happened. [00:35:01] Speaker 02: So as I hear petitioners, they are conceding that PJM was the public utility and PJM acquiesced. [00:35:07] Speaker 02: So what that leaves is [00:35:10] Speaker 02: their reading of City of Winfield. [00:35:13] Speaker 02: And as I read City of Winfield, what then Judge Scalia was saying was that this was a procedural issue, an issue of notice. [00:35:25] Speaker 02: The procedural concern, the concern to customers, strictly speaking, relates not to the power of the commission to prescribe rates under section 205 to the procedures that it must employ in doing so. [00:35:36] Speaker 02: And it's an issue of notice. [00:35:38] Speaker 02: In this case, [00:35:40] Speaker 02: PGM's initial filing said, we propose to eliminate the unit-specific exemption. [00:35:47] Speaker 02: The party's protesting our proposal to eliminate the unit-specific exemption. [00:35:51] Speaker 04: Well, that's not notice. [00:35:52] Speaker 04: That's not notice in the way he's describing it there, of having the two plus the one. [00:35:57] Speaker 02: It started from the premise that it had to be a package deal. [00:36:03] Speaker 02: And we can certainly argue [00:36:05] Speaker 02: Commission, please approve this as a package deal. [00:36:07] Speaker 02: But in all my time doing this, there's never any guarantee that FERC is going to say, yes, we give you 100% of what you want. [00:36:14] Speaker 02: That's simply not the way they operate. [00:36:16] Speaker 02: And other interveners certainly know that, that there is a risk. [00:36:19] Speaker 02: There is a risk that when we propose to eliminate something like unit specific, that FERC might not go along with it. [00:36:25] Speaker 02: And so there were protests of that. [00:36:27] Speaker 02: FERC directed a deficiency letter to EGM specifically on the issue of why should we eliminate the unit specific? [00:36:35] Speaker 02: PJM responded to that deficiency letter and there was another rant of comments and protests. [00:36:40] Speaker 02: After that deficiency response, again on this very question, should the unit specific be eliminated? [00:36:47] Speaker 02: PJM's argument was not that this was allowing below cost offers to the contrary. [00:36:53] Speaker 02: We were the ones administering this tariff, this unit specific process, to ensure that offers did not go through unless they were based on reasonably expected costs [00:37:04] Speaker 02: and reasonably expected revenues solely from our market. [00:37:07] Speaker 02: And we were satisfied that we did that job. [00:37:11] Speaker 02: And so, as I would say, the unit specific [00:37:23] Speaker 02: was there was ample notice. [00:37:25] Speaker 02: So the so-called reserve question, which I don't particularly see as a reserve question, because Judge Scalia does address whether or not there was notice in that case to customers who find it was not a concern. [00:37:35] Speaker 02: But that's all it is. [00:37:36] Speaker 02: It's not a question of Section 205 authority. [00:37:39] Speaker 04: Well, he said we need not decide whether in some situations, for example, when the order imposes an entirely new rate scheme, this requirement can only be met if the utility's initial filing itself sets forth the basic scheme ultimately adopted. [00:37:53] Speaker 02: And it depends upon your perspective as to what is an entirely new rate scheme. [00:37:56] Speaker 04: Exactly. [00:37:57] Speaker 02: And so we can certainly ask, Commission, we all labor over this. [00:38:02] Speaker 02: Please approve it as a package. [00:38:05] Speaker 02: Practically speaking, if you say we want to propose this subsection and this subsection and this subsection and this subsection as a practical matter, FERC is going to look at each one of those. [00:38:14] Speaker 02: And some it may grant, and some it may not. [00:38:16] Speaker 02: And that's pretty much the world we live in. [00:38:20] Speaker 02: Now, what Winfield and Western resources say is that if FERC goes so far in denying what you've asked for, that it fundamentally changes what you've done, then the utility, the public utility, [00:38:32] Speaker 02: has the ability, because of the protections afforded by Section 205, to come in and seek to object to that. [00:38:40] Speaker 02: And certainly, if PJM had been unhappy with that, we could have come in and said, Ferg, we seek re-hearing. [00:38:45] Speaker 02: You're violating Western resources. [00:38:47] Speaker 02: You're violating land field. [00:38:49] Speaker 02: You can't do that. [00:38:50] Speaker 02: And you can't impose that on us. [00:38:52] Speaker 02: And don't put it in for our upcoming audit. [00:38:54] Speaker 02: Had PJM been unhappy, we certainly could have done that. [00:38:56] Speaker 02: And that's what this case is all about. [00:39:01] Speaker 02: I just want to correct something in the reply brief. [00:39:04] Speaker 02: The petitioners, they say that we've overlooked references to alleged limits on our ability to file changes to the capacity market provisions here. [00:39:15] Speaker 02: Their statement is incorrect. [00:39:16] Speaker 02: They're referring to a limit on our ability to change the operating agreement, which is not an issue here. [00:39:22] Speaker 02: and limits on PGM's ability to change something called regional rate design, which is for transmission service. [00:39:29] Speaker 02: This case was not about transmission service. [00:39:31] Speaker 02: It was about the capacity market, sales by generators and demand. [00:39:39] Speaker 02: Competitor entry, the speeding ticket analogy, is a little bit off. [00:39:46] Speaker 05: Oh, I'll tell you, you're a little bit off. [00:39:50] Speaker 02: That's why they are now. [00:39:53] Speaker 02: Because what we're talking about is folks bidding low. [00:39:56] Speaker 02: And so the concern is, oh my gosh, you're bidding too low. [00:40:00] Speaker 02: Bidding too low is only a concern when it's done. [00:40:02] Speaker 02: There's reason to believe it's being done to manipulate the market. [00:40:06] Speaker 02: And if someone makes a poor guess as to their cost, they guess low on their cost or they guess high on their other revenues and say, oh, OK. [00:40:15] Speaker 02: I'm going to submit this bid. [00:40:16] Speaker 02: I'm going to clear that market. [00:40:17] Speaker 02: What they're going to find out is they're not making enough money to stay in business. [00:40:20] Speaker 02: Again, this is someone that doesn't have a subsidy. [00:40:22] Speaker 02: They don't have the out-of-market revenues to make up the difference. [00:40:25] Speaker 02: They're going to pay the price for that. [00:40:26] Speaker 02: They won't be able to stay in business. [00:40:28] Speaker 02: It can be that when they do that, that harms other sellers. [00:40:33] Speaker 02: But guess what? [00:40:34] Speaker 02: That's what happens in the competitive market. [00:40:37] Speaker 02: Not every seller is a genius, and Jess is exactly right as to their cause in the competitive market. [00:40:45] Speaker 02: really a speeding ticket type of situation, if there are no other questions. [00:41:01] Speaker 03: couple. [00:41:01] Speaker 07: You do not have any time remaining, but we'll give you two minutes of the battle time. [00:41:05] Speaker 03: I will be very brief. [00:41:07] Speaker 03: First answer your question, Judge Santel. [00:41:09] Speaker 03: No, I don't think it is the norm. [00:41:11] Speaker 03: Since the briefing this case started, FERC has been inserting notes into numerous orders, telling people, hey, by the way, in case you're not clear, you do have the ability to walk away from this condition. [00:41:21] Speaker 03: If you want to have this filed, it would be a 28-J. [00:41:23] Speaker 03: I'll just tell you that this has actually changed the train there. [00:41:27] Speaker 03: Next, to clear up another thing, yes. [00:41:29] Speaker 03: The problems of the event-specific review were, in fact, litigated in NJVPU, although we had to withdraw a large portion of our side of the case in the NJVPU proceeding because we had a settlement here in 2013 while that case was being litigated. [00:41:41] Speaker 03: It took away a bunch of our issues. [00:41:42] Speaker 03: That's one of the reasons why we keep describing it as a settlement. [00:41:44] Speaker 03: It was a stakeholder settlement of ongoing litigation in the Third Circuit. [00:41:47] Speaker 03: It wasn't just some random deal that we were deciding to pursue. [00:41:51] Speaker 03: So let's now turn to where I think everyone is now focused. [00:41:57] Speaker 03: The real grabment of this case has become, how violent was the change that Burke imposed? [00:42:02] Speaker 03: Does it meet or not meet the standard under Winfield? [00:42:06] Speaker 03: Judge Cowan, I don't think that you're going far enough when you say, well, 2 plus 1 is different than 2 instead of 1, right? [00:42:14] Speaker 03: 1 plus 1 equals 2. [00:42:14] Speaker 03: The 1 plus 1 plus 2, these are all different. [00:42:17] Speaker 03: There's another thing. [00:42:18] Speaker 03: It's the back half of our brief. [00:42:19] Speaker 03: And sadly, we didn't have time in the opening to discuss the 1 versus 3 years of review. [00:42:25] Speaker 03: which is very important because the units that got through here decided between the order and rehearing that they weren't going to proceed, at least not immediately, with construction, which kind of does a lot of damage to the construction costs or sunk costs if you're not actually incurring those costs. [00:42:38] Speaker 03: I don't want to ambush anyone by bringing up this entirely, but please, we'll rest in the briefs, please, please, please review those. [00:42:44] Speaker 03: So it is not effective. [00:42:45] Speaker 04: Your point is that when you add that into the mix, that's more of a change. [00:42:49] Speaker 03: That's even more. [00:42:50] Speaker 03: It's 2 plus 1 plus 2 plus 1. [00:42:51] Speaker 03: It's not fair for FERC to say, oh, we improved the vast majority of what they filed, except its purpose, which was to replace all the stuff that they told us to retain. [00:43:02] Speaker 03: So that just doesn't make sense. [00:43:04] Speaker 03: And the other thread of FERC's argument, and then PJM says, well, you know, it's a very small exemption. [00:43:10] Speaker 03: It's just meant to catch these other fish that don't make it through it. [00:43:13] Speaker 03: This exemption, the misapplication of the exemption, allowed through resources that cost the market $3 billion that resulted in God knows what legal fee is taking all the way through two preemption trials in two different district courts, two courts of appeals, and all the way to the Supreme Court. [00:43:29] Speaker 03: This was enormously damaging stuff that made it through. [00:43:33] Speaker 04: What's the this when you say this was enormously damaging? [00:43:37] Speaker 03: It was enormously damaging that the failure of the unit-specific review, this opaque unit-specific review process was enormously damaging to the market and had to be dealt with through completely collateral proceedings. [00:43:51] Speaker 03: It was a huge error. [00:43:52] Speaker 03: It was a world-changing error. [00:43:54] Speaker 03: We just had two days worth of open technical conference meetings at FERC last week to discuss the way the markets are falling apart as a result of these things. [00:44:01] Speaker 03: This is a very, very... As a result of these things, sorry to ask. [00:44:06] Speaker 03: As a result of the failure of the MOPR system to catch below cost entry. [00:44:12] Speaker 03: Now to Mr. Flynn's point. [00:44:15] Speaker 03: He says, [00:44:16] Speaker 03: The only purpose of the only real problem is below cost and with below cost entry is when they mean to do it. [00:44:22] Speaker 03: That is not what this court's decision in New England Power Generator says. [00:44:25] Speaker 03: Your honor, Judge Santel, what did you say there? [00:44:28] Speaker 03: No, it embraces, it doesn't really matter whether it's intent as long as the prices are officially depressed and you described it as definitional market distortion in favor of buyers. [00:44:38] Speaker 03: So it is in fact a big deal regardless of intent. [00:44:41] Speaker 03: And if the speeding analogy was not apt, I apologize, but I think you see the direction [00:44:45] Speaker 03: that I'm going. [00:44:46] Speaker 03: It's the damage that third parties were worried about, not stupid mistakes that people make about their inability to recover their own costs, particularly in situations where they feel that. [00:44:53] Speaker 07: Yes, ma'am? [00:44:54] Speaker 07: A couple of process questions. [00:44:55] Speaker 07: One is, I think I understood PJM to say that WinFIL and Western Resources both give ability of the utility itself [00:45:09] Speaker 07: to argue about whether FERC is changing this drastically, but does that apply to stakeholders? [00:45:18] Speaker 03: But that, I think, is the whole point of the reserve question in Winfield, because it's saying, look, it's OK for FERC to mess around and impose conditions if the utility acquiesces. [00:45:28] Speaker 03: But then they have a whole long paragraph saying, but there's another really important concern here. [00:45:32] Speaker 03: If the change is really dramatic, then we need to allow these third parties the opportunity to notice and comment. [00:45:38] Speaker 03: And importantly, this is why rehearing is not good enough. [00:45:41] Speaker 03: We have to have notice and comment before FERC makes a decision. [00:45:44] Speaker 03: before, and it's very clear in the decision that that's important. [00:45:47] Speaker 03: We know agencies get dug in once they do this. [00:45:51] Speaker 07: One other question, which is, as I understand it, if this had been presented to FERC as a settlement [00:45:59] Speaker 07: then presumably it would have been all or nothing. [00:46:04] Speaker 03: It was in fact presented to them as a settlement. [00:46:08] Speaker 07: That's my question. [00:46:09] Speaker 07: They describe it as a compromise between the stakeholders, but they don't call it a settlement. [00:46:15] Speaker 03: We think of it as a settlement largely because we know we're settling matters that were before the third circuit. [00:46:20] Speaker 03: It was presented to us in the fourth. [00:46:21] Speaker 07: I guess my question is, is there a difference, in other words, if this had been the result of litigation where everybody signed off on it? [00:46:31] Speaker 03: Because it was a settlement of something different. [00:46:33] Speaker 03: Here, though, is what sustaining first orders will absolutely cause in addition to a future suit about cleaning up the governance procedures at PGM, which is not before this court now. [00:46:45] Speaker 03: But what this case is going to force us to do in the future is, if we want to do something, we're going to have to do like we did in the NJBPU case, file a 206. [00:46:54] Speaker 03: And after we file the 206, we will then get together and settle our 206 complaint. [00:47:00] Speaker 03: And that'll bring us into a trailblazer and all the other things where we're looking at settlement of FERT litigation, not settlement of appellate court litigation through a stakeholder process. [00:47:09] Speaker 03: It's more narrowly. [00:47:11] Speaker 03: Would you need to be clear about which kind of settlement we're talking about? [00:47:14] Speaker 03: That's an excellent question, and I hope I've cleared up for you. [00:47:17] Speaker 04: I need to understand, and I'm sorry to belabor this, I need to understand why the rehearing isn't good enough, and for you to break that down into bite-size pieces if you can. [00:47:29] Speaker 03: first reason is because as the court explains in one field and that the the sedation ruggles house explains it's not just an fpa issue it's also an apa issue the important thing about noticing comment is that it occurs before the agency makes the decision right i i get on i completely get that now what practical difference in a case like this what could have transpired differently if it's a 205 we get [00:47:53] Speaker 03: a stakeholder process beforehand. [00:47:56] Speaker 03: PGM, of course, says now we don't really have to care about what you say. [00:47:58] Speaker 03: We'll follow what we want to anyway, but at least get the opportunity to develop our evidence, dialogue with one another. [00:48:03] Speaker 03: And the purpose of that would be to convince, would be to amass our evidence, maybe get the decision that maybe get the 205 filing more narrowly the way that we want it so we can avoid conflict. [00:48:14] Speaker 03: We also then, once the 205 filing is made, we have 60 days to fight about it, not 30 days to fight about it. [00:48:20] Speaker 03: So we have a 60-day notice period under 205. [00:48:23] Speaker 03: It's a 30-day mandatory re-hearing requirement. [00:48:25] Speaker 03: Of course, it applies to us. [00:48:27] Speaker 03: It's also supposed to be one for FERC, but FERC has tolling orders, and so we don't get orders. [00:48:30] Speaker 04: Is part of your theory that you'd be able to convince PJM to do something differently? [00:48:34] Speaker 03: Yeah, but we don't stand a hope of being able to get a 205 filing [00:48:38] Speaker 03: that's going to get load to sign on the other half of the market, because they got what they want. [00:48:42] Speaker 03: They got their self-supply exemption. [00:48:44] Speaker 03: So that side of the market, they're sitting pretty. [00:48:46] Speaker 03: We, on the other hand, is the merchant generators. [00:48:49] Speaker 03: Where are we supposed to get those votes? [00:48:51] Speaker 03: But interestingly, if you put in this proposal in the stakeholder process, it would have failed. [00:48:56] Speaker 03: And if it had been filed under 205, it would have been protested. [00:48:59] Speaker 03: So the procedure really does matter here. [00:49:03] Speaker 03: We want to go back to square one. [00:49:05] Speaker 03: And strangely, [00:49:06] Speaker 03: first seems to think this is what it fails. [00:49:08] Speaker 04: Can you? [00:49:09] Speaker 04: I'm sorry if longer, but you say it would have failed to explain that. [00:49:13] Speaker 03: I shouldn't have said failed. [00:49:15] Speaker 03: There would have been rampant protest if they tried to follow this. [00:49:18] Speaker 03: This combined proposal, right? [00:49:20] Speaker 03: No, no, no, no one to three. [00:49:22] Speaker 04: Um, you're gonna keep units super and then what does PJM do with that? [00:49:26] Speaker 04: Given that they know that the only way to get it through the commission is to keep the three together or go back with what they had before. [00:49:33] Speaker 03: then they may file nothing, in which case we'll file a 206. [00:49:36] Speaker 03: And if we fail to get to achieve some sort of stakeholder consensus, if this goes back, we will in fact file a 206 and we'll try to get this fixed. [00:49:44] Speaker 03: And not just this fixed, but this fixed in the context of all the other things that have occurred over the last four years to make this make some sense. [00:49:50] Speaker 03: We've got Supreme Court cases to weld into this, we've got capacity performance to weld into this. [00:49:54] Speaker 03: There's much to do, but we, on the generator side, are gonna be able to do the damn thing about unit civic review unless we get some of our bargaining power back. [00:50:02] Speaker 03: We need that back. [00:50:03] Speaker 03: So please send us back to square one. [00:50:06] Speaker 03: Let's build something that works from the ground up in a 205 proceeding with appropriate evidence. [00:50:11] Speaker 03: That's what we that's what we need. [00:50:15] Speaker 07: All right. [00:50:15] Speaker 07: Thank you. [00:50:16] Speaker 07: Thank you. [00:50:19] Speaker 07: Peace will be submitted.