[00:00:02] Speaker 00: Case number 15-1274, Orangeburg, South Carolina Petitioner versus Federal Energy Repertory Commission. [00:00:09] Speaker 00: Mr. Horwood for the petitioner, Ms. [00:00:11] Speaker 00: Vasella for the respondent. [00:00:23] Speaker 03: Good morning, I'm James Horwood, representing the petitioner of the City of Orangeburg, South Carolina. [00:00:28] Speaker 03: I'd like to reserve five minutes of my time for rebuttal. [00:00:33] Speaker 03: This case involves Fert orders approving a new wholesale power resource that is unduly discriminatory. [00:00:42] Speaker 03: Duke, Progress, and their wholesale customers can and will enjoy this resource, but Orangeburg cannot because of state of North Carolina's control over wholesale sales in which it picks winners and losers. [00:00:57] Speaker 03: Orangeburg has been in the market [00:01:00] Speaker 03: for a number of years trying to avail itself of FERC's competitive market regime, but it's been thwarted by actions by the North Carolina Commission and by FERC's failure or refusal to address Orangeburg's concerns. [00:01:15] Speaker 04: You have a contract right now, correct? [00:01:17] Speaker 04: Yes. [00:01:17] Speaker 04: And that contract goes until 2023, is that correct? [00:01:21] Speaker 03: It ends either at the end of 2022 or 2023. [00:01:26] Speaker 04: How far in advance does Orangeburg tend to start contracting? [00:01:32] Speaker 04: We're looking for a possible new contract. [00:01:34] Speaker 04: I assume you don't do these things at the last minute. [00:01:37] Speaker 03: No, it takes about three years. [00:01:39] Speaker 03: For Commissioner Mueller and his dissent then. [00:01:45] Speaker 03: a declaratory order proceeding, we had done a pretty good job of outlining what the process is. [00:01:51] Speaker 03: You put out a request for proposals, you get proposals in, you evaluate them, then you sit down and negotiate a contract. [00:01:59] Speaker 03: And that's what happened back then, starting in 2005, and Orangeburg then entered into a contract in 2008. [00:02:09] Speaker 03: So that took about three years. [00:02:12] Speaker 04: So how is your interest in contract possibly with Duke in 2023 ripe for our review now, or how is your injury imminent now? [00:02:32] Speaker 03: The Joint Dispatch Agreement, which we're complaining about, [00:02:38] Speaker 03: accepts effectively the conditions that Duke in Progress agreed to with the North Carolina Utilities Commission staff that gives the North Carolina Commission the right to review the contract and contains within it [00:02:57] Speaker 03: indication of who get to be considered native-load wholesale customers. [00:03:01] Speaker 03: And Orangeburg's excluded from that definition. [00:03:04] Speaker 03: Native-load wholesale customers are all of what's called traditionally served wholesale customers in it, and they're listed. [00:03:14] Speaker 03: And a glaring omission is Orangeburg. [00:03:16] Speaker 03: Orangeburg has never been served by Duker Progress under first-market-based rate regime. [00:03:23] Speaker 03: Orangeburg's entitled to buy from [00:03:26] Speaker 03: whatever willing seller wants to sell to it. [00:03:30] Speaker 03: And the state of North Carolina has taken Duke in progress off of the table. [00:03:37] Speaker 01: Is Orangeburg paying more for energy right now than it would be if that joint dispatch agreement had been struck down the way that you are requesting? [00:03:53] Speaker 03: Orange wouldn't be affected right now, but it would be affected at the time it goes into the market. [00:04:01] Speaker 03: We don't know whether Duke or Progress would bid at that time, but absent the [00:04:08] Speaker 03: North Carolina regulatory commissions. [00:04:11] Speaker 03: But we know that with the regulatory conditions, they will not bid. [00:04:15] Speaker 03: And we also know that other potential suppliers know that Duke in Progress won't be able to bid, which therefore eliminates the discipline of competitive markets that FERC has kind of implied. [00:04:33] Speaker 03: he has provided for in its regime of open access transmission and competitive markets. [00:04:40] Speaker 01: FERC, when it... Well, perhaps then, I mean, I know that your client is quite frustrated because you sought a declaratory ruling from FERC previously that got dismissed as moot because of the contract being, I guess, voluntarily terminated. [00:05:01] Speaker 01: But perhaps your remedy is to, when you begin the process of seeking bids, if [00:05:15] Speaker 01: If you don't receive the bids that you believe that you otherwise would, because of the NCUC ruling, then you could initiate a petition at that point with FERC, and then if FERC doesn't give you relief, you could come to this court. [00:05:35] Speaker 03: That's kind of fine in theory, but that's not how the market works. [00:05:41] Speaker 03: I think the important thing from Orangeburg's standpoint is when it goes out to the market, it wants to have as many potential bidders as it can, because that's the way the market's supposed to work. [00:05:55] Speaker 03: And Orangeburg and Duke won't be bidders. [00:06:01] Speaker 03: They have no ability to be. [00:06:03] Speaker 03: that is, when they entered into the agreements to get the merger approved by the North Carolina Commission and agreed to the regulatory conditions, among the regulatory conditions they agreed to was something that could properly be called a gag order. [00:06:23] Speaker 03: They don't have the ability to ask the North Carolina Commission or any other court for relief. [00:06:32] Speaker 03: they disabled themselves from being able to come in and say we want to be able to serve the market and with those shackles removed then they could be potential bidders and from Orangeburg's standpoint what's important is that [00:06:53] Speaker 03: Other potential bidders know that, and that eliminates the market discipline. [00:06:59] Speaker 03: When FERC issued its order in 1988, kind of moved from a position [00:07:04] Speaker 03: position of a guaranteed supply for wholesale customers from their traditional resource at regulated rates, which are generally cost-based rates. [00:07:16] Speaker 03: And FERC found that we can have a competitive market, and that'll discipline prices, and that'll be a better way to deal with [00:07:26] Speaker 03: these issues than trying to regulate rates. [00:07:30] Speaker 03: And a major part of that was FERC issued its open access transmission requirements to make sure that competitive markets were there. [00:07:40] Speaker 04: Well, if this Court were to hold that FERC should not have approved the Joint Dispatch Agreement, [00:07:49] Speaker 04: How does that help you? [00:07:50] Speaker 04: Because won't Duke still be bound by the North Carolina Utility Commission regulations, which are on the books in North Carolina? [00:08:00] Speaker 03: I think, well, I guess what we're asking the Court to do is to say that the Joint Dispatch Agreement should not be approved unless [00:08:10] Speaker 03: the regulatory conditions in North Carolina are changed because the Joint Dispatch Agreement is subject to those regulatory conditions and we're asking for relief here because this interferes with first jurisdictions. [00:08:26] Speaker 03: The state of North Carolina is trying to regulate wholesale sales. [00:08:32] Speaker 04: in a position to directly review the North Carolina utility regulations, you have to challenge those within the North Carolina court system. [00:08:40] Speaker 04: What we can review is the federal commission's action and isn't the most that you could get here is a decision from FERC that would strike out. [00:08:53] Speaker 04: any incorporation of those regulations in the Joint Dispatch Agreement, but not – I don't know that FERC can issue an order that makes the North Carolina regulations themselves disappear in this – in the posture of this proceeding. [00:09:07] Speaker 03: Well, what the Joint Dispatch Agreement does is it defines who native load customers are and who are entitled to native load treatment. [00:09:18] Speaker 03: And [00:09:19] Speaker 03: Because of the existence of the North Carolina Regulatory Commissions, which Perk was informed about by us and others, Orangeburg can't be a native load customer, but under the [00:09:34] Speaker 03: whole scheme of interstate regulation, FERC regulation, states don't get to determine which wholesale customers are able to get served or at which rates. [00:09:46] Speaker 03: And that's what is happening here with the state deciding who get to be considered native load customers. [00:09:58] Speaker 01: It seems that in the [00:10:03] Speaker 01: In your argument in your brief in favor of standing, you say that FERC could redress your, that an order from this court could redress your injury because we could order FERC to do something akin to what was done in that California Public Utility Commission's case. [00:10:24] Speaker 01: FERC, I'll ask them about this when they stand up here, but they don't respond to that in their brief. [00:10:31] Speaker 01: Other than to say that, well, we have discretion to act as we did in that California Public Utilities Commission case, and if we choose not to exercise that discretion, then basically there's, you know, tough luck, I guess. [00:10:56] Speaker 01: But I guess your argument would be that [00:11:00] Speaker 01: If they're withholding their exercise of discretion is arbitrary and capricious or is not fulfilling their duty to ensure just and reasonable nondiscriminatory rates, then we can compel them to exercise their discretion or vacate and remand for them to exercise their discretion with those things in mind. [00:11:27] Speaker 01: Is that your argument? [00:11:30] Speaker 03: Well, part of our argument is that FERC does not have discretion when it's faced with undue discrimination. [00:11:38] Speaker 03: It's required to deal with undue discrimination which is presented to it, and we believe that that's the case here. [00:11:47] Speaker 03: And FERC said it's exercising its discretion. [00:11:52] Speaker 03: It says that in its briefs. [00:11:54] Speaker 03: But in FERC's order, it didn't say it was exercising its discretion. [00:11:58] Speaker 03: It said it need not reach Orangeburg's other arguments because it's interpreted Order 2000 in a way that we think is not permissible and goes well beyond what was intended in Order 2000. [00:12:15] Speaker 03: FERC and its [00:12:18] Speaker 03: decision dealing with the Joint Dispatch Agreement said that states are, I'm sorry, that states can determine who's entitled to native load treatment as states always have. [00:12:44] Speaker 03: That statement by itself, which is an isolated statement, doesn't make any sense when Order 2000 is read because the whole purpose of Order 2000 and Order 2888 was to eliminate [00:12:59] Speaker 03: the barriers and who gets to serve in wholesale markets. [00:13:04] Speaker 03: You don't get rid of wholesale markets by saying, well, gee, you can sell anybody you want so long as it's within your existing area. [00:13:13] Speaker 04: Well, the commission said there in order 2000, [00:13:16] Speaker 04: Made that statement and said, as it always has. [00:13:19] Speaker 04: What did it mean by that? [00:13:20] Speaker 04: What had it always allowed before with respect to authority to require state utility commission's authority to direct lease cost sales to native customers? [00:13:36] Speaker 03: Well, first, we don't think that's a correct statement. [00:13:40] Speaker 03: But if it is a correct statement, and we're not challenging it, it's only a correct statement as it applies to retail customers, not to wholesale customers. [00:13:51] Speaker 03: In Order 2000, they weren't talking about wholesale customers. [00:13:56] Speaker 03: They were talking in terms of retail customers. [00:13:59] Speaker 03: And states have never lawfully regulated wholesale sales. [00:14:07] Speaker 03: not at least since the Attleboro decision in 1927, which gave rise to part two of the Federal Power Act. [00:14:18] Speaker 03: This reading of Order 2000 as justifying North Carolina control of Duke of Progress wholesale sales contradicts [00:14:30] Speaker 03: power case. [00:14:31] Speaker 03: And Dana Hale, the New England power case, was one where the state of New Hampshire said, we're going to keep our low-cost power within the state of New Hampshire, and you can't sell it outside the state. [00:14:43] Speaker 03: Supreme Court ruled that that violates a commerce clause. [00:14:48] Speaker 03: And it's a state regulating interstate commerce, which is what's involved here. [00:14:55] Speaker 03: you know quite simply we don't think that states get to pick winners and losers at wholesale and this is particularly true in once you move to a market-based rate regime which said that the incumbent utility the one whose control area or balancing area customers located in doesn't have to continue to serve that customer anymore but in return for that we uh... [00:15:25] Speaker 03: going to make sure that we eliminate these kind of geographic barriers. [00:15:31] Speaker 03: So nothing in Order 2000 speaks to what North Carolina is doing here. [00:15:35] Speaker 04: Now what the Federal Power Act says is that rates cannot be unduly discriminatory. [00:15:42] Speaker 03: Yes. [00:15:42] Speaker 04: It sounds like they can be. [00:15:44] Speaker 04: duly discriminatory, and that's okay. [00:15:47] Speaker 04: So what is unduly discriminatory about a state deciding that, look, for our native load folks, they've borne the cost of building up this system within our state, taxpayer dollars have been used, they're gonna get the least cost. [00:16:03] Speaker 04: And if someone new wants to come in, that's fine, but those newcomers are gonna have to bear the cost [00:16:09] Speaker 04: of the new energy that they're getting. [00:16:11] Speaker 04: They're just having to pay for what they're getting. [00:16:13] Speaker 04: They're going to have to pay their fair share. [00:16:14] Speaker 04: What's unduly discriminatory about that? [00:16:18] Speaker 03: Because states don't get to regulate the wholesale rates. [00:16:24] Speaker 03: That's the Commerce Clause. [00:16:26] Speaker 03: This is interstate commerce. [00:16:28] Speaker 03: And we're dealing with, in effect, the Dorman Commerce Clause, which says if you don't get to regulate [00:16:38] Speaker 03: at state level what is regulated at the federal level. [00:16:43] Speaker 02: How did the New England case get to the Supreme Court? [00:16:52] Speaker 03: New England Power Company, which was effectively prevented from being able to... By the State Commission? [00:17:00] Speaker 03: You need research resources by the State of New Hampshire, yes. [00:17:03] Speaker 03: Right. [00:17:04] Speaker 02: But the proceeding that took place was [00:17:09] Speaker 02: as I remember, New England then appealed to the Supreme Court of New Hampshire, was it? [00:17:16] Speaker 02: So the case came up in a challenge to a state regulatory body, a judicial challenge, but in the state courts, not through FERC. [00:17:29] Speaker 03: Well, that's right. [00:17:30] Speaker 03: That was not a FERC case. [00:17:31] Speaker 02: It was not a FERC case, which raises a question in my mind. [00:17:36] Speaker 02: Did you appeal the North Carolina Utility Commission's ruling to the North Carolina courts? [00:17:45] Speaker 03: Yes. [00:17:46] Speaker 03: We did appeal it and were told that our appeal was moot because the contract we were complaining about no longer existed. [00:17:58] Speaker 03: And then the North Carolina Court of Appeals said, and you have other places you can get this resolved. [00:18:04] Speaker 03: You can [00:18:05] Speaker 03: file at FERC for declaratory relief, as you have. [00:18:09] Speaker 03: You can file in district court for mandamus, which may have been something possible at that time, but not since the Supreme Court's Armstrong decision. [00:18:18] Speaker 03: They said, well, you can go other places. [00:18:22] Speaker 03: They didn't rule that what the North Carolina Commission had done was a proper interpretation [00:18:29] Speaker 03: on the Federal Power Act or was permissible. [00:18:31] Speaker 03: They just said that, you know, you're too late. [00:18:34] Speaker 03: We're kind of faced with arguments here that, you know, Orangeburg [00:18:39] Speaker 03: you're too late because you're no longer have a contract or you're too early because you don't have a contract or you're not in the right place instead of being before the North Carolina courts you should be in before a federal commission or before federal courts or were now told by FERC that when we filed our declaratory relief petition that sat for six years because FERC couldn't get a majority to consider the case [00:19:09] Speaker 03: Well, gee, now you're too late because the contract doesn't exist in its mood. [00:19:14] Speaker 03: The only body that's ever addressed our arguments on what's permissible for states to do and native load customers was the North Carolina Commission. [00:19:27] Speaker 03: No court has addressed it. [00:19:30] Speaker 03: FERC has not addressed the merits of it, except, you know, possibly in this Joint Dispatch Agreement, where kind of the off-handed said, well, you know, what the North Carolina, state of North Carolina doing is okay. [00:19:44] Speaker 02: So you, you exhausted your state, is that what you're talking about? [00:19:48] Speaker 02: Yes. [00:19:49] Speaker 02: So you went to the North Carolina Court of Appeals, did you go to the North Carolina Supreme Court? [00:19:53] Speaker 03: I don't remember whether we did. [00:19:55] Speaker 03: I think we decided that since the ground for dismissal was mootness and effectively it was moot at that time in terms of that particular proceeding and we had other proceedings that we were pursuing. [00:20:09] Speaker 03: So, you know, Frick talks about that Orangeburg engaged in a multi litigation strategy. [00:20:20] Speaker 03: Well, Orangeburg, in all the litigation we've been involved in, which has been a lot, has never made arguments that are inconsistent. [00:20:29] Speaker 03: It's always the same argument, and we can't get anybody to sit down and address the merits of our argument that what the state of North Carolina is doing here is an improper interference with interstate commerce. [00:20:45] Speaker 04: All right. [00:20:46] Speaker 04: Thank you very much. [00:20:47] Speaker 03: OK. [00:20:48] Speaker 03: I don't know if I have any time left. [00:20:50] Speaker 04: We'll give you a couple of minutes. [00:20:51] Speaker 03: Okay, thank you. [00:20:59] Speaker 06: Good morning, Your Honors. [00:21:01] Speaker 06: Beth Pacella for FERC. [00:21:03] Speaker 06: I'll start off with standing. [00:21:08] Speaker 06: As Judge Wilkins was saying, really, it's certainly indicating that the remedy here for [00:21:16] Speaker 06: barnsburg's frustration is to next time it it gets a contract if it's not happy with the contract that's when he's litigated orangeburg voluntarily did withdraw from this contract and i may say we're we're not going to be able [00:21:32] Speaker 04: to get the competition for contracts that we want as long as there's this albatross hanging around Duke's net called the North Carolina regulatory conditions. [00:21:44] Speaker 04: So we're not even going to be able to get it. [00:21:47] Speaker 06: First of all, let me just say that [00:21:51] Speaker 06: Orangeburg's counsel is not correct about saying that Duke and Progress will not be able to bid. [00:21:57] Speaker 06: They will be able to bid. [00:21:59] Speaker 06: Even the North Carolina Commission's own order said Duke can bid. [00:22:03] Speaker 06: It just does it at the risk that possibly... Oh, you can bid, but you're going to have to eat the costs. [00:22:07] Speaker 06: Right. [00:22:07] Speaker 06: That's right. [00:22:09] Speaker 04: Why on earth would they engage in a futile exercise like that? [00:22:12] Speaker 04: It cabloid everything the first time around. [00:22:14] Speaker 04: Why would they go back for another [00:22:17] Speaker 04: Another round. [00:22:18] Speaker 06: Your Honor, I think that Judge Wilkins' point there was, and what he was saying is, that if they don't receive bids... Be careful trying to interpret what my point is. [00:22:26] Speaker 06: No, no, no, that's right. [00:22:27] Speaker 06: And that's why I'm saying what I think I understood. [00:22:29] Speaker 06: But what I heard, what I got from you, and it was what I was thinking myself when I was set on my own. [00:22:33] Speaker 06: So I'll stop saying it. [00:22:34] Speaker 06: As you said it, Your Honor, I'll just say it myself. [00:22:37] Speaker 06: My point is, what I would have said on my own is that when it comes time to try to negotiate a new contract, if Orangeburg determines that people aren't bidding at average cost rates and only at incremental rates, then that's the time that they would have standing to challenge. [00:22:57] Speaker 04: What are they challenging? [00:22:58] Speaker 06: They'd be challenging the North Carolina Commission rules [00:23:03] Speaker 04: In North Carolina court? [00:23:04] Speaker 06: They would challenge it. [00:23:05] Speaker 04: And they're going to go there and they're going to say, see, we don't have bids? [00:23:11] Speaker 04: Are they going to show that someone would have bid but four? [00:23:13] Speaker 06: Well, they can. [00:23:14] Speaker 06: Yeah, I think that they would be able to show that. [00:23:16] Speaker 06: I think they would be able to show that for sure. [00:23:17] Speaker 06: If Duke is offering that service to others but not to them, if that service exists, I think that the case law does support that they would be able to challenge that at that time. [00:23:30] Speaker 06: I do. [00:23:31] Speaker 04: Are they going to show Duke wants to do it? [00:23:33] Speaker 04: Maybe Duke just doesn't want to have a contract with them. [00:23:36] Speaker 04: Maybe Duke has got plenty of other contracts at the time, or for whatever reason isn't interested in taking on the same service. [00:23:42] Speaker 06: Well, that doesn't mean that they're standing here, though, Your Honor. [00:23:44] Speaker 06: What the Joint Dispatch Agreement did here was approve something that has nothing. [00:23:50] Speaker 06: It literally has no effect. [00:23:52] Speaker 06: And as Your Honors were asking questions, it was apparent you were [00:23:58] Speaker 06: I think understanding that even if the court did say to the Commission, you can't approve the Joint Dispatch Agreement as it is, it still wouldn't affect Orangeburg for many, many years to come. [00:24:09] Speaker 01: The Joint Dispatch Agreement... Why wouldn't it? [00:24:12] Speaker 01: I mean, why couldn't the... [00:24:14] Speaker 01: Why couldn't FERC have done something like it did in the California Public Utilities Commission case? [00:24:20] Speaker 06: California Public Utilities Commission case was a case where the California Commission came to FERC for its declaratory order saying, we want to require that specific rates are in wholesale contracts. [00:24:32] Speaker 06: We want to require that. [00:24:34] Speaker 06: And that's not the situation at all like here. [00:24:36] Speaker 06: So that's classic preempted. [00:24:38] Speaker 06: A state cannot set rates at FERC wholesale rates. [00:24:43] Speaker 06: That's not what's occurred here. [00:24:45] Speaker 01: I understand that's not what's occurred here, but the question is, FERC has the authority, obviously, to determine whether a state utility's commission's action is unduly discriminatory or is preemptive. [00:25:01] Speaker 06: Sure. [00:25:02] Speaker 06: Absolutely, Your Honor. [00:25:04] Speaker 01: And where did FERC exercise its discretion or make that judgment here? [00:25:12] Speaker 06: Commission pointed specifically to Order 2000. [00:25:14] Speaker 06: And where the commission said, where there's no retail choice, which is in North Carolina, a state commission has and always had the authority to require a utility to sell its lowest cost power to native load. [00:25:29] Speaker 06: Native load does include wholesale and retail, not just retail. [00:25:36] Speaker 06: In state wholesale. [00:25:38] Speaker 06: In state wholesale? [00:25:40] Speaker 06: Yes, you're not saying interstate wholesale. [00:25:43] Speaker 06: No, I'm saying wholesale as well. [00:25:46] Speaker 06: And that's because in order 888, [00:25:50] Speaker 04: I'm sorry, this little statement here means that they have the authority to set interstate wholesale rates? [00:25:58] Speaker 06: No, they have the authority to require that bundled retail, but bundled – because in states where there's no retail choice, the transmission and the sale are looped together. [00:26:08] Speaker 06: So even a wholesale sale that uses retail – that's [00:26:13] Speaker 06: bundled with a retail, if it's bundled together, then the, excuse me, let me start over. [00:26:21] Speaker 06: In 888, what the commission says, if it helps, let me start where? [00:26:27] Speaker 06: In 888, which was the open access rulemaking, [00:26:31] Speaker 06: FERC said that it would no longer impose a regulatory, a FERC regulatory obligation on wholesale requirement suppliers to continue to serve their existing requirements customers, which includes retail and wholesale customers beyond the end of the contract term. [00:26:46] Speaker 04: I just want to be crystal clear when you say they were addressing both retail I get and wholesale. [00:26:53] Speaker 04: You can have in-state wholesale contracts and interstate wholesale contracts. [00:26:57] Speaker 06: You can have wholesale service that's provided as part of a bundled [00:27:02] Speaker 06: bundled transmission. [00:27:05] Speaker 06: If a state doesn't unbundle. [00:27:07] Speaker 04: How do we know they were talking about interstate wholesale rates in that sentence you just read to me? [00:27:13] Speaker 06: I'm sorry, Your Honor. [00:27:14] Speaker 04: How do we know we're talking about interstate wholesale rates in that sentence? [00:27:18] Speaker 06: The whole point of 888 was to have open access. [00:27:23] Speaker 06: And FERC chose only to remove its own regulatory requirement that people continue to serve their existing customers and said, but we will not also take jurisdiction over the contractually imposed [00:27:45] Speaker 06: So we won't take jurisdiction, which sounds like something that isn't already their jurisdiction. [00:27:54] Speaker 04: And of course, that couldn't possibly be interstate oil sale rates, which isn't exclusive jurisdiction. [00:28:00] Speaker 06: I guess I'm not getting what your point is, Your Honor, by bringing that up. [00:28:03] Speaker 04: Well, I'm trying to understand what that language is. [00:28:05] Speaker 04: I mean, if it actually means that Furke is saying it's fine for state, I'll just say it on the line. [00:28:11] Speaker 04: Sure. [00:28:12] Speaker 04: If that is interpreted as meaning, I'm reading from Order 2000 here. [00:28:16] Speaker 04: Now, the where there is no retail choice, our final rule does not affect a state commission's authority to require a utility to sell its lowest cost power to date of load, as it always has. [00:28:25] Speaker 04: That's a sentence. [00:28:27] Speaker 04: And that just says states, you can do it. [00:28:29] Speaker 04: You're going to do with something that's quite in your wheelhouse, state and state retail rates. [00:28:35] Speaker 04: But if that's now interpreted to mean, actually, that cedes to state utility commissions. [00:28:41] Speaker 04: the power to authorize interstate wholesale rates? [00:28:48] Speaker 06: No, that's not what it is. [00:28:51] Speaker 06: The court still will set the rate. [00:28:53] Speaker 06: And let me point out this, that native load customers does include both wholesale and retail customers for whom the supplier has an obligation to plan and operate their system. [00:29:04] Speaker 06: And that's what the commission didn't [00:29:06] Speaker 06: didn't set aside an order 888. [00:29:08] Speaker 06: It said, we're only requiring open access for wholesale sales where there is retail competition. [00:29:13] Speaker 06: There's no retail competition in North Carolina. [00:29:16] Speaker 06: Therefore, there's no requirement that there be open access in North Carolina. [00:29:21] Speaker 06: And that's 888. [00:29:22] Speaker 06: Then in Order 2000, which built on 888, and that's New York versus Burke, Your Honor, the Supreme Court there, [00:29:32] Speaker 06: in reviewing order 888 said FERC is perfectly fine not requiring that wholesale sales have that bundled states that also require open access where there's no retail options in states like North Carolina. [00:29:53] Speaker 06: That's New York versus FERC. [00:29:55] Speaker 04: Can we get back to standing for a second? [00:29:57] Speaker 04: Sure. [00:30:02] Speaker 04: If it takes the commission six years to decide on one of these contracts, isn't now exactly the right time for them to bring this challenge? [00:30:14] Speaker 04: Is there any question about imminence or ripeness, given that apparently it takes six years? [00:30:18] Speaker 04: So if they want to start contracting now, they have to build in six years lead time to seeking these contracts. [00:30:28] Speaker 01: They may even be too late. [00:30:29] Speaker 01: I mean, they got to go back six years from 2022. [00:30:32] Speaker 01: They should have started earlier. [00:30:35] Speaker 06: All Orangeburg had to do, Your Honors, was not withdraw from the contract. [00:30:40] Speaker 06: It would then have had the ability. [00:30:42] Speaker 06: It would not have been dismissed in North Carolina court. [00:30:45] Speaker 04: How could it not withdraw from a contract when Duke said we're not going to do it anymore? [00:30:49] Speaker 06: No, Duke just said we will do it at incremental costs, not at the average cost that you want. [00:30:55] Speaker 06: So they would have had that harm. [00:30:57] Speaker 06: We tried to have a contract at average costs. [00:31:00] Speaker 06: Duke is saying North Carolina said, no, we can't do that. [00:31:03] Speaker 06: And that's the case that they brought to the North Carolina court. [00:31:06] Speaker 06: But the court in North Carolina court dismissed it as moot because they withdrew. [00:31:10] Speaker 06: They didn't have to withdraw. [00:31:11] Speaker 06: And that's what these cases are about. [00:31:12] Speaker 01: So they should basically bet the farm and stay in a bad contract [00:31:18] Speaker 01: just to preserve standing the utility so that the FERC will rule on it. [00:31:26] Speaker 01: So that North Carolina will rule on it. [00:31:31] Speaker 01: Rather than to try to get the best contract they can from whoever the current market players are. [00:31:37] Speaker 06: No, they did try to get it, but that's exactly, well, you have to have injury impact. [00:31:42] Speaker 01: I mean, they have a fiduciary responsibility to not just kind of like bet the farm and hope that they'll win in some litigation. [00:31:49] Speaker 06: Well, actually, it's not part of the record whether the contract that they entered into with their long, over 100-year supplier, South Carolina Gas and Electric. [00:31:59] Speaker 06: There's nothing in the record to indicate that that contract is for more than the due contract. [00:32:04] Speaker 06: I don't know. [00:32:05] Speaker 04: Really? [00:32:07] Speaker 04: Do you think they're fighting over this for all these years? [00:32:10] Speaker 04: Oh, no, it's more than the due contract. [00:32:11] Speaker 06: Because they thought it was a worse deal from here? [00:32:12] Speaker 04: No, no, no, Your Honor. [00:32:13] Speaker 06: Certainly, it's more than the average cost. [00:32:15] Speaker 06: Right. [00:32:16] Speaker 06: But that's where their injury was. [00:32:17] Speaker 06: So they left. [00:32:18] Speaker 06: They chose. [00:32:18] Speaker 06: They left the Duke contract, which they could have continued with. [00:32:22] Speaker 06: And as the North Carolina court pointed out, that contract would have gone through 2018. [00:32:28] Speaker 06: So that contract would still be in effect, the Duke contract. [00:32:31] Speaker 06: They would have had standing to challenge that. [00:32:34] Speaker 06: They wouldn't have been moved. [00:32:35] Speaker 06: And they would have been able to challenge it through the North Carolina courts and get America's decision. [00:32:39] Speaker 06: And the same thing would happen again. [00:32:41] Speaker 04: Why are they not injured by a joint dispatch agreement that essentially has the green list and the black list? [00:32:49] Speaker 04: The green list are the people who will get the good rate, and anyone who's not listed there is on what I will call the black list. [00:32:56] Speaker 04: You will only be able to compete for [00:33:00] Speaker 06: Incremental rate because that's injury if it were to occur at all would not happen for at least five years from now. [00:33:06] Speaker 04: Yeah, but it's a six year process for first, but it's not a six year process. [00:33:09] Speaker 06: That's extremely unusual. [00:33:10] Speaker 04: Six years. [00:33:11] Speaker 06: Well, it was six years from what we understand from the order. [00:33:15] Speaker 06: It was six years because the commission couldn't agree, but [00:33:18] Speaker 04: Well, how do you know they'll agree next time? [00:33:20] Speaker 04: It seems that same issue. [00:33:21] Speaker 06: Well, you know, Orangeburg had the ability and chose not to for some reason to come into court and say, we want a mandamus petition. [00:33:28] Speaker 06: And that happens not all the time, but it happens often enough. [00:33:31] Speaker 06: And six years is an awfully long time. [00:33:33] Speaker 04: We try not to encourage folks to have to go the mandamus route. [00:33:35] Speaker 04: That's a pretty extraordinary route. [00:33:37] Speaker 04: And so really, the only question is, are they injured by the approval of the Joint Dispatch Agreement? [00:33:42] Speaker 04: No, they're not, Your Honor. [00:33:43] Speaker 04: If I could finish my sentence. [00:33:46] Speaker 04: I'm sorry. [00:33:46] Speaker 04: They say they're injured by it because there's a list of the people who get the good deal, and they're not on it, which means they're on the bad deal list. [00:33:54] Speaker 04: And that is something that has now been ensconced in law and approved by FERC, that they will forever be on the bad deal list. [00:34:00] Speaker 04: And so they can't compete on equal footing with those on the good deal list to get this interstate contract [00:34:09] Speaker 04: for energy. [00:34:11] Speaker 04: That's something that's right now they're on that list and that's hanging over their shoulders today. [00:34:16] Speaker 04: Right now they've got that status imposed upon them by this agreement and it's something that's going to prevent them from competing on the terms that they want to compete for this electric. [00:34:27] Speaker 04: I'm not saying they're right on the merits. [00:34:29] Speaker 04: I'm just saying that that's how we look at what's happened to them. [00:34:32] Speaker 04: That's happened right now and ordinarily I would go [00:34:36] Speaker 04: That's six years down the line, or three years down the line if you have to start three years in advance. [00:34:42] Speaker 04: But when FERC has taken six years to decide something which mooted out their last appeal, it's a little hard for us. [00:34:49] Speaker 04: It certainly had an impact on that, because then they couldn't pursue the FERC decision. [00:34:52] Speaker 06: If I can correct that one thing, Your Honor. [00:34:55] Speaker 06: FERC waiting six years to issue the declaratory order is not what mooted out the contract. [00:35:00] Speaker 06: The contract was mooted out before the declaratory order. [00:35:03] Speaker 06: petition was filed. [00:35:05] Speaker 06: It was already with the contract no longer existed at that time. [00:35:08] Speaker 01: And why would it take them six years to figure that out? [00:35:11] Speaker 06: That I can't explain, Your Honor. [00:35:12] Speaker 06: But that's not before, I mean, I'm not defending the declaratory order. [00:35:16] Speaker 06: Orangeburg didn't even seek a hearing of the declaratory order. [00:35:20] Speaker 06: Because on that point, it was moot. [00:35:22] Speaker 06: Well, you say that, Your Honor. [00:35:24] Speaker 06: But people do use mandamus. [00:35:26] Speaker 06: And I'm not saying we want to encourage people to do that. [00:35:28] Speaker 04: Mandamus against FERC? [00:35:30] Speaker 04: Yes. [00:35:31] Speaker 04: When FERC said the case was moot. [00:35:33] Speaker 06: No, no, no. [00:35:34] Speaker 06: Mandamus during that six-year period. [00:35:36] Speaker 06: People do that. [00:35:36] Speaker 06: People don't wait six years. [00:35:38] Speaker 06: And it would have forced first-hand to make a determination, and perhaps rather than maybe arguing about the merits, they would have looked and said, wow, this has been moot since we got it. [00:35:47] Speaker 04: So – Are you aware of cases where we said someone doesn't have – when there's a six-year process that they're facing down and something they need to start three years in advance? [00:35:56] Speaker 04: that we've said it's not imminent or right because they could wait until they're really in a bind and then seek mandamus? [00:36:07] Speaker 06: No, the mandamus happens to force FERC to issue an order. [00:36:11] Speaker 06: So someone would file saying you're taking too long. [00:36:15] Speaker 06: That's what happens. [00:36:16] Speaker 06: You've taken a year to issue your re-hearing order. [00:36:20] Speaker 04: But the problem is under the mandamus standard, someone can't do that until [00:36:24] Speaker 04: crisis stage, and that's back to sort of bedding the farm, right? [00:36:28] Speaker 04: You have to wait. [00:36:29] Speaker 04: You can't come in and go, we're worried that they're going to take three years or six years, so please do mandamus now and put them on a good schedule. [00:36:35] Speaker 04: They've got to wait until it's the eve of being too late. [00:36:40] Speaker 06: I wouldn't want to defend something on mandamus that was four or five or six years on. [00:36:47] Speaker 06: That would be, you know, one or two years you're right. [00:36:49] Speaker 06: The Commission's busy and it has a lot of orders to issue, but that's an awfully long time to just sit and then now try to use that to say, wow, a contract we voluntarily chose not to stay in so that we could continue to challenge. [00:37:01] Speaker 06: I mean, the case law is pretty clear that you have to have a live controversy and that you have to have an injury in fact, and they gave that up. [00:37:10] Speaker 04: And why isn't the status that's imposed on them by the Joint Dispatch Agreement? [00:37:15] Speaker 06: the injury. [00:37:16] Speaker 06: Because it's speculative to say that Duke won't offer them a contract. [00:37:21] Speaker 04: They said... If this Joint Dispatch Agreements lists the folks that have a native load, and then it had another section that said, here are the folks who can only compete for at incremental plus, even higher. [00:37:37] Speaker 04: We're going to list five entities that if they ever want a contract, we don't know if they do. [00:37:42] Speaker 04: But if they ever want a contract, they're going to have to pay incremental plus. [00:37:48] Speaker 04: That's actually not what the joint dispatch agreement said. [00:37:50] Speaker 04: I'm asking a hypothetical question here. [00:37:52] Speaker 04: That's what it said in the joint dispatch agreement. [00:37:54] Speaker 04: If you had a joint dispatch agreement that had not only a list of native load folks, but also had a next section that said, as to these 10 potential contractors. [00:38:07] Speaker 06: You can never contract with them. [00:38:09] Speaker 04: Oh, no. [00:38:10] Speaker 04: You can never. [00:38:10] Speaker 04: You can contract with them. [00:38:12] Speaker 04: But for those folks, it's always going to cost incremental price. [00:38:16] Speaker 04: Right. [00:38:17] Speaker 06: That would be a very different situation. [00:38:20] Speaker 04: No, no, I'm just asking you, would that be an injury? [00:38:22] Speaker 06: That's the regulatory conditions. [00:38:23] Speaker 04: No, no, I'm just asking you, is that, if they pass that right now, FERC approved a joint dispatch agreement that had that provision, would that be an injury? [00:38:38] Speaker 06: it would certainly be much closer to injury. [00:38:41] Speaker 06: But look, I would still say that when you need to, when you challenge it. [00:38:45] Speaker 06: So you're saying it is or isn't? [00:38:46] Speaker 06: I would still say that when you challenge that, you need to, the right time to challenge that is when it actually, actually affects you. [00:38:53] Speaker 06: And that's when you try to get your next contract, which again, is not going to take effect until. [00:38:57] Speaker 06: So it would not be something they could challenge now? [00:38:59] Speaker 06: Until 2023. [00:39:00] Speaker 06: I would say that that's a closer case, Your Honor. [00:39:03] Speaker 04: But can they come back and challenge that? [00:39:04] Speaker 04: Could they come back? [00:39:06] Speaker 06: Six years three years later and challenge something that FERC already approved three years earlier It would be the challenge would be that the the challenge would be that [00:39:20] Speaker 06: that the state of North Carolina is preempted from requiring. [00:39:25] Speaker 06: They can't challenge FERC's decision. [00:39:26] Speaker 04: They could never challenge FERC's decision to approve that Joint Dispatch Agreement. [00:39:31] Speaker 06: No, but they would have the ability to challenge the North Carolina Regulatory Commission. [00:39:35] Speaker 04: I got that, but they could never challenge FERC's decision to approve an agreement that said, as to these ten entities, they always got to pay more than everybody else. [00:39:43] Speaker 04: Right. [00:39:43] Speaker 06: Than everyone else. [00:39:44] Speaker 06: But that's not the situation here. [00:39:45] Speaker 06: Here, all it says is [00:39:48] Speaker 06: parties are deemed to have been served with a certain price level of energy. [00:39:55] Speaker 06: So it doesn't change at all what anyone under the contracts that people are served under, what their prices are. [00:40:04] Speaker 06: It's just an internal thing between these two entities that we're deeming that you serve these people this way, and we're deeming that you serve people that way, and then you exchange [00:40:13] Speaker 06: funds because this is all about efficiency and the Joint Dispatch Agreement is really actually quite a good thing. [00:40:18] Speaker 06: They're going to serve people more efficiently and there's going to be cost savings. [00:40:24] Speaker 02: You argue FERC has the authority or the discretion to not address a preemption argument. [00:40:31] Speaker 02: Right, Your Honor. [00:40:32] Speaker 02: I'm reminded of something that Chief Justice Marshall said, that a motion to a court's discretion is not to its inclination, but to its judgment, and its judgment is guided by sound legal principles. [00:40:45] Speaker 02: What are the legal principles that FERC uses to determine whether it exercises discretion or not? [00:40:51] Speaker 06: Well, in this circumstance – that's the only thing I can speak to, Your Honor, if that's all right. [00:40:55] Speaker 06: At least I'll start there. [00:40:57] Speaker 06: In this circumstance – and I wish I had been clear earlier, but for some reason I was quite nervous this morning, and I don't know why. [00:41:03] Speaker 06: It's not – anyway, if I could just say again here, far held in the orders here that the North Carolina Commission had the authority [00:41:13] Speaker 06: and it's cited Order 2000, but there's also other cases, had the authority to require Duke in progress to serve its native load customers, which includes wholesale and retail customers, native load ones. [00:41:37] Speaker 06: with the lowest cost power and that comes from order 888 and order 2000. [00:41:43] Speaker 02: Is that essentially a holding that North Carolina was not preempted? [00:41:52] Speaker 06: I believe it is a holding that. [00:41:53] Speaker 06: I mean the Commission didn't say those exact words but to me if the Commission's view is they have the authority therefore they're not preempted. [00:42:01] Speaker 06: I do read the orders that way. [00:42:03] Speaker 06: And there are additional cases in which the Commission has said the same thing about that where there's no retail choice, the final rule doesn't affect the State Commission's authority to require utility to do this. [00:42:17] Speaker 06: New PJM companies and 105 FERC, 61251, they reiterated the holding in order 2000, but earlier than these orders, [00:42:27] Speaker 06: I mean, earlier than that in – excuse me – after that, San Diego Gas and Electric, which was a California energy crisis, proceeding at FERC, the commission said, we recognize load-serving entities use their lowest-cost resources to serve native load. [00:42:42] Speaker 06: and points out that over the course of the proceeding, parties had pointed that out since August 2001. [00:42:49] Speaker 06: This is longstanding. [00:42:50] Speaker 06: It's just a given at FERC that this is OK for states without retail choice, like North Carolina, to require this. [00:42:59] Speaker 01: So even if it affects customers in another state, like South Carolina? [00:43:11] Speaker 06: Yes, yes, yeah, I mean, I don't know why I thought so hard on it. [00:43:14] Speaker 06: Absolutely, because again, open access requirements only apply in order 88, FERC only took away [00:43:24] Speaker 06: its own regulatory requirement that entities continue to be served. [00:43:29] Speaker 06: So it took that away, but it said contracts can continue to do that. [00:43:32] Speaker 06: So, for example, the Joint Dispatch Agreement is a really good example of that. [00:43:35] Speaker 04: Well, just to be clear, a contract saying it's fine for you to give them, these native load folks, the lowest cost [00:43:43] Speaker 04: Is that the same thing as saying it's fine and FERC washes its hands of it for you also, as a consequence of that, to charge higher rates for wholesale interstate contracts? [00:43:57] Speaker 04: Is that necessarily included in that other statement? [00:44:02] Speaker 06: I believe that it is, but it certainly is here because FERC found the joint dispatch agreement rates to be just and reasonable. [00:44:14] Speaker 06: It made three rulings that are pertinent here. [00:44:16] Speaker 06: One is that the joint dispatch agreement rates are just and reasonable. [00:44:19] Speaker 06: So FERC itself has determined that providing, deeming these lower cost [00:44:26] Speaker 06: And deeming the lower crust energy to go to native load, that is just unreasonable. [00:44:30] Speaker 06: FERC found that here. [00:44:31] Speaker 04: No, that's different from saying that, let me see, fine, give them the least cost. [00:44:40] Speaker 04: But does that mean that you can also, again, FERC is washing its hands of it. [00:44:47] Speaker 04: we're not going to stop you from charging a higher rate. [00:44:51] Speaker 04: Maybe you have to give higher rate to interstate ones. [00:44:54] Speaker 06: Maybe you have to give that same rate. [00:44:56] Speaker 06: This case is not about charging anybody rates. [00:45:00] Speaker 06: This case is just about deeming that certain energy is served to certain entities. [00:45:06] Speaker 04: Well, I'm trying to clarify whether when it talked about [00:45:09] Speaker 04: The traditional authority on native load that necessarily meant they were addressing the preemption argument about hang on, hang on. [00:45:18] Speaker 04: Once you start talking about an interstate wholesale rate, that's exclusive FERC jurisdiction. [00:45:25] Speaker 04: It can't give that away. [00:45:28] Speaker 06: Did they address that? [00:45:32] Speaker 06: I mean, FERC has been doing this – FERC just sees this as not contradictory to the Federal Power Act and not – I mean, look. [00:45:41] Speaker 06: FERC is not. [00:45:42] Speaker 06: Because? [00:45:43] Speaker 06: Because it thinks it's fine, but it's being respectful of state rights and state rights. [00:45:50] Speaker 04: It can't be respectful in the sense of unceding to states the power to regulate interstate. [00:45:56] Speaker 04: And it's not doing that. [00:45:58] Speaker 06: I'm just not understanding how it's stopping that part. [00:46:01] Speaker 06: And the contract rate in the 2008 contract rate, FERC reviewed that rate. [00:46:11] Speaker 06: It's a FERC. [00:46:13] Speaker 06: If it's an interstate rate, it's a FERC rate. [00:46:15] Speaker 06: But FERC is not going to require that it be done in an open access way. [00:46:19] Speaker 06: And that's really what's happening here. [00:46:22] Speaker 01: Let me just see if I can understand your position and how this works. [00:46:29] Speaker 01: It's one thing for the North Carolina Utility Commission to say that Duke and other energy providers [00:46:44] Speaker 01: can charge the lowest rate to the native load customers in North Carolina and then charge a higher rate to non-native load customers in North Carolina. [00:46:58] Speaker 01: It seems to me it's a horse of a different color, so to speak. [00:47:03] Speaker 01: for North Carolina utility commission to say to Duke, this is how you can treat native load customers in South Carolina and non-native load customers in South Carolina. [00:47:22] Speaker 06: I think I understand what you're saying, Your Honor. [00:47:24] Speaker 06: And FERC in Order 888 was saying – and Order 2000 – and again, Order 2000 built on Order 888 – was saying that that's okay. [00:47:35] Speaker 06: It is okay for, in this special circumstance of where there's bundled retail native load and where there's not unbundling in a state – and that's a state's right to choose whether to unbundle or not. [00:47:48] Speaker 06: the Supreme Court blessed that determination by FERC, that it did not have to require unbundling so that it could get a handle on the wholesale portion of the bundled sale. [00:48:01] Speaker 06: In that circumstance, this is not a problem. [00:48:03] Speaker 06: Open access, FERC is not going to regulatorily require people to continue to [00:48:11] Speaker 06: to serve, and that made open access. [00:48:13] Speaker 06: I mean, that's what 888 was all about. [00:48:16] Speaker 01: So can you give me an example where an agreement like the present one at issue has been blessed by FERC so that I can feel more comfortable with that proposition? [00:48:29] Speaker 06: Sure, Your Honor. [00:48:31] Speaker 06: In Nevada Power, [00:48:34] Speaker 06: 145 FERC 61238 in 2013, the commission approved a joint dispatch agreement, sounds very much like this one, under which the lowest cost resources for the two companies would be deemed to have provided service for each company, each other's native load, so just like here. [00:48:55] Speaker 06: PJM Interconnection 134, FERC 61048 in 2011. [00:49:00] Speaker 06: The commission says just reasonable for PJM, Carolina's Joint Operating Agreement to exclude hydro nuclear, which were the lower cost energy because the state had said that you need to serve your native load with that energy. [00:49:17] Speaker 06: So they kept it out of. [00:49:18] Speaker 02: Would you define native load for me? [00:49:21] Speaker 06: Sure. [00:49:22] Speaker 06: Yes, Your Honor. [00:49:24] Speaker 06: Native load, as the commission explains in the brief, is an industry term that generally refers to a utility's existing customers whose power needs the utility is bound by franchise or contract to meet. [00:49:37] Speaker 02: It's not geographic, then? [00:49:39] Speaker 06: No. [00:49:40] Speaker 06: It's not, Your Honor. [00:49:42] Speaker 02: Do you know whether Duke had any other customers outside of the boundaries of North Carolina that qualified as native load? [00:49:50] Speaker 06: Duke and Progress both have, my understanding, certainly one of them at least has just some in portions of South Carolina, mostly in North Carolina. [00:50:03] Speaker 06: So their franchised regions include portions outside of the state. [00:50:09] Speaker 06: And native load customers includes both wholesale and retail customers for whom a supplier has an obligation to plan an operating system. [00:50:17] Speaker 06: And that's right in the commission's regulations, 18 CFR section 33.3D4I. [00:50:23] Speaker 06: And in order 2000, the commission recognized that as well, that it includes both wholesale and retail. [00:50:30] Speaker 06: And that's just [00:50:32] Speaker 06: It's an odd, weird, furky thing, but that's not odd or weird to fur people. [00:50:41] Speaker 06: Everybody kind of just knows that. [00:50:44] Speaker 04: All right. [00:50:44] Speaker 04: Thank you very much. [00:50:45] Speaker 04: Thank you. [00:50:50] Speaker 04: All right. [00:50:50] Speaker 04: Mr. Horwood, we'll give you two minutes. [00:50:52] Speaker 04: He has no time left, right? [00:50:53] Speaker 04: Yeah, we'll give you two minutes. [00:50:54] Speaker 03: OK. [00:50:56] Speaker 03: As to that last point, [00:50:58] Speaker 03: Orangeburg, I'm sorry, Duke and Progress do serve in both North Carolina and South Carolina, but the native load customers are those within their balancing area or control area, the historic ones. [00:51:13] Speaker 03: Ms. [00:51:13] Speaker 03: Pacello talked a lot about Order 88, but you talk in terms of retail choice, not in terms of wholesale sales. [00:51:24] Speaker 03: Order 88 provides for a nationwide [00:51:29] Speaker 03: competitive market. [00:51:32] Speaker 03: And what is happening here is that's being limited by the boundaries that FERC has allowed the State Commission to address. [00:51:46] Speaker 03: Duke, which bid for the contract, has an open access transmission tariff. [00:51:51] Speaker 03: Duke has market-based rates. [00:51:54] Speaker 03: market-based rates or whatever a willing buyer and seller negotiate. [00:51:59] Speaker 03: We're dealing with bilateral contracts. [00:52:01] Speaker 03: Duke negotiated a contract with average system costs. [00:52:06] Speaker 03: What the North Carolina Commission did is they said the filed FERC rate, which is the contract rate that Duke and Orangeburg negotiated, won't be honored. [00:52:20] Speaker 03: This kind of gets back to [00:52:23] Speaker 03: the Nana Hale case of the Supreme Court where the North Carolina Commission [00:52:29] Speaker 03: dealing with subsidiaries of alcoa said we're going to assume that the cost of these two subsidiaries are combined rather than treating them separately as FERC has done and Supreme Court overturned the state of North Carolina. [00:52:47] Speaker 03: They're saying, no, North Carolina has to honor the wholesale rate. [00:52:55] Speaker 04: Yeah, but there FERC had approved a specific rate, and the consequences of what North Carolina did was to say, no, no, no, that's not going to be the rate here. [00:53:04] Speaker 04: FERC has actually approved, there is no conflict, FERC has approved the same rate that's consistent with North Carolina regulations. [00:53:11] Speaker 03: That's right, but what FERC has approved is a rate that [00:53:16] Speaker 04: is unduly discriminatory and has the obligation… That's what I was trying to ask you, how do we know it's unduly discriminatory if I think their theory is that, no, we allow this little bit of discrimination as part of this – for states that have no retail choice? [00:53:35] Speaker 04: And these obligations, we allow them to have this special treatment for native loaded customers because they're in a different situation. [00:53:43] Speaker 04: And so maybe you can call it discriminatory, but it's not unduly discriminatory under 888 and 2000. [00:53:49] Speaker 04: Can you answer that? [00:53:53] Speaker 03: That arguably would apply if we're talking about retail customers. [00:53:59] Speaker 03: But the question of whether wholesale rates are unduly discriminatory is something for FERC to determine, not for the states to determine. [00:54:09] Speaker 03: And that's what FERC has the duty to remedy here. [00:54:12] Speaker 03: And it's not enough for FERC to say that, well, these aren't unduly discriminatory because we're going to let the states decide. [00:54:20] Speaker 03: The states don't get to decide at wholesale. [00:54:24] Speaker 03: They may get to decide at retail, but certainly not at wholesale. [00:54:30] Speaker 03: And what you've seen with the first argument here is what Orangeburg has been faced with. [00:54:36] Speaker 03: We're never at the right time and at the right place. [00:54:41] Speaker 03: It's kind of fatuous to say that the Orangeburg could have preserved its rights by not terminating the contract and agreeing to pay a 30% higher rate from Duke while it continued to litigate here. [00:54:55] Speaker 03: That's not a real choice for Orangeburg, which has to serve its retail customers and has [00:55:04] Speaker 03: It's residential customers and wants to serve industrial customers. [00:55:08] Speaker 04: I think we understand your argument. [00:55:11] Speaker 04: Thank you very much for your time. [00:55:13] Speaker 04: The case is submitted.