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Case number 15-1447, State Corporation Commission of the State of Kansas Petitioner versus the Federal Energy Regulatory Commission.

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Mr. Coyle for the petitioner, Ms.

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Parcella for the respondent.

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Good morning, Your Honors.

[00:00:32] Speaker 02:
Good morning, Court.

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John Coyle of the firm Duncan and Allen for the State Corporation Commission of the State of Kansas petitioner today.

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If the Court's agreeable, I'd like to reserve three minutes of my time for rebuttal.

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First orders under review in this proceeding proved as just and reasonable under Section 205 of the Federal Power Act a package of concessions developed by the management of the Southwest Power Pool, a regional transmission organization.

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in order to induce Basin Electric Cooperative Heartland Consumer Power District and the Western Area Power Administration Upper Great Plains region to join the SPP.

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Those concessions exempted Basin, Heartland, and Western from any allocation of the costs of regional transmission facilities that were needed prior to October 1, 2015, which is the date on which those three entities, Basin, Heartland, and Western.

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Now that's reciprocal, right?

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Your Honor?

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If I could, the notion of reciprocity here requires ability.

[00:01:40] Speaker 04:
Well, I guess before we go into the objections to or qualities of reciprocity, is it not reciprocal?

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I would say no, Your Honor.

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The Commission said yes, and I would say no.

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And I think that's one of the failures of reasoned decision-making in this case.

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Every entity that joins the Southwest Power Pool bears the cost of its own, quote, legacy facilities, unquote.

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And where the Commission deviated without reasoned explanation from its treatment of regional cost allocation, in this case,

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was to say, well, it's okay to forego it in this case because the existing, the 18 existing transmission owners in the SPP and their customers get reciprocal access to the transmission systems of Basin, Heartland, and Western.

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That's not reciprocal.

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I think you appear to be mixing two things, whether

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that the pricing system changed from at least the treatment of the Nebraska entities, which appears to be conceded, or whether it is reciprocal in the sense that

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The two joining parties, pricing of the legacy facilities for the two joining parties are treated the same way.

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You could switch the names and describe the pricing rule and it would not change anything.

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I don't mean to grind gears with you, Your Honor, and it may be that I'm missing your point, but everybody else who joined the SPP, all of the other 18... But that's the interesting issue of the historical pattern.

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But it doesn't seem to address the particular case of these two entities joining.

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Let me try it this way, then, Your Honor.

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I think that the characterization of the cost concession as reciprocal is based on a false equivalence.

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between the regional cost allocation of regional facilities, facilities developed on a regional basis by the Southwest Power Pool, which is universal, and whether an entity joining the pool recovers the costs of its own transmission facilities, the transmission facilities that built before joining the pool through the pool.

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Does that make sense?

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I think I'm with you so far, but I'm not sure where you're going.

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Well, my point is that everybody else got treated one way.

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That is to say, everybody, every transmission.

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That's back to the historical question of whether there's a deviation from historical treatments.

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It also deals with what the philosophy of regional cost allocation is.

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When the commission approved the current cost allocation regime in 2010, and what we call the highways and byways were, 131 FERC, sorry, paragraph 61252, FERC said,

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that the extra high voltage, the EHV facilities that were being developed on a regional basis provided benefits to everyone.

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And that therefore it was appropriate to allocate the cost of those facilities on a regional basis.

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Those are the base plan facilities that you see discussed in the opinion.

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And now all of a sudden, Basin and Heartland, I mean I'll clarify that we are not, excuse me, the Kansas Commission is not contesting the treatment of Western because that was based on Section 1232 of the Energy Policy Act of 2005 and it raises a different issue.

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So we're not contesting it as to Western because of that difference in the rationale, but as to Basin and Heartland, it is not reasoned decision-making for the Commission to say, for the FERC to say on the one hand, base plan facilities should have their costs allocated regionally because they benefit everybody.

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And nobody who joined the Southwest Power Pool ever had the facilities that they brought into the pool allocated regionally.

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But then along come Basin and Heartland, and all of a sudden the waiver's just fine.

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The notion that the waiver of cost allocation here is reciprocal is, to my mind, one of the stunning examples

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of a failure of reason decision-making in this order because the Commission deviates from the principles that it adopted in the 2010 Highways Byways Order without a credible explanation.

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I mean, their explanation, like yours, Judge Williams, is, well, it was reciprocal.

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It's not reciprocal.

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Nobody's ever had regional cost allocation of the facilities that they brought into the pool.

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So there's no waiver of expectations here that Basin and Heartland would have achieved regional cost support for the facilities that they brought in with them.

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When you keep saying nobody, you're brief talking about Nebraska.

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That's right, Your Honor.

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What other examples are there?

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I'm aware of, I'm aware of, well,

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examples of... You say there's this long history of everybody going to bear these legacy costs, and the only thing you talked about was Nebraska.

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I think if you look at Appendix H

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to the tariff, which contains the now 19 ATRR zones.

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Every one of the other 18 recover a transmission revenue requirement for what FERC is pleased to call, quote, legacy systems.

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In this case, so when I say is it?

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It appears to be the case that the treatment of the joining of the Nebraska entities Was not contested so that hurt in fact doesn't explain what it's doing was doing anything.

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It's saying

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What the parties agree on is okay, at least we don't see anything wrong with that.

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Do you agree that that's the case as to the Nebraska entities?

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It is the case, Your Honor.

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Moreover, that is an unreported letter order that's dubious, presidential.

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Okay.

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So then can we go back to the other ones that you say are, or at least may be,

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working as precedent of some sort.

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Are those also 100 percent consensual deals?

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To be honest, Your Honor, I don't know.

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I believe so.

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Because, I mean, if they aren't, and the first time that FERC passes

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an objection like yours, it's not clear to me why it should follow something that other parties worked out among themselves.

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I think I can respond to that, which is – and again, I don't mean to cover the same ground, but you have a FERC holding that says regional cost allocation of base plan facilities is appropriate because those facilities benefit everyone.

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And except we're going to exempt Basin and Heartland because why?

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Because they didn't want to pay it?

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Because inducing them to join expands the SPP footprint?

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Because that's, when you get right down to it, those are the only considerations that the record supports, and those are not rational reasons to excuse a utility from transmission cost allocation.

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You're representing Kansas consumers.

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That's correct.

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And I guess your alleged injury is that prices, costs are going to be higher.

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That's correct.

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Because these legacy costs aren't getting spread around.

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That's correct.

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But that's a harm from integration.

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But if there's no integration, reject this inclusion of the IS parties.

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The costs are exactly the same, because there's no integration, and everyone's still bearing the exact same legacy costs.

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So where's the consumer injury from this argument?

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Well, the consumer injury, as Your Honor said, is in the subsidization.

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because the... Well, you have to have increased prices.

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You have to show that prices are different between integration and non-integration as to this area.

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Because your only argument here is one is to increase consumer prices.

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If the consumers are going to have to pay for these legacy costs, whether or not there's an integration, I'm not having trouble seeing what the injury is.

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I think that doesn't quite exactly characterize the argument, which is really that this is undue discrimination.

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that there was a special deal.

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No one discriminated against Kansas consumers.

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It does, Your Honor, because the Kansas consumers had to pay regional cost allocation and pay the costs of the... But they have to do it if the integration is rejected.

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Either way, they're going to pay for these costs.

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Sure.

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If your argument is there could have been a better deal, is that the argument?

[00:11:44] Speaker 02:
Well, excuse me, the discrimination is that the deal that was cut to induce Basin and Heartland to join was discriminatory and preferential to those entities.

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Yeah.

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And so there should be no integration.

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Whether there's integration or not, you can't fund the integration and finance the integration on the backs of a subsidy from Kansas ratepayers.

[00:12:08] Speaker 04:
I thought you were basically saying it was a deal that was better for Kansas that was available and that Kansas asked for and didn't get.

[00:12:19] Speaker 02:
Fair enough, Your Honor.

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Kansas wasn't given the opportunity, and that gets to the second shortcoming in the order if the court will indulge me.

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The FERC's alternative rationale for foregoing regional cost allocation was, if we forego regional cost allocation, there are all these benefits that will inure to everybody in the Southwest Power Pool as a result of integration.

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Part of that's your point, Judge Malat.

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And the claim of benefits has no substantial evidentiary support in this record.

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the entire... I mean, I agree it's vague, but there is considerable stress, at least, on the access of the old SPP members to the new facilities.

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We could talk about that, Your Honor.

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The stress was actually laid on the claim of $334 million nominal over 10 years in benefits that Mr. Monroe, the chief operating officer of the SPP, testified to.

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The commission accepted unquestionably.

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The FERC accepted unquestioningly.

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And 81.5% of that

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uh... three hundred and thirty four million or two hundred and seventy two million three hundred seventy five thousand was based on a proprietary study performed for basin and heartland by a utility consultant that Mr. Monroe never saw.

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Yeah, I mean, the establishments seem to be very strange because you made it appear in your opening brief as if there was an incredible shell game with the study being concealed

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inference upon inference and so forth, all we get is the conclusion.

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But the Commission brief points out that there's a website pointing to the study and linking to the study.

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And you could have argued in your opening brief, but you never did, that the redactions from that were such as to leave you something that was meaningless, but you never made such an argument.

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Your Honor, what's linked in a website is not substantial evidence.

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I think the hypertrophy of that argument appears in the intervener's brief, where they're saying that everything is hyperlinked in these presentations as an item by reference.

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The commission needs to have an evidentiary basis for its rulings.

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The only evidentiary basis for the claim of benefits here is three pages of characterization by Mr. Monroe.

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That's it.

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Now, the Kansas Commission did start its own proceeding because the Kansas Commission was concerned about the railroad being run on this deal.

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And so they got some more information, and they didn't conclude their investigation because the SPP went ahead and filed it to FERC.

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The Kansas Commission decided they didn't want to run a proceeding in conflict with a FERC proceeding, and they expected that FERC would allow for a more fulsome inquiry into the facts, which didn't happen.

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So the hyperlink was in a brief that was submitted to the Kansas Commission or in a brief that was submitted to FERC?

[00:15:49] Speaker 02:
I think, Your Honor, that the victim blaming that goes on, at least with the interveners, I'm not sure whether FERC's brief does it or not, was to the fact that materials were made available on the SPP website and here they are.

[00:16:05] Speaker 03:
I thought there was a reference to a link to a brief, and I thought, and you can correct me if I'm wrong, that it was a brief filed with the Kansas Commission and not with FERC.

[00:16:13] Speaker 03:
That's possible.

[00:16:13] Speaker 03:
So that the hyperlink might not even be before FERC, but I could be wrong.

[00:16:17] Speaker 02:
Yeah, no, there were hyperlinks in the material filed with the Kansas Commission.

[00:16:20] Speaker 02:
I'm not sure whether they were briefs.

[00:16:22] Speaker 02:
I think it was in response to discovery.

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But there were hyperlinks.

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I mean, my point is simply that the hyperlink isn't part of the evidentiary, or the material that's hyperlinked isn't part of the evidentiary record.

[00:16:32] Speaker 03:
Can I ask you, how do you understand FERC's role in determining whether something is just and reasonable?

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Is it

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Because your argument essentially is that we could have gotten a lot better deal here.

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My argument is that this is discriminatory, but not that we could have gotten a better deal.

[00:16:52] Speaker 03:
So you shouldn't have integration at all, is that the argument?

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You can't have integration on this record.

[00:16:56] Speaker 03:
Right, so you should have a better deal.

[00:16:58] Speaker 03:
Everything should be this, plus they have to pay for legacy costs.

[00:17:02] Speaker 02:
Or you could have a better evidentiary record than you do.

[00:17:05] Speaker 02:
Excuse me.

[00:17:05] Speaker 02:
Or you could have an evidentiary record which you don't have.

[00:17:09] Speaker 03:
If what Ferg found here is, look, there's benefits on both sides.

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Maybe there's more benefits on one side than the other.

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Does that make it unjust?

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Are there cases you can point me to that say if the benefits are not roughly proportional on both sides, it's unjust and unreasonable and FERC can't approve it?

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Or is it as long as there's benefits balancing out on both sides, FERC leaves the rest to the contracting process?

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The standard, as I think you probably know, is really that the benefits are roughly commensurate with the costs that you're being asked to absorb.

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and that was expounded most eloquently by Judge Posner in the seventh circuit in the Illinois Commerce Commission case on the appeal of opinion number 494, which was the big PJM cost allocation.

[00:18:02] Speaker 04:
He was not speaking of legacy facilities there, which he stressed very heavily.

[00:18:11] Speaker 02:
It runs to both, but you also was not dealing with a pre-existing regional cost allocation.

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The question that was involved in the Illinois Commerce Commission case and in opinion number 494 before the FER was whether certain 500 KV facilities in Eastern PJM could be deemed to benefit

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utilities in Western, in Illinois in particular.

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And FERC's say so that 500 kV facilities benefit everybody wasn't sufficient in those circumstances.

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In this case, you have precedent.

[00:18:51] Speaker 04:
Judge Posner was very concerned, as always, to get the incentives right, which was not, as far as I can make out, relevant in your objection.

[00:19:02] Speaker 02:
In this case, it is an issue I don't raise, except to say that there was undue discrimination here in preference.

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But the fundamental point is that there was a pre-existing commission determination about the cost allocation for extra high voltage facility, which was then flung down and danced upon in order to get Basin and Heartland in.

[00:19:32] Speaker 02:
I think I've run enough over my original time.

[00:19:35] Speaker 02:
Yes, we'll give you several minutes on rebuttal.

[00:19:36] Speaker 02:
Thank you.

[00:19:45] Speaker 01:
Thank you.

[00:19:46] Speaker 01:
Good morning, Your Honor.

[00:19:46] Speaker 01:
It's Beth Pacella for FERC.

[00:19:49] Speaker 01:
I think I'll start off with the cost allocation point.

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And I think Judge Williams, the Illinois Commerce Commission case that affirmed in part and reversed in part in PJM, it affirmed the commission's determination regarding cost allocation for existing facilities, which was the same type of cost allocation that the commission approved here.

[00:20:11] Speaker 01:
That's that issue before the court here.

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And so there the court found that that was perfectly okay not to allocate the cost of existing facilities to others.

[00:20:24] Speaker 04:
I take Mr. Quill to concede that what happened in the Nebraska instance and I guess prior coalescing that produced SPD were uncontested so there was not

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occasion for a FERC rejection of his claim or endorsement of his claim, one or the other.

[00:20:53] Speaker 04:
But he, if I understand correctly, argues that in the byways decision, that was a framework where the commission endorsed his view of the matter.

[00:21:08] Speaker 01:
When the commission approved the highway byway cost allocation, it was reviewing a FPA section 205 proposal by PJM, excuse me, by Southwest Power Pool, and it found that that was a just and reasonable cost allocation methodology.

[00:21:25] Speaker 01:
In the same circumstance here, we have a section 205 proposal by Southwest Power Pool to integrate this public pool.

[00:21:33] Speaker 04:
Yeah, but he says at least that there's language in the

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commission's highways byways order that's inconsistent with the FERC disposition here.

[00:21:43] Speaker 01:
It's not inconsistent because you can have more than one just and reasonable cost allocation methodology.

[00:21:49] Speaker 04:
The commission says both in its order, its order on rehearing and before us

[00:21:57] Speaker 04:
Well, you know, there are different rules, different situations, but as far as I can see, it doesn't say what's different.

[00:22:06] Speaker 01:
Oh, what's different here, first of all, both were, I mean, what's the same is, in the highway byway proceeding, there was a 205 proposal to allocate costs at the time that way.

[00:22:17] Speaker 01:
And now there's a 205 proposal to allocate costs differently.

[00:22:20] Speaker 01:
And so the commission looks to see whether the proposal itself is just unreasonable.

[00:22:24] Speaker 01:
So that's what's the same about them.

[00:22:26] Speaker 01:
What's different about them is, at the time, the idea was we want to

[00:22:31] Speaker 01:
We want to do this type of cost allocation at the highway-byway time and we're proposing to do it regionally for all of the costs that exist right now.

[00:22:41] Speaker 04:
It's basically the 205-206 difference.

[00:22:44] Speaker 01:
Well, they're both 205s, exactly.

[00:22:46] Speaker 01:
I understand, but the differences are a lot.

[00:22:49] Speaker 01:
Exactly.

[00:22:49] Speaker 01:
And then the commission here is looking at the proposal.

[00:22:53] Speaker 01:
They're saying, hey, we have the opportunity to have these extensive 9,500 miles of transmission lines with public power joining the region.

[00:23:04] Speaker 01:
It's going to create all kinds of benefits, including getting rid of constraints on the system.

[00:23:10] Speaker 01:
And we really want that.

[00:23:12] Speaker 01:
And they need this type of cost allocation.

[00:23:16] Speaker 01:
And we believe it's just unreasonable.

[00:23:19] Speaker 01:
And the stakeholders believed it was just and reasonable.

[00:23:22] Speaker 01:
The only state that's opposed, there are seven states on the regional state committee at the time when this was proposed, and only one even sought rehearing of it, and only one is here on appeal.

[00:23:36] Speaker 01:
So it really was something that the region understood was beneficial and was an appropriate cost allocation in the circumstances.

[00:23:44] Speaker 01:
So, and again, it's not a type of cost allocation that's new.

[00:23:49] Speaker 01:
Commission does license plate, approves license plate cost allocation proposals often, as it did in PJM.

[00:23:58] Speaker 03:
Was the redacted version of the battle group study anywhere, is it anywhere in the record before the commission?

[00:24:09] Speaker 03:
Hyperlinked or otherwise.

[00:24:11] Speaker 01:
It is certainly, it was easy for me to follow the path to find the Brattle study myself.

[00:24:18] Speaker 01:
What I'm saying is, is it part, did the commission?

[00:24:21] Speaker 01:
Is it in the record before the commission?

[00:24:28] Speaker 01:
My brief does not make that point.

[00:24:30] Speaker 01:
What my brief argues is that... Can you just tell me whether it's in the record or not?

[00:24:35] Speaker 01:
The commission did not speak to looking at the Brattle report.

[00:24:38] Speaker 01:
I don't know whether the commission looked at the Brattle, the redacted Brattle study itself.

[00:24:44] Speaker 01:
I don't know the answer to that question, Your Honor.

[00:24:47] Speaker 01:
But I do know that the Kansas Commission... We don't know whether anyone submitted it in the record.

[00:24:51] Speaker 01:
It wasn't submitted as part of the record.

[00:24:53] Speaker 03:
Did anyone hyperlink it in the filing with the commission?

[00:24:56] Speaker 01:
It is hyperlinked to

[00:25:01] Speaker 01:
the protest of the Kansas Commission pointed to Southwest Power Pool, their expert witness, Mr. Monroe's testimony before the Kansas Commission.

[00:25:15] Speaker 01:
So he testified not only before FERC, but he testified before the Kansas Commission, before the FERC proceeding.

[00:25:20] Speaker 01:
And his testimony

[00:25:22] Speaker 01:
had a link to the Brattle study.

[00:25:28] Speaker 01:
And so, technically, I think it's part of this record, but it's not listed in our certified index to record as being there because... I'm sorry, the testimony before the Kansas Commission is in your record, is that correct?

[00:25:43] Speaker 01:
The testimony before the Kansas Commission is in, it is hyperlinked in this proceeding in a document submitted by the Kansas Commission itself.

[00:25:53] Speaker 04:
Okay, and then it's a hyperlink.

[00:25:55] Speaker 04:
It's a hyperlink to a hyperlink.

[00:25:56] Speaker 04:
That's right.

[00:25:58] Speaker 01:
But what is in the record for sure is Mr. Monroe's explanation of

[00:26:05] Speaker 01:
that the methodology, and it's true, I mean it's very easy to look at the Brattle Report, it's extremely extensive and all that's missing... No, but the Commission didn't look at the Brattle Report, so let's assume that's mulled off from the Commission.

[00:26:16] Speaker 01:
I don't know, I can't say to you that the Commission did look at it.

[00:26:19] Speaker 04:
But what I can say is... But if there were objections based on errors in the Brattle Report, Kansas was completely free to bring them to the Commission's attention.

[00:26:26] Speaker 01:
That's exactly the point.

[00:26:29] Speaker 01:
Your Honor, that's exactly right.

[00:26:31] Speaker 01:
And we know, and again, we stated in our brief that the Kansas Commission had that rejected copy of the Brattle Report, and they don't dispute that.

[00:26:43] Speaker 01:
And they don't raise any matter regarding that.

[00:26:46] Speaker 01:
And Mr. Bell certainly could have if he saw any problems with the analysis there.

[00:26:52] Speaker 01:
And we also know that the confidential information in that report that the

[00:26:59] Speaker 01:
that Mr. Monroe relied on and that Southwest Power Pool relied on in accepting information from the Broward report.

[00:27:07] Speaker 01:
We know that that was provided to the Canada Commission as well, and they're not making any complaints about that confidential information that underlies the two data, the simply two data points that were used in one metric in the benefits analysis.

[00:27:19] Speaker 01:
And they're not raising any concerns about that.

[00:27:21] Speaker 01:
So the commission knows that they have this information and there's no complaints made about it.

[00:27:30] Speaker 01:
Why can't the commission rely on that reasonably as it did here?

[00:27:34] Speaker 01:
There is no substantive challenge to it.

[00:27:37] Speaker 01:
And so the commission reasonably relied on that here.

[00:27:40] Speaker 01:
And let me say this, and it's important, and I regret not having put it in my brief, but this is plainly in the record.

[00:27:47] Speaker 01:
If you look at J363,

[00:27:55] Speaker 01:
regarding the benefits.

[00:27:56] Speaker 01:
If you look at J.A.

[00:27:57] Speaker 01:
363, it's Mr. Bell's testimony, and he says there that even if you remove the reserve sharing benefit, which they challenged on appeal but didn't challenge on re-hearing to commission, and the integrated marketplace benefits analysis from Mr. Monroe's

[00:28:15] Speaker 01:
economic benefits analysis, Joider would still be economic.

[00:28:20] Speaker 01:
And my math comes down to it would be still $27,361,000 net positive on these quantifiable benefits.

[00:28:30] Speaker 01:
And that's even besides all the unquantifiable benefits regarding, which are extensive here.

[00:28:34] Speaker 01:
And you know, the commission is- I'm sorry, I'm not seeing this on 363.

[00:28:41] Speaker 01:
It's on JA 363.

[00:28:44] Speaker 01:
He's asked the question.

[00:28:45] Speaker 01:
And I'm sorry if I have the wrong page.

[00:28:47] Speaker 01:
Let me look and see.

[00:28:50] Speaker 01:
363.

[00:28:53] Speaker 01:
Jay, 363.

[00:28:54] Speaker 01:
Mr. Bell is asked the question in his testimony based upon SPP's figures with the unjustified integrated mark.

[00:29:01] Speaker 01:
That very first question and very first answer.

[00:29:03] Speaker 04:
Oh, I see.

[00:29:04] Speaker 04:
It says barely.

[00:29:05] Speaker 01:
It does say, but it is yes, but barely.

[00:29:07] Speaker 01:
And his barely is 20.

[00:29:09] Speaker 01:
It comes out to $27 million.

[00:29:12] Speaker 03:
Is that something, so I noticed this sort of when you do the math, it still adds up to plus even if you back out the integrated marketplace benefits, but is that something that we as a court could rely on, or would we have to send it back for the, because the commission didn't say, it said, hey, here's the benefits.

[00:29:28] Speaker 03:
It didn't say, and even if you got problems with those benefits, we would still determine that this is just and reasonable based on the

[00:29:36] Speaker 03:
sub math calculation.

[00:29:39] Speaker 03:
Can we look, I mean, is our, do we just go look, there's some, I think that if you look, there's some math here that still benefits them either way, or?

[00:29:47] Speaker 01:
I think if you look at the commission's order, orders in this case, it clearly discusses far more often the unquantifiable benefits.

[00:29:56] Speaker 01:
What the commission really was focused on here, it had to look at these

[00:30:01] Speaker 01:
other benefits as well, which, again, Mr. Bell has conceded would be still economic.

[00:30:07] Speaker 01:
But it needed to look at that as well.

[00:30:09] Speaker 01:
But what the Commission really focused on in these orders were the unquantifiable, the reliability benefits.

[00:30:13] Speaker 03:
Well, it did that against a backdrop where there was also all of these quantifiable benefits.

[00:30:16] Speaker 03:
And I'm just asking you about whose role it is if you back out, which is a pretty big, I don't have the chart down for me, 200 and something million

[00:30:28] Speaker 03:
dollars today or something like that it's a big number it's one of the biggest numbers there is in the chart so if they back that out

[00:30:39] Speaker 03:
do we still?

[00:30:40] Speaker 03:
I'm asking you, is that something FERC thinks courts should do for it, or courts should say 272 million?

[00:30:47] Speaker 01:
I think it comes down to that the benefits just have to be roughly commensurate, and even as the Seventh Circuit said, that could be in the millions of dollars.

[00:30:55] Speaker 01:
It could be a millions of dollars difference.

[00:30:57] Speaker 01:
And what we have here are

[00:30:58] Speaker 01:
substantial benefits, not only to – substantial benefits to existing members, including, again, cutting constraints.

[00:31:07] Speaker 01:
I mean, these unquantifiable benefits are extensive, and it seems impossible for me to believe that a commission would have a circumstance

[00:31:14] Speaker 01:
based on these orders, where there's still a net positive in the quantifiable benefits and all the amazing unquantifiable benefits that the existing members.

[00:31:24] Speaker 01:
Again, unchallenged.

[00:31:25] Speaker 01:
These are not challenged benefits.

[00:31:26] Speaker 01:
So we have improved grid reliability, improved efficiency, a reduced need for congestion management.

[00:31:32] Speaker 01:
And there's a specific example

[00:31:34] Speaker 01:
that Southwest Power Pool will now be able to commit and dispatch all generation affecting west-to-east flows and north-to-south flows on the western edge, which have been causing generation curtailment.

[00:31:44] Speaker 01:
So generation curtailments for existing members are now going to be gone on the system.

[00:31:48] Speaker 01:
On top of that, there's going to be increased access to lower-priced energy throughout Southwest Power Pool.

[00:31:54] Speaker 01:
And all of those unquantifiable benefits are unchallenged.

[00:31:58] Speaker 01:
And so that, with the positive number that Mr. Bell's own testimony, clearly part of this record shows that the quantifiable benefits are positive as well.

[00:32:08] Speaker 01:
This is not a circumstance that I don't think the court needs to go back to FERC to feel confident.

[00:32:13] Speaker 03:
So remand would be futile.

[00:32:14] Speaker 03:
It's clear what they would do as your position.

[00:32:16] Speaker 03:
It's not that normally we would do that.

[00:32:18] Speaker 01:
But it's so clear what the commission would do here in this circumstance.

[00:32:22] Speaker 01:
And again, I think if you

[00:32:24] Speaker 01:
We look at the orders.

[00:32:25] Speaker 01:
There are times where the Commission simply talks about the unquantifiable benefits, the reliability, and other matters, and doesn't even mention the quantifiable benefits.

[00:32:34] Speaker 01:
I really think that was the Commission's focus.

[00:32:36] Speaker 03:
And is your view of what FERC's role is here, when parties come to it with a proposed change to the tariff, that essentially they just sort of look

[00:32:49] Speaker 03:
If they're roughly proportionate benefits on both sides, or if they're confronted with an argument that says, oh my gosh, they sold us down the river, we could have gotten such a better deal.

[00:33:03] Speaker 01:
I think that latter is not the standard.

[00:33:05] Speaker 01:
The commission gets a federal power act section 205 proposal and the commission needs to determine whether that is just and reasonable and that it getting a better deal.

[00:33:15] Speaker 01:
The commission doesn't have to be the best.

[00:33:17] Speaker 01:
It's a negotiated matter and the commission is very clear here that negotiated proposals is what the commission wants with this type of large integration.

[00:33:25] Speaker 01:
So the test is?

[00:33:27] Speaker 01:
The test is that it has to be a just and reasonable

[00:33:31] Speaker 01:
proposal, cost allocation proposal, that will provide benefits to the existing members.

[00:33:38] Speaker 01:
The commission is focused on the existing members, which includes the Kansas Commission's state.

[00:33:45] Speaker 03:
And the benefits are more than whatever costs are associated with the change to the tariff.

[00:33:52] Speaker 01:
And the best case for that is?

[00:33:58] Speaker 01:
Just general section 205, let me see.

[00:34:01] Speaker 01:
It's just in 205, that's what, and I apologize.

[00:34:04] Speaker 01:
I don't know that I have something.

[00:34:05] Speaker 01:
Well, I know the statutes are just unreasonable.

[00:34:06] Speaker 03:
It's just that FERCAS obviously can help us in understanding what that means.

[00:34:10] Speaker 03:
Because it sounds to me almost like an argument that this was,

[00:34:14] Speaker 03:
a terrible deal.

[00:34:17] Speaker 03:
We're letting these people free ride.

[00:34:18] Speaker 03:
They're getting away with all this extra money.

[00:34:20] Speaker 03:
On the other hand, the math is the math, and there's still benefits on both sides.

[00:34:24] Speaker 01:
Well, and I appreciate you bringing up the free rider notion, because the Commission explicitly found on this record that there are no

[00:34:31] Speaker 01:
The commission didn't use the term free riders.

[00:34:32] Speaker 01:
The commission found explicitly at rehearing order, J491 paragraph 41, that there's no subsidization here.

[00:34:39] Speaker 01:
And that's because of the reciprocal nature of the cost allocation proposal here.

[00:34:44] Speaker 01:
So there's no free ridership here.

[00:34:47] Speaker 01:
There's no subsidization.

[00:34:50] Speaker 01:
I think that it probably does come down to that the Kansas Commission just wanted a better deal, but that's not the standard.

[00:34:59] Speaker 04:
In terms of the need to find benefits, I assume it's net benefits.

[00:35:05] Speaker 01:
That's right, Your Honor.

[00:35:07] Speaker 04:
Does that seem to be what the Commission tried to do?

[00:35:10] Speaker 01:
Yeah, absolutely.

[00:35:13] Speaker 02:
Thank you.

[00:35:13] Speaker 01:
Thank you very much.

[00:35:15] Speaker 02:
A couple of minutes on rebuttal.

[00:35:21] Speaker 02:
Thank you, Your Honor.

[00:35:22] Speaker 02:
I'll be brief.

[00:35:23] Speaker 02:
I picked up four points for counsel's presentation I'd like to respond to.

[00:35:29] Speaker 02:
The first is to get to Judge Millett's point about what's the standard.

[00:35:37] Speaker 02:
Section 205, the standard is just and reasonable.

[00:35:39] Speaker 02:
You can look at Illinois Commerce Commission.

[00:35:42] Speaker 02:
look at Judge Kavanaugh's recent decision in the NRG case coming up on PJM.

[00:35:48] Speaker 02:
There's a lot of jurisprudence in this circuit about what Section 205 does and does not allow.

[00:35:54] Speaker 02:
One of the things, though, that the statute requires and that the Administrative Procedure Act requires is reasoned decision-making.

[00:36:03] Speaker 02:
You do not have reasoned decision-making underlying this decision.

[00:36:07] Speaker 02:
The SPP regional system is not a legacy system, nor is it a subregion.

[00:36:12] Speaker 02:
as FERC described.

[00:36:13] Speaker 02:
In accepting the highway byway cost allocation method, the FERC found that it, quote, reasonably aligns the costs associated with transmission expansions, with usage of the system, and fairly assigns costs among SPP members.

[00:36:29] Speaker 02:
That's 131 FERC, paragraph 61, 252, and paragraph 76.

[00:36:34] Speaker 02:
And further explained, the Highway Byway reflects SPP's single system regional operations in order to enhance the reliability and efficiency of its regional markets, under which the strong regionally integrated EHV transmission network that results from this process provides benefits to all that are interconnected with it.

[00:36:58] Speaker 02:
That's paragraph 78 of the same FERC decision.

[00:37:01] Speaker 02:
You can't reconcile that with FERC's characterization here.

[00:37:06] Speaker 02:
in the case before the court where it says, ah, this is a license plate concept wherein the integrated system region is treated as one zone and preintegration SBP region is treated as another for the purposes of cost allocation for existing facilities within each subregion.

[00:37:23] Speaker 02:
And that's just and reasonable because it reflects prior investment decisions on each side.

[00:37:28] Speaker 02:
That's OR 144, paragraph 41.

[00:37:32] Speaker 02:
JA 491 and 436.

[00:37:37] Speaker 02:
That's the fundamental failure of reason decision making in this case is that you can't reconcile the two messages.

[00:37:45] Speaker 02:
The second point I wanted to make is that the stakeholder process is not due process.

[00:37:49] Speaker 02:
FERC is due process.

[00:37:51] Speaker 02:
You can count heads all you want in the stakeholder process.

[00:37:55] Speaker 02:
That does not satisfy the statutory burden under section 205.

[00:38:00] Speaker 02:
On a related point, producing and critiquing the Brattle Report is not part of the Kansas Commission's burden as an intervener in this proceeding.

[00:38:09] Speaker 02:
The burden is on the proponent utility, which in this case was the SBP, of justifying the justice and reasonableness of its rape proposal.

[00:38:18] Speaker 02:
You review that both for reasoned decision-making and for substantial evidence.

[00:38:23] Speaker 02:
In this case, as neither.

[00:38:25] Speaker 02:
Excuse me.

[00:38:27] Speaker 02:
Finally, and this is a minor procedural point, I cited with respect to the free rider issue, which FERC actually didn't respond to, a Fifth Circuit decision, El Paso electric, which was only reported in Lexus.

[00:38:42] Speaker 02:
at the time even that our final briefs were filed, and there has subsequently been a Fed 3rd citation to that case.

[00:38:50] Speaker 02:
I'll place it on the record, but the Court, give me some direction if you want a 28-J letter on that.

[00:38:55] Speaker 00:
You can send the letter.

[00:38:57] Speaker 02:
It's El Paso Electric versus FERC 832 Fed 3rd, 495, 504 to 507 to circuit 2017.

[00:39:08] Speaker 02:
All right.

[00:39:10] Speaker 02:
Thank you very much.

[00:39:11] Speaker 02:
The case is submitted.