[00:00:03] Speaker 02: Case number 07-1141 at L, American Services Company at L Petitioners, Russia's Federal Energy Regulatory Commission. [00:00:11] Speaker 02: Ms. [00:00:11] Speaker 02: Warren for Petitioners, American Services Company at L. Ms. [00:00:15] Speaker 02: Boeducker for Petitioner, All-Star Energy. [00:00:19] Speaker 02: Ms. [00:00:19] Speaker 02: Rylander, who responded first, and Mr. Kaplan for entrepreneurs, Cargill Power Markets, LLC at L. [00:00:53] Speaker 09: May it please the Court, Wendy Warren for the Ameren Companies. [00:00:57] Speaker 09: I would like to reserve three minutes for rebuttal. [00:01:00] Speaker 09: These consolidated appeals can be reduced to a single question. [00:01:04] Speaker 07: That's very helpful. [00:01:06] Speaker 07: What is it? [00:01:08] Speaker 07: Having read the brief knowing that this case is simple would help a lot. [00:01:13] Speaker 09: The question is, will the court require FERC to enforce the just and reasonable filed rate as it would have been in effect absent FERC's errors from April 1, 2005 through November 10, 2008? [00:01:29] Speaker 09: For over three years, throughout the multiple orders on review, FERC repeatedly reversed itself as to refunds, abusing its discretion and failing to engage in recent decision-making based on substantial evidence. [00:01:42] Speaker 09: All of the problems after the first year could have been avoided had FERC not misread the definition of capital E energy to create a discriminatory application of revenue sufficiency guarantee charges [00:01:56] Speaker 09: And I hope you'll forgive me for the acronym, but that's a very long thing to say, so I'm going to say RSG, charges that shifted over half of those charges to utilities with captive customers. [00:02:08] Speaker 09: The court can correct all of FERC's errors by ordering FERC to enforce the just and reasonable filed rate, properly interpreted, from the market start. [00:02:18] Speaker 07: Why isn't this court's opinion that was issued after briefing in this case in Louisiana Public Service opinion by Judge Williams, why doesn't that just resolve this issue? [00:02:35] Speaker 07: Because in that case, it says that the Commission does have a policy of denying refunds in allocation cases. [00:02:46] Speaker 07: That's what happened here. [00:02:47] Speaker 07: So as long as it has to consider these relevant factors, but the FERC did here, and our review is highly, highly deferential. [00:02:58] Speaker 07: Why doesn't that case just take care of this whole thing? [00:03:01] Speaker 09: Your Honor, that case was cost allocation, but it specifically singled out, carved out from that filed rate violation cases. [00:03:13] Speaker 09: And the RSG cases from the beginning and even through the 206 case are really a filed rate violation. [00:03:22] Speaker 09: MISO violated its rate from the outset, and FERC then tinkered with how that rate was supposed to work. [00:03:32] Speaker 09: forcing Amaran and others to file complaints. [00:03:35] Speaker 09: But the rate that would be applied, the likely complaint rate, was clear as far back as the first rehearing order. [00:03:45] Speaker 09: So it is a cost allocation case in the sense that that's what the tariff provision was meant to do. [00:03:53] Speaker 09: But MISA violated that. [00:03:59] Speaker 09: that cost allocation scheme and then further confused it by altering the definition of energy. [00:04:07] Speaker 05: But isn't every cost allocation case in a sense in the filed rate case? [00:04:13] Speaker 09: So the typical cost allocation case situation is one where there is a tariff rate, it is in effect, and someone files, excuse me, it's in effect, someone files a Section 206 Federal Power Act complaint to change that rate. [00:04:33] Speaker 09: To say the existing rate is unjust and unreasonable, we're going to put in a new rate. [00:04:39] Speaker 09: And it's the reliance [00:04:42] Speaker 09: people's reliance on the former rate and their inability to anticipate the new rate that makes the cost allocation cases an issue. [00:04:54] Speaker 09: It's also, in those cases, the concern is often having to rerun the market or change the market mechanism. [00:05:03] Speaker 09: And that issue is not present here. [00:05:05] Speaker 09: There's no need to rerun the energy market to calculate what the RSG charges should have been, how they should have been allocated. [00:05:15] Speaker 05: Doesn't the Commission disagree with you on that? [00:05:20] Speaker 09: Well, they say that the energy market needs rerunning, and I think what they mean by that is that [00:05:27] Speaker 09: parties may have made different market decisions if they had known that they would have been responsible for RSG charges. [00:05:37] Speaker 09: And our response to that is they should have known that they were responsible for RSG charges. [00:05:43] Speaker 09: And FERC said repeatedly, you have ample opportunity to adjust your behavior. [00:05:50] Speaker 09: So for them to then find that you couldn't have anticipated that makes no sense. [00:06:00] Speaker 09: So the only reason for the first year that FERC gave for reversing refunds, it acknowledged that the facts in the law that applied had not changed. [00:06:13] Speaker 09: With one exception, which I'll get to, FERC did not cite a changed view of a single argument. [00:06:19] Speaker 09: It had already rejected. [00:06:21] Speaker 09: The only reason FERC gave for its new balancing was its changed view that it was reasonable for sophisticated market participants to ignore what the tariff says, to look at unfiled documents and emails from MISO and MISO presentations that were not filed, and ignore what the filed tariff said. [00:06:44] Speaker 09: And FERC said because it was reasonable for them to rely on those unfiled sources, there was nothing in the record to indicate an inequitable windfall. [00:06:55] Speaker 09: And I assume their reasoning is if it was reasonable to rely on the wrong thing, then the fact that you gained from that, you got a free ride from that is not inequitable. [00:07:08] Speaker 09: We disagree. [00:07:10] Speaker 09: And that conclusion that you could look to things other than the tariff is contrary to FERC's statements earlier and at the same time they reverse the refunds, that we expect market participants to know what's in the filed tariff and follow it. [00:07:28] Speaker 09: I don't understand how if you're expecting people to follow it, you're simultaneously excusing them from following it. [00:07:36] Speaker 09: And their claim that there was no record evidence of an inequitable windfall ignores the record evidence of amounts Ameren was overcharged. [00:07:46] Speaker 09: So in the first round of the RSG proceedings, FERC made all the right findings and choices, with the exception of capital E, and then reversed itself with no explanation, no rational explanation. [00:07:59] Speaker 09: The capital E energy issue involves FERC's misreading of the tariff definition of energy. [00:08:07] Speaker 09: It's in quotes, it's capital E. And FERC's tortured reading excused the purely financial market participants from any RSG charges. [00:08:18] Speaker 07: And that- I thought FERC was interpreting the phrase actually withdraws energy. [00:08:28] Speaker 07: actually withdraws energy. [00:08:30] Speaker 07: That's what it was interpreting. [00:08:32] Speaker 09: It was interpreting the phrase actually withdraws any capital E energy. [00:08:36] Speaker 07: Yeah. [00:08:39] Speaker 07: And this is, again, a deferential standard of review, right? [00:08:44] Speaker 07: We're not deciding initially what that phrase means. [00:08:47] Speaker 07: We're asking whether Ferck's interpretation of the phrase was unreasonable. [00:08:52] Speaker 09: Well, except that Ferck has conceded this tariff is unambiguous. [00:08:58] Speaker 07: What seems unambiguous is the word actually. [00:09:02] Speaker 09: Doesn't it? [00:09:03] Speaker 09: Yes, but the so actually withdraws any are are not capitalized. [00:09:09] Speaker 09: They're not defined. [00:09:11] Speaker 09: But the term energy, the word energy is capitalized and it has a definition given by the tariff. [00:09:18] Speaker 09: So it was unreasonable for FERC to completely ignore that capitalized definition in the tariff. [00:09:26] Speaker 09: I mean, tariffs have definitional clauses for a reason, and this court has found that you should pay heed to those. [00:09:34] Speaker 09: The Supreme Court has found you should pay heed to defined terms. [00:09:43] Speaker 09: It's irrational, if there is a tariff that has a defined term, that you would ignore that definition. [00:09:50] Speaker 09: I mean, there's a reason that that term was there with its definition, and that is to make the... So, FERC's rebuttal to our point is there's nothing financial in the real-time energy market. [00:10:06] Speaker 09: But I don't see how price convergence could work if virtuals were not also in the real-time market. [00:10:15] Speaker 09: They have to buy back their obligation. [00:10:20] Speaker 09: So we pointed out the mismatch and FERC said, well, you're worried about under recovery. [00:10:27] Speaker 09: We weren't worried about under recovery. [00:10:29] Speaker 09: We were worried that FERC was distorting the tariff and that its misreading was unjust and unreasonable. [00:10:34] Speaker 09: And the fruit of that misreading was that MISO implemented the original mismatch, which shifted millions of dollars from the purely financial market participants that should have been paying those charges to load serving entities. [00:10:49] Speaker 09: because it was all spread, instead of being collected from the people it should have been collected from, it was spread over the entire, not over the entire market, but only over the load serving entities. [00:11:04] Speaker 09: Go ahead. [00:11:05] Speaker 07: Your time's almost up, or it is up. [00:11:07] Speaker 09: So FERC then flipped and portrayed that mistake that it had made as academic and reversed the refunds, saying that no one had objected. [00:11:17] Speaker 09: But Ameren's objection was actually before this court. [00:11:21] Speaker 09: We had filed it in 2007, and FERC had argued to hold it in abeyance. [00:11:28] Speaker 09: So then we get to the Section 206 proceeding, and FERC again ignores its own findings as to people had noticed, people understood what the rate was going to be, they could anticipate and accommodate with their behavior, but they didn't. [00:11:49] Speaker 09: And FERC said, well, no one could have predicted this significant increase. [00:11:56] Speaker 08: Nothing further? [00:11:58] Speaker 08: Thank you. [00:11:59] Speaker 08: Okay, thank you. [00:12:16] Speaker 00: Good morning, Your Honors. [00:12:17] Speaker 00: It may please the Court. [00:12:18] Speaker 00: My name is Sean Boedeker, and I represent Westar Energy in this proceeding. [00:12:21] Speaker 00: I reserve one minute for rebuttal. [00:12:23] Speaker 00: Between November 2007 and November 2008, the time period at issue in Westar's appeal, Westar's energy traders actively bought power in the real-time miso market. [00:12:32] Speaker 00: Every day Westar engaged in these transactions, Westar paid RSG costs for them, and Westar does not dispute the charges that it originally paid. [00:12:39] Speaker 00: But in June 2009, long after Westar had closed its transactions and had no ability to change its course of conduct, Westar found out that it owed a retroactive surcharge, which was more than double what it originally paid. [00:12:51] Speaker 00: This surcharge was unexpected, cost Westar millions, and turned many of Westar's trades for the period from winners into losers. [00:13:00] Speaker 00: The surcharged amount did not have any relationship to the amount of cost that Westar imposed on the market during the time period, and FERC has never held otherwise. [00:13:07] Speaker 00: FERC's treatment of Westar was markedly different than a set of other similarly situated market participants in MISO. [00:13:13] Speaker 00: These virtual-only entities not only did not have to pay a surcharge for that one-year time period, but did not have to pay any RSG charges whatsoever, even though they, like Westar, imposed RSG costs on the market. [00:13:24] Speaker 00: FERC's only rationale for its disparate treatment of these two similarly situated entities is its belief that an order FERC issued on November 5, 2007, where FERC labels the second compliance order, gave Westar and other market participants fair notice of how their charges would be allocated during the time period. [00:13:39] Speaker 00: But the second compliance order gave Westar and other market participants no fair notice. [00:13:43] Speaker 00: FERC did not definitively resolve how the tariff was to be interpreted and applied until more than one year after the second compliance order had been issued, which was after Westar had entered into its transactions and had no ability to change its course of conduct. [00:13:56] Speaker 00: And just three days after FERC determined how the tariff should operate, it ruled that the tariff was unjust, unreasonable, and discriminatory because it imposed costs on market participants like Westar that they did not cause in the market. [00:14:08] Speaker 00: In this case, West Star challenges FERC's selection of an appropriate refund effective date in the Section 205 proceeding. [00:14:14] Speaker 00: In the two orders that West Star challenges here, FERC claims that it selected the correct refund effective date because the second compliance order, which again was issued on November 5, 2007, provided a comprehensive explanation to market participants of how the RSG rate would be calculated between November 2007 and November 2008. [00:14:31] Speaker 00: But the second compliance order did not provide a comprehensive explanation. [00:14:35] Speaker 00: The primary issue that FERC was addressing in the Section 205 proceeding was how to interpret and apply the tariff. [00:14:40] Speaker 07: Why would we second-guess FERC's judgment on that question? [00:14:44] Speaker 00: Again, there are at least three honors. [00:14:45] Speaker 00: There's what? [00:14:46] Speaker 00: There are at least three reasons, Your Honor. [00:14:48] Speaker 00: First, MISO, which is the answer. [00:14:50] Speaker 07: Remember, this is a very deferential review we have here, right? [00:14:55] Speaker 00: Yes, Your Honor. [00:14:57] Speaker 00: But FERC only points to the second compliance order and states that it gave a comprehensive explanation, but we believe that's incorrect for at least three reasons. [00:15:04] Speaker 00: I see. [00:15:05] Speaker 00: First, MISO, the entity that's responsible for calculating and assessing the charge on market participants. [00:15:09] Speaker 07: Wait, you disagree that it was comprehensive? [00:15:12] Speaker 00: We disagree that it was comprehensive. [00:15:13] Speaker 00: FERC is essentially imputing clarity to that order when, at the time that it was issued, it was not clear. [00:15:19] Speaker 00: And it wasn't clear for at least three reasons. [00:15:21] Speaker 00: First, MISO, the entity that's responsible for calculating and assessing this charge, interpreted the second compliance order to mean that all virtual volumes would be included in the denominator when calculating the charge, and charge market participants like Westar accordingly during the time period. [00:15:39] Speaker 00: application of the tariff was entirely consistent with FERC's earlier holding on the second rehearing order, which was issued March 15, 2007, that the divisor of the charge includes all virtual volumes. [00:15:49] Speaker 00: That was how MISO was assessing the charge. [00:15:50] Speaker 00: That was Westar's understanding of the second compliance order, MISO's understanding of the second compliance order. [00:15:56] Speaker 00: FERC later ruled in the fourth rehearing order, which it issued on November 7, 2008, it granted clarification as to what exactly the second compliance order meant [00:16:06] Speaker 00: and explicitly stated in paragraph 56, which is in the joint appendix at page 972, that only with the clarifications and modifications provided in that order was it clear exactly how the RSG rate would be interpreted and applied. [00:16:21] Speaker 00: But again, at that point, Westar had already entered into the transactions and had no ability to change this course of conduct. [00:16:28] Speaker 00: Finally, we don't believe that the second compliance order provided a comprehensive explanation because of the plain language of that order. [00:16:34] Speaker 00: For instance, paragraph 23 of the second compliance order, which is at page 678 of the Joint Appendix, noted that the rate to be applied would be determined on the basis of all virtual offers and deviations. [00:16:45] Speaker 00: It mandated that MISO make a compliance filing consistent with that finding, and again, MISO's compliance filing and MISO's understanding of FERC's order was that all virtual volumes would be included in the denominator. [00:16:55] Speaker 00: Now, FERC later reversed that ruling and held that certain virtual volumes should be excluded from the denominator, but we submit that that did not occur in the second compliance order. [00:17:04] Speaker 00: And again, FERC only relies on the second compliance order to support its interpretation, but it cannot rely on an erroneous description of its precedent to support its disparate treatment of two similarly situated entities. [00:17:16] Speaker 00: And because FERC is not adequately explained, its disparate treatment of similarly situated entities, its action is arbitrary and capricious and should be reversed. [00:17:24] Speaker 07: Thank you. [00:17:27] Speaker 07: Okay, thank you. [00:17:29] Speaker 07: We'll hear from FERC. [00:17:43] Speaker 03: Good morning. [00:17:44] Speaker 03: May it please the court Elizabeth Rhinelider for the commission. [00:17:48] Speaker 03: As this court has already noted, review in this case is very deferential and only for abuse of discretion. [00:17:55] Speaker 03: The commission has significant remedial discretion, even in the face of a statutory or a tariff violation, like as Amarin speaks of under the older case towns of Concord. [00:18:06] Speaker 03: All FERC needs is substantial evidence that refunds are not warranted in a particular instance. [00:18:14] Speaker 06: In this case, it's the flip-flopping on the waiver of the refund issue that's the most troubling aspect of this. [00:18:24] Speaker 06: I mean, yeah, highly deferential, but at some point, doesn't it start to look maybe arbitrary and capricious? [00:18:35] Speaker 06: How do you handle the flip-flops? [00:18:37] Speaker 03: No, Your Honor. [00:18:38] Speaker 03: I would actually submit that the Commission's careful reexaminations of the requests for rehearing and the facts and evidence that were submitted in terms of what happened to the market, and I would mention this is a very new energy market. [00:18:54] Speaker 03: It was less than a year old in this case. [00:18:56] Speaker 03: FERC's careful reexamination of requests for rehearing and the evidence of the effect on the market of these various sets of refunds [00:19:03] Speaker 03: showed how careful it was being and how important the equities were and the overall... If you're a market participant, it's got to be more than a little frustrating, though, doesn't it? [00:19:15] Speaker 03: Yes, Your Honor, I imagine it was. [00:19:16] Speaker 03: And FERC's orders show the frustration that the regulators experienced as well. [00:19:22] Speaker 03: Every time FERC thought it had this rate right, something else happened to change the picture somewhat. [00:19:30] Speaker 03: Amarin pointed out in its opening argument that FERC said in the first rehearing order that its view of the facts and the law hadn't really changed. [00:19:42] Speaker 03: Its view of the equities did every time that a refund scenario occurred. [00:19:48] Speaker 03: And what FERC would find out, and I'll use this first set of rehearing as an example, [00:19:53] Speaker 03: The refunds would create uncertainty and undermine faith in the market. [00:19:59] Speaker 03: The system operator pointed out that in order to make refunds happen in that first year would also have required the development of software and complicated calculations. [00:20:10] Speaker 06: Here's my concern. [00:20:11] Speaker 06: I mean, I understand that FERC's position, its default position, is not to give refunds in these sorts of cases. [00:20:20] Speaker 06: Well, then why on three occasions did FERC decide otherwise and then reverse course? [00:20:30] Speaker 03: I would say, Your Honor, that once again, this is an energy market that's less than one year old with a variety of market participants, a variety of interests. [00:20:42] Speaker 03: It's a very large geographical area, 15 states. [00:20:46] Speaker 03: I would say that perhaps FERC's experience and system operators' experience was not sufficient enough to predict what would really occur if refunds were ordered. [00:20:58] Speaker 03: And again, every time FERC did order refunds and every time the evidence came back that this is not [00:21:05] Speaker 03: that this is not beneficial to the market overall, that the equities are more complicated than they thought. [00:21:10] Speaker 06: To three times to get that? [00:21:12] Speaker 06: Again, what's just puzzling to me, and you all are the experts in this, this is a generalist coming to me, coming to, what's puzzling to me is that you start with this baseline, the default is you're not gonna give refunds in these sorts of cases, right? [00:21:27] Speaker 06: And then three times you go ahead and give the refunds and then say, no, now we're taking it back. [00:21:32] Speaker 06: That's my concern. [00:21:34] Speaker 03: The orders also show, Your Honor, that FERC's policy with regard to refunds and organized markets was evolving simultaneously with the period of time that this case occurred. [00:21:47] Speaker 03: Two of the three Louisiana cases that are cited in the briefs and that were decided after briefing in this case occurred during the 12-year period this case took. [00:21:59] Speaker 03: And yes, FERC's position is against refunds in organized market cases. [00:22:04] Speaker 03: Even when there's a tariff violation, FERC got there eventually. [00:22:07] Speaker 03: But it was in every circumstance two steps forward, one step back in order to get to the right result. [00:22:19] Speaker 03: If I could follow up quickly on the other two sets of refunds, the waiver of the mismatch refunds was just simply created confusion in the markets. [00:22:31] Speaker 03: And as FERC acknowledged in the orders, FERC itself got the mismatch issue wrong a couple of times. [00:22:37] Speaker 03: But because the commission had not made a legal error and was not determining the just and reasonable rate in those orders, there was no presumption in favor of refunds there. [00:22:47] Speaker 03: And as noted in the 6-3 hearing order at paragraphs 28 to 30, there was also no overcollection of the rate there. [00:22:56] Speaker 03: In the proceeding where FERC investigated and later amended the rate under section 206, once again the commission focused on market dynamics and found that the guarantee charge was the product of many interrelated factors. [00:23:09] Speaker 03: The commission's expectations of what market participants would predict and would assume with regard to how the markets would work and what the eventual rate would be, the commission expected too much. [00:23:21] Speaker 03: And particularly because there were two rate potential rate formulations at issue there, and once again a large number of market participants with a large variety of interests, it was not realistic to expect that everybody would correctly predict and instantly adjust to what became the eventual rate. [00:23:43] Speaker 03: And then finally as to Westar, Westar is not aggrieved by the orders that it challenges. [00:23:49] Speaker 03: They don't like the small RSG denominator that was in effect for a year. [00:23:55] Speaker 03: But they had two opportunities to challenge it, and they missed both of them. [00:24:02] Speaker 03: The interim rate took effect on November 10, 2008. [00:24:08] Speaker 03: That was said in the first paper rehearing order. [00:24:10] Speaker 03: Westar did not challenge that, and that was the end of the window that they don't like. [00:24:16] Speaker 03: Westar would not be aggrieved in the first place, and we don't concede that it is aggrieved. [00:24:20] Speaker 03: if had Wester simply requested and received what it wanted in the complaint proceeding, and it was a party to that case. [00:24:28] Speaker 03: The November 5th, 2007 date, which is the beginning of the window that Wester doesn't like, was set in the fifth rehearing order. [00:24:35] Speaker 03: That's the date the original rate was finally implemented as it was written on a forward-looking basis. [00:24:41] Speaker 03: But this order makes no new determinations as to what the effective rate was. [00:24:45] Speaker 03: Those determinations, as I believe Westhurst Council conceded, were made in the fourth rehearing order, which at that point was no longer subject to rehearing. [00:24:54] Speaker 03: So again, in view of the difficulty of this case and the Commission's careful balancing of the equities and consideration of the record, this Court should deferentially review the orders and affirm them. [00:25:07] Speaker 03: If the Court has no further questions. [00:25:09] Speaker 07: What about her, what about counsel's argument that in interpreting actually withdraws energy, FERC ignored capital energy? [00:25:17] Speaker 03: Yes, your honor. [00:25:19] Speaker 03: Amarin does say that the commission misread the tariff and in light of its misreading, essentially got the entire tariff proceeding wrong. [00:25:29] Speaker 03: And the FERC doesn't deny that the term energy as it's used in the tariff includes the notions of financial transactions. [00:25:37] Speaker 03: However, what is more important is the phrase actually withdraws. [00:25:42] Speaker 03: And Council conceded in her argument that actually withdraws is really, or I think perhaps just the word actually, is not ambiguous. [00:25:51] Speaker 03: You cannot withdraw a virtual transaction from the grid, which is why the inclusion of financial concepts in the term energy does not affect what occurs in the real-time market. [00:26:07] Speaker 03: A virtual transaction cannot occur by itself in real time. [00:26:11] Speaker 03: It's the counterpart to something that already happened the previous day. [00:26:14] Speaker 03: And again, you cannot withdraw virtual megawatts from the grid. [00:26:17] Speaker 03: And the tariff says, actually withdraws. [00:26:21] Speaker 03: Ameren's reading would take those two words, actually withdraws, out of the tariff altogether. [00:26:28] Speaker ?: Okay. [00:26:28] Speaker 08: Anything else? [00:26:29] Speaker 08: No. [00:26:29] Speaker 07: Okay. [00:26:30] Speaker 07: Okay, thank you. [00:26:31] Speaker 08: Thank you. [00:26:43] Speaker 01: May it please the court, I'm Stuart Kaplan, counsel for DC Energy, and here on behalf of the interveners. [00:26:50] Speaker 01: We share Judge Griffith's frustration with some of the rulings below representing financial participants that were very sensitive to transaction costs. [00:26:58] Speaker 01: I would like to begin with three general points based on what I've heard. [00:27:03] Speaker 01: First, to address Judge Griffith's concern about flip-flops, because the flip-flops were not actually acute with respect to the key rulings on the applicability of the charge as opposed to the calculation of the charge. [00:27:15] Speaker 01: Those are key distinguishing features. [00:27:17] Speaker 01: Second, I would need to address the petitioner's argument that this case is all about one question concerning violation of the filed rate. [00:27:24] Speaker 01: which in actuality, under the Commission's rational interpretation of the actual withdrawal of energy requirement, only applies for a one-year period from April 05 to April 06 and only with respect to a small segment of virtual transactions at issue in this case. [00:27:41] Speaker 01: those of market participants that actually physically withdrew energy. [00:27:45] Speaker 01: And third, I will address Westar's argument on discrimination when in actuality the Commission will consistently, in each case, to apply the rate interpretation change or the actual rate change prospectively from the date of the first merits order so that market participants would have notice of what they were being charged. [00:28:06] Speaker 01: To begin with, the notion that this is only a single question case is plainly wrong. [00:28:11] Speaker 01: There are four separate determinations which require separate legal analysis to handle them properly. [00:28:18] Speaker 01: An actual withdrawal of energy, FERC determined, was a prerequisite to apply the rate. [00:28:23] Speaker 01: From April 05 to April 06, the MISO did not apply the rate to any virtual supplies. [00:28:29] Speaker 01: It was nondiscriminatory in that sense, but FERC found it was a tariff violation. [00:28:35] Speaker 01: Six months later, in response to many requests for rehearing, which discussed the factors that later became approved by this court in Louisiana Public Service Commission, FERC went through a rational balancing of the issues, articulating what it balanced. [00:28:49] Speaker 01: And we know that it didn't matter that it was a violation of the file, right? [00:28:53] Speaker 01: It's a factor that has to be considered, no doubt. [00:28:56] Speaker 01: But it is not dispositive of FERC's discretion. [00:28:59] Speaker 01: Did FERC have discretion? [00:29:00] Speaker 01: Yes. [00:29:01] Speaker 01: Did it abuse its discretion? [00:29:03] Speaker 01: No, because it balanced LPSC factors even before they were articulated by this court more recently, including extenuating justifiable reliance on numerous MISO reports and training at Market Start, where all market participants, including the petitioners, were eligible to participate in any prudent utility I am sure did. [00:29:23] Speaker 01: As this court ruled in LPSC, to go back and take transactions and apply transaction costs that are multiples higher would be pulling the economic rug out from underneath the transactions. [00:29:35] Speaker 01: Now, second was the determination that the actual withdrawal of energy requirement was not satisfied by virtual transactions alone. [00:29:42] Speaker 01: This ruling was rational. [00:29:44] Speaker 01: The counsel for the respondent has already covered that. [00:29:48] Speaker 01: I'll answer any questions if you have them. [00:29:51] Speaker 01: But once you make that determination, as FERC did, two things happened. [00:29:55] Speaker 01: It removed the filed rate violation completely from the case effective as of April of 2006. [00:30:01] Speaker 01: From all times after that, the actual energy withdrawal requirement was part of the file rate until FERC changed it prospectively with the November 10, 2008 order in the complaint docket. [00:30:14] Speaker 01: The third is the rate mismatch issue, but I think I'll come back to that after addressing the 206 issue with my limited time. [00:30:21] Speaker 01: In the Section 206 proceeding, there's no question FERC had discretion. [00:30:25] Speaker 01: Initially, it did not apply the factors relevant in LPSC. [00:30:29] Speaker 01: Instead, FERC rushed to haste, implemented a rate, found out it caused tremendous market upheaval and harm, [00:30:35] Speaker 01: and then reversed itself in six months. [00:30:38] Speaker 01: So in both the initial 205 order and the subsequent 206 order, FERC did not flip-flop on applicability. [00:30:45] Speaker 01: FERC promptly determined that applicability would be resolved and that it would not apply a new rate or surprise parties quickly. [00:30:55] Speaker 01: It did the same thing with the final issue. [00:31:00] Speaker 01: My time's up, but I'd be happy to answer your questions. [00:31:03] Speaker 07: Okay, thank you. [00:31:05] Speaker 07: Did Ms. [00:31:06] Speaker 07: Warren or Mr. Boecker have any time left? [00:31:11] Speaker 07: Okay, you can each take one minute if you would like. [00:31:17] Speaker 09: I'd like to respond to the capital E energy point because FERC is still getting it wrong. [00:31:24] Speaker 09: When they say that there's no withdrawal, you can't actually withdraw a virtual offer from the grid. [00:31:33] Speaker 09: You can. [00:31:34] Speaker 09: Every virtual supply offer in the day ahead market is 100% withdrawn financially in the real time market. [00:31:41] Speaker 09: That's why virtual supply offers are in the denominator of the RSG charge. [00:31:47] Speaker 09: And what FERC did was it said, yes, they're in the denominator of the RSG charge, but then they're not applied. [00:31:53] Speaker 09: And that's the mismatch. [00:31:55] Speaker 09: That's the breakage of the connection, because of their irrational view that you can't actually withdraw a virtual supply offer. [00:32:03] Speaker 09: Every virtual supply offer is withdrawn. [00:32:06] Speaker 09: Otherwise, it wouldn't work. [00:32:10] Speaker 09: And I would just ask the court to... Last sentence. [00:32:12] Speaker 09: Go ahead. [00:32:13] Speaker 09: Thank you. [00:32:13] Speaker 09: Finish your sentence. [00:32:18] Speaker 07: Yeah, you can finish your sentence, if you like. [00:32:21] Speaker 09: Oh. [00:32:22] Speaker 09: Yeah, go ahead. [00:32:23] Speaker 09: I would just ask the court. [00:32:25] Speaker 09: I would ask the court to rectify FERC's many errors, which you can do under Excel Energy Services v. FERC. [00:32:32] Speaker 09: Thank you. [00:32:33] Speaker 09: OK, fine. [00:32:33] Speaker 09: OK. [00:32:33] Speaker 09: Mr. Vodiker. [00:32:40] Speaker 00: Yes, Your Honor. [00:32:41] Speaker 00: Briefly, I would just like to return to a point that Judge Tatel made at the very beginning of this argument. [00:32:45] Speaker 00: He indicated that this court's recent decision in the LPSC case should control here. [00:32:49] Speaker 00: And that was a case in which FERC waived refunds when they would pull the economic rug out from underneath market participants. [00:32:56] Speaker 00: I simply note that FERC has done that here for every single time period, except for the one time period that Westar takes issue with, the November 2007 and November 2008 time period. [00:33:05] Speaker 00: And again, FERC only. [00:33:06] Speaker 07: Which Louisiana case are you talking about? [00:33:09] Speaker 07: The most recent one? [00:33:10] Speaker 00: The most recent one, yes. [00:33:11] Speaker 00: Yes, where this court held that it was reasonable for FERC to waive refunds, even if there was a filed-rate violation where it would pull the economic rug out from transactions that market participants had already entered into. [00:33:21] Speaker 00: And FERC cites to that precedent in supporting its waiver of refunds. [00:33:24] Speaker 00: And again, FERC has waived refunds for all time periods, except for the one time period that Webstar takes issue with, the November 2007 to November 2008 time period. [00:33:32] Speaker 00: And again, only proffers the second compliance order as justification for that. [00:33:36] Speaker 00: Thank you. [00:33:37] Speaker 07: Okay, thank you all.