[00:00:02] Speaker 01: Case number 17-1048L, Old Dominion Electric Cooperative Petitioner versus Federal Energy Regulatory Commission. [00:00:52] Speaker 02: Good morning. [00:00:53] Speaker 03: Good morning. [00:00:53] Speaker 03: Thank you, Your Honors. [00:00:54] Speaker 03: May it please the Court, Jonathan Franklin for Dominion, with me at Council Tables, Adrian Clare, representing Co-petitioner Odek. [00:01:02] Speaker 03: Your Honors, in approving an allocation of costs for rate-making purposes, FERC must follow the cost causation rule, which requires that the costs of a project allocated to a beneficiary must be at least roughly commensurate with the benefits received from that project. [00:01:20] Speaker 03: In this case, FERC abdicated that legal responsibility when it allocated to the local dominion zone 100% of the costs of high voltage projects, even though FERC has found and continues to find that such projects have significant regional benefits that warrant regional cost allocation. [00:01:42] Speaker 03: This case is, in fact, even more straightforward because FERC has in place an accepted and unchallenged methodology for regionally allocating the costs of high-voltage facilities throughout the PGM region, and FERC continues to apply that methodology to other high-voltage projects in the region. [00:02:02] Speaker 02: They say that this case is different because the [00:02:08] Speaker 02: Facilities are not selected by the region's transmission providers, and then they quote from order 1000 that says In order for a transmission facility to be eligible for the regional cost allocation methods the region must select the transmission facility in the regional Transmission plan for purposes of cost allocation so they say as you're aware that this is different [00:02:32] Speaker 02: from the general principle, or at least as a carve-out from the general principle that you articulated. [00:02:37] Speaker 02: What's your response to that? [00:02:40] Speaker 03: Putting aside the intervener's argument that these are projects that are actually still selected, I think that, first of all, let me go through the history here. [00:02:46] Speaker 03: When these projects were first proposed... Well, let me ask, let me stop you right there. [00:02:50] Speaker 02: They're not selected, are they? [00:02:52] Speaker 02: I mean, they're approved, but not selected. [00:02:56] Speaker 02: I would like to be educated on that, but that's the way I read the record here. [00:03:01] Speaker 03: I'm not here to speak for the interveners, but their argument is that they were selected for cost allocation, and then the cost allocation was improperly 100% to the local zone. [00:03:11] Speaker 03: But putting that to one side, Your Honor, these projects were in fact initially selected. [00:03:15] Speaker 03: When they were proposed, they were selected for cost allocation, and the PGM Board approved them, and they were submitted to FERC for regional cost allocation. [00:03:23] Speaker 03: After that point, [00:03:24] Speaker 04: That's because the old tariff says if it's a high voltage transmission line, it's approved. [00:03:34] Speaker 03: But the argument is circular here. [00:03:36] Speaker 03: We are arguing, this entire argument here is these should be selected for regional cost allocation because they have regional benefits. [00:03:44] Speaker 03: It is not an answer to that question to say these projects were not selected for regional cost allocation because they weren't selected for regional cost allocation. [00:03:52] Speaker 02: What they're saying, in essence, they're not needed. [00:03:56] Speaker 02: These projects are not needed. [00:03:57] Speaker 02: And I know you have a factual response to that, but that seems to be the sense, at least some of the comments. [00:04:05] Speaker 02: After FERC's initial determination, there are a bunch of comments submitted that say, wait, this is different because this project was not needed. [00:04:13] Speaker 03: That I would dispute, Your Honor. [00:04:15] Speaker 02: That's what people said. [00:04:16] Speaker 03: They might have said that at some point, but FERC never said that. [00:04:20] Speaker 03: The reason FERC never said that is nobody is challenging that these are appropriate projects, that these are necessary projects. [00:04:27] Speaker 03: In fact, PJM determined not only where they need it, but they had to go into service within three years because they were what, for PJM, which is an independent entity, classifies as immediate need reliability projects. [00:04:40] Speaker 03: The cost causation rule, which FERC has to apply, exists primarily or in large part to avoid the free rider problem. [00:04:49] Speaker 03: To the extent that these projects weren't selected for cost allocation, the only reason is because the owners, not including my client Dominion and not including ODEC, voted and awaited voting not to allow them to be allocated regionally. [00:05:05] Speaker 03: If that principle applies, there's nothing left of the cost causation rule because that means that any owners who don't want to pay for a project can then vote it out of regional allocation. [00:05:18] Speaker 03: In fact, to getting to Judge Kavanaugh's point, the other owners aren't really arguing in this appeal that these aren't necessary projects. [00:05:25] Speaker 03: They know they are. [00:05:26] Speaker 03: These lines are rusting out. [00:05:28] Speaker 03: These are high-voltage steel transmission lines that carry long distances. [00:05:33] Speaker 03: PJM found that if these projects do not proceed as Dominion has planned them, there will be multiple voltage and thermal reliability problems. [00:05:42] Speaker 03: So the other owners know that these are important projects. [00:05:45] Speaker 03: They know that they are going to benefit from them. [00:05:48] Speaker 03: They just don't want to pay for it. [00:05:49] Speaker 04: There's an obligation, as I understand it, under Order 1000 to plan at the regional level, right? [00:05:58] Speaker 04: So all of these owners who are saying no to this project [00:06:03] Speaker 04: They're part of an entity that has to do regional planning. [00:06:07] Speaker 04: And the operating agreement that implements that obligation contemplates three different kinds of plans, right? [00:06:21] Speaker 04: the planning that's done regionally through PJM, there's the planning that's done by the NAREC, which is the safety standard setting, and there's the planning that's done unilaterally by individual members when they go to FERC. [00:06:39] Speaker 04: Why is it [00:06:41] Speaker 04: Why is it arbitrary for FERC to say, if you want something addressed at the regional level, deal with it through regional planning? [00:06:53] Speaker 03: First, I understand the point, Your Honor, but first, this was, in fact, regionally planned. [00:06:57] Speaker 03: Those criteria that you noted were all part of the regional plan. [00:07:01] Speaker 03: This is in the ARTEP. [00:07:03] Speaker 03: This went through the regional planning process. [00:07:05] Speaker 03: The regional planning process, as Your Honor just noted, includes criteria, various criteria, including the 715 criteria. [00:07:13] Speaker 03: Nobody is arguing that this is an inappropriate subject for the regional plan. [00:07:16] Speaker 02: But there's a difference between the regional plan and regional cost allocation, correct? [00:07:22] Speaker 03: The only difference is that regional cost allocation depends on who benefits from the projects that are eventually approved in the regional plan. [00:07:31] Speaker 03: This is a project that was approved in the regional plan. [00:07:33] Speaker 03: It was presented to and approved by the PJM board. [00:07:37] Speaker 03: It was vetted by PJM independently. [00:07:40] Speaker 03: It was selected as a project in the RTEP. [00:07:43] Speaker 03: The question for FERC then becomes, [00:07:46] Speaker 03: under the cost causation rule, who benefits? [00:07:49] Speaker 03: And FERC's problem here is that they made no effort to match costs and benefits. [00:07:53] Speaker 03: Instead, their principle argument is, in fact, I think, as arbitrary as the rule itself. [00:07:58] Speaker 03: The rule is because it's listed, because the criteria are listed on one form, [00:08:03] Speaker 03: We're not going to allocate them. [00:08:04] Speaker 03: And we would submit that as literally elevating a form over substance. [00:08:08] Speaker 04: No, I think the more charitable view of their position is that things listed on the form 715 may or may not be regional. [00:08:22] Speaker 04: Some implicate regional interests. [00:08:25] Speaker 04: A lot of them implicate purely local interests. [00:08:29] Speaker 04: But the best justification of their position is that when one utility unilaterally makes a 715 filing and says, gee, we want to replace lines more quickly than we otherwise would, it may or may not be a good thing, but it's a unilateral decision unless and until the co-operators agree. [00:08:54] Speaker 03: Well, first of all, it wasn't a unilateral decision, as I was just saying, because it went through the proper process. [00:08:59] Speaker 04: The 715 filing is unilateral. [00:09:01] Speaker 03: Because that what the filing is, but the criteria are listed in the ARTEP. [00:09:04] Speaker 03: You know, it could be as a matter of substance. [00:09:07] Speaker 03: If FERC wanted to go with substance, they could say, we don't think that Form 715 projects are appropriate subjects for regional. [00:09:15] Speaker 04: Right. [00:09:16] Speaker 04: Isn't it also a given that something could be covered by a 715 filing and also covered by either the regional criteria or the RTEP criteria? [00:09:31] Speaker 04: Could be, but not this case. [00:09:34] Speaker 04: So what we have here is a case where your client [00:09:41] Speaker 04: Adopts a standard, you know, a more protective standard saying we want to replace lines sooner. [00:09:48] Speaker 04: The regional planners and the safety experts could have adopted the same planning criteria. [00:09:54] Speaker 04: The regional people are obligated to address all these issues under order 1000, and they say, we adopt a lesser standard. [00:10:03] Speaker 03: Here's what I'm trying to make is they didn't adopt a lesser standard. [00:10:06] Speaker 03: They did adopt, as part of the regional planning process, the 715 criteria. [00:10:11] Speaker 04: There are other ways, if the true objection... The amendment only applies to bar reimbursement if this particular project is covered by the 715 standard, but not the regional standard. [00:10:27] Speaker 03: But it's still an RTEP project, which means that [00:10:29] Speaker 03: In fact, under our agreement, we own the assets, but PJM manages them. [00:10:35] Speaker 03: We were directed or selected by PJM to build these projects. [00:10:40] Speaker 03: If we don't build these projects, we're violating our operating agreement with the other owners. [00:10:45] Speaker 03: The point I'm trying to make is if there was a question about substance, if the argument was, we don't think these projects, as Judge Cavanaugh said, are necessary. [00:10:52] Speaker 03: There are ways that that objection can be made. [00:10:55] Speaker 03: FERC always has an obligation to say, even if a project goes through the regional plan, [00:11:00] Speaker 03: the rates are not just and reasonable, or there could be an argument that the costs are imprudently incurred. [00:11:07] Speaker 03: Nobody's making that argument. [00:11:08] Speaker 03: And the reason they're not making that argument is that everybody understands that these are good and appropriate projects that benefit everyone in the same way that other high-voltage projects do. [00:11:17] Speaker 03: If some version of this idea that because it's not selected for regional cost allocation, it can't be selected for regional cost allocation, or the law, [00:11:26] Speaker 03: then what you'll see is other owners will just then say, we decide that even though we think this project is a good project, and even though it meets our current criteria for inclusion in the RTIP, we're not going to allow it to be regionally planned, and then FERC will just rubber stamp that and say, okay, 100% cost allocation. [00:11:46] Speaker 03: That's the free rider problem in a nutshell. [00:11:48] Speaker 03: The reason that these other owners don't want these projects [00:11:53] Speaker 03: is to be allocated is not that they don't want the projects. [00:11:56] Speaker 03: It's that they don't want to pay. [00:11:58] Speaker 03: Go ahead. [00:11:59] Speaker 04: I get that. [00:12:00] Speaker 04: And I get you have flagged a very real concern about free riding. [00:12:06] Speaker 04: But there's potentially a different free rider problem. [00:12:12] Speaker 04: Which is, you know, one utility wants to replace lines, and I understand this may not factually, this probably is not your case factually, but, right, one utility wants to replace lines much earlier than they have to. [00:12:30] Speaker 04: And that's fine, but they don't necessarily get to make all the other utilities pay for that. [00:12:37] Speaker 03: Absolutely. [00:12:37] Speaker 03: I think that's what I just mentioned, and that is that there are other ways to deal with that. [00:12:42] Speaker 03: If the objection is you have a criteria here that is inappropriate, that this criteria replaces lines earlier than they should be, there are many different ways to make that objection. [00:12:56] Speaker 03: That can be vetted through the PJM process, number one, and they could say, we just think these criteria are inappropriate. [00:13:01] Speaker 03: Number two, there can be an objection made with FERC that these rates, even though they result from the RTIP, are unjust and unreasonable. [00:13:09] Speaker 03: Number three, you can always argue that the costs are not imprudent. [00:13:12] Speaker 03: They imprudently incurred. [00:13:15] Speaker 02: necessarily arguing that the criteria are inappropriate, but they're arguing that the criteria have not been adopted at the regional level yet, correct? [00:13:23] Speaker 03: Well, they were adopted, and I keep saying that they have been adopted at the regional level. [00:13:27] Speaker 03: The ARTEP plan, and I can cite you the provisions, says the criteria in Judge Cass's pointed out are including NERC standards, BGM standards, and Form 715 standards. [00:13:35] Speaker 02: But these weren't the first two. [00:13:38] Speaker 02: This project was not necessary for those criteria. [00:13:41] Speaker 03: It was for the third, but they have been adopted in the regional plan. [00:13:45] Speaker 03: And again, we argued below, and we were happy to vet this through the PGM, through FERC, in terms of the reasonableness of our standards. [00:13:53] Speaker 03: Nobody's arguing that these are inappropriate. [00:13:55] Speaker 03: And I was responding to Judge Katz's hypothetical. [00:13:58] Speaker 03: His hypothetical was one where the standards are viewed as unreasonable or something like that. [00:14:03] Speaker 02: Can you explain again, so I understand, [00:14:06] Speaker 02: very clearly the difference between selected and approved, because there's a lot of the key word that I keep circling in FERC's brief is selected. [00:14:17] Speaker 02: And I understand your project's approved at the regional level, but they say not selected. [00:14:27] Speaker 02: Tell me how to resolve that. [00:14:29] Speaker 03: Well, I think that's a FERC word, Your Honor. [00:14:31] Speaker 03: It's not in the RTEP. [00:14:33] Speaker 03: It may come from Order 1000. [00:14:35] Speaker 03: You can ask them. [00:14:35] Speaker 03: My understanding is what they mean. [00:14:37] Speaker 02: I'm going to ask them, yes. [00:14:39] Speaker 03: And I think I went into my rebuttal, but I hope I can have it. [00:14:43] Speaker 03: You can keep going. [00:14:45] Speaker 03: But what I think FERC means by that is, again, my circular argument, meaning it's not selected because an amendment was proposed that would deny regional cost allocation. [00:14:55] Speaker 04: It's in the plan because under, not sure if it's order 1000 or the operating agreement, but there's this principle that you can put in the plan projects that have primarily local benefits just for purposes of information, coordination, but without doing regional cost allocation. [00:15:20] Speaker 03: Actually, it comes from the owner's, the operating agreement, and you can see this, you can find it online in the PGM website. [00:15:31] Speaker 03: But what it does say is not just what your honor said. [00:15:34] Speaker 03: It actually says the RTEP planning criteria shall include [00:15:39] Speaker 03: and you can see this at the interveners in support of our brief at page 18, shall include, among other things, the Form 715 criteria. [00:15:49] Speaker 03: So it's not just informational purposes. [00:15:51] Speaker 03: These are regional planning criteria for the RTEP, which is the Regional Planning. [00:15:56] Speaker 04: But if you go back to Order 1000, it says there's a distinction. [00:16:00] Speaker 04: If I've jotted down the right verbs, this will jive with Judge Kavanaugh's question. [00:16:08] Speaker 04: There's a distinction between facilities included in the regional plan, which could be done for informational or coordination purposes, and facilities selected for the purpose of cost allocation, right? [00:16:25] Speaker 03: Yes, and I would say the proper understanding of that would [00:16:29] Speaker 03: would be that some projects have regional benefits that are in the plan and some do not. [00:16:34] Speaker 04: In fact, most do not. [00:16:37] Speaker 04: And the mere fact that something is on one owner's 715 filings and the mere fact that it is included in the plan in the sense that you read the plan and someone's saying, here's what we're doing in one of our 715 filings, neither of those tells you that [00:16:59] Speaker 04: There are regional benefits or it's appropriate the costs are appropriately spread. [00:17:04] Speaker 03: Absolutely That's the nub of our argument is that it is arbitrary to say just because it's on a form 715 that it has no regional benefit most form we admit most form 715 plan project do not and They will continue to not have regional cost allocation under our argument. [00:17:22] Speaker 02: So it's arbitrary in your view for them to say that [00:17:27] Speaker 02: a project that has regional benefits and is approved at the regional level. [00:17:34] Speaker 02: has not been, quote, selected. [00:17:37] Speaker 03: Yes, I think so. [00:17:38] Speaker 03: And there are plenty of different ways. [00:17:39] Speaker 02: Because that's wordplay to get around, in your view, the substance of what's going on. [00:17:45] Speaker 03: Absolutely, Your Honor. [00:17:46] Speaker 03: And I think it's circular wordplay, too, because in their view, selected means anything that the owners don't vote in for regional cost allocation. [00:17:55] Speaker 03: The cost causation principle at bottom depends on who benefits, not where the need for the project was first identified. [00:18:04] Speaker 02: And in the in the to judge Katz's earlier question, the check on someone. [00:18:14] Speaker 02: Getting the free rider benefit from the other direction. [00:18:17] Speaker 02: In other words, going forward with a project that has regional benefits, but the others really don't think is necessary. [00:18:25] Speaker 02: The check on that is. [00:18:26] Speaker 03: Street checks, your honor. [00:18:28] Speaker 03: One is you can bring that up substantively at the PJM level. [00:18:32] Speaker 03: We tried to do that. [00:18:33] Speaker 03: We tried to have that discussion. [00:18:34] Speaker 03: And the owner said, no, we just want to misallocate the costs in our view. [00:18:39] Speaker 03: Two, even if it comes out of the RTIP, even if it comes out, FERC always has an obligation to ensure just and reasonable rates. [00:18:47] Speaker 03: And you can argue that in Judge Cass's hypothetical, which is a good one, that no, these are not just and reasonable. [00:18:54] Speaker 03: If you want to retire your lines, [00:18:56] Speaker 03: too early a date, we're not going to make anybody pay for that. [00:18:59] Speaker 03: You can do it. [00:19:00] Speaker 03: You have to pay for it. [00:19:01] Speaker 03: And third, there's always an argument you can raise that costs were not prudently incurred. [00:19:07] Speaker 03: What we're saying here now, I think, is that we'd be happy, frankly, we'd be happy to have the substantive debate about whether our end-of-life criteria are appropriate. [00:19:15] Speaker 03: We will win that debate because what we're talking about here is prudent planning. [00:19:19] Speaker 03: Under FERC's rule, if these lines actually rust out and fall down, as everybody says they will, [00:19:26] Speaker 03: we will get regional cost allocation because at that point there will be an existing violation that qualifies us under one of the other two criteria. [00:19:35] Speaker 04: I understand the point about other checks. [00:19:37] Speaker 04: What I'm struggling with is you have this scheme that imposes not just the power but the duty to plan at the regional level. [00:19:45] Speaker 04: You have this potential problem of misaligned incentives. [00:19:49] Speaker 04: I don't know why it wouldn't be arbitrary for FERC just to say. [00:19:54] Speaker 04: If it's a regional issue, address it through, you know, prong one, the regional planning criteria. [00:20:01] Speaker 03: Well, all I can say is that it was addressed regionally. [00:20:03] Speaker 03: Again, I'm going back and forth here, but I think that to take the next step and say that we will hereby exclude from cost allocation anything that a sufficient number of the owners vote to exclude from cost allocation. [00:20:19] Speaker 03: it seems to me would eviscerate the cost causation rules. [00:20:23] Speaker 02: Just at the regional level, isn't the problem, maybe I'm wrong about this, that end of life criteria have not been addressed at the regional level yet? [00:20:32] Speaker 03: Well, we asked them to be addressed. [00:20:34] Speaker 03: You'll see that in the record of our case. [00:20:36] Speaker 02: But doesn't that get to Judge Katz's question that they haven't been? [00:20:41] Speaker 03: Well, they have been in the sense that, and again, I'm going back to it, that the 715 criteria are HARTEP criteria. [00:20:48] Speaker 03: So what the other owners said, we said, let's address them. [00:20:51] Speaker 04: No, they have been. [00:20:53] Speaker 04: in the sense, you know, you think it's arbitrary, but you're saying the regional rule is wait till the line rusts out and then you do your project and you get regional cost shifting. [00:21:09] Speaker 04: You're saying you've adopted a better rule that's gonna do the replacement sooner and save everybody cost and maybe safer and such. [00:21:19] Speaker 03: What I'm saying, Your Honor, is we want to have that debate. [00:21:22] Speaker 03: If they want to have that debate, we'll have that debate. [00:21:25] Speaker 03: That debate was never had. [00:21:26] Speaker 03: Nobody ever debated the merits of our end-of-life criteria and said they're inappropriate. [00:21:32] Speaker 03: We will not include them. [00:21:33] Speaker 03: We think they're wrong. [00:21:34] Speaker 02: And the reason I think I just said... But they haven't been adopted at the regional level. [00:21:37] Speaker 02: That's the point, right? [00:21:38] Speaker 02: Because they're... And maybe it's dumb that at the regional level these have not been adopted, and you're ahead of the game in terms of prudent planning. [00:21:47] Speaker 03: Well, they have been, again, because they are part of the ARTEP process. [00:21:51] Speaker 03: These are not projects that we just decided willy-nilly we're going to build and had nothing to do with PJM. [00:21:59] Speaker 03: They went through the PJM process. [00:22:00] Speaker 03: They were approved by the PJM board. [00:22:02] Speaker 04: We were designated as the owner to build them because they were initially approved because they were in your 715 filing under the old tariff. [00:22:12] Speaker 03: And they would be approved tomorrow, also for that reason. [00:22:14] Speaker 02: They say, FERC says that approval is only to ensure that they are developed in a manner that is consistent with the overall regional plan. [00:22:22] Speaker 03: Okay, I'm sorry. [00:22:23] Speaker 04: They were selected, initially selected, because they're in your 715. [00:22:27] Speaker 03: They were initially both approved and selected. [00:22:32] Speaker 03: Then they were, in Burke's view, deselected. [00:22:35] Speaker 03: And the only reason they were deselected is not having anything to do with the criteria themselves. [00:22:40] Speaker 02: It has to do with the fact that there were not regional criteria yet. [00:22:44] Speaker 03: No, they were not the other kinds of regional. [00:22:47] Speaker 03: That's what I mean. [00:22:48] Speaker 03: You're saying the 715 criteria are regional criteria. [00:22:51] Speaker 03: They can include regional issues because we identified through those criteria regionally beneficial projects that PGM concluded, yes, we were right. [00:23:01] Speaker 03: These are projects that are going to have not just local but regional reliability violations. [00:23:07] Speaker 03: and need to be built within three years as immediate need reliability projects. [00:23:13] Speaker 04: Is there a mechanism by which individual utilities could go to the regional entity and say, we think as a matter of prudent planning, we need a standard for end of life or whatever? [00:23:29] Speaker 04: at the regional level. [00:23:30] Speaker 04: I take it there is because you said you tried to do that. [00:23:32] Speaker 00: We did, yeah. [00:23:32] Speaker 00: Okay. [00:23:33] Speaker 04: So if that is, let's assume that's arbitrarily denied because there are all these free riders in the Midwest that don't want to pay for your very prudent redo or earlier rebuild. [00:23:49] Speaker 04: Do you have recourse? [00:23:50] Speaker 04: Why can't you go to FERC and say that decision was arbitrary? [00:23:55] Speaker 04: We did. [00:23:56] Speaker 04: So you have a mechanism [00:23:58] Speaker 03: We should use this case. [00:24:00] Speaker 03: Among the arguments we made in this case, and we actually made it on appeal to this Court as well, is if you think, Ferck, that somehow all of the projects on the Form 715 have to be only locally beneficial projects, then the solution to that is to put the [00:24:19] Speaker 03: criteria, the end-of-life criteria, into the RTIP. [00:24:22] Speaker 03: And we definitely made that argument below. [00:24:25] Speaker 03: We actually have made it in our opening brief to this court as an alternative. [00:24:28] Speaker 03: And we do argue that. [00:24:31] Speaker 03: But I think that, ultimately, what we're asking for is to vacate the initial order. [00:24:36] Speaker 03: Because what Fert said was, we're not going to do that. [00:24:38] Speaker 03: And we did make that argument. [00:24:40] Speaker 03: We're not going to do that. [00:24:41] Speaker 03: We're not going to get into that issue. [00:24:44] Speaker 03: We're just going to arbitrarily decide that everything that's on the Form 715 [00:24:48] Speaker 03: is ineligible for regional cost allocation, even though, number one, it is approved through the ARTEP process, and number two, has regional benefits. [00:24:56] Speaker 03: And their justification, which I haven't gotten to yet, is actually not anything we've talked about right now. [00:25:02] Speaker 03: Their justification was that we looked at, historically, [00:25:06] Speaker 03: the vast majority, you know, more than 95% of these. [00:25:09] Speaker 02: Yeah, well, you have a very strong argument on that, so. [00:25:12] Speaker 03: That was their principle basis here. [00:25:13] Speaker 02: They have this other argument, though. [00:25:15] Speaker 02: I mean, I don't know if it's alternative, but this other argument that we've been talking about for the last 20 minutes. [00:25:20] Speaker 04: But I'll be just playing between the... Sorry, maybe I missed this, but just tell me how this comes up. [00:25:26] Speaker 04: The main issue below [00:25:28] Speaker 04: was teed up as what happens when the criterion is in the 715 filing, which may implicate local interests, may implicate regional interests, but is done unilaterally. [00:25:45] Speaker 04: You went to FERC and said, even if we're wrong about all of that, we want you to order PJM to change the regional criterion to adopt your end-of-life standards. [00:26:00] Speaker 03: Yes, and I don't have the site for you right now, but yes, we did. [00:26:03] Speaker 04: Maybe I missed that, but where would I find that? [00:26:05] Speaker 03: When I come back up I'll try to have that site for you. [00:26:10] Speaker 03: But yes, we made that as an alternative argument. [00:26:12] Speaker 03: It wasn't so much as even if we're wrong. [00:26:14] Speaker 03: We just said, look, if you want to do this a different way that actually deals with the substance, what you can do is say, hey, let's make them put the form 17, put the end-of-life criteria into the R test. [00:26:28] Speaker 03: We acted to that and FERC didn't do it. [00:26:30] Speaker 03: And we argue that that's another way you can get there. [00:26:34] Speaker 03: But we think the primary problem here is that FERC was arbitrary and said, just because it's on the Form 715, we're not going to regional allocate without looking at the benefits and the costs. [00:26:46] Speaker 03: And their arguments are even more arbitrary when they get down to the point of saying that, in their view, you can allocate 100% of the cost to any beneficiary that receives more than trivial benefits. [00:26:58] Speaker 03: That's just, again, just completely writes the cost causation law. [00:27:02] Speaker 03: And I think the reason that they're making those arguments is they understand [00:27:06] Speaker 03: that the cost causation rule applies here. [00:27:08] Speaker 03: And they can't just say, because a majority of the owners voted it out of cost allocation, we FERC, who have an independent duty here, do the same. [00:27:18] Speaker 03: I mean, it's clear to me that why the other owners don't want to do it, don't want to pay for it. [00:27:23] Speaker 03: What's not clear is why FERC would rubber stamp that and say, OK, with us. [00:27:28] Speaker 02: We'll give you some time on it, but I'll thank you. [00:27:36] Speaker 00: Good morning, Lona Perry for the Commission. [00:27:40] Speaker 00: Under Order 1000, Order 1000 requires for you to be eligible for regional cost allocation that the region must select the project as a more efficient or cost-effective solution to regional transmission needs. [00:27:55] Speaker 00: And the reason why the commission found this was not falling under that category was because this was solely in response to Form 715 criteria that were sponsored only by Dominion. [00:28:10] Speaker 00: And PJM, in its regional and applying its regional criteria and in applying the NERC national criteria for safety, [00:28:18] Speaker 00: found no basis for building this project. [00:28:22] Speaker 02: The only reason the project was... So this project's not necessary in your view, in first view? [00:28:28] Speaker 00: Yes, Your Honor. [00:28:29] Speaker 00: I mean, from PJM's view, PJM, I think PJM has been getting a little undermined here. [00:28:38] Speaker 00: They are responsible for the security and the reliability of this grid. [00:28:43] Speaker 00: They do enormous amounts of modeling and testing and predicting what problems there might be in the future and preemptively building projects in order to try to prevent that. [00:28:56] Speaker 00: Under their criteria, applying their models, there was no need to rebuild this project. [00:29:03] Speaker 04: You don't disagree with what FERC said earlier, which is that as a categorical matter, high-voltage transmission lines have regional benefits. [00:29:15] Speaker 00: The regional benefits, Your Honor, were tied to the fact that it was the product of regional planning. [00:29:22] Speaker 00: And that's why the Commission initially rejected this tariff provision, because they thought that the transmission owners were talking about projects that were being approved in the regional planning process. [00:29:35] Speaker 04: In 2013, you approved [00:29:38] Speaker 04: the implementation scheme, the scheme through which PJM implemented order 1000 under which high voltage transmission lines would automatically qualify for regional cost allocation and you did so on the ground based on your view that [00:30:00] Speaker 04: high-voltage transmission lines have regional benefits, and you don't seem to have backed off that premise. [00:30:10] Speaker 00: It was because the high-voltage lines were the product of the regional planning process, and if I could direct your attention... Let me focus right on that. [00:30:20] Speaker 02: Could a project have regional benefits without having been the product of the regional process? [00:30:27] Speaker 02: Well, the way it works, Your Honor, which is why... The answer to me seems to be yes to that. [00:30:31] Speaker 00: Well, the way it works is this is why I included the PJM opinion, the 157 FERC 61152 in my brief, which is a case where it's exactly the same thing. [00:30:43] Speaker 00: It's a 500 kilovolt rebuild of a line in the dominion zone. [00:30:48] Speaker 00: But PJM found that it would solve a regional problem, a general deliverability violation under PJM's own criteria. [00:30:57] Speaker 00: And so therefore, it did both. [00:30:59] Speaker 00: It solved the local criteria problem, but it also solved the regional criteria problem. [00:31:04] Speaker 00: And therefore, it was entitled to regional cost allocation. [00:31:08] Speaker 02: I'm not sure my question was answered. [00:31:10] Speaker 02: Could something have regional benefits without having been planned to at the regional level or plan to meet the criteria at the regional level? [00:31:22] Speaker 02: Could something still have regional benefits? [00:31:25] Speaker 02: It seems to me yes, right? [00:31:26] Speaker 00: Well, yes, Robert. [00:31:27] Speaker 00: But the point is that Order 1000 was specific about being to be eligible for this regional cost allocation to the entire region. [00:31:36] Speaker 00: that it must be the product of regional planning among the transmission planners. [00:31:43] Speaker 02: What about the idea that council says, well, then the majority, two-thirds, get together and just say we don't want to pay for this. [00:31:52] Speaker 02: How is that concern addressed or can it be addressed? [00:31:58] Speaker 00: Well, Your Honor, it's [00:32:00] Speaker 02: In other words, they come through, I think you understand this, but they come through with their project, and it's a good project, and it's going to be helpful at the regional level, but the others decide, well they're going to go through with it anyway, we don't want to pay for it though. [00:32:14] Speaker 00: Well, Your Honor, you have to understand, though, this is true of all the transmission owners. [00:32:19] Speaker 00: I mean, they are agreeing to this for themselves as well as Dominion. [00:32:23] Speaker 00: It's because they, the majority of the owners in the region who are conducting the regional planning, made the determination that they think it is appropriate for these kinds of projects to be charged to the trans. [00:32:36] Speaker 00: And it applies to them as well as to Dominion. [00:32:40] Speaker 04: Your justification for regional cost allocation for high voltage projects, at least in 2013, seems independent of the process point about regional planning. [00:32:58] Speaker 04: You say high voltage transmission facilities have significant regional benefits that accrue to all members of the PJM transmission system. [00:33:10] Speaker 00: Your honor, what I was, I'm sorry I got distracted, but if I could go back to, I want to direct your attention to the order on rehearing of that 2013 order. [00:33:20] Speaker 00: And it's 147 for 61, 128. [00:33:24] Speaker 00: And if you look at paragraph [00:33:26] Speaker 00: 329 of that decision. [00:33:28] Speaker 00: The order specifically goes through the regional plan development process, describes the process that PGM goes through to develop regional projects. [00:33:39] Speaker 04: Sorry, the 2013 compliance order is no longer effective? [00:33:44] Speaker 00: Well, no, I'm saying this explains what they meant by that statement. [00:33:47] Speaker 00: Okay. [00:33:48] Speaker 00: And then they go on in that same hearing. [00:33:49] Speaker 00: The rehearing order in this case. [00:33:51] Speaker 00: The rehearing order. [00:33:52] Speaker 00: No, no, Your Honor, the rehearing, this is the rehearing order of the 2013 order. [00:33:56] Speaker 00: This is the rehearing on the order of 1,000 compliance. [00:34:00] Speaker 00: Cost allocation proceedings. [00:34:01] Speaker 00: Okay. [00:34:01] Speaker 00: Yes. [00:34:02] Speaker 04: Okay, so on the rehearing, I'm sorry, what's your paragraph? [00:34:05] Speaker 00: It's paragraph 329. [00:34:07] Speaker 00: This is the 147 FERC, 61, 128. [00:34:12] Speaker 00: And the commission there specifically says that when a project is selected for purposes of cost allocation in the PGM regional transmission planning process, that selection is a recognition that the project provides regional benefits. [00:34:29] Speaker 00: The commissioner was specifically saying that it is because it is the product of this regional planning process that we believe that it has regional benefits. [00:34:39] Speaker 00: So it wasn't saying just because it's a high voltage project that it automatically has regional benefits. [00:34:45] Speaker 00: And in that respect, I would direct your attention to the 2014 Illinois Commerce Commission case, where the Seventh Circuit [00:34:53] Speaker 00: expressed concern about the concept that just because a project is high voltage that we assume it automatically has benefits to the entire region. [00:35:08] Speaker 00: And they rejected a pro rata cost allocation of 500 kilovolt projects in PJM because there was no showing that a project in New Jersey that was built to correct violations in New Jersey benefited. [00:35:25] Speaker 02: But you aren't disputing here that this project has regional benefits. [00:35:28] Speaker 00: What I'm saying, this project has benefits that go outside of the zone. [00:35:33] Speaker 02: Otherwise known as regional benefits. [00:35:36] Speaker 00: Well, regional benefits, you have to understand though, half of the cost of the regional facilities are allocated pro rata to everybody in PJM. [00:35:45] Speaker 04: Under the methodology that you had proved as appropriately weighing the short-term obvious immediate local benefits and the longer term hard to quantify, again your phrase, regional benefits. [00:36:00] Speaker 00: Exactly, Your Honor, but for projects that were the product of the regional planning process. [00:36:06] Speaker 00: That's where you get the knowledge that they actually provide these regional benefits. [00:36:10] Speaker 04: And what the court in Illinois... Does FERC have a view one way or the other on whether high voltage transmission lines, in fact, provide regional benefits? [00:36:23] Speaker 04: Put aside any question of who's approved what. [00:36:26] Speaker 00: Well, Your Honor, we know what these... [00:36:30] Speaker 00: lines actually do and who they actually benefit because there is the defacts, the distribution factor analysis, flow-based analysis, which tells us if you look at Joint Appendix 50, it's the analysis for the Elmont-Cunningham line, and 81% of the benefits of that line go to the dominion zone. [00:36:53] Speaker 00: And if you look at JA-236, which is the analysis for Cunningham Dooms, that's 71 percent go to the Dominion Zone. [00:37:03] Speaker 00: And there's some benefit, some small benefit to adjoining regions. [00:37:09] Speaker 00: But that's who benefits from these facilities. [00:37:12] Speaker 04: That's who gets the use. [00:37:16] Speaker 04: doesn't take account of the 50% analysis, which is the postage stamp, which you approved as appropriately recognizing the more regional longer-term benefits. [00:37:29] Speaker 04: And if you apply both prongs of the methodology that you approved, it turns out that the overall benefit to Dominion is under 50%. [00:37:42] Speaker 00: Because of the pro rata allocation, Your Honor. [00:37:44] Speaker 00: And that's why I am referring to the 2014 Illinois Commerce Commission case, which post-dated the 2013 PJM compliance orders, by the way, where the court specifically questioned the assumption that there is pro rata benefits to everybody in the 13 state region from projects that are intended to address violations in New Jersey, as an example they used. [00:38:09] Speaker 04: Again, put aside [00:38:10] Speaker 04: trying to disentangle the process issues from the substance issues. [00:38:14] Speaker 04: So put aside any question of who approved what. [00:38:19] Speaker 04: Does FERC still think that the 50-50 methodology previously approved, right, half is defects and half is postage stamp, do you still think that in fact reasonably measures and allocates cost? [00:38:39] Speaker 00: it does, Your Honor, for the facilities that are selected in the regional plan for purposes of cost. [00:38:44] Speaker 04: Well, now you're just fighting my hypothetical. [00:38:48] Speaker 00: Well, no, not at all, Your Honor, because the point is that there are regional needs that need to be addressed. [00:38:54] Speaker 00: And when you pick a project to address those regional needs, that has regional benefits. [00:39:00] Speaker 00: But in this case, as the Commission said, all you have to do to [00:39:04] Speaker 00: put a project in your criteria under 715 is you file a 715 that includes criteria that allows you to build this project. [00:39:14] Speaker 00: Nobody else votes on it. [00:39:16] Speaker 00: Nobody else has the ability to tell you not to do it. [00:39:19] Speaker 02: And so that- They said there were multiple checks to prevent that from happening, that council listed three checks. [00:39:28] Speaker 02: You could say the costs aren't prudently incurred. [00:39:30] Speaker 02: It's not at just and reasonable rate. [00:39:34] Speaker 02: So they said there are still mechanisms to prevent that kind of scenario from occurring. [00:39:43] Speaker 02: What's your response to that? [00:39:44] Speaker 00: Well, someone could file a complaint. [00:39:46] Speaker 00: But as the Commission said, if you look at paragraph 15 of the PGM order that's at Joint Appendix 186, [00:39:55] Speaker 00: The process for updating your 7-15... Well, someone surely would file a complaint. [00:40:00] Speaker 02: You said, like, that wasn't a sufficient check, but someone surely could file a complaint in a circumstance where someone was taking advantage of the 7-15 process to try to offload costs onto the region that really weren't properly regional benefits. [00:40:18] Speaker 00: Well, yes, your honor, but you can file a complaint about any rates. [00:40:21] Speaker 00: I thought what we were talking about is whether or not it was actually part of the plan. [00:40:26] Speaker 00: It was approved in any way as part of the plan. [00:40:29] Speaker 00: And my point is that 715 criteria are unilateral. [00:40:33] Speaker 02: Nobody... I totally understand that. [00:40:36] Speaker 02: They say... [00:40:38] Speaker 02: Therefore, they're not selected, but they're approved, right? [00:40:42] Speaker 02: That's the distinction. [00:40:43] Speaker 00: They're approved for the quote that you read earlier. [00:40:46] Speaker 00: They're approved for purposes of making sure that they fit in with the rest of the plan. [00:40:51] Speaker 00: In other words, they don't create reliability problems of their own by including them in the plan. [00:40:56] Speaker 00: But that's the reason why they're included in the plan. [00:40:58] Speaker 00: They're not approved in the sense of [00:41:01] Speaker 00: somebody thinks that this is satisfying a regional requirement, because there is no such regional requirement that's being satisfied. [00:41:08] Speaker 02: So it comes down to, I mean, I'm trying to figure out what the heart of the case is, but I think the heart of the case maybe is regional benefits necessarily the determinant, in which case you would have a problem, or is regional planning criteria necessarily or appropriately, it doesn't have to be necessarily for you to win appropriately the determinant. [00:41:28] Speaker 02: Is that a fair way to look at it? [00:41:30] Speaker 00: Well, Your Honor, I think that we would have the better of either of those arguments. [00:41:35] Speaker 00: But I will say the eligibility for regional cost allocation turning on the region selecting it as part of the regional plan was not only in Order 1000, but this court affirmed that. [00:41:52] Speaker 00: It specifically discussed that at page 83 of the South Carolina Public Service Commission. [00:41:57] Speaker 00: and recognized that that was a requirement, and cited Paragraph 539 of Order 1000 and 1000A, Paragraph 579, both of which specifically say to be eligible for this regional cost, because the whole point of Order 1000 was to encourage regional planning. [00:42:16] Speaker 00: And the problem was, in the past, individual- Not just encourage it, require it. [00:42:22] Speaker 00: Exactly. [00:42:23] Speaker 00: But the point was, in the past, [00:42:27] Speaker 00: Individual transmission owners had their individual plans, and the idea of regional planning was everybody just put their plans together largely for feasibility purposes. [00:42:37] Speaker 00: And what the commission wanted to do was to have a process by which the entire region got together and tried to find more efficient and cost-effective solutions to regional needs, not to individual transmission owner planning. [00:42:52] Speaker 00: And that's why the regional cost allocation accompanies [00:42:55] Speaker 00: the regional planning that the region does in individual, and Order 1000 actually says that a transmission owner cannot unilaterally make itself, get regional cost allocation for a project, and that's paragraph 564 of Order 1000. [00:43:23] Speaker 04: So why did FERC initially approve this? [00:43:34] Speaker 04: this scheme with an operating agreement that seems pre-amendment clearly permitted regional cost allocation, not only for the national safety standards and not only for the regional PJM standards, but also for some things that appear on the 715. [00:43:58] Speaker 00: Well, that's why I've directed your attention to that paragraph in the rehearing order, because that makes it clear that what the Commission was thinking this would apply to were regional projects. [00:44:10] Speaker 04: Yeah, but that's sort of an odd thought where the scheme is [00:44:16] Speaker 04: National safety standards, regional planning standards, 715 standards. [00:44:22] Speaker 04: It's an odd view of 715 standards as shorthand for regional standards in the context of that scheme. [00:44:31] Speaker 00: Well, no, Your Honor. [00:44:33] Speaker 00: What I think is that it was not necessarily contemplated at the time that there would be 715 projects that would implicate this allocation. [00:44:44] Speaker 00: I mean, at the time, this proposal was, they originally proposed these rebuilds as supplemental projects, which would have been entirely charged to them. [00:44:54] Speaker 04: I'm sorry, but schedule six on its face says that the national safety standards, the regional planning standards, and the individual criteria as filed on 715. [00:45:06] Speaker 00: But as we know from the statistics, most of these local criteria projects are low voltage projects, which would not have regional cost allocation. [00:45:16] Speaker 00: And they were allocated? [00:45:18] Speaker 04: No, but some of them are high voltage and you also approved the original tariff which permits regional allocation for the high voltage ones along with some pretty strong language saying that high voltage projects have regional benefits. [00:45:35] Speaker 00: Well, Your Honor, these high-voltage projects were not proposed until after the tariff was approved. [00:45:45] Speaker 00: And so I don't know what high-voltage projects there would have been that were responsive only to 715 criteria that would have been... I'm not aware that that is... But I assume high-voltage projects weren't a new thing in 2013 or whatever. [00:46:04] Speaker 00: Well, in response to 715 criteria though, Your Honor, because they are largely low voltage smaller projects. [00:46:13] Speaker 00: And these had not been proposed at that time. [00:46:16] Speaker 00: These weren't proposed until 2014. [00:46:19] Speaker 00: And so I don't know that the issue of high voltage local criteria projects was ever even addressed. [00:46:32] Speaker 00: If there are no further questions? [00:46:34] Speaker 02: Thank you. [00:46:47] Speaker 03: Thank you, Your Honor, and thank you to the court. [00:46:49] Speaker 03: Judge Casas, in response to our earlier colloquy on page 48 of our brief, we made the argument citing our rehearing request at Joint Appendix 295 to 297 that FERC should have adopted our alternative suggestion to make the end-of-life criteria part of the regional standards or the other standards. [00:47:09] Speaker 03: I think one of the key colloquies that I heard in Ms. [00:47:14] Speaker 03: Perry's argument was being asked, does FERC still believe that high-voltage facilities have regional benefits? [00:47:22] Speaker 03: I didn't really hear an answer to that, so I know it's in our brief, but I will repeat what was said in 2013. [00:47:29] Speaker 03: And as we find that high-voltage transmission facilities had significant regional benefits that accrued to all members, and they went on in the next paragraph to list about six different regional benefits, [00:47:39] Speaker 03: And councils noted that under the defects formula, there were certain things that flow, but obviously admitted the other postage stamp, which are designed to get at those criteria. [00:47:54] Speaker 03: These facilities remain today classified as regional facilities. [00:47:59] Speaker 03: They are because they're high-voltage facilities and they have the same regional benefits that FERC not only has recognized in 2013, but continues to apply. [00:48:09] Speaker 03: There's nothing in their brief that says they don't find that these facilities have regional benefits. [00:48:14] Speaker 03: They do. [00:48:15] Speaker 03: To getting to the selection point, I think Council said at one point that the selection ensures that things that are selected have regional benefits. [00:48:25] Speaker 03: I guess implying that things that are not selected don't. [00:48:28] Speaker 03: That is not true, if that's the implication. [00:48:31] Speaker 03: The selection process in this case, we know, happened only because a majority of the voters using their weighted votes in the committee voted out these projects from regional allocation. [00:48:44] Speaker 03: That says nothing about whether the projects themselves have regional benefits. [00:48:49] Speaker 03: That's what FERC is here to decide. [00:48:52] Speaker 03: FERC can't simply just rubber stamp and say, because it didn't get selected, meaning that a majority of the owners decided that they didn't want to pay for these projects, [00:49:01] Speaker 03: That somehow that means that they won't be allocated again if it were selected it does have regional benefits But if it's not selected it still could have regional benefits and that was carefully worded by council I think Exactly and your honor we admit that many many of the projects that aren't given regional cost allocation don't have regional benefits We're not here to argue that everything should be [00:49:26] Speaker 03: But where a project like this is proposed properly through the ARTEP process, approved by the board, vetted by PGM, made the determination that these projects not only have regional benefits, but they have to go into service in three years to avoid serious reliability projects, [00:49:42] Speaker 03: They need to be allocated in the same manner as other high voltage projects, and it is not an answer to that to say that the other owners decided that they didn't want to pay for them. [00:49:54] Speaker 03: That's the free rider problem. [00:49:55] Speaker 03: That's what it's designed to. [00:49:58] Speaker 03: what the cost causation rule is designed to prevent. [00:50:01] Speaker 03: And again, we'd be happy to have a substantive debate about these criteria. [00:50:05] Speaker 03: That debate never occurred below. [00:50:07] Speaker 03: There was never a finding that these are inappropriate criteria, that they shouldn't be put into the RTP, that they shouldn't be approved. [00:50:15] Speaker 03: And I submit the reason is because no owner could credibly make that argument. [00:50:19] Speaker 03: the argument that we should wait for the lines to fall down and only then can you get regional allocation. [00:50:26] Speaker 02: If you were not to prevail in this case, the implications going forward would be [00:50:32] Speaker 03: They would be, I think, significant. [00:50:34] Speaker 03: They would be essentially that there's a heckler's veto, in essence, of the other owners. [00:50:39] Speaker 03: That anything that they decide they don't want to pay for, they can then, quote, deselect for regional cost allocation. [00:50:46] Speaker 03: And FERC is obligated under its rationale in this case to rubber stamp that determination. [00:50:52] Speaker 03: I think that essentially gives the free rider problem [00:50:57] Speaker 03: prominence. [00:50:58] Speaker 03: It says the free riders get to decide because there's going to be more of them than the dominions of the world and that's not appropriate. [00:51:09] Speaker 03: I think for these reasons we would ask that the court vacate the challenged orders and remand so that FERC can apply its accepted unchallenged cost allocation methodology to these high voltage projects in the same manner that it applies it to other high voltage projects in the region. [00:51:25] Speaker 02: Thank you. [00:51:26] Speaker 02: Can I ask first for Council to come back up for a second? [00:51:29] Speaker 02: I'm sorry to do that. [00:51:30] Speaker 02: I have one question, which is the converse of the question I asked Mr. Franklin, which is if FERC were not to prevail in this case, the implications going forward would be? [00:51:46] Speaker 00: that once the commission approves a cost allocation, it will have to adhere to the cost allocation forever, even if it finds that there is another just and reasonable cost allocation that can be applied. [00:51:59] Speaker 00: I mean, that's the other thing that we haven't really discussed is what the standard is here. [00:52:03] Speaker 00: I mean, yes, the commission had previously approved a cost allocation, [00:52:08] Speaker 00: that allocated cost according to voltage and found it to be just and reasonable. [00:52:14] Speaker 00: But the point is, this is a 205 filing. [00:52:16] Speaker 00: The commission didn't have to find that unjust and unreasonable. [00:52:19] Speaker 00: All it has to find is that this is just reasonable. [00:52:22] Speaker 00: And based on the circumstances of this case, particularly given the fact that the 715 criteria are not adopted by the region, and it's not a product of regional planning, [00:52:34] Speaker 00: The commission reasonably found in this case that it was just and reasonable allocation. [00:52:40] Speaker 02: So I think it's important to say- Would this hamstring in any way though a ruling against you hamstring the regional process in any way that you want us to be aware of, particularly when we're talking about this case? [00:52:53] Speaker 00: Well, certainly it would, Your Honor, in the sense that what the commission's goal in Order 1000 is recognized by this Court was that [00:53:03] Speaker 00: the region should select the projects that are more efficient and cost-effective solutions to regional needs. [00:53:10] Speaker 00: And this would undermine the exclusivity, basically, of that goal, which regional cost allocation is a function of the regional selection by all of the transmission errors in the region of more efficient and cost-effective solutions. [00:53:27] Speaker 02: It would seem like a narrow [00:53:30] Speaker 02: A ruling against you in this case would be fairly narrow in the sense that high voltage [00:53:36] Speaker 02: facilities are deemed to have regional benefits, and therefore it's improper. [00:53:40] Speaker 02: And that rarely applies through the 715 form, so there would be a pretty limited universe of situations. [00:53:47] Speaker 02: Am I wrong in thinking that? [00:53:49] Speaker 00: Well, yes, Your Honor, because that concept would undermine the Order 1000 construct, because then anybody can decide that something has regional benefits and have it available for regional cost allocation, and that's not at all what was intended. [00:54:06] Speaker 00: And by regional, the cost allocation again is directed towards those selection of those projects that are going to solve particularly regional needs. [00:54:17] Speaker 00: And you're just talking about something that may have incidental [00:54:21] Speaker 00: benefits to others in the region, you don't necessarily know that it solves any regional needs. [00:54:26] Speaker 00: And as a matter of fact, as with regard to these lines, you know there was no regional need that was satisfied by these projects. [00:54:34] Speaker 00: And so you're greatly expanding the scope of, which was intended to encourage and require this regional planning, and you're permitting other projects that are not a product of that regional planning to benefit from the regional cost allocation. [00:54:49] Speaker 02: Thank you. [00:54:50] Speaker 02: Do you need a final word, Mr. Franklin? [00:54:52] Speaker 02: You can have it. [00:54:53] Speaker 03: I don't know that I need one, but I'll take one. [00:54:56] Speaker 03: I think one thing that will not undermine the regional planning process. [00:55:01] Speaker 03: One other issue that I didn't mention... Because? [00:55:06] Speaker 03: It is something that, as I mentioned before, if there's a substantive objection to a particular criteria, that can always be vetted both through PGM and through FERC. [00:55:15] Speaker 02: Those three checks you identified before. [00:55:18] Speaker 03: And there's more. [00:55:19] Speaker 03: We're going to bear close to half the cost of this, so obviously there's a check right there. [00:55:24] Speaker 03: And I would also note that there are circumstances in which a need is identified or criteria are identified, and there might be multiple projects that can satisfy that. [00:55:33] Speaker 03: In that circumstance, there is a selection process that we are not challenging in the sense that if there are multiple projects, somebody else has a better idea to do this. [00:55:43] Speaker 03: That, of course, will also be subject to the regional planning. [00:55:46] Speaker 03: But all we're saying is FERC has to abide by the cost causation rule, which means costs follow benefits, not what form the need for the project was first noted on. [00:55:56] Speaker 02: Thank you. [00:55:57] Speaker 02: Thank you, Mr. Franklin and Ms. [00:55:58] Speaker 02: Perry, for your excellent arguments. [00:55:59] Speaker 02: The case is submitted. [00:56:02] Speaker 01: Stand, please.