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Case number 17-1251 et al.

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Energy Services Inc.

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Petitioner versus Federal Energy Regulatory Commission.

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Mr. Weisberg is now on mute.

[00:00:19] Speaker 06:
Good morning.

[00:00:20] Speaker 06:
Good morning.

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Can you hear me okay, Judge Tatel?

[00:00:24] Speaker 03:
Yeah, we can hear you.

[00:00:25] Speaker 06:
Go ahead.

[00:00:25] Speaker 06:
Thank you.

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May it please the court, Sanford Weisburs for Petitioner Energy Services in 17-1251.

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I'd like to discuss the principal liability issue that's before the court today, which is whether energy

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Arkansas was allocated the right energy to serve the opportunity sales, which were made between 2000 and 2009.

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Now, the way Entergy Arkansas and Entergy services did this originally was to use Entergy Arkansas's own plants, which tended to be lower cost.

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FERC ruled, however, that Entergy was required to use the highest cost sources on the system to serve these opportunity sales.

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Now that issue of liability turns in particular on the meaning of the word loads in Section 30.03A of the Energy System Agreement.

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And I'd like to begin with that word and that provision.

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Now, our argument today is that FERC erred as a matter of the plain text and the structure of the Entergy system agreement in ruling that LODES does not include the opportunity sales.

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Again, Entergy's position is that LODES does include the opportunity sales and therefore they should have been allocated the low cost energy from Entergy, Arkansas.

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Now, the meaning of the word LODES, I think it's helpful to start with FERC's own decision.

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And I direct the court's attention respectfully to

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Let me just ask you a general question.

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And I do want to hear your argument about why you think this is unambiguous, but if we agree with FERC that it's ambiguous, that the tariff is ambiguous,

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Since there are only two options, it's either under 30.03 or 30.04, then FERC wins, right?

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In other words, your argument depends completely on convincing us that the tariff's unambiguous in your favor, correct?

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Because if it's ambiguous, you can't prevail, right?

[00:02:22] Speaker 06:
We wouldn't entirely agree with that statement because we do present an argument under step two.

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The analysis here is akin to the Chevron analysis the court is familiar with.

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We do present an argument as well at step two.

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And in particular at step two, we focused on the absurdity of FERC's interpretation.

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And I skipped a little step here, which is that FERC initially and finally did rule that Entergy Arkansas was allowed to make the opportunity sales.

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And yet in the same breath, a few pages later in opinion 521, Ferck said, we're gonna allocate the costs such that all the witnesses for all the parties in the proceeding agreed, these sales would almost always lose money.

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And so Ferck is- You're the beast, right?

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I mean, if Ferck's right that the opportunity sales have to be classified under 30.04,

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then energy Arkansas has to bear its own costs.

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Those sales won't be profitable.

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Why is that absurd?

[00:03:26] Speaker 06:
Well, the reason is because the sales were so unlikely to be profitable that it wouldn't even make sense to allow them in that event.

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And I do want to stress, Judge Tatel, that this is a step two argument that we're making.

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It's not our step one argument.

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I just want to cabin the argument so that I understand it.

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But if the court was unpersuaded by the point you just made about absurdity,

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then do you agree with me that if we agree with FERC that the tariff is ambiguous, that that means by definition that FERC prevails, right?

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Usually the agency does prevail if there's ambiguity.

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I would recognize that.

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Not always, but usually.

[00:04:13] Speaker 03:
How about this case?

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In this case, well, in addition to the absurdity point, which let's set that aside, the other arguments that we've made about the plain language, which I'd like to get into in a second, those, even if they don't quite reach the level of unambiguity in favor of energy, we do think that they in balance help to show why FERC's decision was unreasonable.

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But among other reasons, and I'd like to get to 30.03, but I want to answer your honest question.

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Okay, you go ahead and make your plain language.

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Thank you, your honor.

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So, I'd like to start with first own decision page 1401 of the joint appendix for recognize that the word loads is defined by the industry to be generic and inclusive.

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One of LPSC's witnesses, that's the Louisiana Commission at 429 of the appendix, stated that system dispatcher has to meet all of the loads that it faces and those would be meeting native load, meeting off-system sales, and opportunity sales.

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So there is a statement from LPSC's own witness that loads is an inclusive term that includes opportunity sales.

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But even beyond the plain meaning of the word loads and the definition given by the industry, I think the most important thing I can point the court to this morning is the contrast between 30.13 and 30.03A.

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Now these provisions are both part of the key service schedule in the energy system agreement, which is MSS3.

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And there's a clear contrast in that in 30.03a, the word loads is unadorned, there's no carve out, there's no exception, it's just loads.

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And moreover, it's not load singular, it's loads plural.

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So it's hard to imagine.

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What are you looking at 30. what?

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30.03a, which is the key provision.

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And I'm about to contrast that with 30.13.

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I'm trying to get with something else.

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What were you contrasting it with?

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With 30.13.

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30.13.

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Yes, that's the most important contrast that I have to draw this morning.

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Because again, in 30.03a, loads is in the plural.

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It's not subject to any carve out or adjective or modification.

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It's just loads plural.

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However, if we look at 30.13,

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And FERC interpreted this very provision in our case in opinion 521 at page 1397 of the appendix.

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FERC said that 30.13 is narrower because it carves out opportunity sales.

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It carves out the very thing that's at issue.

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So we've got a carve out in 30.13 of opportunity sales.

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We have no such carve out in 30.03a.

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And this court routinely will draw the inference in such a situation that that was intentional, that the broad use of the unmodified term loads in 30.03a was intentional.

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And to put it in FERC's own words at 1397, FERC said that 30.13 excludes opportunity sales, whereas 30.03A allocates based on total load.

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That's a direct quote, total load.

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And it's interesting that FERC said this in the portion of its decision, which was about whether Entergy Arkansas was permitted to make the opportunity sales.

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A few pages later, when FERC turns to the separate issue of allocating costs, FERC sort of forgets about that.

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And then all of a sudden, it comes to a much narrower interpretation of loads in 30.03a.

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So that's a very important contrast.

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There's another contrast, though, if the court wants an additional example, which is 70.06 of the system agreement.

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Again, that uses the term loads, specifically net area loads.

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And then it carves out from that off-system sales.

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Now, an opportunity sale is one example of an off-system sale.

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So in 70.06, we have loads minus off-system sales.

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In 30.03a, all we have is loads, period.

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And those are important contrasts that should be considered as a matter of the plain text and structure here.

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Now, FERC didn't really confront those contrasts.

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To be fair, FERC did address it in opinion 521A, the decision on rehearing, but really in just a sentence, this issue of 30.13 versus 30.03A.

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In terms of the definition, FERC didn't identify another alternate reasonable definition in opinion 521.

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It acknowledged that this is an inclusive definition, and then it said, well,

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Loads and requirements are used in different ways in the system agreement, we think it's ambiguous, but as we explained in our reply brief really first only examples are of the word requirements and not loads, we think that as a matter of loads that the meaning is clear.

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So what did FERC do after it?

[00:09:02] Speaker 02:
I had a question about the fact that requirement sales are included within loads generally under this contract, right?

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I mean, what is the difference between requirement sales and opportunity sales?

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I mean, they're obviously both to others.

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I guess, like, how are they different for purposes of thinking about loads in the industry?

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So Judge Rao, we think that the word loads cannot distinguish between those two types.

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And Your Honor is right.

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Everyone in this case agrees that requirement sales, which is one species of wholesale sales, they generally tend to be longer term, a year or more, as opposed to opportunity sales, which can be a month long.

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they are within loads, and the only dispute here is whether opportunity sales are also within loads.

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We don't think the definition or the text of that word, or in particular the contrast with 30.13, supports any sort of distinction between requirements and opportunity sales.

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They're either both in loads or they're both not in loads, and we think that they both are in loads.

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Now, when FERC said that there was ambiguity in 30.03a, FERC instead decided to turn to 30.04.

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And we don't think the court needs to get to 30.04, but I'd like to talk about a few problems that are created by FERC's interpretation.

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And so FERC basically said, these opportunity sales are within 30.04, and therefore they're going to be allocated the highest cost energy on the system.

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The immediate problem with that is that 30.04 has this concept in it of reimbursement.

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So that is the selling company, which in this case was Energy Arkansas, under FERC's view has to reimburse another energy company that's providing the energy.

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However, FERC earlier in its decision said that the very essence of an opportunity sale is that it's a sale for which the selling company takes sole responsibility.

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And we think that there's a conflict between the notion of taking sole responsibility and yet using some other company's energy.

[00:11:05] Speaker 03:
FERC relied on the language in 30.04, sales to others, right?

[00:11:13] Speaker 06:
Yes, FERC did rely on that language.

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And it said that's the same language that appears in, what is it, 40.04?

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I believe it's 4.05 that your honor might be referring to.

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I'm not sure though.

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And Frick said it's the same language there and it's there that they authorized opportunity sales.

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Isn't that their reasoning?

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So why isn't that?

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I mean, I realize you disagree with it, but why isn't that at least a reasonable interpretation of the terror?

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Well, the main reason why it's unreasonable is because it runs into the problem that loads in 30.03a cannot support a distinction between requirement sales and opportunity sales.

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And in fact, FERC correctly started with 30.03a before turning to 30.04.

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We agree that that's the right order of analysis, but perhaps it would help.

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Let me try to give your honor our interpretation of 30.04.

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We believe that 30.04 is best read and in fact must be read once the court does the 30.03A analysis, must be read to refer to a joint account sale.

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And there's another provision that I wanna get to about 30.04 and I talked about reimbursement.

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30.09 lists the type of payments that one company can make to another and absent from that list is a payment to reimburse for energy supplied under 30.04.

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On the other hand, in a joint account sale, the payment is made by the system, by the group of companies.

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and is received by the company that's furnishing the energy.

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So the fact that there's no provision in 30.09, which provides an exhaustive list of the types of payments that one company can make to another, there's no mention of a 30.04 payment we think is instructive.

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We think FERC's interpretation creates a problem with that.

[00:13:07] Speaker 02:
And there's one other problem, which is that- Mr. Weisberg, did you raise your 30.09 argument below before the commission?

[00:13:14] Speaker 06:
We did not use 30.09 in that specific way.

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We acknowledge that.

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However, we believe it's subsumed within our argument about the reimbursement concept on the one hand, and our argument, which I was about to get to, which is there's a whole service schedule called MSS5 about how to allocate the margins from an opportunity sale.

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Sorry from a joint account sale.

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And yet there's no such service schedule on how to allocate margins from an opportunity sale and we think that that's instructive because as the Louisiana Commission's own witness conceded at page 2028 of the appendix, there is no margin that's calculated for an opportunity sale, and therefore,

[00:13:53] Speaker 06:
it makes sense that you would have a service schedule that only applies to joint account sales and not for opportunity sales.

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And just to circle back to Judge Tatel's point, that is basically our interpretation of 30.04 in light of 4.05 is that it is discussing a joint account sale, not an opportunity sale.

[00:14:09] Speaker 03:
How important, I noticed in your brief, you cite two industry definitions of load, the US Energy Information Administration and Edison Electric Institute.

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How important are those to your argument?

[00:14:24] Speaker 06:
I would say they're fairly important, but I think even more important is the contrast between 30.13 and 30.03a.

[00:14:32] Speaker 03:
So you say they're important.

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I asked the question, I had the same question, Judge Rao, just to ask you whether you raised those two definitions in your petition for a hearing.

[00:14:43] Speaker 06:
So in our petition, to step back for a second, in opinion 521 at page 1401, FERC acknowledged that the industry definitions that I was referring to are generic and inclusive.

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That was in 521.

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Then in our rehearing petition, we argued specifically the point that Judge Rao referred to before, which is about there's no textual basis for a distinction between requirement sale and opportunity sale.

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This is all part of how broad the word loads is.

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But even if the court were to conclude that we didn't preserve the industry definitions, which are in FERC's own decision, we certainly preserved the contrast between 30.13 and 30.03a, as well as the contrast between 70.06 and 30.03a.

[00:15:24] Speaker 03:
You're into your rebuttal time.

[00:15:28] Speaker 06:
Yes, if Your Honor will permit me to reserve the rest, I will.

[00:15:31] Speaker 06:
Thank you.

[00:15:37] Speaker 00:
Good morning.

[00:15:39] Speaker 00:
Carol Banta for the commission.

[00:15:40] Speaker 00:
Morning.

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And I'll begin, just to make a point with regard to the 30.09 as well as the industry definition.

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I would just, with the idea that an unraised argument was subsumed in another argument, I would just point to Judge Tatel's decision in Domtar, Maine from 2003.

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where this court made clear that if you're going to argue about a specific section, you don't get to argue that it was subsumed in an argument that you made.

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And that was in a case where the commission actually conceded that the sections were closely related and the court still found it barred.

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So I just wanted to point that out.

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But to pick up on Judge Tatel's question regarding section 4.05 and section 30.04.

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And this really goes to the key point of the key part of the commission's analysis.

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Sales to others.

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There's actually no provision, if we're talking about things that aren't provided in various provisions of this agreement, there's no provision in this agreement that says anything about how to treat opportunity sales.

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In section 404.05, there

[00:16:57] Speaker 00:
is sales to others that distinguishes sales made by the joint for the sole responsibility of one company versus joint account sales.

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Interestingly, 30.04 echoes the sales to others.

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And the commission said sales to others is a category.

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It means off system.

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And it says that in order 521A paragraph 40 at JA 1833.

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So the commission looked at 30.04 and saw

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In the Commission's words, it mimics the language of Section 4.05, which is the only basis in the main articles of the agreement that indicated that something like opportunity sales could be permissible, and that was the ground for the Commission finding them permissible.

[00:17:45] Speaker 00:
which the Louisiana commission challenged on rehearing, but Entergy certainly did not, and nobody has challenged on appeal.

[00:17:53] Speaker 00:
Ms.

[00:17:53] Speaker 02:
Banta, I guess one of the questions I had is, so opportunity sales are wholesale sales, right?

[00:18:02] Speaker 02:
Like requirement sales, right?

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Which do fit within 30.03, but there are also sales to others under

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or arguably sales to others under 30.04.

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So I'm just wondering why does FERC think that it is more natural to take the sales to other part of an opportunity sale to put it under 30.04 as opposed to the similarities between other wholesale sales in 30.03?

[00:18:30] Speaker 02:
because it seems like it has features of both.

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And I don't really see an opinion 521 a good explanation for why it should be in the 30.04 bucket as opposed to the 30.03 bucket.

[00:18:42] Speaker 00:
And I think, and one thing that really I think wasn't a big issue in this case is requirements contracts.

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There was a lot of discussion of native load and opportunity sales.

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So I don't have a lot I couldn't point you to for requirements contracts.

[00:18:58] Speaker 00:
My understanding is, and I think this is reflected in, Entergy had a couple charts in its brief and I'm thinking it might be page 14 of their opening brief that they showed the stack of how they wanted to allocate energy.

[00:19:12] Speaker 00:
Everyone seems to agree that something called native load is the lowest, gets the highest priority low cost.

[00:19:22] Speaker 02:
Native load is- Parties agree that requirement sales

[00:19:26] Speaker 02:
are within that load within 30.3.

[00:19:29] Speaker 00:
I'm sorry, right.

[00:19:31] Speaker 00:
It wasn't really challenged here.

[00:19:32] Speaker 03:
My understanding is that a requirement- I think the question, excuse me, sorry.

[00:19:42] Speaker 03:
The question is, is- Hello?

[00:19:44] Speaker 03:
Is, I'm sorry, technical interference, sorry.

[00:19:50] Speaker 03:
Yes.

[00:19:54] Speaker 03:
Are wholesale,

[00:19:56] Speaker 03:
I think what Judge Rath's trying to get at is what's the difference between how are opportunity sales and wholesale requirement sales different?

[00:20:05] Speaker 03:
And are wholesale requirement sales part of the native load?

[00:20:10] Speaker 00:
I don't think they're part of the native load.

[00:20:12] Speaker 00:
I think they're often treated like native load and it was a challenge here.

[00:20:14] Speaker 00:
And that's the distinction I was trying to make.

[00:20:16] Speaker 00:
Generally, native load is your retail rate payer.

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They're your end user customers.

[00:20:21] Speaker 00:
They're customers of Entergy, whichever state.

[00:20:26] Speaker 00:
wholesale requirements contracts could be like a municipal, it'd be like a town that serves its retail customers but buys wholesale.

[00:20:34] Speaker 00:
But it pays, I think the distinction that was discussed at some point in the orders, and I may not have that marked, wholesale requirements contracts, because they're long-term, they pay for both capacity and energy.

[00:20:47] Speaker 00:
They pay toward the fixed costs of the system.

[00:20:50] Speaker 00:
So they, like retail rate payers, are paying for

[00:20:53] Speaker 00:
the generation that's built and the transmission and all the fixed costs.

[00:20:58] Speaker 00:
Opportunity sales like joint account sales are one-offs.

[00:21:03] Speaker 00:
Short term, you think you have some extra or you think you can make a buck on whatever you have.

[00:21:09] Speaker 00:
And in this case in particular, they were just energy sales.

[00:21:12] Speaker 00:
I think there's language in section 4.05 that joint account sales can be both capacity and energy, but these were just energy sales.

[00:21:21] Speaker 00:
made short term off the system to entities that were neither.

[00:21:27] Speaker 02:
Is there anything in the definition of loads that requires things that are included in the load to be both to include both energy and capacity?

[00:21:38] Speaker 00:
Not in that definition and again that goes to the ambiguity but this is a key point I wanted to bring up because central to the commission's analysis of this contract and I think missing from energies

[00:21:52] Speaker 00:
is if we go to page, I had it written down, 1831 of the Joint Appendix, this is opinion 521A paragraph 35.

[00:22:02] Speaker 00:
We emphasize this in our brief as well.

[00:22:04] Speaker 00:
And there are other places it's echoed, but I wanted to point to this.

[00:22:07] Speaker 00:
The commission said, Entergy ignores the commission's analysis of the system agreement and the distinction between sales made to native load and those sales made off system that is inherent within the system agreement itself.

[00:22:19] Speaker 00:
The commission was looking at the context

[00:22:21] Speaker 00:
Of this very unusual.

[00:22:23] Speaker 00:
I don't, I don't know if there's there was another agreement like this anywhere like the energy system agreement where these different the operating companies in different states, they serve their

[00:22:36] Speaker 00:
customers in different states, but they cooperated to a great extent on planning, where to build generation.

[00:22:43] Speaker 00:
And so the whole thing in the contract and the whole reason for sections 30.03 and 30.04 is that there was a sharing of lower cost capacity, which as this court has noted several times, such as in the second decision from 2008, the one we called Louisiana 2008-Roman 2, which was

[00:23:05] Speaker 00:
where this this issue previously came up and was dismissed because it was dicta and then this proceeding started, I think, in that case, the court noted that there can be disparities in fuel costs in the energy system, in particular, Arkansas tends to have, I think, a fair amount of nuclear and a lot of coal, and Louisiana would have more gas.

[00:23:26] Speaker 00:
So there were times in history

[00:23:28] Speaker 00:
when Louisiana's energy was cheaper than Arkansas's and vice versa.

[00:23:33] Speaker 00:
In this time period, Arkansas's was significantly cheaper.

[00:23:37] Speaker 00:
So the energy system agreement was set up so that these different operating companies working together would plan generation throughout the system and share access to the cheaper capacity to serve their base loads.

[00:23:53] Speaker 00:
And that context, which suffuses the commission's analysis, I think is absent from Entergy's reading of it.

[00:24:01] Speaker 00:
And that's what the commission says.

[00:24:01] Speaker 02:
Spanta, though, that reading, though, seems inconsistent with what seems to be the practice in the Entergy system of allowing wholesale requirement sales, which was allowing companies to use that low-cost energy to serve other contracts outside the system.

[00:24:20] Speaker 02:
So I understand that that's not before us in particular.

[00:24:24] Speaker 02:
However, it is seemingly part of the practice within the energy system to allow such contracts.

[00:24:33] Speaker 00:
And I think that the answer is that those wholesale requirements contracts, like native load,

[00:24:39] Speaker 00:
contribute to the capacity costs, and they're sharing the cost of the system.

[00:24:42] Speaker 00:
And the only one place I can point to, although it's on a different issue, on JA1404, which was in opinion 521 and its footnote 251, and it's actually a scope holding saying there's something we're not going to look into here, but it was the question of whether Entergy Arkansas had properly accounted for its costs in its requirements contracts in terms of

[00:25:07] Speaker 00:
of making sure that its requirements customers were paying their share, whether it was passing those through appropriately.

[00:25:14] Speaker 00:
So that's an indication that the way wholesale requirements contracts are billed, I think is similar to the way that native load is, whereas opportunity sales are just taking the one-off sale of energy without contributing to the cost of the system.

[00:25:33] Speaker 00:
And the commission is saying that the parties, particularly the native load, and I think

[00:25:37] Speaker 00:
For these purposes, requirements contracts are in the same position.

[00:25:41] Speaker 00:
The parties that have paid to build this system get the benefit of being served by the more efficient lower cost capacity that they've contributed to and that that is the context of this very unusual system agreement.

[00:25:59] Speaker 00:
which the Commission found important in trying to understand an ambiguous term in 30.03.

[00:26:06] Speaker 00:
And again, I would come back to the echoed language in 30.04 to 4.05.

[00:26:16] Speaker 02:
Which again, this whole agreement, the commission also talks and it's in its opinion, not just about the purpose of sharing energy but also about the idea that the system agreement allows the companies to maintain their own capacity.

[00:26:32] Speaker 02:
and to use that for their own retail customers and their own needs.

[00:26:37] Speaker 02:
So there are, I mean, the system agreement doesn't just have a single purpose to share energy, it also importantly leaves some of these energy, some of the control over the generation and use of energy to the individual companies.

[00:26:52] Speaker 02:
So it doesn't seem to me like the general purpose can necessarily dictate how these costs should be allocated for the opportunity sales.

[00:27:02] Speaker 02:
But doesn't contract interpretation generally, right?

[00:27:04] Speaker 02:
Like we would look at the specific controls, any general language, I would think.

[00:27:10] Speaker 00:
Well, the commission found that two others, because it's only used in 4.05 and 30.04.

[00:27:18] Speaker 00:
So the commission actually thought that sales to others was specific language.

[00:27:22] Speaker 00:
But I would point also to paragraph 43 of opinion 521A.

[00:27:27] Speaker 00:
And this is at JA 1835, where the commission said,

[00:27:32] Speaker 00:
that the commission is trying to strike the correct balance.

[00:27:35] Speaker 00:
It believes that it's holding here strikes the correct balance between the rights of the individual operating companies to make opportunity sales for their own account and the rights of the system as a whole.

[00:27:46] Speaker 00:
And it makes a reference elsewhere.

[00:27:48] Speaker 00:
I believe in 548, but I don't know if I can put my hands on it right away to the ability of the

[00:27:58] Speaker 00:
the highest priority customers throughout the system having access to the cheaper energy.

[00:28:03] Speaker 00:
So the balance here is does Entragy Arkansas get to sell all of its cheap energy to whoever it wants or does it have obligations under the system agreement to allocate it?

[00:28:15] Speaker 00:
Yes, first to its retail customers and its wholesale requirements customers.

[00:28:19] Speaker 00:
Those aren't at issue here.

[00:28:21] Speaker 00:
The question is what comes next?

[00:28:23] Speaker 00:
Is it the pool selling it to the other companies?

[00:28:27] Speaker 00:
under 30.03B or are these sales to others like joint account sales with the difference being that the revenues just go to the company itself and not to divide it up for the joint account, which is the difference between the joint account and the opportunity sales.

[00:28:45] Speaker 02:
So Ms.

[00:28:45] Speaker 02:
Banta, maybe let me ask you the reverse of a question that Judge Tatel asked Mr. Wise first.

[00:28:51] Speaker 02:
So, I mean, most of the arguments you're making are about reasonableness.

[00:28:55] Speaker 02:
So do we have, I mean, does FERC lose if we find the contract on ambiguous?

[00:29:05] Speaker 02:
I guess what's your best argument for, you know, like a plain reading that supports FERC at step one of Chevron?

[00:29:14] Speaker 00:
Well, I mean, the commission said there was no plain reading.

[00:29:17] Speaker 00:
I suppose my best argument would be the mirrored language between 4.05 and 30.04.

[00:29:24] Speaker 00:
That's the, and again, there's no language in the agreement that says how opportunity sales should be treated.

[00:29:30] Speaker 00:
All we have even to permit them in section 4.05 is the implication in the negative that joint account sales are for when you don't wanna sell for yourself.

[00:29:41] Speaker 00:
Just a note on the subtraction of them from net area requirements in the bandwidth formula in section 30.13, which was added in 2006.

[00:29:51] Speaker 00:
So it was actually after many of these sales

[00:29:54] Speaker 00:
had occurred.

[00:29:55] Speaker 00:
And that doesn't use the word loads at all.

[00:29:57] Speaker 00:
That's about requirements.

[00:29:58] Speaker 00:
So I don't think that helps here.

[00:29:59] Speaker 00:
And the commission said the allocation provisions in the MSS schedules don't tell you what's allowed under the agreement.

[00:30:06] Speaker 00:
So the commission had to find the permission under 4.05 anyway.

[00:30:11] Speaker 00:
But apart from all that, the commission, I mean, the core of its finding here was that there wasn't an unambiguous breeding.

[00:30:19] Speaker 00:
And the most important part for that is

[00:30:25] Speaker 00:
I think it's 21 at paragraph 128 on J 1401.

[00:30:35] Speaker 00:
The commission's looking at the word load.

[00:30:37] Speaker 00:
On the one hand, it's looking at the word sales to others.

[00:30:39] Speaker 00:
On the other hand, it has substantial evidence in the record.

[00:30:42] Speaker 00:
It's disputed, but it has substantial evidence in the record, including testimony from staff witness Salmon that we cited in our brief.

[00:30:49] Speaker 00:
And it's cited in the order that loads and requirements are used in a number of different ways throughout the agreement.

[00:30:55] Speaker 00:
and there isn't a clear meaning there.

[00:30:58] Speaker 00:
Now, the commission also said at the end of that paragraph that Louisiana has not demonstrated that load and requirements must refer exclusively to native load.

[00:31:11] Speaker 00:
The commission says we are not convinced that that's a plain reading that we must follow, but that is an alternative reading.

[00:31:16] Speaker 00:
So those are the alternative readings in play here.

[00:31:19] Speaker 00:
Either loads means everything and Arkansas

[00:31:24] Speaker 00:
allocates it can allocate its its cheapest energy to everyone that it sells to.

[00:31:30] Speaker 00:
And we're going to imply the term joint accounts in 30.04 where it where it isn't.

[00:31:36] Speaker 00:
That's one reading.

[00:31:39] Speaker 00:
Another reading is that 30.03 necessarily means native load.

[00:31:45] Speaker 00:
Well, the commission didn't make that finding but it said that is another reading.

[00:31:49] Speaker 00:
It's not the one we don't find it to be a plain reading.

[00:31:51] Speaker 00:
So the commission's

[00:31:53] Speaker 00:
decision here was very much based on ambiguity, but it is rooted in both the terms, the mirrored language in those two provisions, and always looking to the overall context of the agreement.

[00:32:15] Speaker 00:
On the opinion, there was.

[00:32:18] Speaker 05:
What weight or significance, if any, is there to the fact that if we adopted the commission's interpretation, these opportunity sales would always lose money, or would almost always lose money?

[00:32:34] Speaker 00:
I don't think there's evidence.

[00:32:37] Speaker 00:
I'm sorry.

[00:32:38] Speaker 05:
And just, I guess, the absurdity argument that's raised.

[00:32:44] Speaker 00:
Well, first, I would note, as we did in our brief, that there was no absurdity argument.

[00:32:49] Speaker 00:
with regard to the contract interpretation raised below.

[00:32:52] Speaker 00:
The only place I could find Entergy ever used the word absurd was with reference to disputing the refunds that the commission determined.

[00:33:04] Speaker 00:
That aside, I don't think there's evidence in this record that they would always lose money.

[00:33:09] Speaker 03:
They certainly- Why make any difference?

[00:33:14] Speaker 03:
Let's assume it's right that they would always lose money.

[00:33:16] Speaker 03:
What difference does that make?

[00:33:18] Speaker 03:
As you just explained, the purpose of this agreement, the companies agreed to basically prioritize their own customers, right?

[00:33:28] Speaker 03:
They would get the lowest cost energy.

[00:33:31] Speaker 03:
And if the only way for them to benefit from the lowest cost energy is not to sell to non-customers, isn't that just a natural consequence of the agreement?

[00:33:42] Speaker 00:
Yes.

[00:33:43] Speaker 00:
Yes, you're absolutely right.

[00:33:45] Speaker 00:
I think there's some evidence in this record that that because Arkansas was was was.

[00:33:53] Speaker 00:
Is that.

[00:33:53] Speaker 00:
Okay, I'm sorry.

[00:34:01] Speaker 00:
No, I think that's right.

[00:34:03] Speaker 00:
The commission said you can make these sales and they may not have made enough to cover their costs.

[00:34:09] Speaker 00:
Maybe they made more than if they hadn't sold any.

[00:34:12] Speaker 00:
But the commission says you want sole responsibility.

[00:34:16] Speaker 00:
It doesn't mean you get to keep the cheapest energy away from the other members of the system.

[00:34:20] Speaker 00:
It does mean that you own the margins positive and negative.

[00:34:24] Speaker 03:
All right.

[00:34:25] Speaker 03:
OK, well, thank you.

[00:34:27] Speaker 00:
Thank you.

[00:34:28] Speaker 03:
Yeah.

[00:34:32] Speaker 03:
I'm here for Mr. Louisiana.

[00:34:37] Speaker 04:
Yes, Your Honor.

[00:34:39] Speaker 04:
Mike Fontham, representing the Louisiana Public Service Commission.

[00:34:44] Speaker 04:
I would like to address Judge Rao's question and Judge Wilkins.

[00:34:49] Speaker 04:
And then if I have time, I'll move to the jurisdiction.

[00:34:53] Speaker 04:
Judge Rao, there is a tremendous difference between opportunity sales and wholesale requirements sales.

[00:35:01] Speaker 04:
Wholesale requirement sales are part of native load.

[00:35:05] Speaker 04:
Native load is defined as the retail and customers served under a long-term wholesale commitment.

[00:35:15] Speaker 04:
Customers served under a wholesale long-term commitment are customers like the customers of a city in North Little Rock that buys all its requirements from Energy Arkansas.

[00:35:28] Speaker 04:
Those requirements customers just like native

[00:35:31] Speaker 04:
load customers pay for the capacity.

[00:35:35] Speaker 04:
And so therefore, they are entitled to the cheap energy that comes from that capacity.

[00:35:41] Speaker 04:
Opportunity sales are these what are supposed to be short term, like day ahead, sales where the utility thinks it can make a buck.

[00:35:52] Speaker 04:
Those revenues are credited to customers in every retail jurisdiction

[00:35:59] Speaker 04:
Those revenues go to customers to offset their cost of the capacity.

[00:36:06] Speaker 04:
What Energy did in this case is it pretended that those sales were being made to a wholesale requirements customer so that it could keep the revenue instead of crediting the revenue.

[00:36:21] Speaker 04:
And it even filed fuel reports at FERC and in Arkansas

[00:36:28] Speaker 04:
saying that these sales were made in Arkansas, they said to customer number 13, which was a fictitious wholesale requirements customer.

[00:36:39] Speaker 04:
And in FERC, it was just must end with the energy for wholesale requirements customers so that the fundamental issue arises.

[00:36:54] Speaker 04:
And that's the issue in this case, more than all this stuff about

[00:36:57] Speaker 04:
what one company can do and what another company can do, the shareholders managed to take all the revenues and they managed to put the cost on the consumers.

[00:37:08] Speaker 04:
They avoided the cost.

[00:37:10] Speaker 04:
These were, Judge Wilkins, these were losing propositions from the start.

[00:37:15] Speaker 04:
They never would have been made except energy thought they could put the cost on the consumers and keep the money for the shareholders.

[00:37:23] Speaker 04:
So they, you know, falsely reported

[00:37:26] Speaker 04:
This is a wholesale requirements customer.

[00:37:28] Speaker 04:
It's not an opportunity sale, but it was an opportunity sale.

[00:37:34] Speaker 04:
So there's a tremendous difference there.

[00:37:36] Speaker 04:
And this is universal judge everywhere you make an opportunity sale, the revenues go to the customers.

[00:37:45] Speaker 04:
It's not, you know, something that's unique to energy, not anything that's unusual.

[00:37:51] Speaker 04:
It's everywhere, but

[00:37:53] Speaker 04:
If you're willing to go to some extremes to keep the money yourself for shareholders, then you don't credit the revenues.

[00:38:03] Speaker 04:
And what Energy has always done with joint account sales is they make the sale.

[00:38:08] Speaker 04:
If there's a positive margin, they give it to everybody.

[00:38:13] Speaker 04:
And if there's a negative margin, they give that to everybody too.

[00:38:16] Speaker 04:
But usually those don't happen because they don't make sales that are going to be losing.

[00:38:20] Speaker 03:
All right, Mr. Phantom, you're over time.

[00:38:22] Speaker 03:
Did you have a second point you want to make that you can make quickly because you're over time?

[00:38:26] Speaker 04:
Well, Your Honor, with regard to what you brought up, you can do a word search in that request for rehearing for energy, Edison Electric Institute, energy information agency, industry definition, technical definition.

[00:38:43] Speaker 04:
You will not find anything.

[00:38:44] Speaker 03:
OK.

[00:38:45] Speaker 04:
They never argued that at any point in phase one, never.

[00:38:51] Speaker 03:
Thank you.

[00:38:59] Speaker 03:
Mr. Weisberg.

[00:39:00] Speaker 06:
Yes, thank you, Judge Tatel.

[00:39:03] Speaker 06:
I'd like to start with, again, going back to the most important point in our view in this case, the contrast.

[00:39:08] Speaker 01:
Anne, how much time does he have left?

[00:39:12] Speaker 01:
Council had no time remaining, but he had initially reserved six minutes for rebuttal.

[00:39:16] Speaker 03:
Oh, well, you can take two minutes in.

[00:39:18] Speaker 03:
Go ahead.

[00:39:19] Speaker 03:
I thought you hadn't used up your time, but go ahead.

[00:39:22] Speaker 06:
So to be clear, how much time do I have?

[00:39:24] Speaker 06:
I'm sorry.

[00:39:27] Speaker 06:
I'll start.

[00:39:28] Speaker 06:
I have very little time.

[00:39:30] Speaker 06:
Joint appendix 1397.

[00:39:31] Speaker 06:
I did not hear Ms.

[00:39:33] Speaker 06:
Banta address that point.

[00:39:35] Speaker 06:
It's FERC's, and it's important, FERC's decision.

[00:39:38] Speaker 06:
Which point?

[00:39:39] Speaker 06:
30.13 versus 30.03a point.

[00:39:43] Speaker 06:
I did not hear Ms.

[00:39:44] Speaker 06:
Banta address page 1397, which is part of FERC's decision opinion 521, where FERC says that 30.03A allocates based on total loads.

[00:39:57] Speaker 06:
It says that in explicit reference and contrast to 30.13, which again has a carve out of opportunity sales.

[00:40:05] Speaker 06:
Ms.

[00:40:05] Speaker 06:
Banta also said that the words in 30.13 are net area requirements.

[00:40:11] Speaker 06:
She said that has nothing to do with load.

[00:40:13] Speaker 06:
It reply brief six, note five, we explained that FERC itself equated those terms.

[00:40:19] Speaker 06:
I'd like to address the point about opportunity sales, the customers don't contribute anything to the fixed costs.

[00:40:26] Speaker 06:
We disagree with that point.

[00:40:28] Speaker 06:
And I'd refer the court to Joint Appendix 413.

[00:40:32] Speaker 06:
Whenever the revenues from an opportunity sale exceed the fuel costs, that excess is available to help pay for fixed costs.

[00:40:41] Speaker 06:
And I think the North Little Rock example, which was referred to by Mr. Fontum, I believe, illustrates this.

[00:40:46] Speaker 06:
So North Little Rock was a wholesale requirements customer.

[00:40:49] Speaker 06:
No dispute that wholesale requirements customers are within loads under 30.03a.

[00:40:54] Speaker 06:
Once that contract ended,

[00:40:56] Speaker 06:
the same exact amount of energy was sold as an opportunity sale.

[00:41:00] Speaker 06:
This wasn't taking it away from the other companies or their customers.

[00:41:03] Speaker 06:
This was the energy that wasn't going to those companies initially.

[00:41:07] Speaker 06:
And now, because of the loss of North Little Rock as a customer, we're being sold to an opportunity sales customer.

[00:41:12] Speaker 06:
And the excess, if any, above the variable cost was going to be used to help pay for the refinancing and mortgaging of the fixed cost of that plant.

[00:41:23] Speaker 06:
So we disagree with that.

[00:41:25] Speaker 06:
I want to come back to the most important thing which is a lot of what we've heard from Ms Banta for Mr Fontum is about reasonableness, it's about policy.

[00:41:34] Speaker 06:
Our main submission in this case, in addition to the absurdity point but our main position is the plain language, the contrast between those provisions Chevron step one.

[00:41:44] Speaker 06:
And I think of the cases we cited, although it goes a ways back, the consolidated Edison case that Judge Tatel sat on is a case that I think shows that even where the agency and FERC in that case is being reasonable, if the plain language precludes what FERC has done, the agency has to lose.

[00:42:04] Speaker 06:
And that is our submission in this case.

[00:42:06] Speaker 06:
If the court has no further questions, I'll rest on my briefs.

[00:42:09] Speaker 03:
Thank you very much.

[00:42:10] Speaker 03:
Thank you.

[00:42:11] Speaker 03:
Okay.

[00:42:14] Speaker 04:
It's Mike Fontham again, your honor, for the LPSC, I believe.

[00:42:29] Speaker 04:
Is that right?

[00:42:30] Speaker 04:
I've got a message to unmute.

[00:42:33] Speaker 03:
Yes, you are up.

[00:42:36] Speaker 04:
Okay.

[00:42:37] Speaker 04:
Thank you very much.

[00:42:38] Speaker 03:
You're going to talk about burden of proof.

[00:42:43] Speaker 04:
Well, yes, your honor.

[00:42:44] Speaker 04:
I'm going to talk about burden and the offsets, the offsets, right?

[00:42:50] Speaker 03:
Okay, go ahead.

[00:42:52] Speaker 04:
Okay.

[00:42:52] Speaker 04:
And I want to reiterate, this is fundamentally a case involving shareholders versus consumers.

[00:43:02] Speaker 04:
And to, uh, to the point just made by Mr. Weisberg, none of these opportunity sales margins, if they were positive, which was rare,

[00:43:13] Speaker 04:
were credited to the customers.

[00:43:16] Speaker 04:
Energy kept them all.

[00:43:18] Speaker 04:
And FERC found that $202 million while they imposed about $280 million on the customers as the cost.

[00:43:29] Speaker 04:
And they were happy with that absurd proposition.

[00:43:33] Speaker 04:
But once FERC says, no, no, you have to absorb the actual cost, which is the actual cost of the sales, well, they're not so happy with it.

[00:43:43] Speaker 04:
The customers should have to pay that.

[00:43:44] Speaker 04:
That's their position.

[00:43:46] Speaker 04:
Now with regard to burden of proof, our complaint alleged that they were doing something that they couldn't do under the system agreement.

[00:43:55] Speaker 04:
And by the fact that the actual fact is they had never done it.

[00:44:02] Speaker 04:
And they had had a policy that they won't do it.

[00:44:06] Speaker 04:
And they had said over and over and over again

[00:44:11] Speaker 04:
Our capacity is available for the native low.

[00:44:15] Speaker 04:
And we've cited all of that.

[00:44:16] Speaker 04:
It's in our briefs.

[00:44:18] Speaker 04:
They said it at work.

[00:44:20] Speaker 04:
They said it at the LPSC.

[00:44:22] Speaker 04:
They said it in their form ones.

[00:44:24] Speaker 03:
They said it in- You were going to talk about the burden of proof, weren't you?

[00:44:28] Speaker 04:
I am, Your Honor, and I'm- Is this a lead up?

[00:44:32] Speaker 04:
It's a lead up.

[00:44:35] Speaker 04:
Your Honor, it's an attempt to- Okay.

[00:44:39] Speaker 04:
Reimpose the big picture

[00:44:41] Speaker 04:
as opposed to all this technical stuff.

[00:44:46] Speaker 03:
Let me just ask you the big picture question about burden of proof.

[00:44:49] Speaker 03:
And you can tell me why you think this is wrong.

[00:44:53] Speaker 03:
I mean, what I see here is you and FERC just have different views about what happened here.

[00:44:59] Speaker 03:
FERC says Louisiana began the proceeding.

[00:45:03] Speaker 03:
So it has the burden of proof on both liability and damages.

[00:45:08] Speaker 03:
You have a different view about that.

[00:45:10] Speaker 03:
And, you know, our case law says that FERC's discretion at this remedial stage is that it's zenith.

[00:45:17] Speaker 03:
What possible basis can you give us for second guessing FERC's judgment?

[00:45:21] Speaker 03:
I mean, I realize you disagree with it, and I might even disagree with it, but given that this is a highly discretionary decision, how can we possibly second guess it?

[00:45:31] Speaker 04:
Well, because their precedent says that if you take the burden, you go first and last, you can't.

[00:45:38] Speaker 04:
turn around and say somebody else had the burden.

[00:45:41] Speaker 04:
That's in the Northwestern case that we cited.

[00:45:44] Speaker 04:
And this court has said it in two or three cases that we cited that the party proposing offsets.

[00:45:51] Speaker 04:
And that is what happened in this case.

[00:45:53] Speaker 04:
Energy asked for the right to propose offsets.

[00:45:57] Speaker 04:
This was after the damages were basically done.

[00:46:02] Speaker 04:
The damages, everyone had agreed, we're going to rerun the ISB intrasystem bill

[00:46:08] Speaker 04:
energy reallocation energy had proposed that we said okay damages was done and that's under service schedule mss3 energy sent then says well we'd like to propose some adjustments to service schedule mss1 and the bandwidth tariff then with tariffs totally separate tariff it doesn't deal with the isb at all and so

[00:46:34] Speaker 04:
We said, then Energy says, okay, here's the procedural schedule.

[00:46:38] Speaker 04:
We go first, we go last.

[00:46:39] Speaker 03:
The first view is it is all part of putting the system back to where it would have been if the opportunity costs had been charged correctly.

[00:46:50] Speaker 03:
It all goes back to that.

[00:46:52] Speaker 04:
Well, it does go back to that.

[00:46:54] Speaker 04:
And as my opponent said over and over again, they never would have been made.

[00:46:59] Speaker 03:
Excuse me.

[00:47:00] Speaker 03:
All of these adjustments,

[00:47:02] Speaker 03:
that FERC has made or not made are in service of that proposition.

[00:47:07] Speaker 03:
Isn't that true?

[00:47:09] Speaker 04:
No.

[00:47:10] Speaker 04:
No?

[00:47:10] Speaker 04:
Energy put, the energy put the load into Arkansas's load.

[00:47:22] Speaker 04:
And as a result of that, the shareholders are really, they imposed it on customers in Arkansas.

[00:47:29] Speaker 04:
But there was an allocation

[00:47:32] Speaker 04:
of the capacity costs to Arkansas.

[00:47:36] Speaker 04:
Energy said, well, wait a minute, we want to change that.

[00:47:39] Speaker 04:
And that's what we were doing.

[00:47:42] Speaker 04:
It wasn't part of the initial damage calculation at all.

[00:47:46] Speaker 04:
And with regard to the bandwidth, FERC had ruled and the Fifth Circuit rule, you can't make out of period adjustments to the bandwidth.

[00:47:55] Speaker 04:
And FERC acknowledged that.

[00:47:57] Speaker 04:
So that was the law.

[00:47:59] Speaker 04:
FERC says, well, yeah, but we're just going to adjust damages for the bandwidth.

[00:48:05] Speaker 04:
Well, how in the world do we have the responsibility to anticipate an argument like that and then attack it when we don't even know what the argument is?

[00:48:21] Speaker 04:
So we went second.

[00:48:23] Speaker 04:
We responded to energy's arguments.

[00:48:26] Speaker 04:
And they got to go last on the staff witness.

[00:48:30] Speaker 04:
They accepted all that.

[00:48:32] Speaker 04:
And then they turned around and changed their mind.

[00:48:35] Speaker 04:
So your honor, these are offsets.

[00:48:38] Speaker 04:
This is not part of the initial damage calculation.

[00:48:41] Speaker 04:
It's two separate service schedules.

[00:48:45] Speaker 04:
And like as an example, in the case of the bandwidth.

[00:48:50] Speaker 04:
Your honor, the bandwidth adjustment that they made

[00:48:54] Speaker 04:
caused everybody to have to pay Energy Arkansas money.

[00:48:59] Speaker 04:
The damages that was returned, $8.3 million.

[00:49:05] Speaker 04:
The bandwidth adjustment, $13.8 million.

[00:49:10] Speaker 03:
All the bandwidth adjustment did was just reduce the damages.

[00:49:14] Speaker 03:
It just reduced the damages that Arkansas, that didn't require the other companies to hear them quoting for you, quote, pay Entergy Arkansas for the excess bandwidth.

[00:49:27] Speaker 03:
It was just, it was, they were putting the system back to where it would have been.

[00:49:32] Speaker 04:
Well, your honor, I, uh, Louisiana disagrees with that because that's not, that's not what happened.

[00:49:41] Speaker 04:
I mean, the fact is that there were damages for the pre-bandwidth period, okay?

[00:49:47] Speaker 04:
And those damages were higher than the damages that got awarded.

[00:49:52] Speaker 04:
For the bandwidth period, which was 2005 to 2009, the only thing at issue in phase three was the bandwidth period.

[00:50:01] Speaker 04:
And in the bandwidth period, FERC made the other companies pay Arkansas, which had the effect of reducing the damages

[00:50:10] Speaker 04:
awarded for 2000 to 2004.

[00:50:14] Speaker 04:
It is not just a reduction.

[00:50:16] Speaker 04:
It's not a reduction of the damages for the bandwidth period.

[00:50:20] Speaker 02:
To follow up maybe on Judge Tatel's questions, it seems most of your arguments are pushing in the direction of putting the companies back to where they would be if opportunity sales never happened.

[00:50:34] Speaker 02:
But we are in a world where FERC has said they are okay.

[00:50:37] Speaker 02:
I believe you're not challenging whether opportunity sales were permissible in this appeal or in this petition.

[00:50:44] Speaker 02:
So I'm just not sure how your arguments fit within the framework of an interpretation of the system agreement that allows for opportunity sales.

[00:50:56] Speaker 04:
The arguments about the offsets?

[00:50:59] Speaker 02:
Yeah, because it seems like your arguments are really trying to push back to a circumstance in which opportunity sales never existed.

[00:51:08] Speaker 04:
Well, and that's exactly right, because that measures the difference in the bandwidth that was made by the opportunity sales.

[00:51:18] Speaker 04:
In other words, FERC said in 548A, 548A, and it's on page 1988 of the appendix, FERC says

[00:51:28] Speaker 04:
We were asking for a re-hearing.

[00:51:30] Speaker 04:
They said, well, Louisiana seems to assume that we ordered putting the refunds into the bandwidth.

[00:51:39] Speaker 04:
We didn't order that.

[00:51:40] Speaker 04:
We ordered avoiding duplicative damages.

[00:51:45] Speaker 04:
Well, if you want to remove duplicative damages, you remove the revenues.

[00:51:51] Speaker 04:
The revenues were much lower than the cost that the other companies pay.

[00:51:56] Speaker 04:
So if you incur a $10 cost and the revenues are six, I credit you six, okay?

[00:52:05] Speaker 04:
And then later on, FERC says, okay, there was a violation.

[00:52:09] Speaker 04:
I have to pay you 10, but we're gonna take the 10 and put it in the bandwidth and it's gonna go right back to you.

[00:52:17] Speaker 04:
So you're still out four.

[00:52:20] Speaker 04:
It went beyond duplicative damages.

[00:52:22] Speaker 04:
There's no evidence in the record

[00:52:25] Speaker 04:
to support that it only fixed the duplicative damages, none.

[00:52:31] Speaker 04:
Now, if all the refunds, all the extra costs had originally been included in Arkansas's costs, yes, that's what they accomplished.

[00:52:44] Speaker 04:
But as everybody agrees, the sales never would have been made under that circumstance.

[00:52:49] Speaker 04:
So, you know, the ratepayers wind up for the bandwidth period, I agree,

[00:52:55] Speaker 04:
The rate payers wind up paying Arkansas.

[00:52:59] Speaker 04:
How can that make any sense for violating the system agreement?

[00:53:05] Speaker 04:
And the same thing is true with regard to the responsibility ratio allocation.

[00:53:09] Speaker 04:
It is proven.

[00:53:11] Speaker 04:
The judge made all kinds of findings that these sales, because they were made a month ahead as opposed to next day, Energy never made sales a month ahead because they didn't have the resources to serve them.

[00:53:26] Speaker 04:
to serve a sale from a month ahead standpoint.

[00:53:30] Speaker 04:
Day ahead, they knew they had the resource.

[00:53:33] Speaker 04:
So they make the sales a month ahead.

[00:53:35] Speaker 04:
They buy capacity to support the sales.

[00:53:38] Speaker 04:
They're buying and putting the cost on consumers and selling and keeping the revenue for shareholders.

[00:53:45] Speaker 04:
Can I just?

[00:53:46] Speaker 04:
And the judge said, well, you have to pay the capacity cost too and reverse that.

[00:53:51] Speaker 03:
Let me just go back to basics with you about this.

[00:53:55] Speaker 03:
OK.

[00:53:57] Speaker 03:
OK.

[00:53:58] Speaker 03:
Tell me if this is wrong.

[00:54:04] Speaker 03:
Energy Arkansas.

[00:54:06] Speaker 03:
by misallocating the opportunity costs, that is, by treating them as 03 rather than 04.

[00:54:15] Speaker 03:
By doing that, it paid more, excuse me, Energy Arkansas paid more in bandwidth payments than it otherwise would have, correct?

[00:54:33] Speaker 04:
No, it's because in the bandwidth,

[00:54:36] Speaker 04:
In the bandwidth, that's not why.

[00:54:39] Speaker 03:
It's not right?

[00:54:41] Speaker 04:
No, sir.

[00:54:42] Speaker 03:
Okay, tell me why.

[00:54:44] Speaker 04:
Well, in the bandwidth, there's two ways you can deal with these sales.

[00:54:51] Speaker 04:
You could have them take responsibility for the sales in the energy ratio.

[00:54:56] Speaker 04:
The energy ratio was not changed.

[00:54:58] Speaker 04:
So they took no responsibility for the sales.

[00:55:01] Speaker 04:
So they bore none of the costs.

[00:55:03] Speaker 04:
What they did was is they credited the revenues, even though the revenues were going to shareholders, they credited the revenues.

[00:55:11] Speaker 04:
And so Energy Arkansas paid other companies an amount equivalent to the revenues, in my example, the $6.

[00:55:20] Speaker 04:
But the cost of the sale was $10, in my example, $10.

[00:55:25] Speaker 04:
So they only gave back

[00:55:28] Speaker 04:
The revenue credit, and this was a matter in opinion 505, we were fighting that.

[00:55:33] Speaker 04:
We were saying, wait a minute, they need to take responsibility for the sales.

[00:55:38] Speaker 04:
And FERC said, no, no, revenue credit's okay.

[00:55:43] Speaker 04:
So that's not why on the bandwidth.

[00:55:46] Speaker 03:
I understand.

[00:55:46] Speaker 03:
Okay, thank you.

[00:55:47] Speaker 03:
You're out of time.

[00:55:48] Speaker 03:
Let's hear from the commission on this issue, okay?

[00:55:55] Speaker 03:
Um, could you miss me.

[00:55:57] Speaker 03:
Could you just issue.

[00:55:59] Speaker 00:
I'm sorry, which issue.

[00:56:04] Speaker 03:
Council said that when I said,

[00:56:08] Speaker 03:
that Energy Arkansas, by misallocating the opportunity sales, paid more in bandwidth payments than it should have, than it would have.

[00:56:18] Speaker 03:
That what FERC has essentially done is, in other words, the operating companies got more than they should have if these had been properly allocated.

[00:56:28] Speaker 03:
Now that they've been properly allocated, they've got to pay it back.

[00:56:30] Speaker 03:
Is that wrong?

[00:56:32] Speaker 00:
No, that is absolutely right.

[00:56:34] Speaker 03:
Okay.

[00:56:34] Speaker 00:
But that is exactly, and I think it goes as we said in our brief and as the commission said.

[00:56:43] Speaker 03:
Why does he say that?

[00:56:48] Speaker 03:
Did you understand his argument to explain why I was wrong?

[00:56:54] Speaker 00:
Somewhat.

[00:56:55] Speaker 00:
But Louisiana's position throughout has been that

[00:57:00] Speaker 00:
that the bandwidth needs to be calculated as though the sales were never made.

[00:57:07] Speaker 03:
Right.

[00:57:08] Speaker 03:
And that I understood.

[00:57:09] Speaker 03:
I get that.

[00:57:10] Speaker 03:
And that all adjustments are to get us back to that point, right?

[00:57:15] Speaker 00:
Except that the commission said the adjustments are to get us to, because the commission said the sales were authorized.

[00:57:22] Speaker 03:
Right, correct.

[00:57:23] Speaker 00:
The commission said, we need to get us back.

[00:57:26] Speaker 00:
Oh, the game back.

[00:57:27] Speaker 00:
It's a bit artificial.

[00:57:28] Speaker 00:
The commission.

[00:57:29] Speaker 03:
It would be if these had been properly allocated under correct.

[00:57:33] Speaker 00:
Precisely.

[00:57:34] Speaker 00:
And the commission said we're trying to recreate a scenario that admittedly didn't happen.

[00:57:39] Speaker 00:
They weren't allocated correctly and

[00:57:42] Speaker 00:
There is an argument that some of these sales wouldn't have been made, but the milk is spilled and the commission is just trying to, and, and says several times, this is necessarily going to be difficult because we're trying to recreate circumstances that did not exist, but the goal throughout.

[00:57:59] Speaker 00:
Yes.

[00:57:59] Speaker 00:
Was what would the picture have looked like if the allocation had, if the sales were made because they were permitted and.

[00:58:09] Speaker 00:
but they were allocated correctly.

[00:58:12] Speaker 03:
Okay, could you respond to the original argument about burden-proof?

[00:58:18] Speaker 00:
Yes, and your questions were exactly right.

[00:58:24] Speaker 00:
The commission looked at this.

[00:58:27] Speaker 00:
We're not setting a rate here.

[00:58:28] Speaker 00:
This is a damage calculation.

[00:58:30] Speaker 00:
What are the damages resulting from the misallocation, not the sales being made?

[00:58:36] Speaker 00:
from the misallocation.

[00:58:38] Speaker 00:
So the first thing we do is the methodology the commission approved was rerunning the intra system bill to determine if all the energy had been allocated appropriately.

[00:58:49] Speaker 00:
But because of the impact in the bandwidth formula, the commission determined that the other operating companies may have already benefited from the mistake because

[00:59:06] Speaker 00:
Arkansas was reporting these sales at the cheapest energy costs.

[00:59:11] Speaker 00:
So it had a lower production cost and its production cost being lower than the system average is precisely the reason that it had to pay bandwidth payments to the other companies and precisely the measure by which it made those bandwidth payments.

[00:59:26] Speaker 00:
So the commission said, if we're calculating the damages done here, which are X,

[00:59:33] Speaker 00:
What do we do to make sure we don't have duplicate amounts that are windfalls?

[00:59:38] Speaker 00:
Because we're requiring damages to be paid for damages that weren't incurred.

[00:59:43] Speaker 00:
And in fact, there were benefits.

[00:59:46] Speaker 00:
So that netting, it's not an offset in the sense of an affirmative defense.

[00:59:51] Speaker 00:
It's not where you determine damages for some contract breach, but then you can back off some of it because there was mitigation.

[00:59:59] Speaker 00:
It is the initial damages calculation.

[01:00:01] Speaker 00:
And the commission said that in a couple of places.

[01:00:03] Speaker 00:
in paragraph 548, in opinion, 548 paragraph 148, and in 548A at paragraph 10 and 23.

[01:00:13] Speaker 00:
And I wanted to point in particular to, actually I'm jumping ahead to opinion 565A, paragraph 11 on JA 2444, where the commission says that the Louisiana commission's arguments

[01:00:33] Speaker 00:
here in phase three, continue to reflect the misunderstanding of the commission's holdings in opinion 521.

[01:00:42] Speaker 00:
Louisiana is still fighting phase one.

[01:00:44] Speaker 00:
Louisiana is still wanting the calculation to be done as though the sales were never made because it believed from the start that the sales were unauthorized.

[01:00:54] Speaker 00:
That's done.

[01:00:55] Speaker 00:
That's phase one.

[01:00:56] Speaker 00:
That's done.

[01:00:57] Speaker 00:
The commission said, and it's not before the court on appeal, the commission said these sales are authorized.

[01:01:02] Speaker 00:
So what do we do with that?

[01:01:03] Speaker 00:
We found the breach in the misallocation.

[01:01:06] Speaker 00:
All the damages and all the calculations are oriented toward recreating the scenario that would have been had the sales been made, but allocated properly.

[01:01:20] Speaker 00:
And I think, and looking at the court's questions, I think Judge Rao had said that Louisiana seems to be pushing for

[01:01:30] Speaker 00:
a scenario where the opportunity sales never existed.

[01:01:32] Speaker 00:
And that's precisely right.

[01:01:33] Speaker 00:
That's precisely what the commission said and why it rejected the arguments.

[01:01:38] Speaker 00:
I also want to point out that while there was some netting to avoid duplicate damages in the bandwidth calculations, no company had to pay Entergy Arkansas.

[01:01:50] Speaker 00:
The commission made clear in numerous places, the damages calculation is for the entire period that was found to have been misallocated, which is

[01:01:59] Speaker 00:
from I think late 2000 to 2009.

[01:02:02] Speaker 00:
The bandwidth remedy becomes into effect in June 2005.

[01:02:09] Speaker 00:
There's evidence in the record that the commission cited that the bulk of these sales and the bulk of the dollars amounts from these sales occurred between 2002 and 2005, maybe 2006.

[01:02:19] Speaker 00:
So most of them are completely unaffected by the bandwidth adjustment at all.

[01:02:25] Speaker 00:
And we had the numbers in our brief in the compliance filing, all of the other operating companies received millions of dollars, in some cases, tens of millions of dollars.

[01:02:34] Speaker 00:
No one had to cut a check to Entergy Arkansas.

[01:02:37] Speaker 00:
So in a few of the bandwidth years, it did turn out that some companies had benefited more from the misallocation than they had suffered from the misallocation.

[01:02:50] Speaker 00:
So there was some netting.

[01:02:52] Speaker 00:
But because the commission was looking at the damages for the entire decade and the bulk of the damages predate the bandwidth remedy, the net amounts were still substantial refunds to all the companies.

[01:03:04] Speaker 00:
And the commission had made clear from, I believe, opinion 521 that Entergy Arkansas would be paying refunds to the other companies.

[01:03:16] Speaker 00:
No one would be paying Entergy Arkansas.

[01:03:18] Speaker 00:
And it was that way from the start and it was that way at the end.

[01:03:21] Speaker 00:
Unless the court has any.

[01:03:26] Speaker 03:
Judge Wilkins judge.

[01:03:27] Speaker 03:
I have no other questions.

[01:03:28] Speaker 03:
Either of you.

[01:03:29] Speaker 03:
Okay.

[01:03:30] Speaker 00:
Thanks.

[01:03:31] Speaker 03:
Thank you.

[01:03:37] Speaker 03:
Councilor.

[01:03:38] Speaker 04:
I rebuttal your honor.

[01:03:39] Speaker 03:
Did you use up?

[01:03:42] Speaker 03:
And how much time does he have left?

[01:03:44] Speaker 01:
Councilor has two minutes left.

[01:03:46] Speaker 03:
Yeah, go ahead.

[01:03:47] Speaker 03:
And would you at least use part of your three minutes to respond to the two points Miss Spanta just made about the burden approved and about the bandwidth.

[01:03:58] Speaker 04:
Those two.

[01:04:00] Speaker 04:
Your honor, with regard to the bandwidth, let me go with that first.

[01:04:06] Speaker 04:
Sure.

[01:04:08] Speaker 04:
The refund, the bandwidth remedy FERC chose was to put the refunds into Arkansas's costs in the bandwidth.

[01:04:15] Speaker 04:
This is to get back to the position if they have been allocated correctly.

[01:04:20] Speaker 04:
In opinion 548A, we asked for rehearing of the bandwidth decision.

[01:04:27] Speaker 04:
And in note 48, on page 1988 of the appendix, FERC says, the Louisiana,

[01:04:37] Speaker 04:
commission appears to assume that the commission found that the refunds ordered in this proceeding should be included in revised bandwidth formula inputs.

[01:04:49] Speaker 04:
That assumption is incorrect.

[01:04:52] Speaker 04:
The commission instead required that a determination should be made as to whether any overpayments were made under the bandwidth formula as a result of the incorrect accounting.

[01:05:06] Speaker 04:
Isn't that what I said?

[01:05:07] Speaker 03:
Isn't that last sentence?

[01:05:09] Speaker 04:
If any overpayments were made as a result.

[01:05:13] Speaker 03:
Isn't that last sentence you read exactly what happened?

[01:05:17] Speaker 04:
No, because the overpayments were not.

[01:05:20] Speaker 04:
The overpayments were not made as a result of the incorrect accounting.

[01:05:26] Speaker 04:
That's because of opinion 505.

[01:05:30] Speaker 04:
And we cited it in the brief.

[01:05:32] Speaker 04:
Opinion 505 says don't include the costs.

[01:05:36] Speaker 04:
which is the incorrect allocation, include the revenues.

[01:05:41] Speaker 04:
That's what they did.

[01:05:42] Speaker 04:
They only included the revenues.

[01:05:44] Speaker 04:
To reverse that, you can only take out the revenues.

[01:05:48] Speaker 04:
That's the whole issue about negative margins, the difference between the revenues and the total cost.

[01:05:54] Speaker 04:
It is incorrect to say that the incorrect allocation caused this bandwidth result.

[01:06:00] Speaker 04:
It did not, and we proved that.

[01:06:03] Speaker 04:
And there's no contrary evidence.

[01:06:06] Speaker 04:
on the burden, Your Honor, what point was it you wanted me to address there?

[01:06:13] Speaker 03:
Well, you heard what Ms.

[01:06:14] Speaker 03:
Banta said.

[01:06:14] Speaker 03:
Well, I think we're going over plowed ground here.

[01:06:21] Speaker 03:
Do you have anything more you want to say about the burden of proof?

[01:06:23] Speaker 04:
Well, I just want to say, Your Honor, in 548A, in this note, they recognize it's not the same thing.

[01:06:33] Speaker 04:
to include the refunds in the bandwidth, which is what ultimately happened, and get rid of the overpayments.

[01:06:41] Speaker 04:
They recognize that.

[01:06:42] Speaker 04:
They said, you're wrong.

[01:06:43] Speaker 04:
We didn't order that.

[01:06:45] Speaker 04:
And then they wind up doing it.

[01:06:47] Speaker 04:
We agree that they should get rid of duplicative damages.

[01:06:53] Speaker 03:
We've got your argument.

[01:06:56] Speaker 03:
We'll go to the third segment of this case.

[01:07:04] Speaker 03:
And we'll hear from Mr. Lane, I think.

[01:07:06] Speaker 03:
Is that correct?

[01:07:09] Speaker 07:
I think so, Your Honor.

[01:07:10] Speaker 07:
OK.

[01:07:13] Speaker 07:
So I just want to get back, since my argument will be about the excess bandwidth payments, I would just like to refer you, particularly Judge Tatel, to JA 2177

[01:07:32] Speaker 07:
It's actually a carryover paragraph.

[01:07:34] Speaker 07:
It's paragraph 76 of the commission's opinion 565.

[01:07:39] Speaker 07:
And it says that what they are doing is making sure the other energy operating companies don't get a windfall from the excess bandwidth payments.

[01:08:03] Speaker 05:
Okay.

[01:08:04] Speaker 05:
Mr. Lane, I think you're muted.

[01:08:12] Speaker 07:
Anyway, did you get my JA reference 21?

[01:08:14] Speaker 03:
Yeah, do I understand you agree with Ms.

[01:08:18] Speaker 03:
Banta on this point, correct?

[01:08:20] Speaker 07:
I agree with Ms.

[01:08:21] Speaker 07:
Banta on this point.

[01:08:23] Speaker 03:
You just gave me a citation, right?

[01:08:27] Speaker 03:
Okay.

[01:08:27] Speaker 07:
Where we disagree is that

[01:08:30] Speaker 07:
The question, so what the commission did was come up with a simple remedy, but the question is, did that simple remedy to get the other, if you don't mind, I'll call them the EOCs, Energy Operating Companies, just to save words.

[01:08:49] Speaker 07:
Helpful just to have it first.

[01:08:51] Speaker 07:
Pardon me?

[01:08:52] Speaker 03:
It's helpful to have the words.

[01:08:54] Speaker 07:
Okay.

[01:08:55] Speaker 03:
I'll give you 10 seconds if you use the words.

[01:08:58] Speaker 07:
Thank you.

[01:09:00] Speaker 07:
Okay, so to put it in your words, Judge Tatel, to put the other energy operating companies in the same position they would have been without a misallocation,

[01:09:17] Speaker 07:
Is that just, there's a simple, the commission picked a simple remedy, but did that abandon cost causation principles and therefore it's arbitrary and capricious.

[01:09:28] Speaker 07:
There are two groups that were burdened by the misallocation under the commission's ruling.

[01:09:34] Speaker 07:
The other energy operating companies obviously paid the higher energy costs, but the excess bandwidth payments

[01:09:44] Speaker 07:
everyone agrees were paid by Arkansas retail ratepayers.

[01:09:52] Speaker 07:
Our position at the commission was that the commission instead of, so what the commission did was take a simple remedy.

[01:10:01] Speaker 07:
They said, wait, okay, all you energy operating companies, you're getting

[01:10:08] Speaker 07:
damages from the lower energy cost that you should have paid had these opportunity sales not been misallocated.

[01:10:20] Speaker 07:
But what we're going to do is offset that with the excess bandwidth payments that you also got.

[01:10:30] Speaker 07:
You'll see in the opinions that there was $81 million of damages and they deducted 13.7 from that for the excess bandwidth payments.

[01:10:45] Speaker 07:
So in effect, Entergy Arkansas paid $67 million.

[01:10:51] Speaker 03:
As I understand it, FERC just decided, FERC didn't address this issue, correct?

[01:10:57] Speaker 03:
It said it's outside the scope of these proceedings, correct?

[01:10:59] Speaker 07:
Correct.

[01:11:00] Speaker 07:
That's what they said.

[01:11:02] Speaker 03:
Right, but you're arguing this before an appeals court, and we aren't FERC, and we defer deeply to FERC on questions like this, on its decisions and judgments regarding the scope of its own hearings.

[01:11:18] Speaker 03:
And I didn't see anything in your brief that gave us a basis for taking the very unusual step of second guessing that judgment.

[01:11:27] Speaker 03:
Can you give us one?

[01:11:28] Speaker 07:
Yes, sure.

[01:11:30] Speaker 07:
So yes.

[01:11:33] Speaker 07:
So the commission said it's outside the scope of the hearing.

[01:11:38] Speaker 07:
But in fact, it was used as an offset.

[01:11:43] Speaker 07:
So that's within the scope of the hearing.

[01:11:45] Speaker 07:
They determined in the hearing that the excess bandwidth payments equal $13.7 million.

[01:11:53] Speaker 07:
So they figured that out.

[01:11:57] Speaker 07:
Yes, the Commission said we're not asking you to recalculate the bandwidth payments.

[01:12:02] Speaker 07:
But in fact, they determined what the excess payments were.

[01:12:06] Speaker 07:
They deducted that from the damages amount.

[01:12:10] Speaker 07:
So it was in the proceeding.

[01:12:12] Speaker 07:
We don't under our view is it wasn't outside the scope of the proceeding.

[01:12:20] Speaker 07:
it was in the proceeding and what FERC should have done was just put that money, basically put it aside and not... I see.

[01:12:28] Speaker 03:
So you're saying that FERC in fact actually decided this issue, right?

[01:12:33] Speaker 03:
That's your position.

[01:12:34] Speaker 07:
Yes.

[01:12:35] Speaker 07:
They did decide it.

[01:12:36] Speaker 07:
They said it was $13.7 million is the amount of the excess payments and they deducted it

[01:12:45] Speaker 07:
And if you look through our reply brief, we discussed this extensive well not.

[01:12:52] Speaker 02:
The standard here.

[01:12:57] Speaker 02:
For us reviewing first manner of proceeding is abusive discretion isn't that the standard that we have to use.

[01:13:04] Speaker 07:
I would I we argued it would be arbitrary and capricious, Your Honor, but I don't know if we're dancing on the heads of pins.

[01:13:12] Speaker 02:
I mean, would your client?

[01:13:14] Speaker 02:
I mean, are you prejudiced by the fact that FERC may not decide this?

[01:13:18] Speaker 02:
I mean, don't you have an alternative forum to pursue these claims in federal district court?

[01:13:26] Speaker 07:
Well, the answer is.

[01:13:30] Speaker 07:
The Arkansas Commission has decided it.

[01:13:34] Speaker 07:
and we decided that the retail rate payers should not pay for it.

[01:13:39] Speaker 07:
Now Entergy Arkansas has taken us to federal district court, appealing that state court decision.

[01:13:47] Speaker 07:
Basically their argument is the FERC decision preempted us from taking that action.

[01:13:55] Speaker 07:
So yes, we are affected.

[01:14:00] Speaker 07:
we remain affected by FERC's decision.

[01:14:03] Speaker 07:
And to answer your question, yes, we think it was an abuse of discretion.

[01:14:08] Speaker 07:
It was arbitrary and capricious not to consider that that money was paid by retail rate payers and it should have gone back to them rather than being used as an offset

[01:14:24] Speaker 07:
to the damages that were to be paid by shareholders.

[01:14:28] Speaker 02:
Mr. Lane, within FERC, I mean, under your view, would FERC have to decide that question with respect to shareholders and rate payers of the other operating companies?

[01:14:41] Speaker 02:
No, no, Judge, to the extent that they were receiving a refund.

[01:14:47] Speaker 07:
No, we don't think

[01:14:51] Speaker 07:
We agree with FERC completely that the question of whether these money should go to rate payers or shareholders is a retail rate question and should be decided in this case by Arkansas Public Service Commission.

[01:15:08] Speaker 07:
But what we're saying is it was arbitrary and capricious in just looking at it from a wholesale rate point of view,

[01:15:20] Speaker 07:
to deduct that amount from the damages rather than, basically, we said it should be credited to the ratepayers.

[01:15:31] Speaker 07:
The shareholders never paid for that.

[01:15:34] Speaker 07:
Shareholders did not pay that excess.

[01:15:38] Speaker 07:
The ratepayers did.

[01:15:39] Speaker 07:
But the effect of using that offset was to give that money to the shareholders.

[01:15:48] Speaker 03:
OK.

[01:15:51] Speaker 03:
Okay, so do you have anything else?

[01:15:54] Speaker 03:
Because otherwise we'll hear from Ms.

[01:15:56] Speaker 03:
Panta again on this issue.

[01:15:57] Speaker 07:
No, I'll reserve my time, Judge Teddy.

[01:16:00] Speaker 07:
Great.

[01:16:00] Speaker 03:
Ms.

[01:16:00] Speaker 03:
Panta, do you want to?

[01:16:02] Speaker 03:
Yes.

[01:16:03] Speaker 03:
And could you just respond directly to this argument?

[01:16:06] Speaker 03:
He says that the commission in effect did decide, Mr. Lane says the commission in effect did decide this question with this $13 million amount, right?

[01:16:19] Speaker 00:
Right.

[01:16:19] Speaker 03:
And what's the answer to that?

[01:16:21] Speaker 00:
The answer is that the Commission went out of its way, and I would point in particular, I mean, in addition to the numerous places where the Commission said this is outside the scope, I would point to paragraphs 11 and 12 of Order 548A on JA 1982-1983.

[01:16:38] Speaker 00:
The Commission went beyond saying this is outside the distribution of damages between ratepayers and shareholders outside the scope.

[01:16:45] Speaker 00:
The commission has made no findings as to how this should be treated for purposes of retail rates and the commission said twice with regard to the bandwidth reductions and the responsibility ratio reallocations.

[01:17:00] Speaker 00:
I think nothing in opinion 548 prevents the Arkansas commission from pursuing

[01:17:08] Speaker 00:
the flow back of the results in an appropriate form.

[01:17:12] Speaker 03:
That was getting into my question.

[01:17:14] Speaker 03:
So how, if it had picked up on that sentence, what would it have done?

[01:17:19] Speaker 03:
What should it have done?

[01:17:22] Speaker 03:
What should who?

[01:17:24] Speaker 03:
I'm sorry.

[01:17:25] Speaker 03:
Mr. Williams, what should they have done?

[01:17:29] Speaker 03:
Did you say pursue?

[01:17:30] Speaker 03:
Was that the language you just read me?

[01:17:32] Speaker 03:
Pursue?

[01:17:33] Speaker 00:
Yes.

[01:17:34] Speaker 00:
Pursuing the language is slightly different as between paragraphs 11 and 12, but pursuing the issue of flow through.

[01:17:42] Speaker 00:
I'm sorry.

[01:17:46] Speaker 03:
I'm sorry.

[01:17:47] Speaker 03:
I didn't mean to interrupt you, but I just want to know what should have been their next step.

[01:17:52] Speaker 00:
Well, the commission left open what the appropriate forum could be, but of course, the Arkansas commission is itself a state regulator.

[01:17:59] Speaker 00:
And my understanding is they did take action.

[01:18:01] Speaker 00:
That would be one forum, as your honor noted, federal district court, I suppose could be.

[01:18:07] Speaker 00:
The commission didn't even limit what an appropriate forum could be, just that this wasn't it.

[01:18:11] Speaker 00:
The commission focused on the allocation among the operating companies because it was focusing on the system agreement.

[01:18:20] Speaker 00:
It said several times that the goal was to put the operating companies

[01:18:25] Speaker 00:
in the position they would have been if the reallocation or if the allocation had been proper and that the commission's remedy was or consideration was limited to allocation of costs among the operating companies, not allocation among classes of customers.

[01:18:42] Speaker 00:
But he left that open and it went out of its way not to say something that would be preemptive or preclude someone from making an argument.

[01:18:50] Speaker 00:
And I would note that in the district court,

[01:18:54] Speaker 00:
litigation, which the commission has not been involved in.

[01:18:57] Speaker 00:
And as far as I know, has not spoken to it in an order or anything.

[01:19:01] Speaker 00:
But because it was put in front of this court in a letter, I would note that the commission seems to agree because that the commission's repeated emphasis that it was not deciding retail treatment.

[01:19:12] Speaker 00:
and that that should be relevant to the preemptive effect of these orders because that's exactly the argument that Arkansas has made in moving to dismiss.

[01:19:21] Speaker 02:
Ms.

[01:19:21] Speaker 02:
Banta, it's not FERC's position that they have exclusive jurisdiction over this, I'm assuming, because they said they're making no findings and it's outside the scope of the proceedings.

[01:19:32] Speaker 00:
That's right.

[01:19:33] Speaker 00:
I think in the appropriate case, there is case law that if the commission sets a rate,

[01:19:40] Speaker 00:
or sets a wholesale allocation.

[01:19:43] Speaker 00:
That does by virtue of case law.

[01:19:46] Speaker 00:
have a preemptive effect on state regulators.

[01:19:50] Speaker 00:
But here it's a damages calculation for a filed rate violation and the commission allocated among, it would not be open for one of the state regulators to decide that the damages should have been allocated differently and that one state really should have gotten more than the other.

[01:20:08] Speaker 00:
That would be precluded by the commission's determination here.

[01:20:12] Speaker 00:
But as to how the damages paid or received residing with any one of the operating companies should be treated by that company's retail regulator or regulators, the commission expressly disavowed in pretty categorical language.

[01:20:34] Speaker 00:
I think that the connection went pretty far in.

[01:20:37] Speaker 02:
So FERC's view is that that excluded issue is more like an issue involving retail regulation, right?

[01:20:44] Speaker 02:
The question of whether you can have the pass-through.

[01:20:46] Speaker 00:
Yeah, because it is a question here within Entry to Arkansas.

[01:20:55] Speaker 00:
Entry to Arkansas had to pay a certain amount.

[01:20:58] Speaker 00:
Those damages were netted out by a certain amount.

[01:21:00] Speaker 00:
How that

[01:21:01] Speaker 00:
will or should affect Arkansas's retail rate payers is not something the commission was deciding here.

[01:21:07] Speaker 00:
And again, had it set a rate in this case, I do think under the case law, you know, that Nantahala and Mississippi, I think, entered into Louisiana, then it does bind the hands of the state regulators to some degree.

[01:21:24] Speaker 00:
But this

[01:21:25] Speaker 00:
Again, and the commission said in several places, although this complaint was brought under section 206, the commission did not set a rate.

[01:21:32] Speaker 00:
It didn't change the system agreement at all.

[01:21:36] Speaker 00:
It said there was a violation of the system agreement and damages are appropriate for it.

[01:21:42] Speaker 00:
The commission didn't go into all that.

[01:21:43] Speaker 00:
It was much simpler.

[01:21:44] Speaker 00:
This is outside the scope and we're not saying anything that prevents you from doing this in another form.

[01:21:52] Speaker 00:
Thank you.

[01:21:53] Speaker 00:
So if the commission has

[01:21:54] Speaker 00:
No further questions.

[01:21:55] Speaker 00:
I'll, I'll give back my time then.

[01:21:59] Speaker 03:
Judge Wilkins.

[01:22:01] Speaker 03:
Okay.

[01:22:01] Speaker 03:
Well, thank you.

[01:22:02] Speaker 03:
Thank you, Mr. Lane.

[01:22:04] Speaker 03:
I think you had two minutes.

[01:22:07] Speaker 07:
Thank you, Judge Tatel.

[01:22:08] Speaker 07:
Just to answer your question, Judge Tatel, we had two options about what we could do about the commission's order.

[01:22:16] Speaker 07:
Under the FPA, we can only appeal it to you.

[01:22:20] Speaker 07:
So we did appeal it to you.

[01:22:23] Speaker 07:
And Entergy Arkansas came to the Arkansas Commission with a retail rate filing requesting that it recover not only the excess bandwidth damages, but the entire amount of the damages.

[01:22:44] Speaker 07:
I say we the Arkansas Commission.

[01:22:47] Speaker 03:
Right, right?

[01:22:50] Speaker 07:
No, it didn't agree with our entered the Arkansas agreed that the retail ratepayers should that energy Arkansas should refund the 13.7 million in excess bandwidth.

[01:23:03] Speaker 07:
And that the retail ratepayers are not liable for the damages and.

[01:23:10] Speaker 03:
But isn't that exactly what the mission contemplated would happen?

[01:23:18] Speaker 03:
By saying this is just a question, this is just a retail question.

[01:23:23] Speaker 03:
It's not something we're going to decide.

[01:23:26] Speaker 03:
I mean, you saw the language Ms.

[01:23:28] Speaker 03:
Banta quoted from the decision.

[01:23:31] Speaker 07:
Yes, I agree.

[01:23:33] Speaker 07:
But we didn't raise this as a retail rate question.

[01:23:37] Speaker 07:
We raised this as a wholesale rate issue.

[01:23:42] Speaker 07:
What damages should be paid in the wholesale under the system agreement?

[01:23:47] Speaker 07:
And what we were saying that all the damages should have been paid by the shareholders.

[01:23:52] Speaker 07:
There should have been no offset

[01:23:55] Speaker 07:
for the excess bandwidth payments, which were paid by retail rate payers.

[01:24:01] Speaker 07:
That's what we're saying is wrong with the commission's decision.

[01:24:05] Speaker 07:
Not that we didn't have other options.

[01:24:07] Speaker 07:
We had other options.

[01:24:09] Speaker 07:
We've taken them.

[01:24:10] Speaker 07:
We're in district court now fighting with EnterD Arkansas about the state retail rate decision.

[01:24:19] Speaker 07:
So yes, we did what the commission said, but we don't think that makes what the commission did

[01:24:25] Speaker 07:
Right.

[01:24:27] Speaker 03:
Well, thank you.

[01:24:27] Speaker 03:
We have your argument.

[01:24:30] Speaker 03:
Thank you all for your arguments this morning.

[01:24:32] Speaker 03:
The case is submitted.