[00:00:01] Speaker 01:
Case number 19-11990, International Transmission for Petitioner versus the Federal Energy Regulatory Commission.

[00:00:09] Speaker 01:
Mr. Street for Petitioners, Ms.

[00:00:11] Speaker 01:
Banta for the respondent.

[00:00:16] Speaker 05:
Good morning, counsel.

[00:00:18] Speaker 00:
Good morning.

[00:00:21] Speaker 00:
May it please the court.

[00:00:23] Speaker 00:
In this case, FERC committed two cardinal sins of administrative law.

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First, it changed its policy on an important issue without acknowledging the change and giving reasons for the new policy.

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Indeed, FERC still doesn't admit that it dramatically changed the test for assessing it.

[00:00:42] Speaker 03:
Well, that is because they are contesting the proposition that they had established a policy which they did not articulate a departure from.

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They're saying this is a case-by-case fact-based determination, and we had made

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particular fact determined in a couple of cases, but in other cases, in particular facts, there is no policy that we're violating.

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Is that not what they're saying?

[00:01:05] Speaker 00:
Yes, I think that's a fair understanding of their argument, Your Honor.

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But this case, this court in West Stepford made very clear that merely invoking the idea of case by case adjudication is not a get out of jail free card for adopting a new test without acknowledging it.

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or for treating like companies or like cases in the same way.

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And that is what FERC has done in this case.

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And I think all we need to see to do that is, all we need to look at to understand that is the FERC's decision in the Neat New York and Grid Alliance cases.

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This is not a situation where FERC merely looked at different facts in different cases.

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Instead, in the Neat New York case, FERC was faced with a company

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that was a transmission subsidiary of a larger corporate company that held massive amounts of affiliated generation.

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And if you look at paragraph 51 in NEET New York, where the commission lays out its analysis, the commission says, NEET New York has demonstrated its relationship to affiliated market participants will not affect the integrity of NEET's investment planning, capital formation, and investment processes.

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So it says,

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Here's the Order 679 criteria.

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Here's the test that we're looking at as a whole.

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The very next sentence says several facts lead us to this conclusion.

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So here are the facts that are dispositive as to when the Order 679 independence criteria are met.

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All of those next two or three sentences talk about the location and the nature of the affiliated generation assets.

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Because they were all out, most of them were outside of the ISO or the ones within the ISO were small or tied up in long term contracts.

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The commission said the order 679 criteria were met, but the commission.

[00:03:03] Speaker 04:
Why why you talk about it as.

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changing the test, because I understand your argument to be, even if it's a totality of the circumstances test, that the agency still has an obligation to apply it in a consistent way.

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And so it seems like there's two levels of argument.

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One is whether they've somehow instantiated a new test.

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But putting that to the side for a moment,

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Assuming that all factors are potentially in play, why isn't it distinction enough that the record in Neat New York and Grid Alliance didn't reflect some of the kinds of information that the commission relied on here with regard to ITC?

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And there just weren't direct challenges to the decisional independence of the companies at issue there.

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There's no inconsistency where here the commission did have information that caused it to be concerned about ITC driving, planning, and making operational decisions and affecting affiliated generators that are kind of evidence that wasn't present in those other cases.

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So I think I have three responses to that, Your Honor.

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First of all, I think you're correct in thinking of this as a two-step argument.

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we do firmly believe that the commission adopted a new test or a new policy.

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But even if you believe that the commission is consistently applying the same totality of the circumstances test or whatever you would like to call it, the commission still has to act consistently in the way it applies that new test across cases.

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And what we have here, even assuming the commission validly used this corporate structure test that it applied to the ITC companies,

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It has not demonstrated that the ITC companies are less structurally independent than the companies that issue in Neat New York and in Grid Alliance.

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And in fact, on the record that we have, the ITC companies are not less independent.

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They're, in fact, at least as independent, if not more independent.

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So I take your honor's point that perhaps those issues were not as vigorously litigated in Neat New York and in Grid Alliance.

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I would, in response to that point, the court to Southwest Airlines and Baltimore Gas and Electric, which says, regardless of how vigorously an issue is litigated, the commission's approach to an issue sets the baseline from which the commission has to make reasonable decisions in the future.

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Here, the commission did square up to the issue of how to evaluate the Order 679 criteria in Neat New York and in Grid Alliance.

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To your point, your honor, even though perhaps it wasn't vigorously litigated all the structural issues, the commission had on the face of its orders in those cases, evidence that those transmission subsidiaries were part of a larger corporate family that owned a massive amounts of affiliated generation throughout the United States.

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And yet the commission looked only at the location and the nature of those assets.

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It also looked there at a factor that's not present here, which is that the market capacity in those cases was pre-committed under long-term contracts.

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And I think that played a significant role in how much it thought that there was a threat to independence.

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What's your response to that?

[00:06:43] Speaker 00:
What your honor you're correct, but only to the extent that the commission in those cases look at.

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The commitment of market capacity as to the affiliated generation within the same as the transmission company outside of the, it did not look at the commitment at all.

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It just said those assets are far distant from the transmission company.

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So, in our case.

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ITC companies have no affiliated generation within the ISO so Distinguished by saying just outside close enough for mutual impact.

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So they are making a distinction.

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You may be persuaded by it, but they're saying it's it's It's closer in

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Well, FERC did not make that distinction in the orders.

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It may have hinted at that distinction in its appellate brief, but I think that nicely gets to the point of even if the court believes FERC is applying this corporate structure test properly, it's valid in terms of the APA, then the burden was on FERC to show why the ITC companies were less independent under that corporate structure test

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than the companies in NEAT New York and Grid Alliance.

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And the same would go for your honor's point, which again, FERC didn't raise any orders about generation just outside of the ISO.

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So here, just taking those points, Siri Adam, because I think, again, this is a second level argument, but I think it is a clear, clearly persuasive one for our clients.

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FERC was concerned in the ITC company's case

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that the ITC companies had become less independent as a result of the merger and that it gave a couple examples.

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One was that the ITC companies had a minority representation on their board of directors from their ultimate parent companies.

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But the commission did not compare that with the companies in NEAT New York and Grid Alliance.

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If it had made that comparison,

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It would have found that those companies either did not have an independent board at all, or they had a board that was majority dominated by the ultimate parent company.

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The commission also said that the ITC companies had become less independent because they could not issue their own common stock.

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They had to look to the ultimate parent company to some extent for financing.

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But again, the commission did not compare that with the companies in New York and grid lines.

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And if it had, it would have found that those companies also could not issue common stock.

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So in on and on through each step of the corporate structure analysis that the commission made in the same is also true of the postdoc rationalization about

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affiliated generalization just outside of the ISO.

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If it had made that comparison, it would have looked at and realized that NEAT New York also had 30,000 plus megawatts in the very next interconnection.

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So if we agree with you that the failure to grapple with these factors renders the commission's decision in this case arbitrary, the remedy would be to remand for the commission to grapple with these issues

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a new and do a better job distinguishing?

[00:10:03] Speaker 00:
The remedy would be vacature and a remand to grapple with those issues.

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And under both Southwest Airlines and West Stepford, where you had a similar situation where it looked like FERC was shifting the test, or at the very least had not distinguished on its facts the previous cases under its new test, the court in those cases vacated the orders.

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And the reason is because the Commission is not merely having to supply some additional reasoning for something that looks like it can ultimately be sustained.

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As you said, Your Honor, they have to grapple with these previous cases where the Commission found companies that were similarly situated to be fully independent and worthy of a 50-point basis point adder.

[00:10:50] Speaker 05:
Go ahead.

[00:10:52] Speaker 05:
Excuse me.

[00:10:54] Speaker 00:
Not at all.

[00:10:55] Speaker 00:
Go ahead, Your Honor.

[00:10:56] Speaker 05:
So basically, in seeking review by the agency, you argued that the factual situation here was identical to the factual situations that the commission addressed in Neat New York, and therefore,

[00:11:26] Speaker 05:
its decision was arbitrary and capricious.

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I didn't quite understand that to be your argument that the corporate structure, board of directors, et cetera, was the same.

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And to the extent it wasn't, then FERC comes back and says, look, we have a lot of precedent.

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We set an order 679.

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We weren't going to set up a test.

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We were going to do this case by case.

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And we have looked at,

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the facts before us in this case.

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And it's impossible, says Ferck essentially, to think that clients were in the same posture after the merger as they were before.

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And so what is the effect of that on the level of independence it has?

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In other words, I didn't take you to argue that

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You know, there are hundreds of cases out there, and FERC has to line up each of them and determine how many members of the board represent certain interests, et cetera.

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But rather that there was a change here.

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And what was the change as to those affected by the merger?

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So, Your Honor, we made

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I think two essential arguments to the Commission.

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The first is that with respect to Neat New York and Gridliance, we were more independent than those companies even after the merger.

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Whether you looked at it in terms of whether we had generation affiliates within the ISO, which we do not, or whether you looked at it in terms of corporate structure, we made both of those arguments below.

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And again, you're absolutely correct, Your Honor, to say something changed with this merger.

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But that itself does not answer the question.

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That just tees up the question.

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The question is, under what test did these companies become less independent?

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And under that test, did they become less independent than the companies like Meet New York and Grid Alliance that were found to be fully independent and warrant a 50-point

[00:13:52] Speaker 05:
So what I'm trying to get at is I don't know what the word grapple means, but we're talking about reason decision-making.

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And at least before the merger, there was one set of circumstances.

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After the merger, the agency says, you know, the 50-point adder was inappropriate.

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Circumstances had changed.

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And you're saying essentially FERC had to match up point by point.

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I'm just trying to understand how far reason decision making has to go.

[00:14:35] Speaker 00:
Well, first of all, reason decision making has to apply the same basic test to like companies.

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And when you're talking about ITC post merger,

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Yes, it's different than ITC pre-merger, but it's very similar to the way the companies in NEET New York and Gridliance already were.

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The companies in those cases were already transmission subsidiaries of a larger corporate family that owned affiliated generation.

[00:15:03] Speaker 05:
At a minimum, the agency had to acknowledge that and say why it wasn't reaching the same conclusion here, that it was not enough to say there had been a change as a result of the merger.

[00:15:17] Speaker 00:
Absolutely.

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At a minimum, the commission had to do two things.

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First of all, it had to explain why it's applying a test that looks at corporate structure here as opposed to a test that looks at the affiliated generation's location and nature in a facially similar case in New York and gridlines.

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But even if you get past that and you think the commission is validly applying a corporate structure-focused test here, then it has to show why the corporate structure of ITC post-merger

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is less independent than the corporate structure of Gridliance and Neat New York, when both of them are transmission subsidiaries within a larger corporate family.

[00:15:57] Speaker 04:
So here I have a question that has to do with the different procedural postures of the commission decisions in those two cases from the decision here.

[00:16:07] Speaker 04:
In those cases, the commission decision is on the basis of the application of those transcos for the adder.

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And it's looking at what it thinks are the most

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significant sort of big picture independence threats and making a decision.

[00:16:29] Speaker 04:
And there aren't rate payers and they're challenging it, as I understand, or raising the kinds of issues that the rate payers here are making.

[00:16:37] Speaker 04:
So yeah, the record could have been much more detailed.

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It could have gone into these questions, but this is in the context of sort of the initial eligibility determination.

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And so too, ITC had made an application and got the adder.

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Here we have a more, so time has passed, maybe the commission is learning more about the kinds of things that affect independence.

[00:17:06] Speaker 04:
It may be, I mean, I gather that the commission has abandoned

[00:17:10] Speaker 04:
or is preparing to abandon this this program altogether, but so it's it's learning more and here it has a challenge and evidence is brought before it from rate payers who object.

[00:17:26] Speaker 04:
So there's going to be you know so does it does it mean if it's your arbitrary and capricious challenge mean that

[00:17:35] Speaker 04:
that the commission can't evolve in the level of rigor and inquiry that it applies because in a different posture, in the initial qualification posture where it wasn't really contested, it was satisfied with a different set of information.

[00:17:59] Speaker 00:
No, Your Honor, we're not tying the commission's hands here at all.

[00:18:04] Speaker 00:
I, and I think it's, it's slightly overstated to say that the issues were not contested in those cases rate payers came in and contest contested the applications for the adders.

[00:18:14] Speaker 00:
And in fact, specifically raised at least in New York specifically raised the issue of affiliation with a parent company that own generation assets.

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And the commission fully grappled with this, but I think, first of all, it's important to answer your question directly, which is, no, we are not saying that the commission cannot now adopt a test that looks more rigorously at corporate structure when that's raised and that's more vigorously litigated in this case.

[00:18:42] Speaker 00:
Absolutely, it can do that, but it has to openly acknowledge

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Well, in New York, we looked at a similar situation of a trans co within a larger corporate family.

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We looked only at the location and nature of generation.

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We've come to see the error of our ways.

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We think it makes sense now to look at corporate structure to assess the Order 679 criteria.

[00:19:02] Speaker 00:
And here's why that's consistent with Order 679.

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And here's why that's consistent with the statute.

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That way, regulated parties know going forward what the test is.

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A regulated party in the

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position of the IPC companies would have looked at New York and Grid Lions and said, well, we're just like those companies.

[00:19:21] Speaker 04:
What's your authority for saying that it has to do that, especially given the different procedural posture that the two determinations arose?

[00:19:32] Speaker 04:
And why does it have to?

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I mean, as Judge Rogers said, there are countless cases

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It has to, what, fess up in a way it didn't?

[00:19:48] Speaker 04:
Or what was missing here?

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It grappled with those cases.

[00:19:53] Speaker 00:
Well, OK, let me answer that in three parts, Your Honor.

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First of all, these procedural postures are not as different, I think, as you're suggesting.

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In all of these cases, the Commission had to decide whether a trans co within a larger corporate family was entitled to a particular level of adder.

[00:20:13] Speaker 00:
And in all those cases, protesters came in and said, no, they're not.

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In all of those cases, FERC said, here's our order 679 criteria, investment planning, capital formation, investment processes, and business structure.

[00:20:26] Speaker 00:
In one case, it said, we're going to assess that through looking at the location and size of the generation assets.

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In another case, it says, we're not going to look at that at all.

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We're just going to look at corporate structure.

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So if the commission is going to make that sort of a shift,

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It would not need to give a lot of explanation if these cases were clearly different on their facts.

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It might have just been able to say this is a different case and we're applying a different test.

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But where you have a similar corporate structure on its face, it had to explain its work and acknowledge that it was making a change and explain why that change made sense.

[00:21:01] Speaker 00:
But again, even if

[00:21:04] Speaker 00:
The commission had validly adopted a corporate structure test.

[00:21:08] Speaker 00:
It still had the duty to show why the ITC companies were less structurally independent than these other companies.

[00:21:15] Speaker 00:
And the authority for that is just basic administrative law, Southwest Airlines, West Stepford.

[00:21:20] Speaker 00:
All of those cases say that regardless of whether there's 100 cases or more like three or four cases, which is what we think is an issue really here, the commission has to show why light

[00:21:32] Speaker 00:
cases are being treated differently.

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If the commission wants to distinguish a case on its facts, it has to show why those facts are material and why they're different in this case.

[00:21:42] Speaker 00:
And that's what it did not do here.

[00:21:44] Speaker 03:
I hate to extend when we're well over time already, but if you prevail on this

[00:21:54] Speaker 03:
No, because if the court rules for us on our first issue, it will vacate and remand

[00:22:10] Speaker 00:
And the commission will have to decide what its test is.

[00:22:13] Speaker 00:
And I'm sure this time it will at least go through the motions of making the right finding.

[00:22:19] Speaker 00:
But again, the commission, this is not a foreordained outcome one way or the other by any stretch of the imagination.

[00:22:25] Speaker 00:
Because even if it applies the corporate structure test, it's going to have to show on a granular level why it's treating the ITC companies less favorably.

[00:22:36] Speaker 00:
It tried to shift the burden to the petitioners here, but that was inappropriate.

[00:22:40] Speaker 00:
under both the rule of both the fact that this is a section 206 complaint where it was the commission's burden and under administrative law of treating like the companies they do have that burden you guys with the one question i have about that thank you just one one final question on that on the um whether the issue was contested in the other cases i don't see it contested in grid lines and there is a sentence in uh in next era

[00:23:05] Speaker 04:
that refers to what sort of looks like an independence challenge, but the intervenors say that that really was about whether NextEra had the small scale of a startup, not whether affiliation with generators compromised its independence.

[00:23:23] Speaker 04:
And so I just think that if they're not, if FERC is not changing the,

[00:23:30] Speaker 04:
analysis, and if the question is just is it arbitrary and capricious and failing to distinguish these cases that the less intensively developed record makes it hard to say that there's a conflict.

[00:23:52] Speaker 00:
So we agree that it was not as vigorously litigated in those cases.

[00:23:56] Speaker 00:
We haven't contested that point.

[00:23:57] Speaker 00:
What we have said is that FERC in those cases did evaluate what its Order 679 criteria was, and it did state what its test was for satisfying those criteria.

[00:24:09] Speaker 00:
So we very strongly believe, as you know, FERC changed its analysis.

[00:24:13] Speaker 00:
That's our first position.

[00:24:14] Speaker 00:
But even if FERC did not invalidly adopt its new test,

[00:24:19] Speaker 00:
The fact that those issues weren't as vigorously litigated in those previous cases doesn't diminish in any way first duty under section 206 and under administrative law to show why under its new test, the companies are less independent.

[00:24:38] Speaker 00:
than Neat New York or Gridliance.

[00:24:41] Speaker 00:
If it had some other reason, if it wanted to say, no, we're dropping everybody down to 25 now, that would be something it could say.

[00:24:47] Speaker 00:
But what it said is, we find the ITC companies to be less independent than the companies in Neat New York and Gridliance under our new test.

[00:24:56] Speaker 00:
But it never compared.

[00:24:57] Speaker 00:
It's never compared its board.

[00:24:58] Speaker 00:
It never compared its ability to issue common stock.

[00:25:01] Speaker 00:
And if you look at Baltimore Gas and Electric and Southwest Airlines, which were cases where

[00:25:06] Speaker 00:
The commission told this court, well, in the previous precedent, those issues weren't litigated.

[00:25:12] Speaker 00:
This court said that doesn't matter.

[00:25:13] Speaker 00:
FERC set up a policy or a test.

[00:25:18] Speaker 00:
And when FERC comes to the next case, it has to either adopt a new test or it has to distinguish the cases that it previously addressed as they would be applied under its new test.

[00:25:30] Speaker 00:
So FERC cannot just say,

[00:25:32] Speaker 00:
The issue wasn't as vigorously litigated.

[00:25:34] Speaker 00:
And my last point here, I know I'm pressing the court's patience, but very, very last minor point on that question.

[00:25:41] Speaker 00:
And that is, if FERC had set even that point down in the record, it would have had a closer case.

[00:25:48] Speaker 00:
If it had said, in Neat New York and Grid Alliance, these things weren't really contested.

[00:25:55] Speaker 00:
So we really only looked at the geographic location of the affiliated assets.

[00:25:59] Speaker 00:
But here we realize the corporate structure is a lot more important and we should have looked at that and meet New York and grid lines.

[00:26:06] Speaker 00:
Now we're looking at it.

[00:26:07] Speaker 00:
Now we have this new test.

[00:26:09] Speaker 00:
Here's why it's consistent with the statute and the regulation.

[00:26:12] Speaker 00:
If they had set that out, it would be a closer case.

[00:26:15] Speaker 00:
We probably would still be making this argument.

[00:26:17] Speaker 00:
But they didn't.

[00:26:20] Speaker 00:
They didn't make that finding or explanation in their orders below.

[00:26:24] Speaker 00:
They were making that solely on appeal.

[00:26:26] Speaker 05:
All right, why don't we move from council?

[00:26:30] Speaker 00:
Good morning.

[00:26:37] Speaker 02:
Carol Banta for the commission.

[00:26:42] Speaker 02:
To start, the commission is not arguing that it made a new test and met it here.

[00:26:50] Speaker 02:
And it didn't in these orders.

[00:26:51] Speaker 02:
This was always the test.

[00:26:53] Speaker 02:
It was the test set forth in Order 679, which was itself derived

[00:26:58] Speaker 02:
from standards that had been applied to the ITC companies themselves.

[00:27:04] Speaker 02:
They were held up as the gold standard in 679.

[00:27:06] Speaker 02:
So the issues of corporate structure and governance were always an issue or were always part of the test.

[00:27:12] Speaker 02:
There are different factual ways to make the case on the record in an individual case.

[00:27:18] Speaker 02:
And that is what we have here.

[00:27:20] Speaker 02:
In Neat New York and in Grid Alliance, the commission said, based on the record here,

[00:27:26] Speaker 02:
This is what we're looking at.

[00:27:28] Speaker 02:
This is what people have raised.

[00:27:30] Speaker 03:
And it found that- Did you explain in this case how it was different from Newton, New York and grid line?

[00:27:41] Speaker 02:
Well, we didn't say it was different because it's the same test, but we did address the record that was here that wasn't there.

[00:27:47] Speaker 02:
So for instance, in rehearing order paragraph 20, we say evidence in this record.

[00:27:53] Speaker 02:
And I would add in this case,

[00:27:56] Speaker 02:
parties on both sides brought in arguments about the corporate structure and governance in a way that just hadn't been done in the previous cases.

[00:28:05] Speaker 02:
Not only did the complainants raise issues about the ITC companies being less independent compared to their previous selves, but the ITC companies brought in their own evidence to try to make the point, no, our corporate structure and governance still maintain the same independence.

[00:28:26] Speaker 02:
Well, the commission looked at the evidence and was not persuaded by that.

[00:28:29] Speaker 02:
It said, yes, you've retained some level of independence.

[00:28:32] Speaker 03:
The commission said that it made the comparison with this company pre-alteration corporate structure.

[00:28:40] Speaker 03:
But nowhere did the commission seem to compare it with two what look like very similar cases.

[00:28:46] Speaker 03:
And you're giving us distinction now, but I don't know that I find that the commission did that in the record.

[00:28:53] Speaker 02:
Well, because I don't think that the commission found

[00:28:56] Speaker 03:
those cases to be um i think they just found the records in that case to be something different so it looked at what did it found in those cases and then even in the re-hearing even though you make the references you don't really commission in the re-hearing does not tell us about the distinctions you're not talking about what you should shouldn't it at least have done so there when you knew what the issue was the the commission

[00:29:24] Speaker 02:
considering all different aspects of what can be considered on the facts of each case, it did look at the geographical distance among other things.

[00:29:35] Speaker 02:
In the initial order, it just didn't find that to be the facts that were as important, not as important, but that showed the lesser independence here.

[00:29:46] Speaker 02:
We just had more evidence here.

[00:29:48] Speaker 02:
And we still don't have evidence in this record or the previous record that

[00:29:54] Speaker 02:
the NextEra and GridLiance corporate structures were.

[00:29:58] Speaker 03:
Mr. Treat says that the commission did have the evidence as to what the corporate structures were in the prior, at least in New York, what the corporate structure was there, maybe in both of them.

[00:30:11] Speaker 03:
They had that evidence before them, didn't they?

[00:30:16] Speaker 03:
They would not have it before them and be trying to make this determination.

[00:30:22] Speaker 03:
Don't believe that they did have that evidence, even the things that that They are taking a decision on the independence of the entity without having the corporate structure before them.

[00:30:38] Speaker 02:
Well, because the corporate structure isn't the absolute be-all end-all of the test.

[00:30:43] Speaker 02:
It's one of many aspects under Order 679 gave parties a great deal of flexibility to make the case for their independence in different ways and looked at criteria that the commission would look at.

[00:30:55] Speaker 02:
It didn't set forth a checklist of every item that you must show.

[00:30:59] Speaker 02:
So different entities... Go ahead, finish your answer.

[00:31:04] Speaker 04:
I'm sorry, I didn't mean to...

[00:31:06] Speaker 02:
I was only going to say that the dozen or so different entities that have come in have come in with different kinds of evidence.

[00:31:13] Speaker 02:
And sometimes there are issues of corporate structure and sometimes it's more focused with a small standalone company or standalone subsidiary about where it is.

[00:31:23] Speaker 02:
And it does to some extent depend on the parties on both sides of each case to compile

[00:31:31] Speaker 02:
the record that's before the commission.

[00:31:33] Speaker 04:
So here's my question, Ms.

[00:31:35] Speaker 04:
Banta.

[00:31:36] Speaker 04:
The commission relies in part on the lack of dispute over independence in grid lines and next era.

[00:31:44] Speaker 04:
But in the posture of applying for the incentive in the first place, wasn't it incumbent on the commission

[00:31:53] Speaker 04:
whether or not anyone else raised the question to make sure that it had all the information on all aspects of potential relevance.

[00:32:02] Speaker 04:
So, I mean, it seems like the commission, first of all, the burden is clearly on the commission to satisfy itself as to independence.

[00:32:11] Speaker 04:
And the commission in that posture has tremendous leverage to ask for the transmission to explain how

[00:32:22] Speaker 04:
you know, and to really probe any internal information it wants about corporate governance, internal structure, policy.

[00:32:29] Speaker 04:
So, you know, I mean, I was, when I was asking Mr. Street, I was saying maybe that cuts against him, but it can also be seen to cut against the commission.

[00:32:41] Speaker 02:
Well, what I would say, first of all, we are not arguing that it was not, that independence was not disputed.

[00:32:47] Speaker 02:
It's not like Baltimore Gas and Electric or to some extent San Diego,

[00:32:52] Speaker 02:
gas and electric, where the abandonment incentive had been involved in a number of cases and often hadn't been disputed as the timing.

[00:33:01] Speaker 02:
There was a dispute about independence in both, next era especially, grid lines somewhat less, but next era.

[00:33:09] Speaker 02:
It's just that the concerns that were raised

[00:33:12] Speaker 02:
by the parties that raised the disputed independence developed a certain record, which is what the commission looked at granting the incentive.

[00:33:22] Speaker 04:
That's what I don't understand.

[00:33:23] Speaker 04:
The commission is the decider, you know, to satisfy itself that there's independence.

[00:33:30] Speaker 04:
And so I guess the question is, if the commission was able to ask everything of relevance and only asked about location and size of

[00:33:42] Speaker 04:
of the affiliated market participants there, then why isn't it absolutely within ITC's prerogative to say, well, that's what they care about?

[00:33:58] Speaker 02:
I mean, they could and did bring in that aspect of the test, but they themselves also brought in other things as did the complainants.

[00:34:08] Speaker 02:
But just to step back for a second, the way this

[00:34:11] Speaker 02:
plays out in many of these cases.

[00:34:13] Speaker 02:
And this one, you're right, it is procedurally different because it is a complaint that against their existing adder having been given on certain premise of independence.

[00:34:25] Speaker 02:
In many of these cases, it's a lot like the cases that we discussed in the San Diego case where parties came in with a

[00:34:35] Speaker 02:
an array of incentives under Order 679, that they were asking for a variety of different rate incentives, the abandonment incentive in many cases, sometimes a risk-based incentive, and they came in with all different incentives and put forth their Section 205 showing of why they believe they qualified for it.

[00:34:54] Speaker 02:
And then there was a lot involved in these cases, and the other parties came in and disputed the various aspects that they thought were unwarranted.

[00:35:04] Speaker 02:
So when you have a lot of flexibility in this very case-by-case analysis, I think Judge Williams, as he often did, had a pretty perfect analogy for this in his dissent in Baltimore Gas, about the past vermicelli of agency cases and the litigant in the next case being invited to take a deep dive into the record of some past case that had a bunch of issues to try to say, well, these facts would have been different, and they're different here.

[00:35:34] Speaker 02:
But even here, when ITC companies said, no, wait, we are less independent than next era, the commission having found on the record here that they were less independent than their former selves, that set the standard under Order 679, said, well, how do you mean you're less independent?

[00:35:52] Speaker 02:
And that record was not made, or I mean, more independent.

[00:35:56] Speaker 02:
That record was not made.

[00:35:59] Speaker 02:
I'm sorry?

[00:36:00] Speaker 03:
More independent.

[00:36:01] Speaker 03:
You had said less independent, but I think you meant more independent.

[00:36:04] Speaker 02:
I absolutely did, yes.

[00:36:05] Speaker 02:
Yes, I did.

[00:36:06] Speaker 03:
You startled me for a moment there.

[00:36:10] Speaker 02:
Okay, yeah, I apologize for that.

[00:36:15] Speaker 02:
Yes, when they tried to say they were more independent than next era, it's not that the Commission was putting the burden on them, it's that the Commission had found on the facts in this record that they were less independent

[00:36:27] Speaker 02:
than their previous iteration, which had been not only deserving of the full adder, but again, the standard that was set for everyone.

[00:36:37] Speaker 02:
And if you want to raise a counter argument to the finding the commission has already made, we need a record to do that.

[00:36:44] Speaker 02:
And we didn't have that.

[00:36:45] Speaker 02:
I don't think we even have it now, even with items raised for the first time on appeal, but the commission didn't have it.

[00:36:53] Speaker 04:
Yeah, so the question is not whether they're less independent, or whether they can show they're more independent, but whether they are as independent as the companies in NextEra and GridLiance.

[00:37:07] Speaker 04:
And so it's a little bit conflating it to say, yes, it's maybe less independent than it was, than ITC was.

[00:37:14] Speaker 04:
But really the question is, is it right to line it up against NextEra and GridLiance?

[00:37:20] Speaker 04:
And if it's right,

[00:37:22] Speaker 04:
then have you satisfactorily in this record distinguished the considerations in those cases from the considerations here?

[00:37:34] Speaker 02:
And I think because of the records in the different cases, we are trying to compare apples and oranges.

[00:37:39] Speaker 02:
We don't have that record

[00:37:44] Speaker 02:
such a record about corporate governance.

[00:37:47] Speaker 04:
Why isn't that on your head?

[00:37:51] Speaker 04:
Isn't that your fault?

[00:37:53] Speaker 04:
You had every prerogative to develop and request whatever record you wanted.

[00:38:03] Speaker 02:
I think in these incentive cases when companies come in asking for a lot of different incentives and their

[00:38:12] Speaker 02:
disputed and litigated by a lot of parties, the record will be developed in different ways.

[00:38:19] Speaker 02:
And I don't know.

[00:38:21] Speaker 03:
I suggest that you get the corporate structure in each of those records.

[00:38:24] Speaker 03:
I haven't reviewed it to find out, but it seems impossible that the Commission would be passing on this question of independence without having the corporate structure in the record.

[00:38:34] Speaker 03:
That just doesn't ring credible counsel.

[00:38:38] Speaker 02:
I mean, the commission always knows that they're a standalone company or a standalone subsidiary the actual The evidence about involvement in the different boards and and the decision making.

[00:38:52] Speaker 02:
I don't know that we always have the record about that if someone hasn't raised the concern.

[00:38:57] Speaker 04:
So have any third parties raised the kinds of petitions with respect to gridlines in Next Era that are raised here with respect to ITC?

[00:39:10] Speaker 04:
And is part of your position that if concerns develop that that should occur?

[00:39:17] Speaker 02:
I think that's right.

[00:39:18] Speaker 02:
I know that there's been some concern, including expressed by the dissent in this case, about NextEra.

[00:39:25] Speaker 02:
I don't know how much of that has to do with actual involvement in corporate governance and the rights to control that raise concerns here.

[00:39:36] Speaker 02:
I think it's because NextEra is a very large company with a lot of subsidiaries.

[00:39:40] Speaker 02:
And so some parties have raised concerns that just it's

[00:39:47] Speaker 02:
size and reach raises concerns.

[00:39:51] Speaker 04:
But there's no section 206 analogous challenge to the adder with respect to grid lines or New York.

[00:40:00] Speaker 02:
Certainly not that I'm aware.

[00:40:01] Speaker 02:
And your honor did make reference to the notice of proposed rulemaking from earlier this year, which appears on its face to stem from some concerns that subsidiaries of large

[00:40:17] Speaker 02:
companies that have a lot of subsidiaries in different markets with ITC companies and NextEra both being mentioned are perhaps behind that reconsideration, but I'm not aware of a 206.

[00:40:30] Speaker 02:
But if that said, if a party came in with that kind of concern about the corporate governance of NextEra,

[00:40:39] Speaker 02:
I think that the commission in such a 206 proceeding would absolutely look at the record before it and probably be looking at this case as well.

[00:40:49] Speaker 04:
Does the commission have authority to do that on its own initiative to reconsider an adder?

[00:40:55] Speaker 02:
It does.

[00:40:55] Speaker 02:
It does.

[00:40:57] Speaker 02:
I'm not aware of any case where it has.

[00:40:59] Speaker 03:
I mean, because for instance- It could in fact, but it would certainly bear the burden of proving that the prior rate is unjust and unreasonable.

[00:41:07] Speaker 02:
including putting together that record of Vermicelli.

[00:41:10] Speaker 05:
But I would note in your response to Judge Pillard, so I'm clear what your argument is.

[00:41:18] Speaker 05:
In this case, objections were made to continuation of the 50-point adder, which was based on a level of independence

[00:41:36] Speaker 05:
Now there's a merger.

[00:41:39] Speaker 05:
So the commission says at a minimum, there's no longer that level of independence.

[00:41:46] Speaker 05:
So to the extent that we had approved the 50 point adder based on a level of independence, it's changed and we need to figure out what would be appropriate.

[00:42:01] Speaker 05:
And I gather the commission came to somewhat of a compromise on that.

[00:42:05] Speaker 05:
coming to this 25 point adder.

[00:42:13] Speaker 05:
So at that point, the commission deals with the argument essentially that you're no longer as independent as you were at the time the commission found you were entitled to a 50 point adder.

[00:42:34] Speaker 02:
Or 100 in two of these.

[00:42:36] Speaker 05:
Or 100, right.

[00:42:38] Speaker 05:
Yeah.

[00:42:38] Speaker 05:
And so where does this take it?

[00:42:42] Speaker 05:
So the commission comes out with a decision.

[00:42:44] Speaker 05:
A petition for rehearing is filed.

[00:42:48] Speaker 05:
All right.

[00:42:49] Speaker 05:
Is it the commission's point that given sort of the posture of this case and the nature of the complaint that was brought to it,

[00:43:02] Speaker 05:
the burden was on the petitioners here to offer a record that would basically counter what the commission had determined and what the complaining parties had argued.

[00:43:26] Speaker 05:
Is that

[00:43:27] Speaker 05:
What we're trying to get at here, I mean, I understand the point.

[00:43:30] Speaker 05:
It's 206, the burdens on the commission.

[00:43:33] Speaker 05:
But the nature of what is before the commission here was determined by the complaint.

[00:43:44] Speaker 05:
And the commission itself was not engaging in an independent inquiry of its own under 206.

[00:43:52] Speaker 05:
Is that your argument?

[00:43:55] Speaker 02:
Um, I don't think that was our argument.

[00:43:59] Speaker 02:
I think our argument was in the first order, we made a finding based on the various aspects, uh, various criteria under order six 79.

[00:44:11] Speaker 02:
And we made the finding that you're less independent.

[00:44:15] Speaker 02:
The ITC companies are less independent than they were, uh, then then was the basis for their existing adder on rehearing.

[00:44:24] Speaker 02:
the ITC companies said, among other things, we are more independent than Meet New York and Grid Alliance.

[00:44:35] Speaker 02:
So we should be treated the same as them.

[00:44:38] Speaker 02:
So on that argument, I mean, the commission said, we don't have the evidence in this record.

[00:44:43] Speaker 02:
And although I don't know if the commission said it, if when we look at NextEra and Grid Alliance, we don't have evidence of any such record in those orders, either.

[00:44:53] Speaker 02:
So I think

[00:44:54] Speaker 02:
The commission said you say you're more independent, but you don't even say how and and most of the pages that the petitioner site in their hearing request.

[00:45:03] Speaker 02:
For where they showed how they were more independent than next era are actually Just explanations of why they believe they're still independent their their arguments about ITC companies.

[00:45:13] Speaker 02:
There's very little about next and next era.

[00:45:17] Speaker 02:
In those materials are in the record of this case.

[00:45:19] Speaker 02:
So the commission saying if you're going to say you're more independent than someone else.

[00:45:24] Speaker 02:
We need more to go on because we're not seeing it, but we do have the factual finding we made as to your own independence.

[00:45:30] Speaker 04:
Ms.

[00:45:31] Speaker 04:
Fanta, if this is a follow up to my question about whether the commission has authority on its own initiative, if it determined that indeed it couldn't reconcile its treatment of ITC with its treatment of gridlines and Next Era, could it level everyone down rather than leveling ITC up?

[00:45:55] Speaker 04:
They too only deserve the 25 point adder.

[00:46:01] Speaker 02:
I mean, within the bounds of 206, I don't see why they couldn't, right?

[00:46:10] Speaker 02:
I don't know of any indication that the commission intends to do that, but the commission would be able to.

[00:46:20] Speaker 02:
And I did want to mention earlier, just again, the Commission does have the ability under 206 to challenge any existing adder.

[00:46:28] Speaker 02:
And just to show that the Commission has, I think, waited for parties to bring these cases to it.

[00:46:36] Speaker 02:
Remember that two of these companies had 100 basis point adder that was given in the early 2000s.

[00:46:42] Speaker 02:
And in 2015, in the ITC Midwest case, the commission made the policy determination that the full adder is now 50.

[00:46:49] Speaker 02:
It did not make any effort to reach out and do a 206 and reduce everyone else's adders to 50.

[00:46:57] Speaker 02:
So I think it isn't looking to do that.

[00:47:00] Speaker 05:
But let me ask you, if we disagree with the commission's position, the petitions are asking us to vacate

[00:47:14] Speaker 05:
as opposed to just remanding.

[00:47:16] Speaker 05:
What's your position on that?

[00:47:22] Speaker 02:
Well, we disagree.

[00:47:26] Speaker 02:
I mean, we don't see a reason to vacate.

[00:47:29] Speaker 05:
And I think the premise of my question was, if the court were to disagree with you, is it just a remand without vacating?

[00:47:43] Speaker 05:
Or is it your position that, I think your position is that you should be entitled on reading to look at the record that is currently before you or before the commission as distinct from a vacator, which would basically allow everybody to start all over again.

[00:48:09] Speaker 02:
Right.

[00:48:10] Speaker 02:
And certainly, I think, if

[00:48:14] Speaker 02:
the case were remanded on the grounds of what we've discussed with the factual record.

[00:48:20] Speaker 02:
I'm sure that the commission would develop that record further and look for the parties to develop that further.

[00:48:26] Speaker 02:
But I don't see any reason it wouldn't build on the existing record.

[00:48:31] Speaker 05:
Well, I guess maybe my question wasn't clear.

[00:48:35] Speaker 05:
I think the commission is in two very different postures, depending on whether

[00:48:41] Speaker 05:
the court were to remand without vacating or to vacate.

[00:48:47] Speaker 05:
And that's what I was trying to get your position on.

[00:48:52] Speaker 02:
I guess I don't really see the reason to vacate because if it's a failure in the commission's explanation of its decision making, that is the kind of thing that the commission fixes on remand.

[00:49:08] Speaker 03:
Vekator is in there and remand without Vekator is not in there.

[00:49:12] Speaker 03:
And there's been a long dispute, Judge Friendly starting in the Second Circuit and Judge Randolph and I in this circuit, that we can't remand without vacating.

[00:49:23] Speaker 03:
At least it is going to be, I think, the precedent here that the norm is that we would vacate unless there's a reason to leave the action in effect and just remand.

[00:49:35] Speaker 03:
Why should we not vacate here?

[00:49:38] Speaker 02:
Well, I don't know what the implications of vacating are in this case.

[00:49:43] Speaker 02:
I'm sorry.

[00:49:45] Speaker 03:
There are some cases where it's pretty high.

[00:49:48] Speaker 03:
You would not have this decision in place for the rest of what kind of adders.

[00:49:53] Speaker 03:
I keep thinking of snakes when I say adders, but that decision would not be in place.

[00:49:59] Speaker 03:
You would be not necessarily starting from around zero, but you would be starting at least for the decision making phase of the

[00:50:07] Speaker 02:
uh proceeding below rather than having it in place and going back to just whether or not you give a different explanation right um yeah i i i don't i don't know what what ramifications that might have i mean it might have maybe mr street can respond to this too but might it have implications for rate payers or not would they well it certainly would for rape you're right you're yeah

[00:50:36] Speaker 02:
It absolutely would have ramifications for rate payers because I don't know the exact dollar amount.

[00:50:42] Speaker 02:
I know there are dollar amounts in here, but I don't know in the period of this case what the dollar amount is.

[00:50:48] Speaker 02:
I do know that the difference between the 50 basis point adder and the 25 that the commission still granted, I'm sorry, between the 100 and the 25 hasn't been that full amount

[00:51:06] Speaker 02:
for some time, I think, because there was also a cap on the upper zone of reasonableness for the entire return on equity.

[00:51:13] Speaker 02:
But I know there's ongoing litigation regarding that.

[00:51:16] Speaker 02:
And I think that there is a period at which that the difference between the base rate of the return on equity and the zone of reasonableness cap is wider so that it actually would go from 25 to 100 and not to 50.

[00:51:34] Speaker 02:
So it could have a very large impact

[00:51:36] Speaker 02:
for rate payers for whatever period of time that would apply.

[00:51:45] Speaker 02:
Anything further?

[00:51:49] Speaker 02:
I don't believe so.

[00:51:50] Speaker 02:
Thank you.

[00:51:50] Speaker 02:
Thank you.

[00:51:51] Speaker 02:
All right, council for petitioners.

[00:51:57] Speaker 00:
My opposing council started off with her argument by saying corporate structure has always been the test for FERC.

[00:52:06] Speaker 00:
We would dispute that, because in older cases, these were purely independent companies that were not within a corporate structure at all.

[00:52:13] Speaker 00:
But let's just accept that statement for a moment.

[00:52:17] Speaker 00:
Why in Neat New York and Grid Alliance would there be no analysis of those companies' corporate structure, even though paragraphs four and five of Neat New York talk about the corporate structure of those companies?

[00:52:30] Speaker 00:
Why would there be no evidence in the record even

[00:52:33] Speaker 00:
of corporate structure in those cases, if corporate structure had always been the test, I would submit that's just completely implausible.

[00:52:41] Speaker 04:
It is evidence of corporate structure to talk about whether those were project specific entities, what kind of distance there was between their affiliates and the trans codes and those are questions of corporate structure, the geographic questions, the size questions, aren't they?

[00:52:59] Speaker 00:
Well, I don't think I would characterize them that way, and I don't think FERC has characterized them that way, but if they are questions of corporate structure, then certainly FERC is looking at very different questions of corporate structure in the ITC case, where it's looking at the structural relationship of the transco companies to its parent company when it comes to capital raising, when it comes to the way the board is formulated, when it comes to

[00:53:26] Speaker 00:
Whether a common stock can be issued none of those traditional classical corporate structure issues were considered at all in neat New York and grid lines where they just talked about the nature and the size of the assets.

[00:53:40] Speaker 00:
And.

[00:53:41] Speaker 00:
To respond to the argument that this is sort of a deep dive into the vermicelli again, if corporate structure has always been the test, and this should have been front and center and in our rehearing petition, we did raise all of these corporate structure issues that were brought to the forefront by FERC in its initial order.

[00:54:00] Speaker 00:
And we showed by reference to both the public filings in New York and grid Alliance and by reference to public Internet websites.

[00:54:09] Speaker 00:
that those companies were less independent than the ITC companies.

[00:54:14] Speaker 00:
And FERC, on page 45 of its brief, complained that we had cited, quote, filings in the neat New York and grid lines proceedings, end quote, about corporate structure.

[00:54:23] Speaker 00:
So the idea this was not in the record is rather implausible.

[00:54:29] Speaker 00:
On the judge book.

[00:54:30] Speaker 05:
Who's on the record in this case?

[00:54:32] Speaker 05:
This case involves a section 206 complaint.

[00:54:38] Speaker 05:
saying the merger had occurred and the only reason FERC allowed the adder was because of the independence.

[00:54:51] Speaker 05:
Now that's changed and the question is or FERC said the current adder is no longer appropriate.

[00:55:04] Speaker 05:
Is it your position then that

[00:55:08] Speaker 05:
At that point, you raise the neat New York type argument.

[00:55:18] Speaker 05:
Our position only developed on rehearing.

[00:55:24] Speaker 00:
No, we in our in our opening argument in our answer to the complaint, we put on evidence of our corporate structure.

[00:55:31] Speaker 00:
And we said that we are functionally independent because we have our own board, majority controlled by our own people.

[00:55:39] Speaker 00:
We have the ability to issue debt.

[00:55:41] Speaker 00:
We don't have interference from the parent company in our planning, et cetera, et cetera.

[00:55:45] Speaker 00:
So we made all those arguments in the opening.

[00:55:47] Speaker 05:
And further, that we're just like Neat New York?

[00:55:53] Speaker 05:
I'm trying to focus on.

[00:55:54] Speaker 05:
I understand you described yourself, all right, in response to the complaint.

[00:56:01] Speaker 05:
But it's a question about, did you put first notice that you were taking the position that if you didn't prevail, then you would be being treated differently than Neat New York?

[00:56:17] Speaker 00:
Yes, absolutely, Your Honor.

[00:56:19] Speaker 00:
We pointed out that Neat New York and Grid Alliance were transco's within a larger corporate structure that owned massive amounts of affiliated generation.

[00:56:28] Speaker 05:
That was very much friends.

[00:56:32] Speaker 00:
Yes, I mean, we made that argument before re-hearing.

[00:56:35] Speaker 00:
I don't know that we went and did our own research about the record in New York and Grid Alliance, but the relevant pages in the record would be JA 182 and JA 295 to 297.

[00:56:49] Speaker 00:
But I think my probably at least important answer to that question is that under this procedural posture, and this gets back to Judge Pillard's point as well,

[00:57:01] Speaker 00:
It actually, not only does it not cut against us, it cuts in our favor because as Judge Pillard pointed out, the burden was on FERC and Meet New York and Grid Alliance to do its own analysis of corporate structure of those companies and to determine whether they were truly independent.

[00:57:18] Speaker 00:
And in our case, we now have a complaint under Section 206.

[00:57:21] Speaker 00:
So if FERC wants to reduce the ITC company's adder

[00:57:27] Speaker 00:
It's not enough to just say the ITC companies have become less independent after the merger.

[00:57:34] Speaker 00:
It has to show why they have become less independent than the similarly situated companies in NEAT New York and Grid Alliance.

[00:57:40] Speaker 00:
That was a burden on FERC as a matter of Section 206 and administrative law.

[00:57:46] Speaker 04:
Mr. Sheet, what's your position on what would happen if we vacated and remanded

[00:57:55] Speaker 04:
The adder would go to 100 points.

[00:57:59] Speaker 04:
What would be the impact on rate payers?

[00:58:04] Speaker 04:
How, you know, would you immediately recoup all of the, what is it, 24 million for the intervening, 24 million annually?

[00:58:15] Speaker 04:
Give us a little bit of explanation on remedy.

[00:58:20] Speaker 00:
Sure.

[00:58:20] Speaker 00:
So my understanding is if the orders were vacated,

[00:58:23] Speaker 00:
There, there would be a return to the existing adder that was in place.

[00:58:29] Speaker 00:
However, that would be subject to pending litigation about the overall zone of reasonableness of the.

[00:58:35] Speaker 00:
So, if the was set at a level below where our base plus our adder is, then we wouldn't be able to recoup all of that amount.

[00:58:43] Speaker 00:
But the answer is there would be a period of time most likely where would be able to recoup some of the adder that was improperly denied.

[00:58:53] Speaker 00:
And that would just be as a result of treating the treating the companies.

[00:58:59] Speaker 00:
Similarly, to meet New York and grid lines, and I think that question goes right to the heart of whether remand without vacature or vacature is appropriate.

[00:59:09] Speaker 00:
And I take judge's point that this is not in the statute and perhaps the Supreme court's recent DACA case throws even more doubt on whether you can have a remand without vacature.

[00:59:19] Speaker 00:
But assuming that option is on the table.

[00:59:21] Speaker 00:
That only has been applied when FERC just has to give more explanation for a result that it likely is going to be able to sustain.

[00:59:30] Speaker 00:
And from everything we know about this record, the ITC companies are more independent on every metric.

[00:59:38] Speaker 00:
They don't own generation.

[00:59:39] Speaker 00:
They don't have affiliated generation inside the ISO.

[00:59:43] Speaker 00:
They have their own board and everything else they're on equivalent basis.

[00:59:47] Speaker 00:
So if this goes back,

[00:59:49] Speaker 00:
FERC is going to have to decide, is it going to apply the 50-point basis adder consistently and give the ITC companies 50, or is it going to have to go back completely to square one and say, we think we've messed this all up, and we need to bring everybody down to 25, or we need to just see what happens in our rulemaking.

[01:00:12] Speaker 00:
But none of those are just the instance of giving a little more explanation under an arbitrary and capricious challenge.

[01:00:17] Speaker 05:
What's the Supreme Court docket case you cited?

[01:00:23] Speaker 00:
The Department of Homeland Security versus the Regents of California, where Chief Justice Roberts, in his majority opinion, suggests that he rejects the idea that there should be a remand without vacature of the DACA rule regarding the undocumented immigrants who arrived as children.

[01:00:43] Speaker 05:
All right, well, this court

[01:00:46] Speaker 05:
outstanding precedent allows a remand without vacator.

[01:00:54] Speaker 05:
And Judge Randolph and Judge Santel do not agree.

[01:01:00] Speaker 05:
But that nonetheless is our precedent.

[01:01:03] Speaker 05:
And one of the things we take into account is the disruption that vacator might entail.

[01:01:16] Speaker 05:
And I need to understand, I get the point.

[01:01:23] Speaker 05:
You retain your 50-point adder.

[01:01:29] Speaker 05:
But in addition, you were talking about recouping in response to Judge Pillard's question.

[01:01:37] Speaker 05:
How does that recoupment occur?

[01:01:39] Speaker 00:
I may have used an imprecise term in that instance.

[01:01:45] Speaker 00:
Would say is that the 50 point and the 100 point adder that are relevant to the respective companies would come back into play at the time the court vacated the orders.

[01:02:01] Speaker 00:
So I don't think there would be any retrospective.

[01:02:03] Speaker 00:
My understanding is there would be no retrospective relief and I may have used the wrong word.

[01:02:07] Speaker 00:
I can certainly confirm that and no recruitment.

[01:02:11] Speaker 05:
Just want to be clear.

[01:02:12] Speaker 00:
Is my understanding and your honor, if I learn something different as soon as I finish this argument, I will immediately let the court know, but that's my understanding.

[01:02:21] Speaker 00:
And I use that perhaps very loosely to say we would begin to recover the rate adder that we were entitled to relative to meet New York and grid lines.

[01:02:32] Speaker 00:
And I certainly understand that the DC circuit has its has its long standing precedent about the availability of remand.

[01:02:39] Speaker 03:
We're talking here.

[01:02:42] Speaker 05:
No, what I'm focusing on now is not our precedent in that regard, but in terms of when you're before FERC, you're able to prevail in the sense of FERC ordering refunds and that type of thing.

[01:02:58] Speaker 05:
And that's what the recoup word signaled to me in terms of disruption.

[01:03:04] Speaker 05:
But you're talking about a forward remedy, I gather, that you retain the 50 points you have.

[01:03:12] Speaker 05:
And then FERC would have the burden to explain why, if it pertains that position, you're not entitled to it.

[01:03:24] Speaker 00:
That's correct.

[01:03:25] Speaker 00:
That's correct.

[01:03:26] Speaker 00:
My understanding is that when FERC issued these orders, it ordered refunds, and that refund period runs for a certain amount of time.

[01:03:38] Speaker 00:
And if we were to prevail and the orders would be vacated, which again, I would say is the appropriate approach under this court's precedent in Southwest Airlines and West Deptford, which also had implications for rate payers, then we would be able to begin collecting the adders that were previously in place to the extent that's not inconsistent with any refund order of FERC.

[01:04:02] Speaker 05:
Can you just explain your motion?

[01:04:04] Speaker 05:
I'm sorry.

[01:04:06] Speaker 05:
You were no longer collecting

[01:04:09] Speaker 05:
On the basis of that adder.

[01:04:12] Speaker 00:
We've not been collecting on the basis of that adder for a long time as a result of these orders.

[01:04:18] Speaker 00:
Right, so Yes.

[01:04:21] Speaker 04:
Two questions about that.

[01:04:22] Speaker 04:
One is, wouldn't it be your position that a remedy then would be that you would be entitled to reach back for that period where it was unjustified and collect

[01:04:35] Speaker 04:
And the second is you were mentioning 50 point versus 100 point.

[01:04:42] Speaker 04:
And I thought Ms.

[01:04:43] Speaker 04:
Banda had said that the adder would go back to 100 points.

[01:04:49] Speaker 00:
No, she didn't.

[01:04:51] Speaker 00:
There are three ITC companies.

[01:04:54] Speaker 00:
Two of them went into the FERC proceedings below with a 100 basis point adder.

[01:05:00] Speaker 00:
One of them went into the proceedings below with a 50% basis

[01:05:03] Speaker 00:
50 basis point adder.

[01:05:05] Speaker 00:
They were of course all reduced to 25 as a result of this order.

[01:05:09] Speaker 00:
So if these orders were vacated, one of them would go back up to 50.

[01:05:14] Speaker 00:
The other two would go back up to 100.

[01:05:16] Speaker 00:
And we would argue that certainly at that time, we would be able to begin recovering those adders.

[01:05:25] Speaker 00:
Again, subject to litigation, which is still ongoing over the overall zone of reasonableness, which could cut back into those adders.

[01:05:32] Speaker 00:
And I think to your honor's first question, to the extent we would be entitled to anything retrospective, it would be whatever is consistent with FERC's authority to order refunds as a result of its initial orders.

[01:05:47] Speaker 00:
And I think that would be perfectly consistent with FERC practice in the past and this court's remand orders in the past.

[01:05:57] Speaker 04:
This is just one more question and I apologize.

[01:06:01] Speaker 04:
that I'm keeping everyone so long, but if, and I understand this is not your position, but if their standard wasn't changing, they have a standard under which they look at all factors relevant to independence.

[01:06:18] Speaker 04:
But their applications over time are growing more nuanced.

[01:06:24] Speaker 04:
You said, oh, of course their ability to apply their standard wouldn't be frozen

[01:06:31] Speaker 04:
as long as they adequately explained.

[01:06:34] Speaker 04:
Is that an accurate recap of your position?

[01:06:39] Speaker 00:
Yes, I think so.

[01:06:41] Speaker 00:
For example, assuming you did accept our position that they have sort of changed the test here without acknowledgement or explanation.

[01:06:49] Speaker 00:
For purposes of this appeal, we're not saying they substantively couldn't do that as a matter of the regulation or as a matter of the statute.

[01:06:57] Speaker 00:
We're saying that if they want to evolve or make their tests more nuanced, they just have to face up to it and say, we're changing our tests.

[01:07:06] Speaker 00:
We're more explicitly looking at all circumstances.

[01:07:09] Speaker 00:
We're expressly going to look at corporate structure in this way.

[01:07:13] Speaker 00:
And then that can be judicially reviewed by this court, whether that's an adequate definition.

[01:07:17] Speaker 04:
Now, the premise of my question was that they're not changing their test.

[01:07:23] Speaker 04:
They're applying it, looking at,

[01:07:26] Speaker 04:
you know, investment planning, capital formation, investment processes, but looking at more facts.

[01:07:33] Speaker 04:
I mean, think of any totality circumstances test, you know, in one case you have how are, you know, comparative, how are different employees treated differently to show discrimination.

[01:07:43] Speaker 04:
In another case, you have direct evidence.

[01:07:45] Speaker 04:
In a third case, you have sequence of events.

[01:07:47] Speaker 04:
I mean, you don't require every kind of evidence in every case, but the standard may nonetheless be the same.

[01:07:55] Speaker 04:
Your argument is that they can become more detailed in the evidence they look at, but they still have to explain that they are doing that?

[01:08:08] Speaker 04:
And if so, what's your best case for that?

[01:08:11] Speaker 00:
Well, I think cases that talk about the evolving nature of case-by-case analysis at West Deptford and other Southwest Airlines

[01:08:22] Speaker 00:
Our cases where the commission made those arguments, and this court says there still has to be an adequate and reasoned explanation of an evolving test, even a test.

[01:08:31] Speaker 00:
That's not a radical departure.

[01:08:33] Speaker 00:
And of course, even under that theory under the new test, it would have to show why like companies are being treated alike and not being differently treated.

[01:08:43] Speaker 00:
And that's what we think.

[01:08:44] Speaker 00:
They also fall short on here.

[01:08:46] Speaker 00:
But I guess if I could just wrap up and maybe I'm.

[01:08:49] Speaker 00:
Again, resisting the premise of the question a little bit, but very briefly, I would just say.

[01:08:54] Speaker 00:
We completely agree that the commission has always parroted the order 679 criteria.

[01:09:02] Speaker 00:
It's always said we're evaluating investment planning processes, capital formation and business structure.

[01:09:09] Speaker 00:
But if you read paragraph 51 of meet New York.

[01:09:12] Speaker 00:
It says, here's how that test is met and it's met only by looking at geography.

[01:09:17] Speaker 00:
It's a completely different situation under the ITC company's test.

[01:09:21] Speaker 05:
And so with that argument, thank you.

[01:09:24] Speaker 00:
Thank you.

[01:09:24] Speaker 00:
Your honor.

[01:09:26] Speaker 05:
We'll take the case under advisement.