[00:00:01] Speaker 00:
Case number 20-1453, American Clean Power Association Petitioner versus Federal Energy Regulatory Commission.

[00:00:09] Speaker 00:
Mr. Tabak for the petitioner, Mr. Kennedy for the respondent, Mr. Jones for the interveners for the respondent.

[00:00:26] Speaker 07:
Good morning, Your Honors.

[00:00:26] Speaker 07:
May it please the Court?

[00:00:28] Speaker 07:
Gabriel Tabak on behalf of the petitioner.

[00:00:31] Speaker 07:
Your honors, Perk's post-Amaran orders imposed a new rate that was fatally flawed for three reasons requiring remand from this court.

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First, Perk clearly risked undue discrimination by vertically integrated transmission owners against competing generators, despite evidence that transmission owners still own generation in the region.

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Perk failed to meaningfully address this evidence and failed to square its determinations with its own precedent, rendering its orders arbitrary and capricious in violation of the Administrative Procedures Act.

[00:01:01] Speaker 07:
ask questions about that first point.

[00:01:04] Speaker 06:
Absolutely your honor.

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What would the discrimination look like?

[00:01:08] Speaker 06:
And I have two possible kinds of discrimination in mind and I wonder if you have one in particular that you mean when you say discrimination.

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One would be that transmission owners that also owner generator would make a different binary decision on whether to transmission fund or

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It's one type of discrimination they make that based on what they own the.

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The other type of discrimination would be well we'll run up costs a lot.

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When we transmission when we sell fund.

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So long as the generator is owned by somebody else.

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But you know the generators owned by us.

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then we're going to be conscious of costs and we're going to go with the lowest bidders.

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Are you imagining both of those types of discrimination or just one or a third time?

[00:02:04] Speaker 07:
Your honor, I believe those would be closely linked in practice, but principally the first that the transmission owners would have an incentive or what the Ameren Court referred to as a competitive motive to use transmission owner funding strategically against independent generators where they might not be using it for affiliated generators, potentially driving up costs for those competitors.

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They would allow the owned generators to fund

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but they would not allow independent generating.

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Yes, Your Honor.

[00:02:40] Speaker 03:
Does it matter what form that preference would take?

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Does it matter whether that preference would manifest itself in version one or version two of Judge Walker's question, or it's simply the substantial risk that there would be preference in one form or another, whether they would allow

[00:03:02] Speaker 03:
generator funding or would fund it themselves because it's all the same thing if they own the generator funding themselves or generator funding is transmission funding.

[00:03:12] Speaker 07:
Your honor, I think either of the two circumstances that Judge Walker outlined would squarely fit within the commission's concern with the motive for undue preference and undue discrimination from transmission owners against independent generators, as exemplified in Order 2003, which governs FERC's generator interconnection rules, upheld by this court in National Association of Regulatory Utility Commissioners versus FERC.

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Can I ask?

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From your record evidence, what percentage of transmission owners in MISO own directly or through affiliates generation?

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Because I heard some, substantial, majority, vast majority.

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What's the percentage?

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What's the number?

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What's the percentage?

[00:04:00] Speaker 07:
Your honor, I'm not certain of the percentage off the top of my head.

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We're aware that the Amherst court indicated that only one of the petitioning.

[00:04:07] Speaker 03:
Yeah, I'm aware of that.

[00:04:08] Speaker 07:
Yeah.

[00:04:10] Speaker 03:
But your briefing sure sounded like I said, a time it got majority and vast majority.

[00:04:13] Speaker 07:
And so a significant majority, your honor.

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We're aware of at least 27 transmission owners in the region that still own generation.

[00:04:22] Speaker 03:
And how many how many total transmission owners are there?

[00:04:25] Speaker 07:
I'm not certain of that figure off the top of my head, Your Honor.

[00:04:28] Speaker 03:
Well, to say substantial majority, you've got to know that 27 is, it's got to be less than 27.

[00:04:34] Speaker 07:
A fair point, Your Honor.

[00:04:36] Speaker 07:
I don't have the figure of miso transmission owners off the top of my head, unfortunately.

[00:04:45] Speaker 02:
Mr. Tabak, why was that information not before the Ameren Court?

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the number of- Yeah, I mean that they concluded there was just one and it wasn't, why was that information not before the previous panel?

[00:04:59] Speaker 07:
Your honor, the commission made its pre-Amarin findings without respect to whether the transmission owners still own generation.

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I think that was part of the Amarin court's basis for vacating the discriminatory treatment portion of the underlying orders from FERC.

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And because of that, the commission, I don't believe, had that figure in evidence.

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And the court relied upon the proportion among the petitioning transmission owners.

[00:05:32] Speaker 02:
And since the orders that FERC issued on remand, is there any evidence of actual discrimination against independently-owned generators?

[00:05:43] Speaker 07:
Your honor, it's impossible to know that because of first practice regarding the agreements.

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In circumstances where a transmission owner and a generator come to terms on one of the 3 categories of agreement at issue here.

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Those are filed unexecuted at the commission or sorry, those are not filed at the commission.

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There would be they would not generally be available to anyone only in the circumstance where the generator in the transmission owner cannot come to terms would they be filed un-executed at the Commission.

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And we're aware of at least

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18 agreements that have been filed, un-executed under protest since the Emoryn decision and at least 21 that have been filed for the retroactive 2015 to 2018 period since the Emoryn decision.

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But the inability to determine the level of discrimination, if any, really speaks to the need to develop a record here, which is something that only the commission can do.

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On that topic, Juan, are there 27?

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of those 27.

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Are you talking about a transmission owner.

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It also owns generator.

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Generator that is connected to me so or are they just transmission owners that own a generator.

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It's somewhere in the country maybe not connected.

[00:07:09] Speaker 07:
Your honor, it's it's the first circumstance that they they own transmission and they own generation within the myself footprint.

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These agreements have been filed with the commission because there's disagreement between the generator and transmission owner.

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Did any of them involve generators that were owned by that transmission owner?

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Sorry, Your Honor, could you repeat that last part?

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You said these filings with FERC when there's disagreements between the generator and the transmission owner and coming to agreement for terms for the connection.

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Did any of those involve the situation where the generator was owned by that transmission?

[00:07:46] Speaker 07:
Um, we're, we are unaware of anywhere.

[00:07:49] Speaker 03:
So these have always been between independent generators and transmission owners that there have been disagreements.

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We are unaware of anywhere that have been filed, un-executed between a transmission owner and its generation owning affiliate.

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You're aware that at least some of them have the opposite?

[00:08:04] Speaker 07:
Yes, your honor.

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Between transmission owners and an independent generator.

[00:08:07] Speaker 03:
You think they're all, you think they're all between independent generators?

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To our knowledge, your honor.

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Unsurprising.

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Is a rate making challenge sort of the default method for combating undue discrimination in general?

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The commission has a range of potential approaches at its disposal.

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A rate-making challenge would certainly be one of them.

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And we certainly wouldn't want to presuppose precisely the form that commission action could take on remand here.

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But our focus is on developing a sufficient record to be able to identify what the risk of under-discrimination is and balance it against any risk to the transmission owners.

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So the reason I ask is, if a rate-making challenge is sort of the normal remedy, the default remedy that FERC makes available in the case of potential undue discrimination,

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then it might seem that Perk didn't need to explain why it was defaulting to the default in terms of its choice here.

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On the other hand, if it's not the default, if it's somewhat of an unusual remedy, then it might make sense to say, okay, Perk, if you're gonna choose to allow rate-making, if you're gonna say rate-making challenges are the remedy to combat potential undue discrimination, then you have to explain why you're choosing

[00:09:40] Speaker 07:
You're on your your your post you're you're referring to the commission leaving the door open for individualized section 206 complaints against underdiscrimination here.

[00:09:49] Speaker 07:
Yes, yes, that is extremely a typical and inconsistent with the commission's approach to.

[00:09:56] Speaker 07:
The relationship between transmission owners and independent generators, again, as exemplified in order 2003, there the commission's actions really were aimed at preventing the potential exercise of under-discrimination by transmission-owning utilities.

[00:10:11] Speaker 07:
That's really where the commission's precedent is.

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Not to say that the commission could not adopt something different, but under the APA, the commission needs to adequately explain why, where it has not used individualized rate-making challenges

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as a means of remedying undue discrimination in the past, it would be opting to do so here.

[00:10:33] Speaker 02:
What precisely did you expect FERC to do on remand after the Ameren decision, right?

[00:10:40] Speaker 02:
So Ameren, I mean, just on one level, you know, had an economic theory that transmission owners

[00:10:48] Speaker 02:
you know, couldn't be forced to operate as nonprofits, right?

[00:10:51] Speaker 02:
And in light of that holding, what precisely did you expect the agency to do?

[00:10:57] Speaker 07:
Your Honor, that's a good question and one for which I think the most ready answer is the New York order, which this court allowed to be lodged from September, which post-states the briefing.

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In that order, the New York transmission owners filed at FERC to implement a nearly identical transmission owner funding practice.

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And I'd refer the court in particular to paragraphs 33 to 57 of that order, which detail both the transmission owners' evidence that they submitted and what they believe the level of risk to them from these network upgrades was, as well as countervailing evidence that was specifically submitted on these points from generators, from state parties, from other entities, on whether they believe that these were realistic risks, and if so, what the scope of them was.

[00:11:43] Speaker 02:
Was that not part of the voluminous record before FERC, before the 2015 orders?

[00:11:49] Speaker 07:
Was that information not part of that record?

[00:11:55] Speaker 07:
The record prior to Amarin did not reflect the scope of any risk in any kind of quantifiable way to transmission owners.

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There are a lot of assertions in that record that the transmission owners face risk, but with no particularity.

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Again, I think the New York order stands as a

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substantial counterpoint to that and indicative of what the commission is fully capable of doing upon remand.

[00:12:19] Speaker 02:
So is your view that FERC had to create a record that demonstrated that the Ameren Court's economic theory was correct?

[00:12:30] Speaker 07:
Simply that the commission, the Ameren decision at various points seemed to have no confidence in the level of the commission's record on the key basis for the remand and vacatur.

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and with instructions for things like holistically assessing the risks and benefits to transmission owners, to fully consider arguments.

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Looked at in its entirety, the AMRA decision simply does not seem to have expressed confidence in FERC's level of record development underlying it, which is why in our view, the reasonable thing for the commission to do with some latitude for precisely how to structure it would be to accept evidence on those core issues.

[00:13:14] Speaker 03:
Your honor, it's returning to the second... I was going to ask, do you know, are there other regional transmission organizations that allow transmission funding like this?

[00:13:25] Speaker 07:
No, your honor.

[00:13:26] Speaker 03:
This would be the only one?

[00:13:28] Speaker 07:
MISO is the exception.

[00:13:30] Speaker 07:
The New York transmission owners, again, sought it, but the commission denied it.

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There is a comparable proposal that is still before the commission from the Mid-Atlantic Grid Operator, PJM.

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That has not had final commission action yet.

[00:13:42] Speaker 03:
How would, in this case-by-case approach, if the agreements between transmission owners and their own generators are not getting filed with FERC, because presumably they work out any disagreements amongst themselves, how would discrimination be proved on a case-by-case basis?

[00:14:04] Speaker 07:
Your Honor, it would be extremely challenging.

[00:14:09] Speaker 07:
and from the three orders under review here, it seems that the theory would be that if, to Judge Walker's second point from earlier, that if generators believe there were excessive costs included in their network upgrade expenses that they were being billed for, they could file a 206 and contend that the transmission-owning utility was escalating costs, but as to sort of the

[00:14:34] Speaker 07:
strategic application of uh they were escalating costs but they were doing it to their own generators would that be a viable claim if the if a transmission owner were escalating costs for their own generators and to the uh independent generators i'm sure they'll say this is what we need to make a sufficient profit

[00:14:52] Speaker 07:
Your Honor, it might be, but we simply can't know.

[00:14:55] Speaker 07:
Again, there's simply not evidence here to show whether or not the core point that the Amherst- Would you be able to prove discriminatory treatment?

[00:15:04] Speaker 03:
Just that, put aside excess costs.

[00:15:08] Speaker 03:
How would you be able to show discriminatory treatment?

[00:15:10] Speaker 07:
In a context where only a 206 complaint is available?

[00:15:15] Speaker 07:
It would likely have to be under the excessive cost or if there were additional sources, for instance, state regulatory filings that showed differential upgrade costs for affiliated generation.

[00:15:32] Speaker 07:
Those would not be before FERC, but it's possible that depending on what state commission rules require, there might be evidence available that would vary significantly state by state.

[00:15:40] Speaker 03:
So the states covered by MISO require such filings?

[00:15:42] Speaker 03:
Have you looked to see if this is actually happening?

[00:15:46] Speaker 07:
Yeah, there's wide variation in what the level of detail before state commissions might be, Your Honor.

[00:15:52] Speaker 07:
But it is certainly not the case that there would be a

[00:15:57] Speaker 07:
readily available information in all states in MISO that a independent generator would be able to ascertain if they had been subject to undue discrimination where a transmission-owning utility had escalated costs to them, but not their own affiliated generation.

[00:16:14] Speaker 03:
I wanted to question, too, that do you dispute that whatever the rule you think FERC should adopt, yes or no on transmission funding, that the rule should be the same for direct and indirect connections?

[00:16:27] Speaker 03:
Do you dispute that aspect of their reasoning?

[00:16:31] Speaker 07:
Your honor, I think that needs to be broken into two parts, prospectively and retroactively.

[00:16:35] Speaker 03:
I'm sorry.

[00:16:35] Speaker 03:
Yeah, I meant prospectively.

[00:16:37] Speaker 07:
Prospectively, the commission, if the record demonstrates comparability between the parties who are subject to those three types of agreements, that could be a reasonable approach.

[00:16:47] Speaker 07:
Comparability is simply presumed, and the order in which they're determined.

[00:16:51] Speaker 03:
Well, how would they not be comparable?

[00:16:52] Speaker 07:
That your honor they very likely would be but I think that would have the ultimate determination would have to wait for a mission determination of that.

[00:17:00] Speaker 03:
I'm just you have a theory on how they situations would be comparable possibly.

[00:17:06] Speaker 03:
I don't have enough experience in this area to be able to understand why there would be any differential treatment prospectively.

[00:17:13] Speaker 07:
There could be differential treatment based both on aspects like the multi-party facility construction agreement that have multiple funders for them.

[00:17:23] Speaker 07:
There could also be differences in the type of facility being funded.

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For instance, the Emory & Court noted

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that in the region for upgrades above 345 kilovolts, 90% is funded by the generator, 10% is passed through in transmission rates, and a rate of return is recovered on that 10%.

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So it's possible there could be variation by both agreement type and upgrade type.

[00:17:48] Speaker 07:
But again, those are fact-specific matters that we can't know until there's a record on those points.

[00:17:55] Speaker 06:
If I could share

[00:17:59] Speaker 06:
theory of the case that you won't like and ask you why it's wrong, I'm going to share a different theory of the case with Burke and ask them that they won't like him.

[00:18:09] Speaker 06:
Here's the area I want you to tell me why it's.

[00:18:13] Speaker 06:
For what we start with what you and judge I were just discussing that you know for before Ameren decided independent.

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Indirect and the direct transmission owners had to be treated the same.

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And that wasn't disturbed by Amarin.

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And as I see it, that may even be sort of a done deal issue.

[00:18:38] Speaker 06:
And so then the question becomes, well, is FERC going to level up by allowing both direct and indirect transmission owners to self-fund, or is it going to level down by not allowing either of them to do it?

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They tried leveling down.

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And Amarin said that one of the problems with that is enterprise risk.

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And Ameren didn't leave a lot of room for FERC to later say, well, we don't think enterprise risk is a real risk.

[00:19:05] Speaker 06:
I think Ameren made pretty clear that it's real.

[00:19:09] Speaker 06:
And so to the extent that you're going to level down, it's because you have to have a different reason that is more important that outweighs the enterprise risk.

[00:19:18] Speaker 06:
And the most logical different reason would be this potential for discrimination.

[00:19:23] Speaker 06:
And so then that raises the question, well, is there evidence of discrimination in the record?

[00:19:30] Speaker 06:
Seems like there's not evidence in our record of discrimination.

[00:19:34] Speaker 06:
Because Ameren said there wasn't evidence in the record and there hasn't been any more record.

[00:19:38] Speaker 06:
And then Ameren said, there could be an economic theory for potential discrimination.

[00:19:44] Speaker 06:
We're not going to give a lot of weight to that because there's only one petitioner who owns a generator.

[00:19:50] Speaker 06:
But we now know that there are 27 or something.

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And so then your case against FERC has to depend on saying why my FERC was wrong in that situation to say the remedy for that potential discrimination is individualized rate-making challenges.

[00:20:14] Speaker 06:
Perk said that's that's the remedy.

[00:20:16] Speaker 06:
They didn't give them they didn't a lot of explanation, but they gave enough explanation.

[00:20:22] Speaker 06:
They do this in other contexts so it was a reasonable remedy to choose and it was reasonably.

[00:20:30] Speaker 06:
So what's wrong with that.

[00:20:34] Speaker 07:
Your Honor, two points on that.

[00:20:36] Speaker 07:
The first is that on the initial part of that theory of the case, you mentioned the comparability determination from FERC.

[00:20:44] Speaker 07:
That was in an order that was itself vacated by Amarin.

[00:20:48] Speaker 07:
So I think that that issue remains open for a future evidentiary demonstration through a commission proceeding.

[00:20:56] Speaker 07:
The second point regarding the risk of undue discrimination

[00:21:00] Speaker 07:
The Emron court quite clearly left the door open based on the competitive motive that transmission owners still owning generation would have.

[00:21:12] Speaker 07:
Petitioner proffered that evidence.

[00:21:14] Speaker 07:
The commission notionally accepted it at paragraph 38 of the second of the three orders, the order on briefing and rehearing here.

[00:21:22] Speaker 07:
But to call that a cursory treatment I think would be generous there.

[00:21:28] Speaker 07:
That is the precise animating rationale that this court acknowledged could pose a risk of undue discrimination.

[00:21:34] Speaker 07:
And again, that risk of undue discrimination, the potential for competitive motive is precisely what the commission has used to justify and this court has upheld in prior rule makings and proceedings between transmission owners and generation.

[00:21:52] Speaker 07:
So at a minimum, the commission needed to better explain why it found that evidence unconvincing and why the remedy that it adopted there of individualized determinations was consistent or why it had changed its mind from those past determinations, again, upheld by this court.

[00:22:11] Speaker 06:
If we were to say exactly that in remand, would that get you pretty much what you want from us in this case?

[00:22:20] Speaker 07:
Yes, Your Honor.

[00:22:20] Speaker 07:
We would submit that on a remand, the Commission would, of course, have some latitude about exactly how to structure it, but we would fully anticipate that they would develop the record in a way comparable to the New York order that's lodged here, that holistically looks, as the Ameren Court put it, at the risks and benefits to transmission owners, that considers the potential undue discrimination for independent generators,

[00:22:46] Speaker 07:
and considers those things through development of substantial evidence, which was the second of the three points I was going to lay out at the outset.

[00:22:56] Speaker 07:
A long time ago.

[00:22:57] Speaker 07:
Yes.

[00:22:58] Speaker 07:
But development of substantial evidence to fully support ultimate orders here that considers all of these aspects rather than a cursory reversal without further record development, which is what occurred here.

[00:23:15] Speaker 03:
Thank you very much.

[00:23:17] Speaker 03:
Thank you, Your Honor.

[00:23:38] Speaker 01:
Your honors, Robert Kennedy on behalf of the mission.

[00:23:42] Speaker 01:
Judge Walker picking up on your question or a whether or not the distinction between generator direct connections and interconnection agreements, whether they are similarly situated in response to that council indicated that the commission's determination was vacated, which it's true.

[00:23:59] Speaker 01:
Those that was initially made in the underlying orders.

[00:24:01] Speaker 01:
It footnotes 77 of the remand order.

[00:24:03] Speaker 01:
The commission noted that

[00:24:05] Speaker 01:
reaffirmed its terminations.

[00:24:07] Speaker 01:
And I would agree with you, I think the idea that there's a distinction as to how indirectly connected generators should be treated versus directly connected generators.

[00:24:15] Speaker 01:
Is it done?

[00:24:17] Speaker 06:
I agree with you on that.

[00:24:18] Speaker 06:
But I just say I'm pretty sympathetic to the second thing he said in response to my very long-winded question.

[00:24:28] Speaker 06:
So if you could

[00:24:30] Speaker 06:
address what I think is his strongest point, which is the decision to allow rate making challenges to be the remedy for potential discrimination was unexplained.

[00:24:43] Speaker 01:
Well, I think certainly the commission flag that as I first look if I can step back and I don't mean to sidestep your question, but I will get there, but I think it's important to understand the context in which this took place.

[00:24:58] Speaker 01:
The entire case was started by the commission in its.

[00:25:01] Speaker 01:
the investigation.

[00:25:02] Speaker 01:
So the commission took on for itself the burden of establishing that the existing just and reasonable rate, transmission owner funding, the option for them to unilaterally choose that was unjust and unreasonable.

[00:25:13] Speaker 01:
And then the second part, the commission had to establish that a replacement rate was just and reasonable.

[00:25:17] Speaker 01:
And the replacement rate is the unilateral selection by the generators as to self-funding.

[00:25:23] Speaker 01:
The commission didn't, and that was vacated by the Ameren Court.

[00:25:27] Speaker 01:
So the question before the commission was A,

[00:25:30] Speaker 01:
Based on the entirety of the record, can we, and in taking into account the infirmities flagged by the Ameren Court, can we make a renewed finding that transmission owner funding is unjust and unreasonable?

[00:25:42] Speaker 01:
And if so, then can we go on and establish a just and reasonable replacement rate?

[00:25:48] Speaker 01:
the absence of it, giving the generator the individualized choice, the unilateral choice.

[00:25:54] Speaker 01:
In answering part one, could the commission establish that transmission owner funding was unjust and unreasonable?

[00:26:01] Speaker 01:
Not that it is just and unreasonable, that it is unjust and unreasonable.

[00:26:04] Speaker 01:
A little difference in the burden of proof there.

[00:26:07] Speaker 01:
The commission had made two findings.

[00:26:10] Speaker 01:
One, compensation, which I'll come back to.

[00:26:12] Speaker 01:
And the second was discrimination, getting back to your question.

[00:26:16] Speaker 01:
Again, there was no evidence of actual discrimination in the record.

[00:26:19] Speaker 01:
The record has been open since 2005.

[00:26:22] Speaker 01:
There has never been any showing.

[00:26:25] Speaker 01:
Had there been, the Commission obviously would have been interested, it would have bolstered its initial finding to second.

[00:26:30] Speaker 01:
As to an economic theory for discrimination, the Ameren Court noted and the Commission accepted that there really is no economic theory supporting the potential for discrimination as to those generators, as those transmission owners that are not

[00:26:44] Speaker 01:
And I don't know the numbers judge what, but the order say a majority of the transmission owners in the Midwest are affiliated with generators.

[00:26:57] Speaker 01:
It accepted that.

[00:27:00] Speaker 01:
but found that that did not make the existing transmission and accepted that there would be an economic motive for them to discriminate.

[00:27:07] Speaker 01:
Again, if this has been in place a while, there was no evidence that had been used in that manner.

[00:27:13] Speaker 01:
So the question before the commission, okay, does that make the existing transmission owner funding option unjust and unreasonable?

[00:27:19] Speaker 01:
Obviously, this is all made against the backdrop of the Ameren Court's decision that the Commission's previous remedy was constitutionally and statutorily on shaky ground, to say the least.

[00:27:30] Speaker 01:
But the Commission said, OK, we have the normal process for this.

[00:27:33] Speaker 01:
When there's disputes regarding interconnection agreements, there's a process that that can be ironed out.

[00:27:40] Speaker 01:
Claims of discrimination can be raised.

[00:27:41] Speaker 01:
And there you'll see in these orders, the Commission said, you know,

[00:27:47] Speaker 01:
If transmission owners are treating their affiliates one way in terms of not.

[00:27:52] Speaker 01:
making them fun or vice versa, treating their affiliates different, making different choices.

[00:27:57] Speaker 03:
How are they going to show that?

[00:27:58] Speaker 03:
Excuse me?

[00:27:58] Speaker 03:
How are they going to show that?

[00:27:59] Speaker 01:
Well, so, and my initial point with respect to all your questions about the adequacy of the remedy, the commission flagged it at its remedy and there was no dispute raised.

[00:28:09] Speaker 01:
There was no questions raised as to its adequacy.

[00:28:12] Speaker 03:
FERC is the expert here, claims to be the expert agency.

[00:28:14] Speaker 03:
How are they going?

[00:28:15] Speaker 03:
How did FERC in making this choice?

[00:28:18] Speaker 01:
Correct.

[00:28:19] Speaker 03:
think they were going to show actual discrimination if the agreements between owned or affiliated generators and transmission owners, there's no disagreement.

[00:28:32] Speaker 03:
And so they aren't filed with FERC.

[00:28:33] Speaker 03:
How are they going to show it?

[00:28:34] Speaker 01:
So the commission hasn't in these orders worked out.

[00:28:37] Speaker 01:
It didn't want to prejudge those issues it said in here.

[00:28:40] Speaker 03:
It said this is a remedy.

[00:28:41] Speaker 03:
How can you think this is a remedy if you don't have a conception of how it might work to show discrimination?

[00:28:46] Speaker 01:
The way these normally work is the party comes in and says, I'm being overcharged with a dispute as to the agreement.

[00:28:52] Speaker 01:
You bring a complaint, you make a prima facie case saying, I'm overcharged.

[00:28:55] Speaker 01:
I have some other issue.

[00:28:56] Speaker 03:
And then there's a process of discovery involved and all that in which- Does discovery get into whether they're overcharging in other agreements?

[00:29:04] Speaker 01:
I think in this context, given what the commission held in these orders, that if there is differing treatment, that would have to be explained by the- No, no, no, no, no.

[00:29:13] Speaker 03:
I'm going to back up.

[00:29:16] Speaker 03:
You're saying what would happen if they showed different treatment.

[00:29:18] Speaker 03:
I'm asking a predicate question.

[00:29:20] Speaker 03:
They come in.

[00:29:22] Speaker 01:
Sorry, go ahead.

[00:29:23] Speaker 03:
If you were answering it, go ahead and finish.

[00:29:25] Speaker 03:
So I think there is deferring treatment.

[00:29:27] Speaker 03:
I'm trying to get to that.

[00:29:28] Speaker 01:
The commission flagged in these orders, again, that transmission owners need to treat their affiliates and they need to have a valid reason if they're going to treat them differently.

[00:29:38] Speaker 01:
Why?

[00:29:38] Speaker 01:
So I think that is a live issue that could be raised in these complaint proceedings that the commission established.

[00:29:44] Speaker 03:
How are they going to?

[00:29:47] Speaker 03:
I'm not being clear somehow here.

[00:29:49] Speaker 03:
All right.

[00:29:51] Speaker 03:
I am an independent generator and I think this is way too big a bill.

[00:29:55] Speaker 03:
Charging for too much stuff.

[00:29:56] Speaker 03:
I file a complaint with FERC.

[00:29:59] Speaker 03:
I would like to, I suspect they're not charging their own generators.

[00:30:04] Speaker 03:
They own the same transmission owner isn't charging their own generator that type of extra costs.

[00:30:10] Speaker 03:
How do they show that?

[00:30:12] Speaker 01:
I'm suggesting that if if there is a prima facie case being made in the complaint that they are being overcharged or treated unfairly.

[00:30:21] Speaker 03:
Those are two different things.

[00:30:24] Speaker 03:
They are being overcharged because they don't know if it's unfair.

[00:30:27] Speaker 01:
Correct.

[00:30:27] Speaker 01:
That they are being overcharged.

[00:30:29] Speaker 01:
That there is discovery that takes place in there and I think given.

[00:30:33] Speaker 03:
And discovery of what?

[00:30:35] Speaker 01:
of the cost, you know, you can try and prove that it is being overcharged.

[00:30:39] Speaker 03:
So I think... Would that discovery include a transmission owner?

[00:30:47] Speaker 03:
Did you impose these same costs on generator X, which happens to be affiliated with you?

[00:30:53] Speaker 03:
Do you get to look at other agreements as part of that discovery process?

[00:30:57] Speaker 01:
And my bottom line answer is, I can't answer that definitively.

[00:31:01] Speaker 01:
There is a discovery process.

[00:31:03] Speaker 03:
And because... Well, if FERC didn't think that they would be able to show... If FERC had no conception how they would be able to make this showing of differential treatment, how could it possibly have thought this was a remedy?

[00:31:18] Speaker 03:
Didn't it need to explain how this would work?

[00:31:21] Speaker 03:
How it would address discriminatory treatment?

[00:31:24] Speaker 01:
I'm saying the record here does not reflect what would happen in the discovery process.

[00:31:29] Speaker 01:
I'm suggesting the commission has identified in here that if there is differing treatment, that is something that needs to be explained.

[00:31:39] Speaker 01:
So it could be a valid basis for discovery.

[00:31:42] Speaker 02:
Maybe one way of answering Judge Malt's question, what's happened with the 18 or 20 un-executed contracts that have been filed?

[00:31:50] Speaker 01:
So I think what that is.

[00:31:52] Speaker 02:
Is there any, what happens in that case?

[00:31:54] Speaker 01:
I'm not sure I know the answer to that, where those stand.

[00:31:57] Speaker 01:
I think that number captures the number of agreements entered into during the interim period that then the transmission owner came back and said, I would like to take advantage of the opportunity to self-fund these upgrades.

[00:32:11] Speaker 01:
So I don't know if I'm unaware of what the status is.

[00:32:15] Speaker 02:
So those aren't necessarily contracts in which there's an allegation of discrimination.

[00:32:20] Speaker 01:
That's my understanding.

[00:32:22] Speaker 01:
I think it's 21.

[00:32:23] Speaker 01:
That's what I think that number is.

[00:32:26] Speaker 01:
And you see that in the end of the second rehearing order in this case.

[00:32:29] Speaker 01:
Out of the universe of roughly 100 agreements entered into why this proceeding was going on, there's about 21 that a change in the funding mechanism was made.

[00:32:44] Speaker 03:
But this is you said, look, this is our usual.

[00:32:48] Speaker 03:
We do this all the time.

[00:32:49] Speaker 03:
People can always come file complaints on a case by case basis without rates charged.

[00:32:55] Speaker 03:
They can always do that.

[00:32:57] Speaker 03:
This is not a novel process created for this problem.

[00:33:02] Speaker 03:
So there must be rules.

[00:33:05] Speaker 03:
About what this discovery we have rules on what discovery can what comes in and what doesn't and so do non filed agreements.

[00:33:16] Speaker 03:
Between other generators that transmission owner.

[00:33:22] Speaker 03:
Is that relevant discovery?

[00:33:24] Speaker 03:
Or is that something that's confidential and isn't going to come in?

[00:33:26] Speaker 01:
Well, again, the record in this case does not reflect that.

[00:33:31] Speaker 01:
And there have been no, I understand your frustration, and I think it stems from this.

[00:33:35] Speaker 03:
I'm aware the record doesn't reflect it.

[00:33:36] Speaker 01:
There has been no allegations of discrimination.

[00:33:40] Speaker 01:
The issue has not been litigated.

[00:33:42] Speaker 06:
So I'm not sure.

[00:33:45] Speaker 01:
What's the standard for discovery?

[00:33:48] Speaker 01:
Well, I think it has to be relevant to your to your allegations.

[00:33:51] Speaker 01:
It's not.

[00:33:52] Speaker 01:
I apologize.

[00:33:53] Speaker 06:
Now my judgment, that's hypothetical seems like that information would be relevant.

[00:33:58] Speaker 06:
It could.

[00:33:58] Speaker 03:
Yeah.

[00:33:59] Speaker 03:
Is it relevant if they have to make a they've made a prima facie case that they've been charged a lot of high costs.

[00:34:06] Speaker 03:
They haven't made a prima facie case that is because of discrimination unless we do we just infer when there's high costs that is discriminatory.

[00:34:12] Speaker 03:
No, no, no, we don't do that.

[00:34:14] Speaker 03:
So they don't.

[00:34:14] Speaker 03:
What prima facie case does this person who thinks they've been this this generator thinks they've been charged much?

[00:34:18] Speaker 03:
How do they get even a prima facie case so that it will be relevant for discovery purposes of discrimination?

[00:34:25] Speaker 01:
Again, because this issue has not been litigated, I can't I can't answer your question.

[00:34:30] Speaker 03:
All right.

[00:34:31] Speaker 03:
We can all agree then that FERC did not explain how a prima facie case of discrimination would be made on a case by case basis.

[00:34:39] Speaker 01:
I agree that the commission identified this as its preferred remedy.

[00:34:43] Speaker 01:
And there was no issues raised with it that the commission had the opportunity to.

[00:34:49] Speaker 03:
Are there other situations where FERC has said we see the structural problem?

[00:34:56] Speaker 03:
You said FERC said a majority.

[00:34:59] Speaker 03:
of transmission owners, also on generation.

[00:35:02] Speaker 03:
We know at least 27.

[00:35:04] Speaker 03:
That's more than the one that was at issue in Amarin.

[00:35:09] Speaker 03:
We see the structural problem.

[00:35:11] Speaker 03:
We've recognized that as a structural problem for years and years and years.

[00:35:17] Speaker 03:
Is there another situation where they've said, let's solve that case by case?

[00:35:23] Speaker 01:
Nothing immediately comes to mind, Your Honor.

[00:35:25] Speaker 03:
But again, I mean... There's been a structural problem before.

[00:35:28] Speaker 01:
Well, there's a theoretical problem.

[00:35:31] Speaker 01:
That's what the Commission acknowledged here.

[00:35:33] Speaker 03:
Again, there has been... The original sort of significant orders on this thought it was just theory.

[00:35:38] Speaker 03:
The whole reason that there was all this impetus to try to stop, I think what then Judge Roberts called the bad old days of vertical integration.

[00:35:50] Speaker 03:
That wasn't theory.

[00:35:51] Speaker 03:
That was a real problem that FERC has been trying to get rid of for quite some time.

[00:35:59] Speaker 03:
That's not theory.

[00:36:00] Speaker 03:
That's not economic theory.

[00:36:01] Speaker 03:
That is the problem that FERC has been trying to eliminate through orders.

[00:36:06] Speaker 03:
And so now you have an order that says, we accept that, I'm told, 27, or FERC will go with FERC's own answer, a majority.

[00:36:16] Speaker 03:
A majority of these transmission owners own their own generation.

[00:36:20] Speaker 03:
We're taking that as given.

[00:36:25] Speaker 03:
And we don't know if that's a problem or not.

[00:36:30] Speaker 03:
You come prove it on a case-by-case basis.

[00:36:33] Speaker 03:
And you say you're not aware of them ever having done something like that before, when they have.

[00:36:37] Speaker 03:
In Emory, they didn't have the evidence.

[00:36:39] Speaker 03:
And Judge Silberman was quite clear.

[00:36:41] Speaker 03:
The court was quite clear in that opinion.

[00:36:43] Speaker 03:
And Judge Silberman was quite explicit at oral argument.

[00:36:46] Speaker 03:
It would be a totally different case if they had that evidence.

[00:36:50] Speaker 03:
And so here, FERC has it.

[00:36:53] Speaker 03:
But now it seems to be walking away from what it's been doing for years and years and years and years and trying to eliminate vertical integration.

[00:37:02] Speaker 01:
So my answer is the Ameren Court also made clear that the commission's

[00:37:06] Speaker 01:
The remedy it initially chose was statutorily and constitutionally infirm.

[00:37:12] Speaker 03:
Because there wasn't a discrimination problem to remedy.

[00:37:15] Speaker 01:
I believe the court said, even if there was a theory supporting discrimination, then the commission would still have to answer the second question.

[00:37:24] Speaker 01:
Again, remember, it's a two-step process.

[00:37:26] Speaker 01:
Is the existing universe unjust and unreasonable?

[00:37:29] Speaker 01:
If yes, then OK, what can we do about it?

[00:37:31] Speaker 01:
And the court found that there were significant concerns with the commission.

[00:37:34] Speaker 03:
What did Ferck say here?

[00:37:36] Speaker 03:
that it couldn't do anything about that discrimination.

[00:37:39] Speaker 03:
The only thing it could do was resort to this.

[00:37:42] Speaker 01:
Well, I mean, the commission did walk through it and retract it and explain why its previous findings as to why.

[00:37:48] Speaker 03:
All it did was say what the Ameren Court said.

[00:37:50] Speaker 01:
Well, it went beyond that, Your Honor.

[00:37:52] Speaker 01:
It found one of the points by the Ameren Court was that

[00:37:56] Speaker 01:
And again, this sort of goes to both sides of the equation, whether the existing rate is just reasonable and what replacement should be, but that the commission had never really grappled with the transmission orders position, the operation of these.

[00:38:08] Speaker 01:
Network upgrades suggestions subjects them to risks, which are not compensated under the current.

[00:38:14] Speaker 01:
Tariff scheme mission.

[00:38:16] Speaker 01:
The court said, kind of the commission, you sort of dodged that issue.

[00:38:19] Speaker 01:
Go back, take a look at the record and address it.

[00:38:22] Speaker 01:
And the commission did.

[00:38:23] Speaker 01:
It accepted the transmission owners proffer that operation of these does subject them to a variety of risks that are not compensated under the current tariff regime.

[00:38:36] Speaker 03:
So option C might be let them compensate for those risks.

[00:38:42] Speaker 03:
the tariff.

[00:38:43] Speaker 01:
Which transmission owner funding does, because then they get to be able to put it in.

[00:38:46] Speaker 03:
But it does more than that.

[00:38:47] Speaker 03:
That's the problem.

[00:38:48] Speaker 03:
It's never considered an option C, which would be generator funding, but the tariff has to allow compensation for those risks.

[00:38:58] Speaker 01:
I mean, certainly there, there could be other, consider any other options.

[00:39:01] Speaker 01:
Well, because the question before the commission was based on the record, could it reaffirm its finding that transmission owner funding is the initial hurdle it needs to clear that it is unjust and unreasonable.

[00:39:12] Speaker 01:
And because there were uncompensated risks, the commission found that it was reasonable that generators should explain it was those risks were so substantial.

[00:39:24] Speaker 03:
Where did it give an explanation as opposed to just stated in a conclusive reform that those risks were so substantial, they outweigh this imperative that is sort of driven for, as I've said years and years and years of policing, being suspicious about and trying to eliminate vertical integration.

[00:39:42] Speaker 03:
Where do they say make that balance?

[00:39:45] Speaker 01:
Well, I think as you walk, it clearly does not use the language you just used, but it walks through its findings.

[00:39:51] Speaker 03:
Tell me where you think it makes that balance.

[00:39:54] Speaker 01:
So I think if you look.

[00:39:55] Speaker 03:
Which order too are we talking about?

[00:39:57] Speaker 03:
We had a lot of orders here, so tell me which order.

[00:40:01] Speaker 01:
I guess I'll start with the.

[00:40:05] Speaker 01:
I'm sorry, I'm in the wrong.

[00:40:11] Speaker 01:
I mean, that's we can start there if you like, but I'm sorry, if I could redirect the court's attention to the remand order, which is actually at one, I'm looking at pages 156 and 157 of the J.A.

[00:40:34] Speaker 03:
So tell me where they made that balance between the two.

[00:40:41] Speaker 01:
So I think if you look at paragraph 31 of the remand order, the commit, which is JA 157,

[00:40:50] Speaker 01:
You know that the commission finds that there are based on the record there are on compensated risks that transmission owners are subjected to through operation of these network upgrades.

[00:41:00] Speaker 01:
And that they shouldn't be that is essentially in part 2 of that that sentence there basically says that it's reasonable that they should be afforded an opportunity to be compensated for those risks.

[00:41:12] Speaker 03:
Where does it say this harm is so much that it outbalances what we have long recognized to be a discrimination problem?

[00:41:23] Speaker 03:
You're saying they had to balance.

[00:41:24] Speaker 03:
There was two things going on here, and I don't see that.

[00:41:27] Speaker 03:
OK, we see there's a problem.

[00:41:28] Speaker 03:
Cameron told us there's a problem.

[00:41:30] Speaker 03:
Our record doesn't rebut that problem.

[00:41:34] Speaker 03:
And that problem outweighs the risk of discrimination.

[00:41:37] Speaker 01:
And then I think you go to the remand rehearing order, paragraph 38, where, again, it talks about, you know, here we are.

[00:41:46] Speaker 01:
Oh, wait.

[00:41:47] Speaker 03:
Sorry.

[00:41:48] Speaker 03:
I've got to find where.

[00:41:48] Speaker 03:
What page is it?

[00:41:49] Speaker 01:
That's page 225 of the Joint Appendix, paragraph 38, which is the remand rehearing order.

[00:42:00] Speaker 03:
Well, that's just, again, that's just conclusory, right?

[00:42:04] Speaker 03:
If I were describing their decision, I would say they decided that there isn't enough, let's see, is not itself to demonstrate there is undue discrimination.

[00:42:17] Speaker 01:
Correct.

[00:42:18] Speaker 01:
And then it identifies, it identifies the remedy there.

[00:42:22] Speaker 01:
And then on the, uh, the next page, again, it on page paragraph 39, um, you know, it reiterates the point that there's not enough, uh, evidence in the record to overcome the transmission or showing that, that, uh, they do take on risks when they operate those.

[00:42:40] Speaker 03:
It's not making an expert judgment.

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

[00:42:43] Speaker 03:
It's just describing what Amarin said.

[00:42:46] Speaker 03:
Well, and then I believe that an ultimate the court remanded for a reason because it wasn't making the decision.

[00:42:52] Speaker 03:
And it thought the expert agency here who is the expert on this risk of undue discrimination is absolutely the expert and has the ability to see, well, how much, how big is this risk of uncompensated costs?

[00:43:09] Speaker 03:
And then balance those two interests, and it didn't do that.

[00:43:13] Speaker 03:
I mean, it could.

[00:43:13] Speaker 03:
Maybe the question, I'm not here to say what the right answer is.

[00:43:18] Speaker 03:
It is to say that it was in picking this case-by-case so-called solution or remedy that no one seems to know how it's actually going to work.

[00:43:29] Speaker 03:
And FERC didn't grapple with that.

[00:43:32] Speaker 03:
over as a solution here as opposed to considering any other options or just explaining why we're no longer concerned about majority ownership problem here and its discrimination, which Emoryn was very careful to say, we're not dealing with that situation.

[00:43:49] Speaker 01:
Correct, but I believe the commission's analysis here is that it could not carry its burden of showing that transmission owner funding is unjust and unreasonable because A, there are uncompensated risks there, and B, yes, there is a potential for discrimination with respect to- Is there a dollar value anywhere on those uncompensated risks?

[00:44:06] Speaker 03:
Like what percent?

[00:44:07] Speaker 03:
I mean, if they have uncompensated risks and it's a material percentage in a way that's gonna affect their profits, their attractiveness to investors, that's one thing.

[00:44:19] Speaker 03:
If at the end of the day, it turns out to be, you know, a penny on a thousand dollars, then the balance would be different.

[00:44:28] Speaker 03:
Did any of us sort of see what the magnitude of that uncompensated risk is?

[00:44:33] Speaker 01:
I don't believe the record here reflects that.

[00:44:35] Speaker 01:
I will sort of take issue with your

[00:44:39] Speaker 01:
you know, point that maybe it's a different question if it's going to throw them into bankruptcy.

[00:44:42] Speaker 03:
That's really a... I didn't say throw them into bankruptcy.

[00:44:45] Speaker 03:
I said material in a way that would affect their profitability and their attractiveness to investors, which is what Ameren was concerned about.

[00:44:50] Speaker 01:
That's sort of a step two question in, you know, would eliminate it be just and reasonable, but here the commission again found that the record didn't support the first part of the 206 analysis.

[00:45:00] Speaker 03:
You would agree that if there was a problem of undue discrimination and transmission owners came in and said,

[00:45:08] Speaker 03:
But we weren't able to collect a penny last year.

[00:45:12] Speaker 03:
We missed a penny.

[00:45:14] Speaker 03:
It would be quite unreasonable for her to say, OK, let's not worry about that discrimination.

[00:45:18] Speaker 03:
You need your penny, right?

[00:45:20] Speaker 03:
I'm sure they're going to say it wasn't a penny.

[00:45:22] Speaker 03:
But what I'm asking is to make this judgment about whether this remedy is just and reasonable.

[00:45:33] Speaker 03:
This case-by-case remedy for discrimination is just and reasonable.

[00:45:37] Speaker 03:
because of this other harm, don't we need to know what that harm, not just words for it, but like some sense of how material that harm is, how significant it is.

[00:45:48] Speaker 03:
Does it really have an impact on profitability or investment?

[00:45:52] Speaker 01:
Well, again, I think the, you know, the statutory context and the standard and sort of what was happening here matters.

[00:46:00] Speaker 01:
The existing rate was transmission owner funding.

[00:46:03] Speaker 01:
That was the existing just and reasonable rate as a result.

[00:46:05] Speaker 03:
The firm's not capable of thinking of anything else.

[00:46:08] Speaker 01:
I'm sorry.

[00:46:08] Speaker 03:
Perk is not capable of saying transmission owner funding is fine as long as something to protect against discrimination or transmission funding is out, but generating funding is fine as long as uncompensated costs, the tariff allows for incorporation of these costs and risks into that.

[00:46:26] Speaker 03:
Perk can't do that.

[00:46:27] Speaker 01:
Only if it first establishes under Section 206 of the Federal Power Act that the existing rate is unjust and unreasonable.

[00:46:33] Speaker 01:
Only then can it get to the second step.

[00:46:36] Speaker 01:
And again, the commission here.

[00:46:37] Speaker 03:
So in this two-step process here, they could have said unjust and unreasonable because of discrimination concerns that were not before the court in Ameren, but were specifically reserved and acknowledged that that could change everything.

[00:46:48] Speaker 03:
So it's unjust and unreasonable for that reason, but we're not going to go

[00:46:55] Speaker 03:
just going with generation funding, that would not be just and reasonable either because of these unincorporated, if they were material in any way, these unaddressed costs.

[00:47:08] Speaker 03:
Yeah, I mean, certainly if the commission- So here's, they can't make a, you need, your generator funding tariff has to allow for addressing these costs.

[00:47:17] Speaker 03:
They can't do that?

[00:47:18] Speaker 01:
If the commission found that the existing, found that the record supported a conclusion that the existing tariff was unjust and unreasonable,

[00:47:25] Speaker 01:
Yes, it has sort of broad remedial authority under step two of the analysis, again, bound by, you know, it's statutory authority and the constitution.

[00:47:36] Speaker 02:
Why did FERC have to decide whether the transmission owner funding was unjust and unreasonable?

[00:47:43] Speaker 02:
I mean, what is the commission's view about the intervener's argument that this is a heck of a chainy type of situation?

[00:47:49] Speaker 01:
I'm sorry, I lost the end of your question.

[00:47:51] Speaker 02:
That this circumstance where you have a remand and the court has vacated all of your orders, including the order to Sue Esponte consider whether transmission owner funding was just and reasonable.

[00:48:03] Speaker 02:
Did the commission have to go back and make any determination?

[00:48:11] Speaker 01:
You know, again, this started as started back in 2015 as a transmission owner coming to the commission and saying it's unjust and unreasonable that bringing a complaint to the commission saying, I, if this generator was directly connecting to me, I would have the option to self-fund and the commission took it and it should be extended everywhere.

[00:48:32] Speaker 02:
And then the commission to respond to a question as a whole.

[00:48:34] Speaker 01:
So following Ameren, what's the state of play?

[00:48:37] Speaker 01:
The state of play is that the commission's changed to the existing status quo, which was transmission owner funding in the generator interconnection agreements, but not in the indirectly connected agreements.

[00:48:48] Speaker 01:
That was the status quo.

[00:48:49] Speaker 01:
So then if the commission wanted to change that, wanted to take it on, it again, as I've been trying to explain today.

[00:48:56] Speaker 03:
Well, it had to do that.

[00:48:57] Speaker 03:
It had to deal with the indirect.

[00:48:59] Speaker 03:
connection issue, the Otter Tail issue.

[00:49:01] Speaker 03:
They couldn't have just sort of said, never mind, we're dismissing our complaint.

[00:49:05] Speaker 03:
They had to deal with Otter Tail's complaint.

[00:49:08] Speaker 01:
Correct.

[00:49:08] Speaker 01:
Correct.

[00:49:09] Speaker 03:
And then the commission... But they had to do something.

[00:49:10] Speaker 03:
They had to pick one solution or the other because I think, at least as a prospective matter, no one's complained.

[00:49:17] Speaker 03:
I haven't heard people saying it was unreasonable for FERC to equalize the treatment of direct and indirect connections.

[00:49:25] Speaker 03:
And so then they had to pick

[00:49:27] Speaker 01:
right this wasn't like we're just dismissing our complaint and going away they had to deal with this otter tail objection and come up with a solution to it correct when the orders on the commission's yes that's what's left the commission took up on itself to extend transmission order funding i'm sorry to take away transmission order funding to change the status quo when the when the orders were vacated uh

[00:49:48] Speaker 01:
the pre-existing status quo is transmission owner funding in the direct connections and integrate not.

[00:49:54] Speaker 01:
And yes, that should be equalized.

[00:49:58] Speaker 01:
You know, the commission relied on it or reaffirmed his previous finding that all those parties, whether directly or indirectly connected or similarly situated and that the pre-existing just and reasonable rate should be extended to those indirectly connected agreements.

[00:50:13] Speaker 06:
I. And I know or no, no, but my my first question was where is first explanation why it believed case by case challenges were at.

[00:50:29] Speaker 06:
What's the answer.

[00:50:30] Speaker 01:
I think in the in the remand order.

[00:50:35] Speaker 01:
You pointed us again.

[00:50:36] Speaker 06:
I think I not only read what you pointed us to, but

[00:50:41] Speaker 06:
You know, I wasn't surprised that you named those J a pages.

[00:50:44] Speaker 06:
Those are the J a pages that I've got scribbled all over in my notes for argument.

[00:50:49] Speaker 06:
And I think the closest her comes give you a chance to tell me why I'm wrong is paragraph 38 on J a 2 25.

[00:50:56] Speaker 06:
And the last sentence there, it says that a W E a let's get ahead of it.

[00:51:05] Speaker 06:
does not show why the ability of interconnection customers to challenge costs for the commission is inadequate.

[00:51:14] Speaker 06:
Fair enough.

[00:51:14] Speaker 06:
Maybe EWEA did not show why that's inadequate.

[00:51:21] Speaker 06:
But I think FERC had to show why it was inadequate.

[00:51:25] Speaker 06:
And where is FERC's explanation for why it was inadequate?

[00:51:28] Speaker 06:
Well, I think in the Amarin decision itself, the court flagged this as one avenue to... But would you agree that if I read Amarin for the fifth time... I mean, just a short circuit that... And if I read Amarin and I don't find what you just said, do we remake?

[00:51:52] Speaker 01:
I'm sorry, we kind of said the last, do you need to remand?

[00:51:55] Speaker 01:
No, because I think the, again, this goes to the first part of the analysis.

[00:52:00] Speaker 01:
Did the commission, was the commission reasonable in concluding that the existing setup was unjust and unreasonable?

[00:52:07] Speaker 01:
And there's sort of two bases there, and I think they're independent that, one, there's uncompensated risk, and therefore it's reasonable to offer them some degree of compensation.

[00:52:18] Speaker 01:
And again, the idea that the commission has not expounded on how this work out in practice, it sort of reserved the issue.

[00:52:24] Speaker 01:
If you look in these orders, because the same issue came up with respect to how we're going to treat the interim agreements, like we said, it would take a case by case.

[00:52:31] Speaker 01:
They want to prejudge the issue and would take a case by case approach to how we would deal.

[00:52:41] Speaker 01:
Thank you.

[00:52:41] Speaker 01:
Any further questions?

[00:52:42] Speaker 01:
Thank you, Your Honors.

[00:52:45] Speaker 03:
We have an intervener now.

[00:52:58] Speaker 05:
we may please the court christopher jones for the interveners but there's a lot of work i could with the uh... case-by-case issue uh... because there's some because of a fundamental misunderstanding presented by the petitioners argument i think petitioner actually said they can't know if there's been discrimination that that is absolutely not true this is part of this whole scheme is part of the most transparent regulatory regime

[00:53:20] Speaker 05:
that the industry has, frankly, ever seen.

[00:53:23] Speaker 05:
And over the 15-year history of transmission owner optionality, the reason that, you know, there has not been a single allegation of undue discrimination.

[00:53:32] Speaker 03:
But the reason they can find out, these are public... The history of this and any other regional transmission organizations?

[00:53:38] Speaker 05:
Your Honor, I don't think... I think Council was correct that that's... No, that other RTOs have moved off in different directions.

[00:53:44] Speaker 05:
The transmission owner funding was originally developed by the Commission in its pro forma order 2003.

[00:53:50] Speaker 05:
It remains in the mid-continent just by virtue of the way that the mid-continent tariff has developed.

[00:53:56] Speaker 03:
Can I ask you the, I'm sorry, I just wanted to get to the chase because time is short.

[00:54:02] Speaker 03:
This discovery issue that we were talking about, about which I confess profound ignorance about how it works.

[00:54:08] Speaker 03:
So if an independent generator comes in and says, I think I've been overcharged in a way that makes the rates unjust and unreasonable.

[00:54:21] Speaker 03:
And does that allow them to get discovery of the agreements not filed with FERC between that same transmission owner and a generation that it owns?

[00:54:34] Speaker 05:
Absolutely, Your Honor.

[00:54:35] Speaker 05:
These contracts are not, these are not secret contracts.

[00:54:38] Speaker 05:
The only reason they're not clear about this, the only reason that those contracts that are agreed upon are not filed with the commission is only because they use a pro forma form.

[00:54:48] Speaker 05:
And the commission for workload purposes says, if you use the form contract, I don't need to see it.

[00:54:52] Speaker 05:
That's the only reason those contracts are not filed with the commission.

[00:54:55] Speaker 05:
In fact, now I can't say this first.

[00:54:57] Speaker 03:
Where would I find, where would I find?

[00:55:00] Speaker 05:
So there's two places.

[00:55:01] Speaker 05:
And again, I can't say first, I haven't checked in recent weeks, but at one point, every contract was actually available on the MISO website.

[00:55:07] Speaker 05:
Again, Mid-Continent itself is a party to these contracts.

[00:55:11] Speaker 05:
They sign them.

[00:55:12] Speaker 03:
The second place is- And those form contracts, will they detail the charges?

[00:55:18] Speaker 03:
Because my assumption is that the independent generator doesn't have a form contract.

[00:55:23] Speaker 03:
So- Will it allow you to document whether

[00:55:27] Speaker 03:
owned generation and this independent generation are charged the same things.

[00:55:33] Speaker 05:
Can you tell that by looking at the paper?

[00:55:36] Speaker 05:
As to the funding election, that has to be memorialized in the agreement.

[00:55:39] Speaker 05:
It's apparent on the face of the agreement.

[00:55:41] Speaker 05:
All these costs?

[00:55:42] Speaker 05:
Well, indeed, yes.

[00:55:43] Speaker 05:
The upgrade costs are absolutely in there as well.

[00:55:46] Speaker 05:
The costs for

[00:55:47] Speaker 03:
Building the new line for building the new substation they are every piece of evidence they would need to know to know whether they were treated exactly the same as a as a. Transmission own generation every detail of that contract every number.

[00:56:05] Speaker 03:
is going to be there on MISO's website, just like theirs.

[00:56:08] Speaker 05:
Again, at one time they were on the MISO website.

[00:56:10] Speaker 05:
Again, the second, I don't know if they still are, I don't run the MISO website.

[00:56:13] Speaker 05:
The second place though, Your Honor, is the commission, in lieu of requiring them to be filed, asked for this thing called an electronic quarterly report, at which point every contract is listed and the party's there too.

[00:56:24] Speaker 03:
Again, where we- Again, listing contracts and parties isn't the same thing as the details in a way that would let me know if I was treated differently or the same.

[00:56:33] Speaker 05:
I don't believe the petitioners have ever asked.

[00:56:37] Speaker 03:
That's not my question.

[00:56:39] Speaker 03:
If you're going to have a case by case approach, it's got to allow them to show discrimination and it wasn't clear to me that this discovery process would allow that.

[00:56:52] Speaker 05:
And again, I would suggest that it doesn't even need to get to a formalized discovery process.

[00:56:56] Speaker 05:
Again, with an independent entity running the transmission system and signing these agreements, our funding elections are not secrets.

[00:57:05] Speaker 05:
That is just not true that they cannot know.

[00:57:09] Speaker 05:
And again, I think the only reason there hasn't been a record developed there is because I have not been made aware of these things.

[00:57:14] Speaker 03:
When you say funding election, you mean transmission funding versus generation funding?

[00:57:19] Speaker 03:
Yes, Your Honor.

[00:57:21] Speaker 05:
that's not the point is the details of it like what they're charged as to for is your question you're right we should simply charge them more for the same widget

[00:57:33] Speaker 03:
that yes or a higher rate of return or I mean there's a lot of ways and a lot of numbers that that transmission owner could you know up things for I'm not saying this is happening to be clear this is all hypothetical to be clear and let me unpack those in the order which presented what in backwards actually the rate of return absolutely cannot be changed that's regulated by the commission it's in the tariff we have no ability to change that or charge different rates of return to different customers

[00:57:57] Speaker 05:
would not be allowed that's file rate doctor would prohibit it as to other costs in the agreement, those are costs flowed through on an actual cost basis detailed in the agreement itself.

[00:58:10] Speaker 05:
So a typical generator interconnection agreement will say $10 million for a new substation, $5 million for a reconductor of this line and

[00:58:18] Speaker 05:
$5 million for some other labor associated with doing the project.

[00:58:23] Speaker 05:
Again, the reason, and you're right, at some point this entire regulatory regime was grown out of a suspicion of vertical integration.

[00:58:29] Speaker 05:
I would grant you that.

[00:58:30] Speaker 05:
But what we have in its place is an independent entity and a pro forma contract that makes these details available.

[00:58:37] Speaker 03:
Again, I don't... Too bad FERC didn't say what you've been saying.

[00:58:40] Speaker 05:
Your honor, I think maybe the reason they didn't is because frankly, it's so ingrained in the regulatory regime that this is the transparency of it and that these contracts are not state secrets.

[00:58:51] Speaker 05:
In fact, we would absolutely, we would expect to own our cost estimates and expect to own our funding elections at every turn.

[00:58:59] Speaker 03:
Well, if also transparent, then why would there even be a need for this case by case?

[00:59:07] Speaker 03:
Well, again, if it's all set, if the rates returns, if all these charges are out there and they can't be changed between different generators, they can't be changed between different generators.

[00:59:18] Speaker 05:
Well, what petitioner is worried about is the funding election.

[00:59:21] Speaker 05:
And we do have that optionality, but that optionality has been in the care for 15 years.

[00:59:24] Speaker 03:
I don't think they're worried about the funding election.

[00:59:25] Speaker 03:
I think they're worried about what's going to happen with the funding election.

[00:59:28] Speaker 05:
I'm sorry, Your Honor, I missed the question.

[00:59:29] Speaker 03:
I think they're worried, not that, you're not worried just that you pick transmission funding in the abstract.

[00:59:35] Speaker 03:
It's what transmission funding

[00:59:37] Speaker 03:
allows to have happen.

[00:59:39] Speaker 03:
That's what they seem to be worried about.

[00:59:41] Speaker 05:
It is.

[00:59:42] Speaker 05:
And it would allow us to earn that regulated rate of return, which we cannot change.

[00:59:47] Speaker 05:
That rate is in the territory.

[00:59:48] Speaker 02:
Mr. Jones, is part of your argument that because there is so much transparency, there is in fact not a lot of discrimination because everyone can kind of see what is happening in these contracts?

[01:00:00] Speaker 02:
I mean, do you think the transparency in part eliminates the possibility of discrimination or eliminates the

[01:00:07] Speaker 02:
actual, any possibility of actual discrimination.

[01:00:11] Speaker 05:
Your honor, I don't know that I would go so far as to say that mere transparency would per se eliminate all possibilities, but it would absolutely bring a polite word to occur.

[01:00:19] Speaker 05:
Do you think it's discouraging that?

[01:00:20] Speaker 05:
Absolutely.

[01:00:21] Speaker 05:
Again, vertically integrated utilities operate under a comprehensive scheme of regulation to ensure exactly that, that the transmission system cannot be used to provide preferential access to an affiliate or a cell phone generator or transmission system.

[01:00:38] Speaker 05:
That's the entire regulatory regime that's been in place now since 1996.

[01:00:42] Speaker 03:
So when we say... Fair decision in Amherst said the reason, it wouldn't reason to that, sorry, reason that the reason that there would not be discrimination risk is that there was only evidence of one and then specifically went on to say because this is all been getting, this vertical integration has all been getting driven out by FERC and its orders.

[01:01:03] Speaker 03:
We did not say anything about it won't happen because of transparency.

[01:01:08] Speaker 03:
It can't happen or it will be such a minuscule risk.

[01:01:11] Speaker 03:
And this is all the balancing that normally I would have thought FERC would do.

[01:01:15] Speaker 03:
They would say, because of this transparency, because of this, because of that, maybe it could happen, but it's hard.

[01:01:22] Speaker 03:
Even if you have 27 of these folks owning their own generators, it's just really hard to discriminate these days because of other protections we've put in place.

[01:01:34] Speaker 03:
the costs and risks that are not being compensated are high enough to make this, you know, that balance that that's what we need to worry more about that than we do about discrimination.

[01:01:47] Speaker 03:
But I just don't see that anywhere.

[01:01:50] Speaker 05:
Well, I think the Amherst Court's discussion of vertical integration went to motive.

[01:01:57] Speaker 05:
And what the Commission did on remand said, we looked and we again see no record of a single allegation over a 15-year history of transmission owner optionality and funding, that this has ever happened.

[01:02:09] Speaker 03:
That's because they were for a while there there was a third option that was being used first of all if you don't have a pure record Yes, but again, it's the question here is first needed to explain why with these two concerns And when amaran was on a record that didn't have really a plausible discrimination concern and Then they say we accept

[01:02:36] Speaker 03:
the association's evidence that in fact, there are 20 some majority of integrated, vertically integrated transmission owners.

[01:02:46] Speaker 03:
We're accepting that now.

[01:02:47] Speaker 03:
So now we have a problem that we didn't have an outcome.

[01:02:51] Speaker 03:
And then said, we accept that there's uncompensated costs and risks, or maybe it was just ended up being uncompensated risks, but it didn't quantify those.

[01:03:00] Speaker 03:
And it never did this balancing,

[01:03:03] Speaker 03:
it's the expert, it could get this information and strike the balance as it seems reasonable.

[01:03:08] Speaker 05:
But I think the reasonableness of Park's reaction in that situation, Your Honor, goes from the fact that this rate has been in place, like I said, for 15 years, and the commission has known that there has been no generator has ever stepped forth and said, I am being treated unfairly as to the funding election, or there may have been cost disputes, but those can be handled.

[01:03:29] Speaker 05:
I don't know that there was ever a discrimination cost dispute.

[01:03:32] Speaker 05:
But again, the commission, I think, was absolutely reasonable to say, you know, the court told us we overstated the risk of discrimination, we understated the risk of the transmission owners, and we look back on the record and we think that the court had it right that we got that balance wrong.

[01:03:49] Speaker 03:
Okay.

[01:03:49] Speaker 03:
Thank you very much.

[01:03:51] Speaker 03:
All right.

[01:03:51] Speaker 03:
We'll give, Mr. Tabak, we'll give you two minutes.

[01:03:56] Speaker 03:
If you can start by responding to this argument about can't have discrimination with all the transparency that's out there.

[01:04:03] Speaker 03:
So what are you guys really worried about?

[01:04:04] Speaker 07:
Thank you, Your Honor.

[01:04:08] Speaker 07:
On that point regarding the

[01:04:11] Speaker 07:
potential for discrimination and transparency.

[01:04:13] Speaker 07:
We know that the core issue here is that while MISO is an independent administrator of these contracts, the election is unilaterally done.

[01:04:22] Speaker 07:
The election of which funding structure to use is done by the transmission-owning utility at their sole discretion.

[01:04:28] Speaker 07:
MISO can reflect that.

[01:04:30] Speaker 07:
MISO will collect the associated rate.

[01:04:32] Speaker 07:
But that is not the decision of the independent grid operator.

[01:04:37] Speaker 03:
The decision?

[01:04:40] Speaker 03:
Back to your first question, I think.

[01:04:43] Speaker 06:
So why should FERC have believed there would be discrimination once you also allowed self-funding by indirect?

[01:05:03] Speaker 07:
Your honor, two responses there.

[01:05:05] Speaker 07:
First, the Otter Tail complaint dealt with one category of the affected transmission owners, the facility construction agreements.

[01:05:11] Speaker 07:
It did not deal with the multi-party facility construction agreements, which is a separate category, and that sort of leads to the retroactivity to 2015 for that category that wasn't on notice.

[01:05:22] Speaker 07:
I think I'm asking a different question.

[01:05:24] Speaker 06:
Yeah, I think so, Your Honor.

[01:05:25] Speaker 06:
Before whatever year it was filed, what year was Otter Tail?

[01:05:28] Speaker 06:
2015.

[01:05:28] Speaker 06:
2015.

[01:05:29] Speaker 06:
Before 2015, direct transmission owners could elect

[01:05:33] Speaker 06:
to self-fund.

[01:05:35] Speaker 06:
And there's no evidence that they were discriminated.

[01:05:40] Speaker 06:
Maybe it's because of this transparency incentive to not discriminate.

[01:05:45] Speaker 06:
Who knows why?

[01:05:46] Speaker 06:
They weren't discriminating before 2015.

[01:05:50] Speaker 06:
And so now that we add a new group that can also do what direct transmission owners were doing,

[01:05:57] Speaker 06:
Why would we think that all of a sudden, why would we think the indirect transmission owners are going to discriminate when the direct transmission owners never discriminate?

[01:06:05] Speaker 07:
Your honor, I would simply say that that factor, if it was animating FERC's decision making, is not reflected there.

[01:06:10] Speaker 07:
They did not.

[01:06:11] Speaker 07:
And I'm pretty sure I agree with you.

[01:06:14] Speaker 06:
And that might probably be the case.

[01:06:17] Speaker 06:
But what's your answer to the question?

[01:06:20] Speaker 07:
Your honor, our response there is that the structural motive that the Ameren Court noted is still present, and the Commission's response to structural motives has been to structure prophylactic rules that prevent the potential exercise of under-discrimination by transmission-owning affiliates.

[01:06:37] Speaker 07:
Again, if the Commission changes its mind, it needs to adequately explain why the new remedy it's proposing is sufficient.

[01:06:44] Speaker 02:
Mr. Tabak, you've also asked us not just to remand for further reasons, but also to vacate Burke's decision.

[01:06:50] Speaker 02:
I mean, what will happen to all the contracts that have been entered into in the interim?

[01:06:56] Speaker 07:
Your Honor, for the contracts that have been filed un-executed, I would imagine that the Commission will have to revisit those.

[01:07:03] Speaker 07:
Those, I believe, are treated as open proceedings at the Commission.

[01:07:08] Speaker 07:
And there may be an opportunity to

[01:07:12] Speaker 07:
move away from the funding election, or the contracts for which the parties reached agreement and they were not filed and executed, my suspicion is that those would not be reopened because the parties had a meeting of the minds.

[01:07:27] Speaker 07:
But ultimately, there needed to be some remedial effect here because all of FERC's actions were immediately timely sought rehearing and timely appealed.

[01:07:37] Speaker 07:
If there's constructive notice back to that date, then FERC may be in the position, depending on what the record reflects, of having to consider retroactive application back to 2018 or back to the interim period.

[01:07:49] Speaker 03:
Do you agree with the predicate of Judge Walker's question that there was no discrimination by direct transmission owners that directly owned their own generation prior to 2015?

[01:08:02] Speaker 07:
I would agree that the commission did not deal with any complaint on that front.

[01:08:06] Speaker 07:
And my understanding is that transmission owner funding was little used prior to that period.

[01:08:13] Speaker 03:
Okay, so it wasn't used often, so we don't really know that.

[01:08:18] Speaker 03:
So there wasn't sort of a statistically significant sample before 2015?

[01:08:22] Speaker 03:
Is that your answer?

[01:08:23] Speaker 07:
I think that's accurate, Your Honor.

[01:08:26] Speaker 03:
And now it would be pretty universally used within MISO, is that the point?

[01:08:30] Speaker 07:
Our understanding is it has become prevalent in the region.

[01:08:33] Speaker 07:
And this speaks again to the indicative precedent here is what I would believe led to the New York transmission owners filing for comparable treatment here in the September order that's lodged with the court.

[01:08:48] Speaker 06:
It's such a great gig that everybody's doing it now.

[01:08:50] Speaker 06:
Why weren't they doing it before the direct transmission?

[01:08:54] Speaker 07:
Your honor, I can't speak to the decision-making process at that time.

[01:08:58] Speaker 07:
There could be various factors that...

[01:09:03] Speaker 07:
play in here, including the type and value of the network upgrades that might be at issue, which again speaks to the need for record development here to establish both what the risk of under-discrimination might be and what the risk, if any, to the transmission owners is, and to holistically assess those risks and benefits simultaneously and arrive at a reasoned conclusion that balances them.

[01:09:25] Speaker 06:
If we remand and are

[01:09:29] Speaker 06:
comes to the same conclusion in their explanation, everything Mr. Jones said.

[01:09:36] Speaker 07:
Honor, if FERC does the type of record development that it did in New York and adequately explains itself, I think that would be a very different case from the one before the court today.

[01:09:49] Speaker 07:
I can't presuppose any action from independent generators at that stage.

[01:09:55] Speaker 07:
But it would look like a fundamentally different case from the one the court's considering now.

[01:10:03] Speaker 03:
Thank you very much.

[01:10:04] Speaker 07:
Thank you, Your Honor.

[01:10:05] Speaker 03:
For all the attorneys, and the case is submitted.