[00:00:00] Speaker 01: Phase number 20-1495 et al. [00:00:03] Speaker 01: Duke Energy Progress LLC petitioner versus Federal Energy Regulatory Commission. [00:00:08] Speaker 02: Mr. Saitlin for the petitioner, Mr. Ediger for the respondents. [00:00:13] Speaker 01: Mr. Saitlin, good morning. [00:00:15] Speaker 02: Thank you, Your Honor. [00:00:16] Speaker 02: Misha Saitlin for Duke. [00:00:18] Speaker 02: FERC's orders below rewrite the full requirements contract between Duke and PowerAgency, permitting PowerAgency to implement a scheme to eliminate its contributions to Duke's fixed costs by deploying grid-scale battery devices to service the retail energy needs of PowerAgency's customers precisely on a contractual event one particular hour per month. [00:00:42] Speaker 02: This we would respectfully submit is a straightforward case of contractual interpretation, reading primarily just two provisions of the contract here. [00:00:50] Speaker 02: Our position is that power agencies deployment of grid scale batteries to services consumers retail demands is not within the contractual text for demand side management or demand response because the contractual text requires that both of these concepts are limited to modify consumers patterns of electricity usage. [00:01:11] Speaker 02: Where does it state that? [00:01:13] Speaker 03: in the language of the contract. [00:01:16] Speaker 03: I know that's your position. [00:01:17] Speaker 03: I know your position is it requires actual production, it requires actual reductions in energy consumption and affirmative acts by end users, but where is that in the actual language of the contract? [00:01:30] Speaker 02: Right, so I'll talk about demand-side management first, and then I'll talk about demand response. [00:01:35] Speaker 03: Okay, great. [00:01:36] Speaker 02: With regard to demand-side management, it is the definition of demand-side management, and I'm gonna quote the language. [00:01:43] Speaker 02: Demand-side management is defined as energy and load-shaped modifying activities that are designed to encourage consumers to modify the patterns of electricity usage. [00:01:55] Speaker 02: So there, the requirement is that the consumers modify their pattern of electrical usage. [00:02:01] Speaker 00: It wouldn't be a problem under that provision, Mr. Sitlin. [00:02:05] Speaker 00: It wouldn't be a problem if the power agency loaned to its largest retail users the batteries and said, here, put these in your [00:02:17] Speaker 00: let's say it's a Walmart or something, put this in your electrical intake, and we're gonna signal you when to use them, and it'll change your pattern of electricity usage in a way that's gonna lower everybody's rates. [00:02:33] Speaker 00: That's not what they did here, but that wouldn't be a problem under Article 1.47 defining demand-side management, would it? [00:02:42] Speaker 00: That's just not what happened here. [00:02:44] Speaker 02: That's right. [00:02:44] Speaker 02: That would be a different case, situations where retail consumers self-supply their own energy rather than power agency self-supply. [00:02:52] Speaker 00: Well, they're not supplying it, but they're storing it and therefore modifying a pattern of usage, including the timing of demand. [00:03:00] Speaker 00: So the overall demand would be the same. [00:03:01] Speaker 00: Nobody disputes that here. [00:03:03] Speaker 02: Right, Your Honor, that would be a different case that would be outside of what the order is here. [00:03:07] Speaker 02: And I don't think that we need to pre-judicate that. [00:03:10] Speaker 02: Situation here is that the consumers are doing nothing. [00:03:14] Speaker 00: Right, now talk about 9.5, because it doesn't have that encourage consumers language. [00:03:18] Speaker 00: Under 9.5, I think the best argument for your opponents is that nothing is intended to preclude the power agency [00:03:30] Speaker 00: from taking steps to manage or reduce members demands and or load through the use of pricing information. [00:03:40] Speaker 00: And that's obviously taking out the communication to consumers, but there's sort of two separate pieces of that clause. [00:03:48] Speaker 00: And why isn't this within managing demand or load through the use of pricing information on power agencies part? [00:03:55] Speaker 02: Well, your honor, I think you just answered your own question, is that would take out that other aspect of the language, is it's the use of communicative pricing information to consumers. [00:04:04] Speaker 00: No, no, no, it's the use or communication of pricing information to power agencies or its members, customers. [00:04:14] Speaker 00: So communication of pricing information to customers is one aspect, but the use is, it can't be the use [00:04:24] Speaker 00: to customers, is it? [00:04:26] Speaker 00: It's the use of pricing information or the communication of pricing information to customers. [00:04:32] Speaker 02: I think it's pretty clear from that language, which isn't, you know, the best draft language that it's not the use by the customers. [00:04:40] Speaker 00: And I also say that, that, that customers use pricing information in that. [00:04:45] Speaker 02: Well, so let me explain your honor. [00:04:46] Speaker 02: And this is the way these, these work. [00:04:48] Speaker 02: So the customer will sign up for a demand response program, which will send to their, to like an app on their phone that'll say, Oh, look, [00:04:55] Speaker 02: it would cost you a lot of money to run your washing machine right now. [00:04:59] Speaker 00: No, no, no. [00:04:59] Speaker 00: This is actually a point of contention or confusion that I have from the briefs. [00:05:04] Speaker 00: The retail price, I mean, the whole structure here is that the retail price doesn't go up and down. [00:05:09] Speaker 00: And so it's the, it's the, those who have contracted to provide the energy that are worried about saving costs at peak, because the retail customers, they're not going to pay more at peak. [00:05:22] Speaker 02: Well, Your Honor, I think that's not a correct understanding. [00:05:26] Speaker 02: The customers, there could be variable pricing on the customer side. [00:05:31] Speaker 00: Is there here? [00:05:33] Speaker 00: I thought the whole structure was that retail customers have an upfront contract for fixed price, and that creates this sort of lack of supply and demand pressure. [00:05:46] Speaker 00: It's not costing them more on the peak days. [00:05:48] Speaker 00: If it were, then [00:05:49] Speaker 00: The problem would resolve itself because they wouldn't use as much energy on peak days but but that customers are kind of indifferent as to whether it's a peak day or not because they're paying the same amount now. [00:06:00] Speaker 02: I don't believe that's right I believe a demand response. [00:06:04] Speaker 00: program is created is so that the customers can ratchet up, that they can be given savings for- I think the haste of the power agency, because the power agency says, we're absorbing this cost in order to align your incentives, ultimate consumer with ours, we're going to sweeten the pot. [00:06:21] Speaker 00: We're going to pay you 60 bucks a year. [00:06:22] Speaker 00: If you agree, then on a couple of peak days, we can duck in and turn up your thermostat. [00:06:29] Speaker 00: That's how I understand it, and that they need to do that because otherwise the incentives aren't aligned. [00:06:34] Speaker 00: Am I wrong about that? [00:06:35] Speaker 02: That's more demand-side management. [00:06:39] Speaker 02: That's when customers sign up for a program where a power agency can turn up off and on their thermostat in exactly the way you described. [00:06:48] Speaker 02: The way the demand response works [00:06:50] Speaker 02: is that the customers are given a financial incentive to do that themselves. [00:06:55] Speaker 02: They get pricing information. [00:06:56] Speaker 02: They say, oh, well, if I run my washing machine at 6 PM when everyone's got their lights on, everyone's cooking dinner, everyone's watching the TV, I'm not going to get that discount. [00:07:06] Speaker 02: But if I run my washing machine overnight because I got this pricing information, then I'm going to save a bunch of money. [00:07:12] Speaker 02: because that's, and that is the way the demand response works. [00:07:17] Speaker 02: But again, that is the fundamental point here is that the consumer has got to do something. [00:07:22] Speaker 02: The entire structure of both 9.4 and 9.5 is the consumers shifting the time when they use electricity and shifting their energy, shifting their consumption. [00:07:36] Speaker 02: What happens with the deployment of grid scale batteries [00:07:39] Speaker 02: by power agencies, the consumers are doing nothing. [00:07:43] Speaker 02: They are blissfully ignorant. [00:07:44] Speaker 02: They turn on their lights, they turn on their TV, they run their washing machines all at the same time. [00:07:49] Speaker 02: They couldn't care less. [00:07:50] Speaker 02: They're not communicated in any way that whether they're getting their retail power as a pass through directly from Duke's utility at that moment. [00:07:59] Speaker 02: or if they are getting their power where they turn on their light switch from grid scale batteries run by power agents. [00:08:08] Speaker 00: So it's your position that just as a factual matter, there isn't a way that a power agency could use pricing information itself to reduce members demands or load. [00:08:21] Speaker 00: That just isn't a category. [00:08:23] Speaker 00: So whatever ambiguity there is in the language, it just couldn't refer to that because that isn't an action. [00:08:29] Speaker 02: I mean, certainly, but by the fact that power agency has that information it can use as powers under demand side management. [00:08:37] Speaker 02: If someone signed up for a program to ratchet off and on the thermostat but with regard to demand response that that's not how it operates. [00:08:48] Speaker 02: Sergeant Fiddle? [00:08:49] Speaker 03: Your whole argument is that this contract's clear. [00:08:55] Speaker 03: Suppose we think it's not. [00:08:57] Speaker 03: And we owe deference to the commission, even on the question of whether it's ambiguous. [00:09:02] Speaker 03: And so just suppose for argument's sake, we think it's not as clear as you think, and that there's ambiguity in this contract. [00:09:08] Speaker 03: Can you prevail at that point? [00:09:10] Speaker 03: Or does your whole argument depend on your claim that this contract is unambiguously clear? [00:09:17] Speaker 02: Absolutely, Roger. [00:09:18] Speaker 02: So the. [00:09:22] Speaker 02: I'd like to quibble with the premise of your question and then answer it directly. [00:09:27] Speaker 02: I think it's fairly clear from this course cases, such as Cajun, that if the contract is clear, this is just a Chevron step one issue and you don't give deference to an agency on Chevron step one. [00:09:40] Speaker 02: And this is an analogy. [00:09:42] Speaker 03: No, I didn't say we did. [00:09:44] Speaker 03: I'm asking you whether or not, if we think it's not clear, what's your best argument that [00:09:51] Speaker 03: that the commission's interpretation of the contract is unreasonable. [00:09:55] Speaker 02: I think, Your Honor, in that sort of circumstance, we would be in a Chevron Step 2 world. [00:10:00] Speaker 02: And under this case, this court's case law, including the recent decision in the ACE case that Judge Pillard was on, if the agency does not show that it is exercising some sort of discretion, it's not recognizing an ambiguity and then attempting to resolve it, then the agency cannot prevail under Chevron Step 2 or this analogy. [00:10:20] Speaker 02: under the Channery Doctrine. [00:10:23] Speaker 03: You cannot, for example... You don't think that's what the conditions brief does? [00:10:28] Speaker 02: I don't see the Commission's brief as arguing anything except for the meaning of the contract. [00:10:33] Speaker 02: But if Your Honor do read its brief that way, then I think that it would be foreclosed by the Channery Doctrine. [00:10:39] Speaker 02: Because they did not, in their orders on review, say, well, this contract is ambiguous. [00:10:45] Speaker 02: Chevron, step one. [00:10:46] Speaker 02: Now we're going on to Chevron, step two, and we're going to use our policymaking authority to resolve that ambiguity. [00:10:52] Speaker 02: They did not engage in that kind of inquiry and so under Chenery their decision cannot be upheld under that ground. [00:10:59] Speaker 02: If your honors think that the contract. [00:11:01] Speaker 02: is ambiguous, contrary to our submission, then I think the only resolution of this case is to vacate the underlying orders, send it back to the agency, for the agency to resolve any ambiguity that this court would identify in the contract. [00:11:17] Speaker 00: I have just some practical questions trying to understand, and maybe these just go to the equities of the case, but how much of the total power demand comes from [00:11:27] Speaker 00: power agency. [00:11:28] Speaker 00: One thing that I wondered about is whether it's possible that by discharging their batteries at the hour they think is going to be the peak, they're going to actually prevent that hour from being the peak, because it's a feedback loop. [00:11:42] Speaker 02: Your Honor, I don't believe it's in the record, but they're about 10% of what Duke outputs. [00:11:48] Speaker 02: And there's nothing in the record that I know that would answer your question any further. [00:11:54] Speaker 00: And is the battery capability [00:11:56] Speaker 00: big or how marginal is that? [00:11:59] Speaker 02: I believe this is all in Indonesian faces. [00:12:02] Speaker 02: I believe they're asking FERC to approve this so they can then deploy this grid scale batteries at a very substantial rate. [00:12:11] Speaker 02: And our primary concern here is they're going to deploy it at such a rate that they're going to completely eliminate their contribution to our fixed costs. [00:12:19] Speaker 00: So, so that was my other question about fixed costs the capacity charge. [00:12:24] Speaker 00: Is that the only place that fixed costs are as part of the energy charge also includes some, some element of fixed costs because in the past I had thought the capacity was really about future capacity but I know different markets are structured differently. [00:12:38] Speaker 00: And you had made a pretty bright line distinction between capacity charge as the only place where power agency contributes to a pro rata share of fixed costs. [00:12:49] Speaker 00: Is that accurate? [00:12:51] Speaker 02: My understanding, Your Honor, is that the energy costs under this contract are a complete pass-through. [00:12:56] Speaker 02: We made that argument repeatedly in our submissions before [00:13:00] Speaker 02: and as far as I can tell, nobody disputed that claim that the energy cost here is a complete pass through and the entirety of our capacity cost and entirety of our profit, you know, this is a capitalist system, all come from the capacity charge, which they could- But does the pass through not include, it doesn't include amortization of existing facilities as distinct from capacity, which is about sending signals to build future? [00:13:28] Speaker 02: That's right, Your Honor. [00:13:29] Speaker 02: My understanding is that the energy charge is a complete pass-through. [00:13:33] Speaker 00: But pass-through of what? [00:13:34] Speaker 00: I'm asking whether isn't it also pass-through of some amortized asset cost? [00:13:40] Speaker 02: I believe it's not, but I will correct myself on reply if that is incorrect. [00:13:44] Speaker 00: OK. [00:13:49] Speaker 00: And it's not typical, necessarily, that peak [00:13:57] Speaker 00: Demand is determined from one day. [00:14:02] Speaker 00: I mean, under some regulatory systems, it's sampling across different periods. [00:14:08] Speaker 00: This is the way this contract is written. [00:14:11] Speaker 02: Your Honor, I'm not familiar with the broad strage. [00:14:14] Speaker 02: The FERC does say in its order that this is something that is done from time to time on a somewhat basis. [00:14:19] Speaker 02: And it operated, you know, it's important to understand that that hour [00:14:24] Speaker 02: is a contractual proxy. [00:14:26] Speaker 02: No one believes that it only matters how much they draw on us one hour per month, and it's a contractual proxy that works well within the confines of the contract. [00:14:36] Speaker 02: What they're attempting to do here to deployment of grid-scale batteries is destroy the economics of the entire contract by [00:14:44] Speaker 02: timing their supply of retail energy just during this one hour, they are basically becoming free. [00:14:50] Speaker 02: They can give themselves the authority to become complete free riders off our system where they're only paying the pass through and everyone else, including us, is bearing the capacity costs and of course, no profit for us. [00:15:02] Speaker 01: All right, if there are no more questions, Mr. Etiker. [00:15:09] Speaker 00: Who on my screen seems frozen. [00:15:12] Speaker 04: Good morning and may it please the court. [00:15:14] Speaker 04: I'm Scott Edgar for the Federal Energy Regulatory Commission. [00:15:17] Speaker 04: Thank you for hearing the case today. [00:15:19] Speaker 04: I'd like to go to the standard of review and address Judge Tatel's point about if, I certainly understand that there's a disagreement about whether the contract language is plain, but in at least two places of Duke's reply brief, they suggest that they have the more reasonable [00:15:39] Speaker 03: Interpretation of the contract and I would submit that that implies that the that there is some reasonableness to be what about what about counsel's argument that for any order it's brief indicate it's exercising its authority to interpret the language. [00:15:55] Speaker 04: I would point to this court's decision in National Fuel, which talked about the question here is whether the contract has directly addressed the precise question. [00:16:08] Speaker 03: I understand that, but his argument is that in FERC's decision, the agency did not claim to be exercising its discretion to interpret the contract. [00:16:24] Speaker 04: I think the only reading of the commission's orders is that it did just that. [00:16:29] Speaker 04: A battery storage technology is not addressed as we all acknowledge, even Duke acknowledged that. [00:16:36] Speaker 04: It's not addressed in the contract. [00:16:38] Speaker 04: The commission's only reference to plain language in the declaratory order and in the rehearing order was to reject Duke's position that the plain language [00:16:52] Speaker 04: leads us to the outcome that it prefers. [00:16:56] Speaker 04: The Commission also explicitly in Paragraphs 38 of the Declaratory Order, this HAA 24 to 25, said that key terms of the contract are not defined, and that's demands and loads. [00:17:12] Speaker 04: The Commission also [00:17:15] Speaker 04: that in the rehearing order at page 14. [00:17:18] Speaker 00: Let me ask you, Mr. Edgar, about this issue that came up with Mr. Settlen about the Article 9.5 definition. [00:17:27] Speaker 00: First of all, I don't know if you read it as I do that it's susceptible to be read that [00:17:36] Speaker 00: That it allows the power agency to manage or reduce members demands and our load through the use of pricing information or the communication of pricing information to members customers to agencies or members customers. [00:17:56] Speaker 00: Is it in fact ambiguous in that way in your view? [00:17:58] Speaker 00: And second, if so, does the power agency use pricing information itself to manage or reduce loads? [00:18:09] Speaker 04: I will concede that this isn't the best drafted language, but I will make one point. [00:18:18] Speaker 04: The municipal agency doesn't have customers other than the municipalities. [00:18:23] Speaker 04: The members. [00:18:24] Speaker 04: If that's to have any meaning whatsoever, what we're talking about there is the municipal agency's use of providing the information to the members. [00:18:38] Speaker 04: Their use would qualify as demand response under section 9.5. [00:18:45] Speaker 00: So it's through the use of pricing information by power agency or the communication of pricing information to the power agency members, customers. [00:18:55] Speaker 00: And my question is just as a factual matter, is there such a thing as the power agency's own use of pricing information to manage or reduce demand? [00:19:08] Speaker 04: I think that's something that is contemplated here. [00:19:14] Speaker 04: that the agency is contemplating. [00:19:16] Speaker 04: I don't know whether they have actually done that here, but that's what they're asking for. [00:19:23] Speaker 00: By the use of the batteries? [00:19:24] Speaker 04: Yes. [00:19:25] Speaker 00: Are there other programs that track the language in that same way? [00:19:34] Speaker 00: that don't have to do with communicating the information onto customers and having them react, but having power agency itself use pricing information itself without communicating onto customers to use pricing information to manage or reduce demands or load. [00:19:51] Speaker 04: Well, and again, I think here what the commission was getting at was that the agency was [00:19:59] Speaker 04: communicating that information to the members, to the municipalities, and that they would use it to reduce the load on the system, and from the perspective of Duke's system. [00:20:14] Speaker 00: But not to the members' customers? [00:20:17] Speaker 04: Correct. [00:20:19] Speaker 00: Why do they need to communicate it to the members? [00:20:23] Speaker 00: if there are steps that the power agency itself can take? [00:20:26] Speaker 00: I guess is what I'm asking. [00:20:27] Speaker 04: Well, I'm not sure I follow. [00:20:29] Speaker 04: I'm sorry, Your Honor. [00:20:30] Speaker 04: This language is difficult. [00:20:33] Speaker 04: I think, and again, the power agency doesn't have customers. [00:20:38] Speaker 04: And I think what's contemplated here is that they would pass this information on the pricing information that they're entitled to under section 18 of the contract to the municipalities that would use the information to operate the battery storage technology. [00:20:53] Speaker 00: Okay, I just thought that you had said that how you thought this provision 9.5 demand response authorized the use of the batteries. [00:21:03] Speaker 00: Nobody's saying that the that information is passed on to customers in the process of using batteries to manage demand or load. [00:21:12] Speaker 04: Right. [00:21:13] Speaker 04: That's correct. [00:21:14] Speaker 00: And the question is, therefore, do you read this contract to allow that because you read it to allow the power agency to manage or reduce the member's demands or load through the power agency's own use of pricing information, as opposed to the power agency's communication of pricing information to members' customers? [00:21:36] Speaker 00: And I thought you said to that, yes. [00:21:38] Speaker 00: And I was asking whether there was any precedent for any other kind of [00:21:43] Speaker 00: management or reduce of demands or loads on the part of power agency that would similarly not involve communication of pricing information to customers, but simply the use of pricing information by the power agency. [00:21:57] Speaker 04: I'm aware of none, your honor. [00:21:59] Speaker 04: And what I think is key to this section is it's the manage or reduce the members demands, not the end users demands. [00:22:12] Speaker 04: And I think that's what Duke is asking for here is a simple backing up a few lines in that section. [00:22:19] Speaker 04: And this is the same language in 9.4. [00:22:22] Speaker 04: is what they're seeking is that a rewrite of the contract such that the contract only permits managing or reducing the end user's demands and or loads. [00:22:35] Speaker 04: And that's not what the contract says. [00:22:37] Speaker 04: The contract speaks in terms of the member's demands or loads. [00:22:41] Speaker 04: And I think this is the language that the commission was grappling with is determining from what perspective we [00:22:50] Speaker 04: look at demand. [00:22:52] Speaker 04: And that's what led the Commission to, as I was saying before, those terms are not defined in this contract. [00:22:58] Speaker 04: And that's what led the Commission to look at the definition of hourly demand in Section 1.77. [00:23:08] Speaker 04: And I also want to highlight section 9.3. [00:23:13] Speaker 04: This was important in the commission's analysis. [00:23:18] Speaker 04: We're talking about consumption and getting back to my comment about perspective on whether this contract requires the customers to do anything. [00:23:29] Speaker 04: And that section is [00:23:31] Speaker 04: very clear that it is talking about actual consumption and that's I would suggest that by negative inference that means we're talking about something very different in sections 9.4 and 9.5. [00:23:46] Speaker 03: What's your response to council's argument that what the commission has done here is completely blown up this contract? [00:23:58] Speaker 04: I would disagree with that, Your Honor. [00:24:00] Speaker 03: I thought you might. [00:24:01] Speaker 03: Why? [00:24:02] Speaker 04: There's no record support for that. [00:24:04] Speaker 04: The idea that something cataclysmic, disastrous has happened here, I'm aware of no record support for that argument. [00:24:11] Speaker 00: Well, because nothing's happened here yet. [00:24:13] Speaker 00: It's all about approving something that might happen in the future. [00:24:17] Speaker 04: That's correct, Your Honor. [00:24:18] Speaker 04: And I would point out as well that the Commission addressed this in rehearing. [00:24:21] Speaker 04: And in particular, the last two paragraphs of the rehearing order, paragraph 15, [00:24:27] Speaker 04: at JA 33 to 34 and paragraph 16. [00:24:31] Speaker 04: This contract. [00:24:32] Speaker 04: What did it say there? [00:24:34] Speaker 04: I'm sorry, Your Honor. [00:24:35] Speaker 03: I'm sorry. [00:24:36] Speaker 03: What did it say there? [00:24:37] Speaker 04: It addressed the idea that this contract permits a revision if there, if, if it doesn't believe. [00:24:45] Speaker 03: They can come back. [00:24:46] Speaker 03: They can come back to the commission. [00:24:47] Speaker 03: This paragraph 16. [00:24:50] Speaker 04: It's actually a 15 where we cite section eight. [00:24:55] Speaker 04: I was close. [00:24:55] Speaker 04: Yeah. [00:24:56] Speaker 04: of the contract, and that's at J.A. [00:24:58] Speaker 04: 194. [00:24:58] Speaker 00: You mentioned that 9.3, but did the commission's order rely on 9.3? [00:25:05] Speaker 04: It did, Your Honor, and it did in paragraph 38. [00:25:14] Speaker 04: This is at J.A. [00:25:15] Speaker 04: 24 to 24. [00:25:19] Speaker 04: And I believe it repeated that similar analysis hearing order. [00:25:25] Speaker 04: In particular paragraph 14 of the rehearing order at ja 33 this gets very short shrift attention in the in the dukes briefs and and I think I think it's a very telling. [00:25:38] Speaker 04: provision for understanding why reduction of consumption was not contemplated in these two sections. [00:25:47] Speaker 04: And I think the commission was on firm ground in rejecting that argument by Duke for that reason. [00:25:55] Speaker 01: All right. [00:25:55] Speaker 01: If there are no more questions, why don't you take two minutes and reply? [00:26:02] Speaker 02: Thank you, Your Honor. [00:26:03] Speaker 02: Just three brief points. [00:26:05] Speaker 02: First, Judge Pillard, I was correct that the energy charging includes only the pass-through amount and maintenance, no amortization of fixed costs. [00:26:17] Speaker 02: With regard to 9.3 that my friend just mentioned, that's energy efficiency. [00:26:23] Speaker 02: That's like installing more efficient light bulbs that has nothing to do with demand side management and demand response, which is modifying the patterns of electrical usage, you know, power agency taking over your thermostat, you know, turning it down, turning it up, or them sending you pricing information so you can run your washing machine overnight and things of that sort. [00:26:46] Speaker 02: And then the final point. [00:26:48] Speaker 00: When you talk about power agencies taking over your thermostat, is that under Article 9.5? [00:26:56] Speaker 00: Isn't that the kind of thing where it doesn't need to on that in real time communicate information to consumers? [00:27:04] Speaker 00: It just needs to react itself to what it knows is a coming peak and take action based on other information it's collected in the past. [00:27:12] Speaker 02: That's 9.4, Your Honor. [00:27:14] Speaker 02: That doesn't involve any communication or pricing information to the consumer, but it does involve a consumer signing up for a program that will modify the pattern of the consumer's usage. [00:27:27] Speaker 02: So the thermostat where power agency uses in the words of 9.5 or the definition of 9.5, 1.47 centralized control. [00:27:38] Speaker 02: That's what that means. [00:27:39] Speaker 02: And so the customer says, yes, I want to save some money power agency. [00:27:43] Speaker 00: So give me in your view the classic example of demand side management and the classic example of demand response. [00:27:51] Speaker 02: The classic demand side management is what I was just describing, Your Honor, where you allow a power agency to control your thermostat or to pre-cool your building before they know a peak is happening. [00:28:02] Speaker 02: That is classic demand side management. [00:28:05] Speaker 02: Classic demand side response is you get an app on your phone that tells you [00:28:10] Speaker 02: if it's going to cost you more, you as the consumer is going to cost you more money to run your washing machine now. [00:28:16] Speaker 02: And you look at your app and say, oh, look, it's going to cost me, I'm going to save some money if I don't run it now, if I run the washing machine overnight. [00:28:23] Speaker 02: So you decide not, you yourself decide not to run your washing machine now, run it overnight because you've gotten some pricing information from power agency. [00:28:33] Speaker 00: I should have asked Mr. Edgar this, but I just don't think you're right that consumers' prices fluctuate based on the day or time of day that they're using energy. [00:28:43] Speaker 02: I believe that the way the demand side response program works is that they give you financial incentives to do that precisely. [00:28:52] Speaker 02: They give you savings if you so choose on yourself to not run at a certain time and run at other times. [00:29:03] Speaker 02: And then the final point, Your Honor, is the one you've asked about. [00:29:06] Speaker 02: I just don't think about 9.5 and the word use. [00:29:11] Speaker 02: I just don't think that that textually works. [00:29:13] Speaker 02: And it wasn't certainly a textual analysis that FERC did here. [00:29:17] Speaker 02: I think you would say you would have to kind of take out or communicate pricing information. [00:29:24] Speaker 00: Well, you use it as an alternative, which is what OR denotes. [00:29:28] Speaker 02: Through the use of [00:29:32] Speaker 02: pricing information, but then you would take out the back end of it. [00:29:36] Speaker 02: You basically, as I understand that reading, and it wasn't presented by my president aside, is you'd say through the use of pricing information, but then you would take out the end of it. [00:29:48] Speaker 02: And so then you would have a sentence that's kind of like split into two and rewritten. [00:29:52] Speaker 02: And I would say, your honor, that's creative. [00:29:55] Speaker 02: But I think that is outside the bounds of traditional understanding of text. [00:30:01] Speaker 02: And I think that [00:30:02] Speaker 02: And certainly wouldn't get the agency beyond the equivalent of Chevron step one. [00:30:07] Speaker 02: And for those reasons, I would urge your honors to vacate the orders below. [00:30:13] Speaker 01: All right. [00:30:13] Speaker 02: Thank you. [00:30:15] Speaker 01: Madam Clerk, would you please adjourn court?