[00:00:00] Speaker 00:
Place number 20-1324, Karen Newman and Alison Hoverty, petitioners, versus Federal Energy Regulatory Commission.

[00:00:09] Speaker 00:
Ms.

[00:00:09] Speaker 00:
Newman for the petitioner, Karen Newman.

[00:00:11] Speaker 00:
Ms.

[00:00:12] Speaker 00:
Hoverty for the petitioner, Alison Hoverty.

[00:00:14] Speaker 00:
Mr. Fish for the respondent.

[00:00:16] Speaker 00:
Mr. Gossett for the intervener.

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

[00:00:20] Speaker 06:
Ms.

[00:00:20] Speaker 06:
Newman, please proceed when you're ready.

[00:00:23] Speaker 02:
Thank you, Your Honor.

[00:00:26] Speaker 02:
Good morning, Your Honors.

[00:00:27] Speaker 02:
May it please the court?

[00:00:28] Speaker 02:
I am Karen Newman, and with me this morning is Alison Havardy.

[00:00:31] Speaker 02:
We are PJM rate payers appearing before the court pro se.

[00:00:35] Speaker 02:
This morning, I will address past expenditures to influence public officials, as well as account 426.4 in rate making.

[00:00:44] Speaker 02:
Ms.

[00:00:44] Speaker 02:
Havardy will address past advertising expenditures, including the formula rate mechanisms that will allow for their recovery.

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We would like to reserve two minutes for rebuttal.

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This case is not about whether the commission can change its mind on rehearing.

[00:00:57] Speaker 02:
Of course it can't.

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This case is about the arbitrary and capricious way the commission failed to logically and reasonably support its decision to reverse course on the recovery of past expenditures to influence public officials.

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A formula rate prevents utility from utilizing excessive discretion in determining the ultimate amounts charged to customers.

[00:01:18] Speaker 02:
PATH, and then later Commission on Rehearing, utilized excessive discretion by misinterpreting account 426.4 and misinterpreting PATH's formula rate in order to increase the charges to customers.

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The Commission's uniformed system of accounts is a regulation that sorts utilities' expenditures by their purpose.

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All expenditures for the purpose of influencing belong in account for 26.4.

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The first clause covers the influencing of public opinion.

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The second clause covers the influencing of public officials.

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Common to them both is the act of influencing.

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Interpreting this account so narrowly that influencing expenditures are excluded defeats the purpose of the regulation.

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When the commission sets rates, it may include amounts segregated in account for 26.4 in the rate.

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However, that's not what the commission did when it set pass rate.

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In that instance, the commission specifically excluded account for 26.4 from the rate.

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Pass annual formula rate update filings cannot change the rate.

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They are not a rate making proceeding.

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Instead, the commission must make an accounting determination to find the proper account for an expenditure whose classification has been challenged.

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Choosing at this point to place an expenditure in an inappropriate account simply to make it recoverable circumvents the limitations of the approved formula rate.

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The commission has no discretion to alter or adjust a rate retroactively.

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However, the commission altered pass rate when it made a retroactive recoverability determination to change the accounting classification of expenditures that were prohibited by the rate on file.

[00:02:51] Speaker 02:
A recoverability determination is only properly made when the commission is setting a rate.

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The commission set pass rate back in 2008, and thereafter it's a formula rate dependent upon accounting assignments.

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Pass formula rate protocols that were included in our opening brief addendum at page A9 state that an annual update shall be in accordance with the commission's uniform system of accounts.

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There's nothing in there about making retroactive recoverability determinations because making a recoverability determination at that point retroactively alters the rate on file.

[00:03:26] Speaker 07:
So that so that, Ms.

[00:03:27] Speaker 07:
Newman, it seems like your argument really boils down to the plain language of

[00:03:34] Speaker 07:
the account of 426.4 and perhaps most simply and clearly clause two, which includes in that account expenditures for the purpose of influencing the decisions of public officials.

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And as I gather, there is no dispute that these expenditures were for the purpose of influencing the decisions of public officials

[00:04:03] Speaker 07:
but that FERC and the intervener argue that that purpose was effectuated in an indirect manner and that we should read this clause to put into account 426.4 only expenditures for the purpose of directly influencing the decisions of public officials.

[00:04:26] Speaker 07:
Is that an accurate encapsulation of sort of your core argument?

[00:04:32] Speaker 02:
Um, yes, the unwritten direct versus indirect influence test that for added in there.

[00:04:40] Speaker 02:
It's just doesn't make sense.

[00:04:43] Speaker 02:
The commission did not cogently define the line between direct and indirect.

[00:04:47] Speaker 02:
I mean, there is no difference between professional lobbyist versus a citizen lobbyist, both individuals are directly appealing to the public officials.

[00:05:01] Speaker 06:
Do you think there's a difference between influencing public opinion and influencing public officials?

[00:05:11] Speaker 02:
The way it's written in the account, the first clause about influencing public opinion is kind of related to situations where the public actually can take the action that the utility is trying to influence, like an election or pushing an elected official to do something or a referendum, things like that.

[00:05:29] Speaker 02:
That's where the utility would influence

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the public opinion to get what it wants.

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But in the second clause, they're influencing public officials.

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This is the situation where only the public official himself can make the decision.

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And they were trying to influence the state utility commissioners to approve their project.

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But they say, no, we were just influencing public opinion.

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But it makes no sense to spend $6 million trying to influence public opinion if PATH did not also intend for the public opinion that it influenced

[00:06:02] Speaker 02:
to in turn influence the public officials to approve their project?

[00:06:06] Speaker 07:
Well, is that right?

[00:06:08] Speaker 07:
I mean, I trust there are monies that that power companies or transmission companies spend for general goodwill.

[00:06:18] Speaker 07:
They might.

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I don't know, want to encourage

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people to buy plug-in vehicles rather than fossil fuel vehicles and just make people feel warm and fuzzy about the grid and spend money on that.

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I mean, that would be, for public opinion, that wasn't instrumentally related to a decision.

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And that- Correct.

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That not exist?

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Was that just a fanciful category?

[00:06:55] Speaker 02:
I think that does exist.

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And I mean, that's something a utility would do in its normal course.

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But here, the whole goal of PATH was to get this project approved.

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If PATH could get this project approved by the state regulators, the parent companies, American Electric Power and First Energy stood to make an enormous profit from building and owning this project over its expected 40-year life.

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At the time they chose to influence public officials, PATH was looking at a 14.3%

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annual return on its 50% equity stake in this $2.1 billion project.

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There was a lot of money riding on the state approvals, not just grid reliability for rate payers.

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I ask you a question about the fact that the project's been canceled.

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And so PATH is really an empty shell, I guess.

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And how does PATH, well, PATH doesn't have a rate now, does it?

[00:07:54] Speaker 02:
Yes, it still has the same formula rate that it was.

[00:07:59] Speaker 03:
It does, but it doesn't have any customers, does it?

[00:08:03] Speaker 02:
Well, PJM rate payers are responsible for all the costs in the formula rate.

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So in this case, if PATH can recover the $13.2 million back from rate payers, it'll come from everyone's pocket in the PJM rate.

[00:08:18] Speaker 03:
Isn't that up to the, you know, the wholesale rate, I understand, but the retail rate, which is what I take you pay,

[00:08:29] Speaker 03:
is totally up, not totally, but it's up to the State Utility Commission, isn't it?

[00:08:36] Speaker 02:
Well, the State Utility Commission has to pass through these rates that are set by FERC without touching them.

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It cannot alter these rates and leave past stranded, even though FERC says this is, the transmission rate is a federal process, whereas the distribution rates are a state process and the state must pass through.

[00:08:57] Speaker 03:
So how much more

[00:08:59] Speaker 03:
in your monthly bill is going to result from FERC's action here?

[00:09:05] Speaker 02:
It's really hard to determine.

[00:09:08] Speaker 03:
But don't you have to determine that in order to establish standing?

[00:09:13] Speaker 03:
And let me just follow up question.

[00:09:16] Speaker 03:
I mean, if it's one cent a month, then I don't know if there's a de minimis requirement in standing, but it doesn't seem to me to be any kind of concrete injury.

[00:09:27] Speaker 03:
So where's your

[00:09:28] Speaker 03:
What is your concrete injury?

[00:09:33] Speaker 02:
Any rate payer has standing to challenge the rate that is set at FERC and there is no other venue for us to challenge this rate.

[00:09:41] Speaker 02:
So whether it's a penny or $25, we can't, I mean, FERC cannot shut us out.

[00:09:48] Speaker 02:
And actually this issue came up in the case a number of times and the commission found in our favor that we did have standing and neither party has questioned our standing in this case.

[00:10:00] Speaker 03:
Well, I know that you don't have to have standing that appear before FERC.

[00:10:07] Speaker 07:
The standing that's being asserted is the standing as as ratepayers were affected by what is authorized to be passed through.

[00:10:17] Speaker 07:
Yeah.

[00:10:26] Speaker 07:
I think it was asserted in the briefing that this formula rate is a typical kind of formula rate, and this is really more a question for FERC, but do you have reason to believe that the items that are in and out of this rate also appear in other transmission formulas?

[00:10:52] Speaker 02:
Yes, they are all pretty similar.

[00:10:55] Speaker 02:
There is one exception with the advertising provisions where some of them are slightly different and Ms.

[00:11:01] Speaker 02:
Havardy, that's more in her wheelhouse.

[00:11:03] Speaker 02:
So I will let her explain that.

[00:11:05] Speaker 07:
And if we were to agree with you that the reconsideration opinions were contrary to the plain text of the account, we don't need to reach the separate questions about whether these expenses

[00:11:24] Speaker 07:
could be appropriately put into the other accounts, the advertising and the 900 series accounts, right?

[00:11:34] Speaker 07:
Because those are residual, those are framed as only if they aren't appropriately in another account.

[00:11:40] Speaker 07:
So if they were appropriately in 426.4, those accounts wouldn't come into play.

[00:11:46] Speaker 02:
Exactly.

[00:11:48] Speaker 02:
Before you put something in account 923 which is kind of a general account.

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You have to first make sure that it doesn't fit in a more appropriate account.

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And I mean some of these accounts can apply to different expenses and maybe a certain

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expense could be in two lists and two different accounts.

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So you really have to look at what the account language says.

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And so when you have these kind of influencing expenditures, the first place to look is account 426.4.

[00:12:16] Speaker 02:
And only if it does not fit there, then you can put it in 923 or some other account.

[00:12:24] Speaker 06:
Okay.

[00:12:24] Speaker 06:
Thank you, Ms.

[00:12:25] Speaker 06:
Newman.

[00:12:25] Speaker 06:
Unless my colleagues have further questions for you this time, we'll hear from Ms.

[00:12:29] Speaker 06:
Harvey.

[00:12:32] Speaker 07:
Havardy, I believe.

[00:12:34] Speaker 06:
Havardy, sorry.

[00:12:37] Speaker 06:
My Zoom moniker is blurred out.

[00:12:40] Speaker 06:
Havardy.

[00:12:42] Speaker 01:
No problem.

[00:12:43] Speaker 01:
I've been called worse.

[00:12:47] Speaker 01:
Good morning, Your Honors.

[00:12:50] Speaker 01:
Paths Advertising belongs in 426.4 because Advertising Account 930.1, there's a note B.

[00:13:00] Speaker 01:
in the uniform system of accounts plain language and it reads exclude from advertising account 930.1 and include in 426.4 expenses for advertising activities which are designed to solicit public support or the support of public officials in matters of a political nature.

[00:13:24] Speaker 01:
the standard definition of political being relating to government or public affairs of a country.

[00:13:31] Speaker 01:
FERC acknowledges, as you've stated before, that advertising is intended to solicit support for approvals needed from state governmental bodies.

[00:13:45] Speaker 01:
And so those expenses do rightly belong in account for 26.4.

[00:13:53] Speaker 01:
Our subsequent argument is that past advertising belongs in the other ad column of attachment four of the formula rate.

[00:14:05] Speaker 01:
Via the formula rate, any expense placed in 930.1 is first and foremost other ad.

[00:14:12] Speaker 01:
And those expenses would be described as you were saying, the goodwill institutional nature,

[00:14:23] Speaker 01:
and I believe those words are actually used in the 930.1 descriptor.

[00:14:30] Speaker 01:
But those expenses, any expense in 930.1 is first and foremost in a broad category of other advertising.

[00:14:39] Speaker 01:
The exceptions, which are listed in various ways in the path company's formula rates are similar to numerous other FERC regulated utility companies shown in the,

[00:14:52] Speaker 01:
We had a non-exhaustive spreadsheet in our brief at JA573-574.

[00:14:59] Speaker 01:
FERC's orders on rehearing are the first instance in the record of the advertising being solely and completely outreach.

[00:15:10] Speaker 01:
FERC did not point to any evidence in the record when it determined

[00:15:15] Speaker 01:
the advertising to be outreach.

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So characterizing all of the expenses as outreach, I believe is a reach or arbitrary and capricious.

[00:15:28] Speaker 01:
The path companies themselves did not maintain their books to reflect any sub accounts for 930.1.

[00:15:36] Speaker 01:
They simply placed the balance of 930.1 into the column of the formula rate

[00:15:41] Speaker 01:
which made the entire balance the responsibility of rate payers instead of categorizing using definitions, descriptors, something to characterize these expenses in the different ways that the formula rate does.

[00:16:04] Speaker 01:
This arbitrary and capricious act was followed by FERCs

[00:16:08] Speaker 01:
own arbitrary and capricious act in their opinions on rehearing, where they basically did the self same thing.

[00:16:15] Speaker 01:
The 2020 commission went so far as to change the wording of the column header that they chose to focus on.

[00:16:24] Speaker 01:
The heading reads, safety, comma, education, comma, citing and outreach related.

[00:16:33] Speaker 01:
The opinions read, safety, comma, education,

[00:16:38] Speaker 01:
comma, citing comma or outreach in their determination.

[00:16:45] Speaker 01:
A change from and to or, well, it might seem small, as well as the addition of an Oxford comma drastically changes and amounts to the changing of the formula rate retroactively, something that cannot be done without a rate making proceeding.

[00:17:03] Speaker 01:
and ignores the plain language used in several other places of the formula rate in which safety related advertising is read to be the key determining factor.

[00:17:14] Speaker 01:
Finding all advertising is outreach, further nullifies the exceptions and therefore allows for the over collection from rate payers and that the formula rate so obviously is aimed at avoiding in 930.1.

[00:17:33] Speaker 01:
We ask the court to vacate opinions 554A and 554B and remand to the commission for further proceedings with instructions to please follow the initial decision and opinion 554.

[00:17:51] Speaker 06:
Can I ask you one question, which is if we, you have your point that the way that the tariff in the,

[00:18:03] Speaker 06:
table retitles using the Oxford comma, not using the Oxford comma, I can't remember which way it goes, but switching it was problematic and should have been done in another way.

[00:18:12] Speaker 06:
But suppose just for as a matter of hypothesis that we don't agree with you on that.

[00:18:18] Speaker 06:
And we take that second way of describing the list as a given.

[00:18:21] Speaker 06:
Do you take issue with whether the expenses were act were appropriately allocated to that account if we take that revised way of characterizing it as a given?

[00:18:33] Speaker 01:
So the account is a general advertising account.

[00:18:41] Speaker 01:
What happens in the formula rate is where they're listing exceptions, which are then recoverable because it's understood that all advertising is not the responsibility of the rate payers.

[00:18:55] Speaker 01:
It is the responsibility of the utilities.

[00:18:58] Speaker 01:
And so

[00:19:02] Speaker 01:
If the expenses are in 930.1, the exceptions are very specifically focused on safety related or siting related because we understand and we did not challenge expenses, say advertising for open houses that were gonna be held or public meetings that were gonna be held.

[00:19:31] Speaker 01:
those kind of advertising expenses we did not challenge.

[00:19:37] Speaker 01:
And because we do recognize that the precedent is there for those particular expenses to be recoverable.

[00:19:51] Speaker 01:
So we did not challenge those.

[00:19:53] Speaker 07:
Just to be clear, and I think this is clear in your briefing that this whole categorization

[00:20:00] Speaker 07:
is only relevant if these expenditures aren't appropriately in account for 426.4.

[00:20:08] Speaker 01:
Exactly.

[00:20:09] Speaker 01:
This is an alternative argument.

[00:20:11] Speaker 01:
Yes.

[00:20:12] Speaker 01:
Yes.

[00:20:12] Speaker 01:
But our first, our primary argument is that they do rightly belong in 426.4, along with the actual outreach.

[00:20:24] Speaker 01:
I know there was some discussion or there was some

[00:20:29] Speaker 01:
you know, the word outreach is used in the contracts of the subcontractors.

[00:20:35] Speaker 01:
And so trying to conflate the outreach that Ms.

[00:20:42] Speaker 01:
Newman is more focused on as opposed to the outreach was not advertising.

[00:20:51] Speaker 01:
It was not specified to be outreach.

[00:20:54] Speaker 01:
There was no, not until,

[00:20:56] Speaker 01:
Not until what was it the, was it 554A?

[00:21:00] Speaker 01:
It was the first time they mentioned that this was outreach.

[00:21:04] Speaker 01:
It came out of nowhere.

[00:21:06] Speaker 01:
And so it kind of adds to the arbitrary and capricious way that it seems to be that FERC is addressing these at this point to more look at retroactively recovering as opposed to following the process of

[00:21:24] Speaker 01:
placing the expenses in the correct accounting.

[00:21:28] Speaker 01:
accounts first and then letting basically the chips fall where they may as far as the formula rate goes.

[00:21:35] Speaker 01:
Otherwise, we're doing it backwards.

[00:21:37] Speaker 03:
Is it your view that we should look or FERC should have looked at 426 without regard to 930.1?

[00:21:48] Speaker 03:
And then if it finds that the expenses were fit within 426, it doesn't have to decide whether they're political or not?

[00:21:58] Speaker 01:
If they're political or not, I'm sorry, Your Honor, I actually, I don't understand that last part of the question.

[00:22:10] Speaker 01:
Could you repeat that?

[00:22:12] Speaker 01:
I'm sorry.

[00:22:13] Speaker 03:
We look at, or you have FERC look at 426 and concludes that the advertising was for the purpose of influencing public officials, right?

[00:22:23] Speaker 03:
And so does FERC then have to also look to 930.1 to make sure that that fits within the definition of political?

[00:22:36] Speaker 01:
Well, I think actually it goes maybe the other way, you know, that the advertising, if they wanted to put it in 930.1, but there is the note B,

[00:22:50] Speaker 01:
which says, this probably is not the account for these particular expenses.

[00:22:56] Speaker 01:
These need to more properly be placed in 426.4.

[00:23:03] Speaker 01:
And they do fit within the descriptor of 426.4.

[00:23:06] Speaker 03:
So I'm not sure that that determination- Well, you came up with a definition of political that says that it's influencing a public official, which makes the,

[00:23:20] Speaker 03:
meshes 930 and 426 together.

[00:23:25] Speaker 03:
Where did you get that definition of political?

[00:23:28] Speaker 01:
That the influencing, well, it says the note B was which it says note B of 930.1 is I think what you're maybe referring to as what

[00:23:43] Speaker 01:
So 426.4 include in 426.4 expenses for advertising activities which are designed to solicit public support or the support of public officials in matters of a political nature.

[00:23:57] Speaker 03:
That's no be of account 930.1 in the US of A. My question is where did you get your definition of what is of a political nature?

[00:24:10] Speaker 01:
I just pulled my definition of political from the standard definition of just any dictionary, I guess.

[00:24:21] Speaker 01:
Do you mean when I referred to it being approvals and solicit support, let's say relating to government or the affairs of the country?

[00:24:35] Speaker 01:
Is that what you're referring to as my definition?

[00:24:40] Speaker 01:
Well, one of the, I mean, the, one of their, one of the path or the witnesses also referred to political opposition when they were talking about the approval process that, so.

[00:25:01] Speaker 07:
I guess one question, I'm not sure that I'm following

[00:25:07] Speaker 07:
and he can speak to it directly, what my colleague is asking, but part of the question might be, does political refer to, is that a shorthand for everything that's covered by 426.4, or does it contain its own potentially limiting meaning that might be read back into and limit, provide sort of a gloss on,

[00:25:37] Speaker 07:
what is included in account 426.4?

[00:25:40] Speaker 07:
Apologies to anybody who I might be further confusing rather than alluding.

[00:25:50] Speaker 01:
I think, so the, when 426.4 was basically, so there was order 276 that may help us

[00:26:05] Speaker 01:
get to an answer on this one.

[00:26:09] Speaker 01:
Let me see, JA290 is where some of the language that was used in making sure that we understood what was supposed to be in 426.4.

[00:26:22] Speaker 01:
And it actually talks about advertising in mass communications media to influence general public or public officials.

[00:26:34] Speaker 01:
It says such advertising, even where it has no specific or express objective, is calculated to affect public or official attitudes towards future legislative or administrative action.

[00:26:48] Speaker 01:
I think the word political is, I believe, just understanding that it is having to do with regulation,

[00:27:04] Speaker 01:
governmental bodies influencing those decisions made at that level.

[00:27:12] Speaker 06:
Okay.

[00:27:13] Speaker 06:
Let me make sure my colleagues don't have additional questions for you, Ms.

[00:27:15] Speaker 06:
Haverty.

[00:27:17] Speaker 06:
Thank you.

[00:27:17] Speaker 06:
We'll hear from the government, Mr. Fish.

[00:27:21] Speaker 05:
Morning, Your Honors.

[00:27:22] Speaker 05:
May it please the court, Jared Fish, for the commission

[00:27:25] Speaker 05:
I'd like to pick up on the question posed by judges Randolph and Pillard regarding what is the definition of political, because this really contextualizes this entire case.

[00:27:35] Speaker 05:
The commission recently found expressly, paragraphs 84, 86, and 99 of opinion 554A, that's JA508 and 513, that the disputed expenses here are not political.

[00:27:48] Speaker 05:
And it explained why.

[00:27:49] Speaker 05:
It explained that the expenses here

[00:27:52] Speaker 05:
were incurred for a public benefit because PJM determined there was a reliability need and this project would meet that public that public or serve that public benefit.

[00:28:03] Speaker 05:
And that follows from how the Commission has previously defined political versus non political in the Alaska Northwest case.

[00:28:12] Speaker 05:
which petitioners cite, and we also cite note 43 of opinion 554B.

[00:28:18] Speaker 05:
The commission explained there that political expenditures, quote, have a doubtful relationship to rendering utility service.

[00:28:26] Speaker 05:
And there the commission found that the disputed expenses did have to be recorded to account for 426.4 and were not recoverable because the applicant had, quote, not adequately demonstrated what benefits, if any,

[00:28:39] Speaker 05:
have or will accrued rate payers.

[00:28:41] Speaker 05:
That's at 61, page 61, 428 to 29 of the Alaskan Northwest order on show cause order.

[00:28:48] Speaker 05:
And that's an important distinction because it also gets to the fundamental error committed by the ALJ and the commission initially in opinion 554.

[00:28:59] Speaker 05:
Both the ALJ and the commission initially compared this case to the Alaskan Northwest cases and finding that both involved

[00:29:06] Speaker 05:
expenses incurred prior to the selection of the project at issue.

[00:29:12] Speaker 05:
Here, however, there, the project had not been selected.

[00:29:15] Speaker 05:
It was by Congress that ultimately chose the natural gas project.

[00:29:19] Speaker 05:
Here, the project was selected.

[00:29:21] Speaker 05:
In fact, PJM actually ordered the construction of the line.

[00:29:25] Speaker 07:
And- Well, it wasn't really in the sense that it wasn't, and in the end,

[00:29:32] Speaker 07:
couldn't go online because it didn't have certificates of public convenience and necessity.

[00:29:36] Speaker 07:
So this is not a situation where there's benefit to the ratepayers from the action, because in fact, ratepayers never benefited from this.

[00:29:48] Speaker 05:
Well, I respectfully disagree, Your Honor.

[00:29:51] Speaker 05:
Ratepayers did not benefit because the line was ultimately not built, because PJM determined in 2012 there was no longer a reliability need

[00:29:57] Speaker 05:
But the question of public interest is a federal question.

[00:30:01] Speaker 05:
We're talking about a FERC regulated utility under FERC accounting regulations concerning expenses incurred by a FERC regulated utility PJM.

[00:30:12] Speaker 05:
And there's nothing in the accounting regulations, commission precedent, or judicial precedent that subordinates a federal determination of need

[00:30:21] Speaker 05:
to a state PUC's determination under its own policies, under its own laws.

[00:30:29] Speaker 05:
And furthermore, I don't think there's any argument that the state PUC proceedings on the certificates of public convenience and necessity had anything to do with selecting a project.

[00:30:39] Speaker 05:
It was just whether they could under state law block the project.

[00:30:44] Speaker 05:
So that distinguishes these cases and takes it out of the realm of a political expense.

[00:30:51] Speaker 05:
Order 276 the preamble to account for 26.4 explains I'm going to reference our addendum at page 29 that for 26.4 is all about expenditures for political purposes.

[00:31:05] Speaker 05:
So the Commission's reasonable determination that these are outreach rather than political because they were incurred pursuant to an RTO ordered project to meet a public need.

[00:31:14] Speaker 05:
takes it out of the realm of 426.4.

[00:31:16] Speaker 07:
Does it matter, Mr. Fish, that that was not an argument ever raised by PATH before the commission?

[00:31:27] Speaker 07:
That's an argument that FERC has developed in the rehearings.

[00:31:36] Speaker 05:
No, Your Honor, because perhaps if PATH was challenging the commission's determinations on judicial review,

[00:31:44] Speaker 05:
what the court is reviewing here is the commission's final order under 16 USC 825L.

[00:31:50] Speaker 05:
And it's looking at what the commission ultimately decided.

[00:31:54] Speaker 05:
We could argue if PATH was challenging us and they raised a new argument that they hadn't raised in the rehearing request that then that argument was waived, but that's not the case here.

[00:32:07] Speaker 03:
May I ask you?

[00:32:09] Speaker 03:
Suppose that it's conceded that particular advertising is for the purpose of influencing the state's utility commissioners.

[00:32:22] Speaker 03:
What account does that go into?

[00:32:25] Speaker 05:
Well, it depends on whether the influence was direct or indirect, Your Honor.

[00:32:29] Speaker 05:
And here's where the commission drew a reasonable line for which we deserve deference.

[00:32:34] Speaker 05:
It distinguished the expenses, the direct lobbying expenses incurred by AccessPoint.

[00:32:39] Speaker 03:
It's advertising.

[00:32:40] Speaker 03:
It's on television.

[00:32:41] Speaker 03:
It's on the radio.

[00:32:44] Speaker 03:
And get to your local state commissioner and tell them we really want this transmission project.

[00:32:54] Speaker 03:
That's the advertising.

[00:32:55] Speaker 03:
Now, where does the expense of that advertising go?

[00:32:59] Speaker 03:
Does it go to $4.26 or $9.30?

[00:33:01] Speaker 05:
Your Honor, it would depend on whether that advertising is directly in front of the public officials.

[00:33:06] Speaker 05:
And here there's no evidence it was.

[00:33:08] Speaker 05:
The ALJ at J328 explained that the promotional brochures... It's aimed at both.

[00:33:16] Speaker 03:
It's aimed at both.

[00:33:17] Speaker 03:
It's aimed at the public official and it's aimed at the public.

[00:33:21] Speaker 03:
Where does it go?

[00:33:21] Speaker 05:
Well, in your hypothetical, if it's directly, I would say that the pamphlet has to be handed to a public official, not just a member of the public.

[00:33:30] Speaker 05:
Because if it's one step removed and it's handed to the member of the public, then the hope is that member of the public is going to try to write letters to their public utility commissioner or do something else to directly influence.

[00:33:43] Speaker 05:
And that takes it away from the expense incurred here.

[00:33:47] Speaker 05:
which is only to influence members of the public.

[00:33:50] Speaker 05:
But the record shows that the only advertising here was to quote, this is from the ALJ's decision, J328, to extol the need for reliability and why the project should be built, any references, advertising that was promotional in nature.

[00:34:05] Speaker 05:
There's nothing there that ties that advertising

[00:34:12] Speaker 05:
to direct contact with public officials?

[00:34:14] Speaker 03:
Well, not direct, but page 66, I think it is of your brief, plus page 67, is essentially an admission that the very purpose of the advertising was to put pressure on public officials.

[00:34:29] Speaker 05:
ultimately to put pressure on public officials, but that's the nature of advertising.

[00:34:35] Speaker 05:
At some level, advertising is intended to persuade.

[00:34:38] Speaker 03:
What's the rationale?

[00:34:41] Speaker 03:
If a group of public relations people goes to the staff of a utility commissioner and puts

[00:34:51] Speaker 03:
and then winds and dines and gets them to agree to the project as opposed to going directly to the public utility commissioner than himself or herself.

[00:35:02] Speaker 03:
What's the rationale for saying one is not recoverable and the other is?

[00:35:09] Speaker 05:
Well, your honor, I'd say there is no distinction there because you're talking about, you said staff.

[00:35:14] Speaker 05:
You're talking about staff who presumably are incurring an expense to lobby to wine and dine the public official.

[00:35:21] Speaker 05:
So in either of those cases, it's more like access point and Larry Puccio, where there's an expense that's actually tied to to the activity before a public official.

[00:35:32] Speaker 05:
That's, that's what's missing with

[00:35:35] Speaker 05:
the ALJ's conclusion that all the expenses have is their ultimate goal.

[00:35:39] Speaker 06:
Can I ask this question?

[00:35:40] Speaker 06:
I mean, the line between direct and indirect when you're dealing with public officials can be a little bit elusive, as some of the questions might be elucidating.

[00:35:47] Speaker 06:
But just under the text of the regulation, it's puzzling to me, 426.4.

[00:35:53] Speaker 06:
It says, this account shall include expenditures for the purpose of infilling public opinion with respect to, and then there's a bunch of stuff that follows with respect to, including approval, modification, or revocation of franchises.

[00:36:05] Speaker 06:
And that's all part of clause one right and is the proper way to read that that approval modification or revocation comes after for the purpose of

[00:36:17] Speaker 06:
or is it for, or it comes after, I'm sorry, does it modify for the purpose of, or does it modify for the purpose of influencing public officials with respect to approval?

[00:36:27] Speaker 05:
Public opinion, your honor, so.

[00:36:29] Speaker 06:
I'm sorry, public, yeah, public opinion and clause one, yeah, right, public opinion.

[00:36:32] Speaker 06:
Is it for the purpose of influencing public opinion with respect to approval modification or revocation of franchises?

[00:36:41] Speaker 05:
Yes, your honor.

[00:36:42] Speaker 06:
And so if- But then the text kind of, I don't know that the distinction, at least as an intuitive matter, makes a lot of sense, but the text talks about influencing public opinion with respect to approval or revocation of franchises.

[00:36:58] Speaker 06:
And I take it public, is it public officials who determine whether to approve or revoke franchises?

[00:37:03] Speaker 06:
Correct, your honor.

[00:37:05] Speaker 06:
So the text itself is,

[00:37:09] Speaker 06:
kind of contemplating some distinction, apparently, that seems not entirely apparent as a matter of how we normally intuit these processes working.

[00:37:18] Speaker 06:
But this is talking about influencing public opinion with respect to revocation or approval of franchises, which is necessarily something that goes through public officials.

[00:37:27] Speaker 06:
And then the next clause talks about for the purpose of influencing the decisions of public officials.

[00:37:32] Speaker 05:
Right.

[00:37:33] Speaker 05:
Well, as a first matter, I'd say what all this boils down to is that regulation is certainly ambiguous and we receive discretion for a reasonable interpretation.

[00:37:40] Speaker 05:
But Franch, I think the point here is everything goes to whether the influence of public opinion was on one of the listed items in clause one.

[00:37:50] Speaker 05:
If it is, the relevance of the fact that everything goes towards influencing public officials in the end

[00:37:58] Speaker 05:
It supports our textual argument.

[00:38:01] Speaker 06:
Well, can I ask this?

[00:38:02] Speaker 06:
Is the approval of a franchise a decision of a public official?

[00:38:07] Speaker 05:
Yes.

[00:38:08] Speaker 05:
Yes, Your Honor.

[00:38:09] Speaker 05:
But we're not talking about franchises here.

[00:38:13] Speaker 06:
I know we're not.

[00:38:14] Speaker 06:
No, I don't think this question is meant to be hostile to you, actually.

[00:38:18] Speaker 06:
It's just meant to raise a question, which is the first clause presupposes that you can influence public opinions with respect to decisions of public officials.

[00:38:28] Speaker 06:
because it's talking about influencing public opinion with respect to the approval of a franchise.

[00:38:33] Speaker 06:
And that's the decision of a public official.

[00:38:35] Speaker 06:
But then the second clause talks about decisions of public officials.

[00:38:38] Speaker 05:
I see where you're getting.

[00:38:39] Speaker 05:
I apologize.

[00:38:39] Speaker 05:
Yeah.

[00:38:40] Speaker 05:
So to give the two independent meaning, we'd have to read them.

[00:38:44] Speaker 05:
It makes sense to read them separately.

[00:38:46] Speaker 06:
I think that maybe it's just at least at least seems to raise that.

[00:38:50] Speaker 06:
It's the least potentially seems to raise that question in my mind, even though just as a matter of the way we normally think about things for a lot of the reasons

[00:38:57] Speaker 06:
the questions that you've been faced with presuppose, we always think about influencing public officials through the medium of influencing public opinion.

[00:39:06] Speaker 06:
That just seems natural to think about things that way.

[00:39:08] Speaker 05:
Right, exactly.

[00:39:09] Speaker 05:
And so if you could do that with certificates of public convenience and necessity, it takes the list out of clause one and it renders it superfluous because you couldn't seek to influence public opinion on any matter.

[00:39:21] Speaker 05:
And it would still fall under clause two, even if it wasn't directed at one of the items in listing clause one.

[00:39:28] Speaker 07:
Well, but what about goodwill advertising generally where you're trying to influence public opinion to be more comfortable with what you're doing in the world?

[00:39:40] Speaker 05:
Right, your honor.

[00:39:40] Speaker 05:
And that would be appropriate.

[00:39:42] Speaker 05:
It would be appropriate to record those expenses to account nine thirty point one.

[00:39:46] Speaker 05:
pursuant to note A. Why wouldn't they fall within clause one of 426.4?

[00:39:57] Speaker 05:
Well, again, because here we're talking about certificates, not for franchises.

[00:40:01] Speaker 05:
That would be a different question if we were talking about seeking to influence public opinion on the matter of franchises.

[00:40:07] Speaker 07:
No, I'm just talking about the statute.

[00:40:09] Speaker 07:
And I guess, let me back up and ask you.

[00:40:11] Speaker 07:
Your brief talks a lot about deference, but as we know, deference is only owed where the text is, you know, applying all tools of such reconstruction, the text is ambiguous.

[00:40:24] Speaker 07:
Your argument as to why the text is ambiguous as to whether direct is implicit is what?

[00:40:36] Speaker 05:
Well, the text is ambiguous because if you don't read it as applying to only expenses to have an indirect connection to influencing public officials' decisions, then the list of items in clause one falls out of the account.

[00:40:49] Speaker 05:
It's rendered superfluous.

[00:40:50] Speaker 05:
Clause one is subsumed under clause two, because as Chief Judge Sreenivasan said, as we normally think about it, any attempt to influence public opinion has as its ultimate goal influencing the decisions of public officials.

[00:41:03] Speaker 05:
So if you can.

[00:41:04] Speaker 07:
That was why I was asking about influencing public opinion for purposes that don't have to do with influencing public officials influencing public opinion so that people will be more inclined to come and work for you people will feel more cooperative at an eminent domain proceeding.

[00:41:28] Speaker 07:
power line is going to go over their property or I mean there's a lot of reasons to want to influence public opinion.

[00:41:37] Speaker 05:
Yes, your honor, but it so taking that as the case, then that further supports our position, because then the ultimate goal is not to influence public officials decision so all you're left with.

[00:41:49] Speaker 05:
is an attempt to influence public opinion on the matter of certificates of public convenience and necessity, which are not included in clause one.

[00:41:56] Speaker 05:
And, you know, even if you found that clause two could apply to indirect influences public officials under your example, your honor, there's no attempt to influence public officials.

[00:42:05] Speaker 05:
So the expense just wouldn't be recorded to account for 26.4 so I think under either interpretation.

[00:42:10] Speaker 05:
get to the same place.

[00:42:13] Speaker 03:
What is the rationale for saying that you put in the 426 account expenditures to influence public opinion with respect to the franchise, but you don't put it in if it's with respect to the granting of a certificate

[00:42:36] Speaker 05:
Well, your honor, that's something we explain a paragraph 19 of opinion 554 be where the commission explains that and this gets back to the point of whether these are political expenses or outreach expenses.

[00:42:48] Speaker 05:
Seeking a franchise is to is seeking a lucrative status for the utility itself.

[00:42:53] Speaker 05:
There is it's not imbued with the same public interest, or at least it's not necessarily imbued with the same public interest certificate of public convenience and necessity by definition.

[00:43:02] Speaker 05:
is all about the public need for the project.

[00:43:06] Speaker 05:
And the commission in its regulations has distinguished the two terms, account 302 uses the two terms separately.

[00:43:13] Speaker 05:
And so it's a foundational tenant of regulatory interpretation that where the commission uses the same term in two different provisions, it should be given the same meaning.

[00:43:24] Speaker 05:
So if it franchises exclusive of certificates account 302, it should also be exclusive of franchises in account 426.4

[00:43:31] Speaker 05:
And the Commission's own precedent, going way back, has distinguished the process of seeking a franchise from the process of seeking a certificate.

[00:43:39] Speaker 05:
I can't speak, Your Honor, exactly why the Commission, when it wrote the regulation back in 1963, decided to include franchises in the list and not certificates, but that's a plain text issue.

[00:43:50] Speaker 05:
I mean, it's, it's... Yeah.

[00:43:53] Speaker 07:
So, because you represent FERC, I had a question about, that's really parallel to Judge Randolph's question about the rationale.

[00:44:03] Speaker 07:
And I appreciate your answer pointing to paragraph 19 of 544B.

[00:44:10] Speaker 07:
But there also seems like there's some historical, part of this is when 544B

[00:44:22] Speaker 07:
I'm sorry.

[00:44:24] Speaker 07:
And the 426.4 was written.

[00:44:34] Speaker 07:
Were certificates of public convenience and necessity playing the same role that they play now in the sort of deintegrated electricity field?

[00:44:48] Speaker 05:
I don't know the answer to that question, your honor, I can say I know that several of our precedents that distinguish franchises from certificates go back several decades, you know, before the advent of RTOs and organized markets so I do think the distinction holds.

[00:45:06] Speaker 07:
I agree with you that in a way it doesn't matter because we're going on plain language, but what is a franchise?

[00:45:15] Speaker 07:
I mean, one of the things I've noticed is even in the record in this case, sometimes franchise is used in a kind of casual way, meaning, you know, you got the business, meaning synonymous really with a certificate of public needs and necessity or

[00:45:28] Speaker 07:
or other choice of your firm to do the work.

[00:45:34] Speaker 07:
But is there a more technical way in which the commission uses the term in contemporary approvals?

[00:45:46] Speaker 05:
Well, whether you have a franchise determines whether you get to provide service to a set of customers.

[00:45:53] Speaker 05:
And that's qualitatively different from a certificate which says you can build this line.

[00:45:58] Speaker 05:
You can go ahead and break ground on this project.

[00:46:02] Speaker 05:
We find that it's needed in the public interest.

[00:46:05] Speaker 07:
When you said whether you have franchise determines whether you get to provide service to a group of customers, where is that definition offered?

[00:46:17] Speaker 05:
Paragraph, it's at least implied by paragraph 19, where, let's see.

[00:46:24] Speaker 07:
No, no, I mean in like in statute or regulation.

[00:46:29] Speaker 05:
Well, I could refer back to our brief in looking at examples in the past where the commission has distinguished the two.

[00:46:41] Speaker 05:
Apologize, just give me a moment.

[00:46:49] Speaker 05:
So on page 28 of our brief, so Illinois Public Service Company, this is 1966, so we are going back a long time where the commission has distinguished the two, a natural gas company received franchises,

[00:47:09] Speaker 05:
for the right to deliver gas to those towns and later it received a certificate of public convenience and necessity authoring authorizing it to to commence the service.

[00:47:20] Speaker 05:
So the first was a competitive, presumably a competitive bid, you know, winning the right perhaps because it could provide service at a lower rate.

[00:47:28] Speaker 05:
And the second certificate was a finding, well, it was an authorization that that service could actually go forward.

[00:47:36] Speaker 05:
And that's also reflected in Algonquin Gas Transmission Company and Trunkline Gas Company.

[00:47:42] Speaker 05:
I don't know that I can give a completely satisfactory answer to your question, Your Honor, because the past precedent is somewhat limited.

[00:47:53] Speaker 05:
And I don't have at the ready a precise

[00:47:56] Speaker 05:
definition that we've offered beyond what we have in the record here.

[00:47:59] Speaker 06:
Can a franchise be, you're sort of drawing a distinction it seems like between public spirited and private spirited and it seems like really a lot of your argument is animated by this distinction that you see that the purpose of 426.4 is to render certain things off limits

[00:48:16] Speaker 06:
purposes of passing on to the rate payers and that would be private spirited things and then the residual stuff that can go into 930 and 923 is public spirited stuff that can be fairly passed on to rate payers.

[00:48:25] Speaker 06:
That's sort of a large measure of the underlying logic here and what I'm wondering is for franchises which are specifically denominated in 426.4 and therefore would be off limits for passing on to rate payers are the franchises that are publicly spirited.

[00:48:40] Speaker 06:
So it actually makes sense to pass on well associated costs to

[00:48:46] Speaker 05:
Let me understand your question, Your Honor, why you're saying that franchises would be publicly spirited.

[00:48:52] Speaker 06:
Well, I guess what I'm saying is it seems like part of the distinction drawing between franchises and certificates, at least with the certificate in this case, is that the certificate in this case has this imprimatur that it pertains to the public in a way that it makes sense to pass on the associated costs

[00:49:11] Speaker 06:
to rate payers, whereas a franchise wouldn't necessarily do that because it could be just for the private gain of the entity that's requesting the franchise.

[00:49:19] Speaker 06:
And what I'm asking, I think that's part of the logic of your submission and it seems to be in paragraph 19 and some of the other places in 554 and 554A and B. And what I'm asking is, are there franchises that

[00:49:33] Speaker 06:
overlap with certificates in this way in that the franchise actually would be perceived as doing something that would be public facing in a way that would make sense to pass on the associated costs to rate payers.

[00:49:45] Speaker 05:
Yes, Your Honor, there could be.

[00:49:46] Speaker 05:
And I think this points to an important distinction that this court highlighted in its 2008 Braintree decision.

[00:49:51] Speaker 05:
Account 426.4 in and of itself does not bar passing expenses recorded there through the rate payers.

[00:49:59] Speaker 06:
But it sounds like for most formula rates, 426.4 is not included.

[00:50:03] Speaker 05:
here, that's true.

[00:50:04] Speaker 05:
Yes.

[00:50:05] Speaker 06:
But is that not generally true for formula rates?

[00:50:07] Speaker 05:
No.

[00:50:07] Speaker 05:
And that's why this case is a bit sui generis and why the court, we don't have an opinion directly relating to the circumstances here where it's just a straight accounting determination.

[00:50:19] Speaker 05:
In Braintree, the court didn't even need to decide whether the expenses, which included lobbying there, had to be recorded to 426.4 at all because it found ultimately

[00:50:29] Speaker 05:
because 426.4 was included in that formula rate, the costs were properly passed through to rate payers because they were all imbued with a public interest.

[00:50:38] Speaker 05:
They all went, they all had to do with an RTO objective.

[00:50:42] Speaker 05:
And here we have the same situation.

[00:50:44] Speaker 05:
All these expenses, the expenses incurred serve an RTO objective of reliability.

[00:50:51] Speaker 07:
So yes, I would, you know- I thought there was a stated rate, not a formula rate in ISO New England.

[00:50:58] Speaker 07:
You said it was a,

[00:50:59] Speaker 07:
it was okay under the formula rate.

[00:51:01] Speaker 05:
I apologize, Your Honor.

[00:51:02] Speaker 05:
It shouldn't make a difference though, whether it's a stated rate or a formula rate.

[00:51:08] Speaker 05:
Right.

[00:51:08] Speaker 07:
I mean, the point was it wasn't excluded there.

[00:51:11] Speaker 07:
So that wasn't the question.

[00:51:13] Speaker 07:
The question was, is it compelled speech?

[00:51:15] Speaker 07:
I mean, there were other issues there.

[00:51:19] Speaker 07:
So the question is sidestepped.

[00:51:22] Speaker 07:
But I guess the underlying question is the chief said that

[00:51:28] Speaker 07:
For formula rates, it seems that 426.4 is often excluded.

[00:51:32] Speaker 07:
And you, I'm interested, is that not the case?

[00:51:35] Speaker 07:
Because you seem to be pushing back on that.

[00:51:39] Speaker 05:
So I don't know the answer to that question.

[00:51:43] Speaker 05:
That's not exactly in the record.

[00:51:45] Speaker 05:
To the extent that petitioners argue that this is an odd formula rate, they do so only in their reply brief.

[00:51:50] Speaker 05:
And that argument I respectfully submit is waived.

[00:51:54] Speaker 07:
But it shouldn't- Wait, wait.

[00:51:56] Speaker 07:
You don't know whether this formula rate is typical or unusual?

[00:52:02] Speaker 07:
I'm sorry, let me make it a more specific question.

[00:52:06] Speaker 07:
Whether excluding recovery for amounts appropriately in account for 26.4 is typical or not?

[00:52:18] Speaker 07:
It's not something that you know?

[00:52:21] Speaker 05:
That's not something that I know beyond the precedent of this court.

[00:52:24] Speaker 05:
And in Braintree, the court said, it doesn't matter.

[00:52:26] Speaker 05:
It doesn't matter if it's recorded to 426.4 or not.

[00:52:29] Speaker 07:
In that kind of rate, if it's a stated rate.

[00:52:33] Speaker 07:
But I think the question is a question about the broader importance of the decision in this case.

[00:52:39] Speaker 07:
Is this a very exotic formula rate, a one-off?

[00:52:43] Speaker 07:
or do most formula rates allow recovery under other accounts, but not passing through to rate payers amounts that are appropriately described by 426.4?

[00:52:56] Speaker 05:
And I don't have the answer to that question.

[00:53:00] Speaker 07:
You have no idea.

[00:53:01] Speaker 05:
I'm happy to look into it.

[00:53:03] Speaker 05:
All I know is the precedent that we have with the commission and this court, which has not had to resolve this issue.

[00:53:10] Speaker 05:
So I agree that the issue is important for

[00:53:13] Speaker 05:
know, for broader purposes.

[00:53:15] Speaker 05:
But I think at the end of the day, whether excluding 426.4 from formula rates is typical or not, the question ultimately boils down to what is a proper accounting determination?

[00:53:28] Speaker 05:
What does the text of 426.4 reasonably accommodate?

[00:53:32] Speaker 05:
And we're talking about, you know, the petitioners

[00:53:36] Speaker 05:
point to no evidence to suggest that the certificates applied for in the three states somehow fall under the definition of franchise in account 426.4 for federal purposes.

[00:53:48] Speaker 05:
There's nothing, there's no evidence to suggest that.

[00:53:50] Speaker 05:
So we have to take the certificates as they're named in the states on their face as distinct from franchises which are covered in clause one of 426.4.

[00:54:00] Speaker 05:
And as for, I think we've gone around this a couple of times in a couple of different ways,

[00:54:05] Speaker 05:
in ways that reinforce our interpretation of clause two as applying only to expenditures with the direct connection influencing public officials.

[00:54:12] Speaker 05:
And again, the commission drew a reasonable distinction here.

[00:54:16] Speaker 05:
It didn't say that all the disputed expenses can be recovered from rate payers.

[00:54:21] Speaker 05:
It said those by access point in Larry Puccio, where there was evidence of an expense tied to direct lobbying of public officials, those had to be recorded to 426.4.

[00:54:32] Speaker 05:
And those expenses are not an issue here.

[00:54:34] Speaker 05:
didn't dispute that finding.

[00:54:37] Speaker 05:
All we're left with are the expenses that are tied to PATH's contractors seeking to influence public opinion.

[00:54:44] Speaker 05:
And those expenses stop at the water's edge of the public.

[00:54:47] Speaker 05:
There is nothing in the record.

[00:54:49] Speaker 06:
Let me make sure my colleagues don't have additional questions for you, Mr. Fish.

[00:54:55] Speaker 05:
Thank you.

[00:54:56] Speaker 05:
Thank you, Your Honors.

[00:54:56] Speaker 05:
We request you deny the position for review.

[00:54:59] Speaker 06:
Thank you, Mr. Fish.

[00:54:59] Speaker 06:
We'll hear from intervener Mr. Gossett.

[00:55:06] Speaker 04:
Sorry, trying to unmute.

[00:55:09] Speaker 04:
Thank you, Your Honor.

[00:55:11] Speaker 04:
Chief Judge Srinivasan, and may it please the court.

[00:55:14] Speaker 04:
I think now may be a good time to take a small step back and focus on what this case is basically about, which is whether PATH can recover what are ordinary expenses in the development of a project like this that was ordered by PJM and approved by FERC.

[00:55:34] Speaker 04:
To be sure, to develop these transmission lines, PATH had to play in the court of public opinion.

[00:55:42] Speaker 04:
But the evidence is that that was normal and necessary, and in no way makes the expenses unrecoverable.

[00:55:48] Speaker 04:
That's the point of this court's Braintree decision, which said that it can be recovered and affirmed the commission not even deciding if certain expenses were in 426.4.

[00:55:59] Speaker 07:
Can I just stop you, Mr. Gossett?

[00:56:01] Speaker 07:
You and Mr. Fish have referred to this as ordered by PJM.

[00:56:07] Speaker 07:
Presumably PATH applies for this.

[00:56:11] Speaker 07:
I mean, this is not a hijacking of a private company out of the blue, right?

[00:56:18] Speaker 07:
This is something that PATH wants to do as a business matter and gets the job from,

[00:56:28] Speaker 07:
The ISO.

[00:56:30] Speaker 04:
Sorry you're on I didn't mean to talk over you.

[00:56:33] Speaker 04:
The.

[00:56:34] Speaker 04:
That's not my understanding my understanding is that the way this works is that

[00:56:39] Speaker 04:
PJM the RTO determines that there is a reliability problem that there was a problem with adequate electricity in DC Baltimore area and then went about figuring out how to solve that reliability problem and chose this project and then

[00:56:59] Speaker 04:
designated specific entities to construct the project.

[00:57:04] Speaker 04:
It is, of course, the case that those entities were interested in the project, but the determination was made by PJM, not by PATH.

[00:57:14] Speaker 04:
And PATH didn't create the project and bring it to PJM in the first instance.

[00:57:20] Speaker 07:
It goes the other way.

[00:57:22] Speaker 07:
It's really helpful.

[00:57:23] Speaker 07:
But PATH applies?

[00:57:27] Speaker 07:
Or does PJM kind of look out and say, who's best for this?

[00:57:30] Speaker 07:
I'm going to hire PATH to do it.

[00:57:34] Speaker 07:
Who approaches who?

[00:57:36] Speaker 07:
My understanding was that PATH, the PJM determines there's a reliability problem.

[00:57:40] Speaker 07:
And then PATH says, hey, actually joins some pieces together and says, hey, we're interested in that.

[00:57:49] Speaker 04:
I'm not sure the exact order.

[00:57:52] Speaker 04:
I mean, I think it's a discussion at that point.

[00:57:54] Speaker 04:
Obviously, these were the two companies that created PATH, its own company, were the two primary transmission owners in the region.

[00:58:05] Speaker 04:
So it's unsurprising that they would have been selected to do it, but it wasn't the case that they were the initiator of the project, if that makes sense.

[00:58:16] Speaker 07:
Right, no, because this is under an, an ISM, of course, but I've just, it just it struck me as a little odd to say the project is ordered by PJM when is a business venture that path is voluntarily entering into.

[00:58:32] Speaker 04:
I don't actually think in the end it counts as voluntary.

[00:58:35] Speaker 04:
I believe that once PJM instructs them to make the project, it is no longer voluntary at their part under the PJM governing documents.

[00:58:47] Speaker 04:
They have been instructed to take all efforts to make the project.

[00:58:51] Speaker 04:
in the interest of all of the PJM customers in a 13 state region.

[00:58:57] Speaker 04:
It's not specifically that they are now choosing to work on it.

[00:59:02] Speaker 04:
They can't just stop working on it because they've been told to make the project and told to use their best efforts to doing so.

[00:59:09] Speaker 04:
And that's why I point out that the evidence in the record is clear that these sorts of expenses are normal in that sort of project.

[00:59:17] Speaker 07:
I mean, that's- So once they've agreed

[00:59:21] Speaker 07:
maybe that they have obligations to continue, but I'm sorry, this is not a business venture that Path voluntarily entered into?

[00:59:34] Speaker 07:
Your response was about, you know, once they, once PJM had instructed them to proceed, they had to proceed, of course, they're under an obligation, but

[00:59:45] Speaker 04:
I hope.

[00:59:46] Speaker 07:
And this matters because as the chief judge is raising this question about public and the commission raises this question about public spirit versus private interests.

[01:00:00] Speaker 07:
And so this seems to me this is a really, having an accurate description of how these projects are undertaken and in whose financial interests they are and when matters.

[01:00:15] Speaker 04:
Can I answer that the question a slightly different way because I wasn't clearly wasn't quite getting where you were trying to go.

[01:00:21] Speaker 04:
I mean, and I think this, this does go to the same point which is the distinction between the franchise and the certificate that we will that Mr fish was talking about in that in the context of

[01:00:33] Speaker 04:
a franchise someone is competing for work they're asking to be able to be the electric provider in a certain region or something like that and there are multiple entities that are competing for that whereas in this case that's not what's going on and I think this is important because this is the distinction and the distinction that the commission itself drew with the Alaska cases in which both

[01:00:57] Speaker 04:
both the Northwest Alaska and the other Alaska case involved expenses before the selection of the entity that was going to create that project.

[01:01:08] Speaker 04:
I mean, to be sure that entity was going to make money off of the project, but that wasn't what the point is.

[01:01:14] Speaker 04:
The point is that it was, they had been selected in that instance by Congress, in this instance by PJM for its approval to do so, at which point they were obligated to work on the project.

[01:01:25] Speaker 04:
And I think that's the critical point about when we're talking about how this is a necessary project to go forward.

[01:01:37] Speaker 04:
It's that someone else has decided that the project is necessary.

[01:01:41] Speaker 06:
Is that why the commission's orders repeatedly refers to already approved?

[01:01:45] Speaker 06:
That's the significance to the commission, it looks like.

[01:01:47] Speaker 06:
Yes, Your Honor.

[01:01:48] Speaker 06:
In a number of the paragraphs, it talks about an already approved project.

[01:01:52] Speaker 04:
Exactly, Your Honor.

[01:01:53] Speaker 04:
And one more point on the last point to Judge Pillard about the cancellation, which you had raised before, which, again, to our mind is completely irrelevant because

[01:02:08] Speaker 04:
It's the same thing.

[01:02:09] Speaker 04:
While they were told that this project was a necessary thing for the reliability of the network by PJM, they worked on it.

[01:02:15] Speaker 04:
PJM decided it no longer was necessary in light of the 2008-2009 recession and a significant decrease in energy usage.

[01:02:25] Speaker 04:
And therefore, they stopped working on the project.

[01:02:27] Speaker 04:
But that was not something that PATH decided.

[01:02:30] Speaker 04:
It had nothing to do with the certificates.

[01:02:32] Speaker 04:
It had to do with the overall network in the entire region, which PJM, not PATH, decided rendered this product no longer important.

[01:02:44] Speaker 04:
And therefore, they stopped at that point precisely and stopped billing to the PJM ratepayers as a result of that.

[01:02:53] Speaker 03:
Is it possible that Franchise has

[01:02:56] Speaker 03:
has a different meaning.

[01:02:59] Speaker 03:
You know, when I think of franchises, I think of McDonald's.

[01:03:03] Speaker 03:
And I don't know that or Taco Bell or whatever they are.

[01:03:07] Speaker 03:
And you don't need a public official to get the approval to open up a McDonald's.

[01:03:12] Speaker 03:
At least I don't think you do.

[01:03:14] Speaker 03:
Are there franchises that are doled out to public utilities that are not doled out, but they enter into the contracts that are private, private?

[01:03:25] Speaker 04:
Not in this context, no.

[01:03:27] Speaker 04:
I mean, that's why in 426.4 it talks about the approval modification or revocation of franchises.

[01:03:33] Speaker 04:
That's a governmental action.

[01:03:34] Speaker 04:
I mean, the way in which the term is, I think, used similarly in that context is that most McDonald's franchises are exclusive in a region.

[01:03:44] Speaker 04:
That's what you're getting is the exclusive right to be the McDonald's owner in Northwest DC.

[01:03:50] Speaker 04:
So to here, a franchise would be an exclusive right to provide electrical service in Northwest DC in that example.

[01:03:57] Speaker 04:
Whereas here we're talking about a cable that in no way a transmission line that the approval of would in no way prevent another line to be approved.

[01:04:07] Speaker 04:
It doesn't directly connect to.

[01:04:08] Speaker 07:
It would though prevent someone else from building that line.

[01:04:12] Speaker 07:
I mean, they're not going to do two lines.

[01:04:15] Speaker 07:
So in a sense, and I think that Perk uses the term loosely this way in the record.

[01:04:21] Speaker 07:
They talk about getting the franchise, meaning getting the job, referring to actually PJM's selection of path for this line.

[01:04:29] Speaker 07:
So it does seem like there's a, I mean, at best it's ambiguous, so there's that.

[01:04:36] Speaker 07:
On the question of whether it's sort of public or public spirited or not, I mean, there's really almost a, there's a kind of a federalism issue here.

[01:04:44] Speaker 07:
The 426.4 public officials can be state officials or federal officials.

[01:04:54] Speaker 07:
And with respect to the state officials who have to grant the public certificates of public convenience and necessity, this was not an already approved project, right?

[01:05:03] Speaker 07:
There's a public interest

[01:05:05] Speaker 07:
that has yet to be satisfied, that's a state-level public interest, right?

[01:05:13] Speaker 04:
Yes, Your Honor, I agree that there is a approval process that the state has to go through.

[01:05:19] Speaker 04:
It is not a selection process.

[01:05:21] Speaker 04:
No.

[01:05:23] Speaker 04:
But yes, there is, of course.

[01:05:25] Speaker 04:
But this is where the terms of the regulation are, I think, controlling.

[01:05:31] Speaker 04:
They don't address that.

[01:05:32] Speaker 04:
It is also the case that if you

[01:05:37] Speaker 04:
If you use the political nature language from the later note in the advertising thing as an overall description here, I mean, the selection of who's gonna provide service is a much more political choice than do you license someone to build something that isn't preventing someone else from doing so.

[01:05:59] Speaker 07:
But again- Is that, I mean, when you talk to people who, I mean, I think like the pro se,

[01:06:04] Speaker 07:
Petitioners in this case, when you talk to people who are affected by those decisions, they're very political, very political.

[01:06:14] Speaker 07:
You know, the public service commission, the commissions and whether they're going to grant these certificates to the public convenience and necessity, whether, you know, what kind of demand is counted and do we really need this?

[01:06:28] Speaker 07:
And, you know, should we pay for it?

[01:06:30] Speaker 07:
Very political, no.

[01:06:32] Speaker 04:
In a lay sense of the term, certainly, but in ISO New England and in this court's Braintree decision, the commission and then this court discuss how in the context of an RTO or ISO approved project,

[01:06:48] Speaker 04:
Another entity has made the determination that this is in the interest of the ratepayers of the entire network.

[01:06:57] Speaker 04:
And that's all that is happening here is the implementation of that.

[01:07:01] Speaker 04:
It's not a decision being made by PATH in its private, pecuniary business interest.

[01:07:08] Speaker 04:
path is executing a decision made by the nonprofit PJM that is responsible for all electricity in a 13 state region and determined that this project was important for all of the electric users in that region.

[01:07:27] Speaker 06:
Okay.

[01:07:27] Speaker 06:
Let me ask, make sure my colleagues don't have additional questions for you, Mr. Gossett.

[01:07:34] Speaker 06:
Thank you.

[01:07:34] Speaker 06:
Thank you.

[01:07:36] Speaker 06:
Ms.

[01:07:36] Speaker 06:
Newman.

[01:07:37] Speaker 06:
We'll give you a rebuttal time.

[01:07:38] Speaker 06:
You have two minutes.

[01:07:41] Speaker 02:
Thank you, Your Honor.

[01:07:42] Speaker 02:
I would like to point out that on the hearing, the commission ignored evidence that the coalitions and Pete were for the purpose of recruiting business and union leaders using quid pro quo arrangements and sponsorship money to represent past interest at the in the state public hearings.

[01:07:59] Speaker 02:
These weren't informational efforts.

[01:08:02] Speaker 02:
I would also like to point out that the Braintree case, that was a stated rate case, and that was about making a recoverability determination.

[01:08:12] Speaker 02:
Could the commission include account 426.4 in the ISO's rate?

[01:08:18] Speaker 02:
Now, past case is a formula rate.

[01:08:20] Speaker 02:
So it's an accounting determination, as the commission has said.

[01:08:24] Speaker 02:
So there you only have to find the proper account.

[01:08:27] Speaker 02:
So the Braintree case is completely different from this because accounting determinations are completely different from recoverability determinations and when they are made.

[01:08:38] Speaker 02:
Another thing I would like to point the court's attention to something the commission said in its opinion number 554 paragraph 53 that's in the joint appendix that page 353.

[01:08:50] Speaker 02:
The commission said that there was no precedent for such a narrow interpretation of the first clause or a rigid separation between the influencing of public opinion and the influencing of public officials.

[01:09:02] Speaker 02:
In fact, none of the relevant precedent made such a narrow determination.

[01:09:06] Speaker 02:
Instead, in all of these cases, the commission's interpretation of the language was broad.

[01:09:12] Speaker 02:
And this is,

[01:09:17] Speaker 02:
aligns with the commission's order number 276 that said that the interpretation of the language of the account should be made in its broadest meaning.

[01:09:29] Speaker 02:
In his concurrence, Joint Appendix, page 298, Commissioner Black said he was fearful that too restrictive an interpretation of the language of the account would allow utilities influencing expenditures to be lost in the recoverable operating expense accounts.

[01:09:44] Speaker 02:
Commissioner Black's fear has been realized in this case.

[01:09:48] Speaker 02:
A narrow interpretation of the first clause and opens the door to exclude a utility's influence on a whole world of utility expenditures that are not included in that very short list, things like a rate case.

[01:10:01] Speaker 02:
Ratepayers should not have to pick up the tab for a utility's influence of public opinion and public officials to increase the rates they pay.

[01:10:09] Speaker 02:
And I see that my time has expired.

[01:10:12] Speaker 02:
So thank you very much.

[01:10:14] Speaker 06:
Thank you, Ms.

[01:10:14] Speaker 06:
Newman.

[01:10:15] Speaker 06:
Thank you to all who presented arguments this morning in this case.

[01:10:17] Speaker 06:
We'll take this case under submission.