[00:00:01] Speaker 00: Case number 19-1091 et al, Public Service Electric and Gas Company Petitioner versus Federal Energy Regulatory Commission. [00:00:09] Speaker 00: Mr. Longstreth for the petitioner, Ms. [00:00:11] Speaker 00: Rylander for the respondent. [00:00:14] Speaker 03: Council, Mr. Longstreth, please proceed if you're ready. [00:00:16] Speaker 03: Thank you very much and may it please the court, your honors. [00:00:20] Speaker 03: John Longstreth for the petitioners, Public Service Electric and Gas Company and PPL Electric Utilities Corporation. [00:00:28] Speaker 03: Two things stand out about this case. [00:00:30] Speaker 03: First, the commission repeatedly insists that this is essentially a one off case. [00:00:36] Speaker 03: Its briefs note that the commission's findings were expressly limited to stability related transmission upgrade projects, currently a category of one, and makes repeated references to the case as unique or highly unusual. [00:00:50] Speaker 03: Now it's conceptually permissible to have an agency one-off decision, but it does raise the suspicion that the decision is temporizing rather than fully reasoned and that ordinary process hasn't been followed. [00:01:04] Speaker 05: Here is another aspect critical that the commission was dealing with the same record in 2018 and it had in 2016. [00:01:15] Speaker 03: That's correct. [00:01:16] Speaker 03: And as a matter of fact, I was just going to lead to the confirmation of the suspicion here that the commission did a 180 degree change in position in the orders on review based on the same record and barely... Why is that a problem? [00:01:34] Speaker 03: You said it's going to reconsider. [00:01:36] Speaker 01: Yeah, why is that a problem? [00:01:37] Speaker 01: We do that all the time. [00:01:39] Speaker 01: I mean, we hate when we make a mistake. [00:01:43] Speaker 01: but that's exactly why you have rehearings. [00:01:46] Speaker 01: We've done, I mean, I laughed when I read this. [00:01:48] Speaker 01: I've gotten burned as my colleagues who make mistakes. [00:01:52] Speaker 01: You look at a record and you swear you got it right. [00:01:54] Speaker 01: You publish it and you say, then you get a petition rehearing. [00:01:58] Speaker 01: You say, oh my God, we really screwed that one up. [00:02:01] Speaker 01: And you redo it on the same record. [00:02:03] Speaker 01: I mean, the one thing I wanna make clear here is what you're suggesting [00:02:10] Speaker 01: doesn't, at least to this judge, suggest anything that's horrible, it suggests exactly what we ought to be doing. [00:02:17] Speaker 01: This is what we do. [00:02:18] Speaker 03: No, I appreciate your honor that the purpose of rehearing is that sometimes FERC does change its mind. [00:02:27] Speaker 03: We all do. [00:02:28] Speaker 03: All judges do. [00:02:31] Speaker 03: I think the one thing though that is clear here is not just that they changed their mind, but they changed their mind without any reference to the previous decision they had made. [00:02:44] Speaker 03: So it's one thing to change your mind and say, look, as you're saying, Your Honor, yes, I got it wrong the first time. [00:02:51] Speaker 03: Here's what I did wrong. [00:02:53] Speaker 03: Here's why I've changed my mind. [00:02:55] Speaker 03: Here's why what I decided before is no longer right. [00:02:58] Speaker 03: That's exactly what they did not do here. [00:03:00] Speaker 03: So if you look at- [00:03:01] Speaker 05: So when the agency says taking the same record, [00:03:06] Speaker 05: We're going to reconsider our decision. [00:03:11] Speaker 05: Isn't that enough? [00:03:13] Speaker 05: I understand Supreme Court cases that talk about, well, you have to acknowledge you're changing your position and you have to tell us why, et cetera. [00:03:21] Speaker 05: And my only question is, I understand the nature of those cases, but I don't know that I read them quite the way you do in terms of saying that the agency cannot change its mind [00:03:34] Speaker 05: unless sort of it goes through this self-flagellation process. [00:03:40] Speaker 03: Well, I'm certainly not suggesting that the commission needs to do that, but, and you know, I mean, I counsel, I'm not, it's really an unfair characterization. [00:03:51] Speaker 01: They clearly were explaining [00:03:54] Speaker 01: what preceded this and what happened here. [00:03:56] Speaker 01: It's a difference between solution based for reliability as opposed to stability. [00:04:01] Speaker 01: They put it in that even I, I mean, Lord knows I don't sit around dealing with stability and reliability every day, but I got what they got. [00:04:11] Speaker 01: And it was very clear to me that they were making it clear to someone like me who might judge them and say, look, [00:04:17] Speaker 01: we put it in the wrong box and this is a really unusual case and that's the one thing that seems absolutely clear here is that the mistake was a mistake it was an honest to god mistake they put it in the wrong frame and i don't know how you can doubt that and they made it very clear what happened and they made it very clear why [00:04:38] Speaker 01: they had to change. [00:04:39] Speaker 01: I don't think there's any confusion. [00:04:40] Speaker 03: Well, let me tell you what I think, and I understand your point, Your Honor, that there was an explanation as to what they were doing, but what I would- As against what they did. [00:04:52] Speaker 03: But it's not as- You're claiming they didn't. [00:04:54] Speaker 01: I got it. [00:04:54] Speaker 01: Now, like I say, I'm not someone who does this every day, but I clearly understood what they were saying about that. [00:05:01] Speaker 01: They made a mistake with respect to what they did as against to what they are now doing. [00:05:06] Speaker 03: Well, with respect, Your Honor, I don't think, the thing that they didn't do was the first time they made the decision, when they made their first decision, they said there were going to be substantial benefits from this project. [00:05:18] Speaker 01: And I can give you an opinion I've written where that's what I thought the first time. [00:05:25] Speaker 01: And then we've re-heard it and I had to kind of eat crow and say, well, you know, that was wrong. [00:05:31] Speaker 03: But but your honor, I'm sure that you do that as rational decision maker, that is not what for did here for did not say they never said there are not substantial benefits to these agencies, they never, they never disavowed that finding. [00:05:48] Speaker 03: So, they, the finding is. [00:05:51] Speaker 03: And so, all they need to do to all they need to do to affirm their decision here is to not for all you need to do to affirm the transmission operators decision here and again we have to back up a little bit, the transmission operators are the ones that [00:06:08] Speaker 03: propose transmission cost allocations. [00:06:11] Speaker 03: That's our job as the transmission operator. [00:06:14] Speaker 03: It's not FERC's job to propose it. [00:06:16] Speaker 03: It's not the court's job to propose it. [00:06:17] Speaker 03: It's our job to propose it. [00:06:19] Speaker 03: And FERC has to affirm that if they find that there are substantial benefits to the project commensurate with the cost. [00:06:28] Speaker 03: FERC found that in 2016. [00:06:30] Speaker 01: And they made a mistake. [00:06:32] Speaker 01: They did. [00:06:34] Speaker 01: They said in this context, [00:06:36] Speaker 01: It doesn't work. [00:06:37] Speaker 01: That is what we thought in Order 1000 and applied to most of the cases. [00:06:43] Speaker 01: They said we still affirm that. [00:06:45] Speaker 01: That is correct. [00:06:47] Speaker 01: But we found out that in this situation where we're talking about for stability is not reliability, it doesn't work. [00:06:55] Speaker 01: The frames don't work. [00:06:56] Speaker 03: I'm sorry, they did say, yes, we think stability is a different situation. [00:07:03] Speaker 03: What they did not say is, we found substantial benefits and now we find there aren't substantial benefits. [00:07:10] Speaker 03: Where did I get that from? [00:07:11] Speaker 03: They never said it was wrong. [00:07:13] Speaker 03: They never said it was wrong. [00:07:14] Speaker 03: They never even addressed those findings of substantial benefits. [00:07:18] Speaker 03: That was made in the first decision. [00:07:20] Speaker 03: All they did in the second decision was say, [00:07:23] Speaker 03: Well, even if all they did in the second decision was say, well, we might have something that works better in this case. [00:07:29] Speaker 03: That, with respect to the commission, is not the right standard. [00:07:33] Speaker 01: The commission cannot... Well, I think what they were saying is their basic premise of Order 1000 is cost causation. [00:07:41] Speaker 01: That's the foundation. [00:07:43] Speaker 01: And they were saying that they missed the boat on cost causation the way they initially set it up in this situation. [00:07:50] Speaker 01: They were wrong. [00:07:51] Speaker 01: There may be a little bit, there may be tiny bits of benefit here or there. [00:07:56] Speaker 01: They weren't suggesting there are no benefits. [00:07:59] Speaker 01: They were saying the cost causation allocation was so far off that in this situation, we are obliged to change it. [00:08:08] Speaker 01: I don't know how I could have gotten that. [00:08:10] Speaker 01: Listening to you, I'm wondering now whether I was delusional. [00:08:14] Speaker 01: You just can't miss what Frick said. [00:08:16] Speaker 01: You can't miss it. [00:08:18] Speaker 05: Well, let me ask you, counsel, because you started out by saying that the agency here proceeded improperly. [00:08:30] Speaker 05: And that's what I need to understand what your concern is. [00:08:35] Speaker 05: Judge Edwards has outlined why we all understand what it did. [00:08:38] Speaker 05: But what was improper about what it did? [00:08:42] Speaker 03: Well, let me put it, let me put it this way. [00:08:44] Speaker 03: And I certainly don't suggest anyone's delusional, but it does appear I have to change somebody's mind here. [00:08:50] Speaker 03: So I'm going to try to do that as respectfully as I can. [00:08:53] Speaker 03: My question in the, in the, in the April. [00:08:57] Speaker 03: Yes. [00:08:58] Speaker 03: In the April 26th with our colleagues. [00:09:02] Speaker 03: Well, with all due respect, Judge Rogers, it did seem like you were kind of coming from the same place, so I didn't mean to deflect. [00:09:11] Speaker 03: Here's the situation. [00:09:13] Speaker 03: The April 16th order comes out. [00:09:16] Speaker 03: The April 16th order says, we have this rule in place. [00:09:19] Speaker 03: It is an ex ante rule. [00:09:21] Speaker 03: The whole point of an ex ante rule is it's ante. [00:09:24] Speaker 03: We have the rule in place before the project is proposed so that we don't have all this litigation afterwards and all these lawyers and all these lobbyists and all these public officials coming in and trying to overturn it. [00:09:37] Speaker 03: That's what ex ante means. [00:09:39] Speaker 03: We've got the rule. [00:09:40] Speaker 03: We've adopted it. [00:09:41] Speaker 03: We found in 2013 and 2014 it was proper. [00:09:44] Speaker 03: And it applies to these projects, reliability projects like this one. [00:09:49] Speaker 03: So they proved it. [00:09:51] Speaker 03: And they found that there were significant benefits to the project. [00:09:55] Speaker 03: That takes care of cost causation. [00:09:57] Speaker 03: Cost causation. [00:09:58] Speaker 03: If it's correct. [00:10:00] Speaker 03: What? [00:10:00] Speaker 03: If it's correct. [00:10:02] Speaker 03: If it's correct. [00:10:03] Speaker 03: And if they think it's not correct, what they have to do is come back and say, we said there were significant benefits to the project, but we were wrong. [00:10:10] Speaker 03: There are not significant benefits to the project. [00:10:12] Speaker 03: They never said that. [00:10:13] Speaker 03: And they couldn't have said it. [00:10:14] Speaker 03: Going to your question, Judge Rogers, a procedural thing, how can you say we were wrong in an April 2016 decision? [00:10:23] Speaker 03: If you never refer to that decision or discuss the reasoning of that decision, look at the decisional paragraphs in the 2018 and 2019 orders. [00:10:33] Speaker 03: In the 2018 order, they have a paragraph that's about three lines long saying, here's what we decided in 2016. [00:10:41] Speaker 03: Then we never hear about the 2016 order again. [00:10:44] Speaker 03: It's not discussed. [00:10:45] Speaker 03: Its findings aren't discussed. [00:10:47] Speaker 03: Its findings aren't overturned. [00:10:49] Speaker 03: They just go on to something else and say, well, you know, we could have done something that [00:10:53] Speaker 03: a little better. [00:10:55] Speaker 03: The test is not. [00:10:58] Speaker 05: In other words, I need to be clear on your procedural point. [00:11:03] Speaker 05: When an agency such as FERC announces, it is granting reconsideration of its 2016 order. [00:11:20] Speaker 03: Right. [00:11:23] Speaker 05: It cannot, in your view, even where it's proceeding on the same record, act as though nothing happened before and come up with what I'll just suggest is a new way of looking at the record. [00:11:46] Speaker 03: Yeah, I think that's correct. [00:11:47] Speaker 03: And I think the analogy I would use, and I understand the points that you're making, which is when the agency's in the same proceeding, that's a little bit different from looking at prior precedent. [00:11:56] Speaker 03: I would think of it more kind of the way Universal Camera looks at it, which is that, you know, that was a case, yeah, the ALJ made a decision, then the commission made a decision, and the question was, you know, how you look at that. [00:12:08] Speaker 03: And the court makes clear, as I think you're suggesting, the agency can change its mind. [00:12:12] Speaker 03: The agency can have a final decision. [00:12:15] Speaker 03: That's all fine. [00:12:16] Speaker 03: But the court does have to take into account. [00:12:18] Speaker 03: I think that's what that case said is they have to take into account that you had an administrative law judge who made findings and those are in the record and they have to be dealt with. [00:12:27] Speaker 03: And that, I think, is the answer to your question, which is sure, they can change their mind. [00:12:32] Speaker 03: Sure, they can come to a different conclusion. [00:12:34] Speaker 03: But they can't just ignore the fact that in April 2016, they came to the opposite conclusion and they made findings in this very case that there were substantial benefits from this project. [00:12:47] Speaker 01: And then again, that ties into the... So they made a specific finding. [00:12:52] Speaker 01: First of all, you're ignoring the fact that this all starts pursuant to a petition for a hearing, which states the alleged mistake. [00:13:01] Speaker 01: That's the context. [00:13:02] Speaker 01: That's why we're not confused. [00:13:04] Speaker 01: There was also a dissent in the original opinion, which helps to frame it. [00:13:08] Speaker 01: So there's a very strong dissent in the first opinion, framing it. [00:13:12] Speaker 01: There's a petition for rehearing. [00:13:14] Speaker 01: That's what FERC is acting against or pursuing to. [00:13:19] Speaker 01: That is the frame. [00:13:20] Speaker 01: There's a petition for, you're being very formalistic in a very strange way. [00:13:26] Speaker 01: I have the faintest idea, if we send it back, what are we supposed to say? [00:13:31] Speaker 01: Add some words and say, [00:13:34] Speaker 01: gee, we made a mistake. [00:13:36] Speaker 01: They have a petition for rehearing [00:13:38] Speaker 01: which they're responding to, which says you made a mistake. [00:13:42] Speaker 01: And then their finding is solely relying on the solution-based DFAX method to allocate the blah, blah, blah that address stability, erase issues, does not allocate the cost of such transmission projects in such a manner, et cetera, et cetera. [00:13:59] Speaker 01: They made that finding as against in response to a petition for rehearing, which said the first disposition was wrong. [00:14:07] Speaker 01: And they are now saying it was wrong. [00:14:09] Speaker 01: They agree. [00:14:10] Speaker 01: They made the critical finding in response to a petition for rehearing. [00:14:13] Speaker 01: Now, if they had just walked in and there was no petition for rehearing and they just said, oh, incidentally, we're going to have a new opinion. [00:14:21] Speaker 01: And there's no frame or no framework whatsoever. [00:14:24] Speaker 01: And they just issued something. [00:14:26] Speaker 01: Maybe I can understand you, but you really are not being fair and characterizing. [00:14:30] Speaker 01: There was a lot of [00:14:32] Speaker 01: fighting. [00:14:33] Speaker 01: I mean, you're taking it so out of context. [00:14:36] Speaker 01: It's not fair. [00:14:37] Speaker 01: There was a huge battle. [00:14:39] Speaker 01: The overarching agencies weighing in, they have their white paper, both sides were fighting like crazy for two years. [00:14:46] Speaker 01: Everyone disagreed and was strong concerns about what was going on. [00:14:50] Speaker 01: And then there's a petition for rehearing and FERC response to it when something happened here. [00:14:55] Speaker 01: I'm sorry, that was my computer. [00:14:58] Speaker 01: And so that's what I want you to understand why I'm not getting it. [00:15:01] Speaker 01: I think you're creating something that's just a fiction. [00:15:05] Speaker 01: If there was no petition for rehearing, then I, as a judge, I would say, yeah, that's strange. [00:15:10] Speaker 01: I know how an agency or a court could get out of that bind, but there was one here. [00:15:14] Speaker 01: There's a dissent and then a petition for rehearing frames the issue and then FERC makes its finding. [00:15:21] Speaker 01: Okay. [00:15:23] Speaker 03: I think the problem, the thing that I think is missing here in the discussion is that, and I think the reason that the initial finding of substantial benefits from the project, which was never expressly addressed or overturned is- It is. [00:15:40] Speaker 01: It is. [00:15:41] Speaker 01: Council, wait a minute. [00:15:41] Speaker 01: That is just wrong. [00:15:42] Speaker 01: FERC made a finding [00:15:46] Speaker 01: in its new order which says here is what we are concluding on the same record, which is absolutely inconsistent with what they initially said. [00:15:55] Speaker 01: They're clearly saying they were wrong initially. [00:15:57] Speaker 01: They said in the second opinion what we said before is wrong. [00:16:02] Speaker 01: It doesn't work in this context. [00:16:04] Speaker 03: Yes, but I think the point I'm trying to make is that I don't think FERC's explanation works because FERC was not free on rehearing to simply say, we have a new method that we think might be better than the first method. [00:16:21] Speaker 01: They were not all they're saying. [00:16:23] Speaker 01: They're saying what we did initially was wrong. [00:16:26] Speaker 01: Right. [00:16:26] Speaker 01: That's the key point. [00:16:28] Speaker 01: There could be a fight over what they replace it with, but I don't understand you challenging that. [00:16:35] Speaker 01: They clearly said what was initially done was wrong. [00:16:40] Speaker 01: I just looked at the finding. [00:16:41] Speaker 01: The finding is there. [00:16:45] Speaker 03: but I don't think the finding is what they needed under their section 206 burn because I was saying under 206, they cannot simply find what we have a special circumstance here where we think this new approach would be better and that the first one is not right. [00:17:05] Speaker 03: They have to find specifically that the benefits are not commensurate. [00:17:12] Speaker 03: Ask this question on the project but but they found that there were significant benefits and they didn't they didn't reverse that finding. [00:17:18] Speaker 03: So I think the pressure in a box. [00:17:21] Speaker 02: I'm sorry, maybe my voice isn't coming to me. [00:17:23] Speaker 02: Can I ask this question. [00:17:25] Speaker 02: Yeah. [00:17:25] Speaker 02: Are you able to hear me. [00:17:27] Speaker 02: Yes, I am. [00:17:28] Speaker 02: Okay, thanks. [00:17:28] Speaker 02: So, to me, the way to understand the benefits question is this that [00:17:35] Speaker 02: The original order in 2016 was framed around a particular set of assumptions about what the relevant benefits were, because the relevant benefits had to do with flow. [00:17:46] Speaker 02: But in 2018, there's a recognition that, wait, we're just conceptualizing this erroneously, because in the stability-related context, there's a different kind of benefits that come to the fore, and the benefits that come to the fore are the stability-related benefits. [00:17:59] Speaker 02: And so that's in some places, but at least in paragraph 40 on page J92. [00:18:04] Speaker 02: And so when you think about the benefits as being in the context of a stability-related problem that is remedied with stability-related benefits, then yeah, they might have talked about substantial benefits before, but it was a different framework for understanding what the relevant benefits were. [00:18:20] Speaker 02: And that seems like that addresses the substantial benefits [00:18:24] Speaker 02: description because it was substantial benefits of a kind that were originally viewed to be the relevant field of benefits. [00:18:32] Speaker 02: And now we're talking about a different kind of benefits that we now understand is what's more apposite when it's a stability related problem. [00:18:40] Speaker 02: And so therefore, you know, I don't know that you have to explicitly say [00:18:43] Speaker 02: You know, and that when we were talking about substantial benefits before it was a different frame of benefits. [00:18:49] Speaker 02: Now we understand that there's stability related benefits and stability related benefits. [00:18:54] Speaker 02: It's not commensurate anymore to assign it all to del del Marvel. [00:19:00] Speaker 03: Well, I think you're right that they said there could be a different way of looking or there is a different way of looking at the benefits when you're in a stability context. [00:19:10] Speaker 03: And if you go back and look, I mean, and I think you're sort of suggesting that we kind of have to infer what was going on because they never say, here's the finding we made and here's why we're contradicting that finding. [00:19:23] Speaker 03: I guess I was more troubled by that than certainly it seems Judge Edwards is because he was able to discern the path, I guess, as it goes. [00:19:31] Speaker 03: But it seems to me that that's more than sort of a technical or formalistic problem in this case because we as the transmission owners have the right to present this as long as it passes muster under the cost causation test. [00:19:49] Speaker 03: and FERC's finding of these substantial benefits because no one is denying this energy goes to Delaware and Maryland. [00:19:57] Speaker 03: They get the benefit of it. [00:19:58] Speaker 03: This is nothing at all like the ICC case where Illinois is paying for something that's in New Jersey or out in the east part of the country. [00:20:07] Speaker 03: This is going right there. [00:20:09] Speaker 03: But what they so they made that finding of benefits and that finding of benefits, if it is enough to meet the commensurate benefits test means that they have to accept our allocation proposal in order to overturn it, they have to find that. [00:20:27] Speaker 03: It's not commensurate. [00:20:29] Speaker 03: And they did, as I understand it, and I agree, they did find it was not commensurate. [00:20:34] Speaker 03: But the problem is in finding it wasn't commensurate, they didn't deal with their prior finding that there were substantial benefits here. [00:20:41] Speaker 03: And there was a lot of record evidence about the substantial benefit here that Delmarva is an importer of power. [00:20:48] Speaker 03: that it had transmission constraints that most of its energy comes from connections to North all those findings are in there that this is a benefit. [00:20:57] Speaker 03: And so, the problem is, I think, not that they didn't make a finding that this new [00:21:07] Speaker 03: know, stability deviation might not be proper. [00:21:11] Speaker 03: It's not enough for them to find that the new one has to be proper. [00:21:15] Speaker 03: They have to find the old one is improper. [00:21:17] Speaker 03: They did find the old one was improper, as Judge Edwards notes, but they didn't take into account the record. [00:21:22] Speaker 03: They didn't take into account their prior findings [00:21:25] Speaker 03: And all of the evidence that supported those prior findings that there were substantial benefits to Delmarva. [00:21:31] Speaker 03: Yes, maybe in a stability context, there might be benefits to other people. [00:21:35] Speaker 03: And if you look, you know, it's not in the commission's order, but if you go root around in the technical transcript that Ms. [00:21:42] Speaker 03: Rylander cited to, [00:21:44] Speaker 03: They point to PJM and PJM talks about how these stability violations are different. [00:21:55] Speaker 03: And they say, yeah, maybe you could find an additional beneficiary. [00:21:58] Speaker 03: Maybe this doesn't capture all the beneficiaries. [00:22:02] Speaker 03: But the point for our purposes is, [00:22:04] Speaker 03: solution-based defects does capture the user beneficiaries, and that's enough. [00:22:09] Speaker 03: And it's particularly enough in the context of 401,000. [00:22:14] Speaker 02: Excuse me. [00:22:16] Speaker 02: I think we understand that part of your argument. [00:22:17] Speaker 02: Let me make sure my colleagues don't have further questions for you at this point, because you mentioned, Ms. [00:22:21] Speaker 02: Rylander, why don't we give her a chance to make her argument, and we'll give you a bit of time for rebuttal, unless my colleagues have further questions for you at this time. [00:22:30] Speaker 02: Okay, thank you, Mr. Longstreet. [00:22:32] Speaker 02: Let's hear from fur council, Ms. [00:22:34] Speaker 02: Rylender. [00:22:36] Speaker 04: Good morning. [00:22:37] Speaker 04: May it please the court, Elizabeth Rylender, for the commission. [00:22:40] Speaker 04: To briefly recap what we've heard already, it is correct to say that when the commission grants re-hearing, what it's trying to do is get to the correct answer. [00:22:52] Speaker 04: And in this case, the two very thorough orders the commission issued in 2018 and 2019 go to extensive effort to grapple with the record [00:23:01] Speaker 04: to look at what the commission had not discussed in 2016 and to arrive at the correct answer that the proper way to measure benefits of a stability project is not to follow the flow of electrons to whatever terminus PJM as the system operator has chosen for the new project. [00:23:22] Speaker 05: Well, can I ask you, the commission says clearly [00:23:28] Speaker 05: in paragraph 66 and 67 of the 2018 order that disagrees with these other arguments, it's taking the position. [00:23:39] Speaker 05: Where did it respond to the concerns addressed about order 1000? [00:23:49] Speaker 05: That the benefits of knowing what the rules of the road are in advance [00:23:58] Speaker 05: captured so many important things. [00:24:00] Speaker 05: And I'm looking at what the commission has said specifically. [00:24:07] Speaker 05: Here, I'm looking at the 2018 order, starting around paragraph 64 and going through, let's see, 69. [00:24:22] Speaker 05: But I don't see that it just [00:24:26] Speaker 05: Until 74, it says, commenters raise concerns that the solution-based method may encourage selection of projects based on voltage or cost rather than efficiency or cost effectiveness as directed by order 1000. [00:24:47] Speaker 05: And the commission, this is paragraph 74, simply says there is no evidence here. [00:24:53] Speaker 05: Is that his complete response to the concern about Order 1000? [00:24:58] Speaker 04: I'm sorry, Your Honor. [00:24:59] Speaker 04: I'm having trouble finding the place in the order that you're looking. [00:25:02] Speaker 04: Paragraph JA544. [00:25:07] Speaker 04: I'm sorry. [00:25:08] Speaker 05: Paragraph 74. [00:25:28] Speaker 04: Yep, the commission did, with regard to order 1000, the commission did not make a finding that the selection of project was done incorrectly. [00:25:44] Speaker 04: And what they're saying here is there's no evidence to support the contention that the project selection was incorrect. [00:25:53] Speaker 04: So it's hard to know exactly what the commission was thinking there. [00:25:56] Speaker 04: There is evidence in the record that PJM had 26 options to choose from in selecting this project. [00:26:03] Speaker 04: And as quoted in a later order, that PJM chose what it viewed as the least risk and a relatively cost-effective option [00:26:14] Speaker 04: for solving the stability problem. [00:26:17] Speaker 04: What order 1000 requires is not that PJM select the least expensive or the easiest project to build, but something that will improve efficiency and will have benefits for the entire region. [00:26:38] Speaker 05: All right, and I see it also, I even highlighted it in paragraph 72, it talks about order 1000, but does it ever address the fact not that it is suggesting that it's change of method in 2018 isn't correct in its view? [00:27:05] Speaker 05: but that it has no concern that this change will adversely affect those affected contrary to the predictability issue, not issue, but principle on which Order 1000 is founded. [00:27:27] Speaker 05: I know in your brief, you say Order 1000 leaves open the method, just has some principles. [00:27:33] Speaker 05: All right, but I didn't see anything in the commission's decision itself about that. [00:27:38] Speaker 04: I just wanted to be clear because you're probably more familiar with this than I. The commission speaks broadly in the 2018 order about the importance of matching costs to benefits and certainly order 1000's first regional cost allocation principle. [00:28:00] Speaker 04: is that costs and benefits be allocated in a way that is roughly commensurate with one another. [00:28:07] Speaker 04: If I'm understanding your honor's concern correctly, it's that the commission arrived at this finding following the selection of project and following what was intended to be an ex ante allocation of costs. [00:28:20] Speaker 05: And the submission of the proposed tariff. [00:28:23] Speaker 05: So the entities have proceeded on the basis of the 2016 order. [00:28:29] Speaker 05: Now the commission is reconsidering and saying, you know, we have to change our mind. [00:28:34] Speaker 05: Are the concerns that are addressed in my question matters that would come up later in commission proceedings, namely when it reconsiders the submission. [00:28:51] Speaker 05: in the whole idea was I get to know what the rules of the road are in advance. [00:28:59] Speaker 05: So I proceed on that basis. [00:29:01] Speaker 05: And I submit this proposal to the commission on tariffs, et cetera. [00:29:06] Speaker 05: Then the commission says, we have decided for excellent reasons that we want to adopt a different framework. [00:29:16] Speaker 05: And that framework makes much more sense. [00:29:18] Speaker 05: And it's consistent with a statutory directive [00:29:23] Speaker 05: And is this going to apply? [00:29:28] Speaker 05: Am I just caught? [00:29:37] Speaker 05: That's what I want to understand. [00:29:38] Speaker 05: Do I get some relief further down the road? [00:29:43] Speaker 01: Let me, can I add on to that? [00:29:44] Speaker 01: I don't think there's any reliance interests that they can properly argue here. [00:29:48] Speaker 01: One rule. [00:29:49] Speaker 05: I was asking counsel for FERC to tell me that. [00:29:53] Speaker 01: Yeah, no, I was just adding my question to yours, Judy, so she would answer it within the frame, but I'll let her answer yours first. [00:30:03] Speaker 01: Go ahead. [00:30:04] Speaker 05: Because this was raised by, you know, before the commission. [00:30:11] Speaker 05: And I just didn't see it ever answered it. [00:30:12] Speaker 05: That's all. [00:30:16] Speaker 04: So again, your honor, the commission's overarching responsibility is to ensure that rates are just and reasonable. [00:30:22] Speaker 04: And both these orders and order 1000 share that goal. [00:30:27] Speaker 04: The departure from the rate approved in the 1000 compliance filing is certainly not what the parties were necessarily expecting. [00:30:36] Speaker 04: But we're still dealing with the same project. [00:30:39] Speaker 04: And in addition to the complaint orders on review here, there was a parallel finding of there was a parallel case under Federal Power Act Section 205 that allocated the dollars specifically. [00:30:51] Speaker 04: So while while the cost allocation in an ex ante was spelled out ex ante in terms of this is what you can reasonably expect. [00:31:02] Speaker 04: in terms of boiling it down to dollars, that requires a separate commission approval on a separate track. [00:31:09] Speaker 04: And both those proceedings leave room as here for the commission to look at the overall picture and say, you know, this doesn't work. [00:31:19] Speaker 04: And which is also consistent with the statute and also furthering the goal of just unreasonable rates. [00:31:25] Speaker 04: This is not, I would say this is not necessarily an optimal way [00:31:32] Speaker 04: to establish expectations and to allocate costs under the broad theories established in order 1,000 and implemented in the compliance filings, but in the service of the statute, that's what was required here. [00:31:50] Speaker 04: And Judge, do you want us to follow up? [00:31:51] Speaker 04: Yes, you're asking about reliance. [00:31:54] Speaker 01: Yeah, make sure I understand. [00:31:58] Speaker 01: My sense is no one can reasonably claim, but wait, I had a reliance interest and I did something I wouldn't have done. [00:32:04] Speaker 01: had I known we would end up in this place. [00:32:07] Speaker 01: That's not what I'm understanding. [00:32:08] Speaker 01: My understanding is that the commission has simply said they made the finding here that opposing council has been arguing about that the benefits were not commensurate with costs, which is order 1000. [00:32:23] Speaker 01: And that's the foundation for the new order. [00:32:30] Speaker 01: And that answers any concern [00:32:32] Speaker 01: that opposing counsel is raised, if the commission is correct. [00:32:37] Speaker 01: And they are correct. [00:32:38] Speaker 01: They are saying, in this frame, we missed it. [00:32:41] Speaker 01: It's not that there are no benefits [00:32:44] Speaker 01: there are benefits, and they may even be more than a little bit, but Order 1000 says benefits have to be commensurate with costs. [00:32:53] Speaker 01: And they fixed it. [00:32:53] Speaker 01: They said in this framed situation, we were wrong in suggesting that. [00:32:59] Speaker 01: And I want to make sure I'm correct. [00:33:00] Speaker 01: I don't see any viable reliance interest where anyone would say, oh, wait, you can't do that because [00:33:07] Speaker 01: I did X, and I wouldn't have done X. The project's a good project. [00:33:11] Speaker 01: It was going to go ahead. [00:33:12] Speaker 01: And then you have to figure out how you're going to allocate the cost. [00:33:15] Speaker 01: Am I understanding it correctly? [00:33:17] Speaker 04: Yes, Your Honor, you are. [00:33:19] Speaker 04: And I would add that it is. [00:33:21] Speaker 04: I view it as consistent with Order 1000 to get that cost allocation right, even if that has to be done as it was here, which was in a way that was somewhat different from what the parties would have thought [00:33:35] Speaker 04: at the time the project was chosen. [00:33:38] Speaker 04: I would also add, again, and this is clear in the record, PJM, which is the independent transmission operator, chose the project. [00:33:47] Speaker 04: It is not that the parties are choosing it and then allocating the costs among themselves. [00:33:54] Speaker 04: This was done independently and [00:33:57] Speaker 04: And without PJM has does not have financial interest in that's what I that's part of what I was trying to ask on the reliance claim. [00:34:04] Speaker 01: It's a PJM makes the determination and we need this project. [00:34:07] Speaker 01: Then you then you go through the fight over benefits and costs. [00:34:14] Speaker 01: Yes. [00:34:15] Speaker 01: Okay. [00:34:16] Speaker 01: I understand. [00:34:17] Speaker 01: Thank you. [00:34:23] Speaker 04: Okay. [00:34:23] Speaker 04: Okay. [00:34:24] Speaker 04: And to finish following up on Mr. Longfus' argument, I'd like to clarify that FERC did not just swap in a new rate in these 2018 and 2019 rehearing orders. [00:34:36] Speaker 04: The 2018 order found that the initial cost allocation was not effective in a stability setting and that further proceedings were necessary to identify a replacement rate. [00:34:46] Speaker 04: And those further proceedings were held in the form of a paper hearing. [00:34:50] Speaker 04: And as the court has already observed, [00:34:52] Speaker 04: The outcome of the paper hearing and the resolution of the rate issue are not at are not an issue in this case because the petitioners didn't secret hearing of them before the Commission. [00:35:01] Speaker 04: All of the court needs to look at here is the Commission's decision that because of the definition of benefits that was used in order 1000 compliance and used in this case, the original flow-based method was not appropriate to a stability project. [00:35:26] Speaker 04: I'm happy to answer further questions if the court has more. [00:35:29] Speaker 02: I don't, I don't. [00:35:30] Speaker 02: Sure. [00:35:31] Speaker 02: Okay, thank you. [00:35:33] Speaker 02: Miss rounder. [00:35:34] Speaker 02: Mr Longstreet, you know, you have three minutes for your bottle. [00:35:39] Speaker 03: Thank you very much, Your Honors. [00:35:41] Speaker 03: And I'd like to go to the points about Order 1000, because I think that really is important to where we are here. [00:35:51] Speaker 03: Again, Order 1000 was designed to set an ex ante rule that people would, that was easily administrable, easily unknown to the parties, and that would avoid litigation over cost allocation by people who were unhappy with the decision. [00:36:09] Speaker 03: And so to the extent there's a reliance interest, I think much of what Judge Edwards says is correct. [00:36:15] Speaker 03: But the reliance here was, I think as Ms. [00:36:18] Speaker 03: Rylender conceded, we knew we were going to have this rule in place. [00:36:22] Speaker 03: We knew this rule was going to apply and basically even out over projects based on the fact that we could tell who the users were and that's how it would be applied. [00:36:34] Speaker 03: And the thing that Fert never addressed, the arguments that Fert never addressed were how this is consistent with that ex-ante portion of Order 1000. [00:36:47] Speaker 03: Yes, it is true that under Order 1000, the costs have to be commensurate with the benefits. [00:36:52] Speaker 03: But that gets back to the point that I was making before, which is there's no question there are benefits going to Delmar. [00:37:00] Speaker 03: And they could, as Judge Edwards noted, even be more than the sum benefits that they've been trying to minimize it as being. [00:37:06] Speaker 03: If, in fact, there are substantial benefits, then the solution-based defects does meet the commensurate benefit test. [00:37:14] Speaker 03: And first finding to the contrary, because it did not consider that fact and did not consider its prior finding is just not supported. [00:37:23] Speaker 03: Yes, they made the finding, but it was not proper for them to make that finding without considering and specifically addressing their prior finding that there were substantial benefits. [00:37:34] Speaker 03: And the reason that's important is because [00:37:36] Speaker 03: if in fact the solution-based defects is close enough here, we as the transmission owners had the right to rely on the fact that that was the rule and that was going to be applied in all cases. [00:37:49] Speaker 03: And we were not going to be faced with a decision where somebody unhappy with that decision after the fact was going to be able to come in and overturn the decision. [00:37:59] Speaker 03: In other words, if you have a rule that's going to [00:38:02] Speaker 03: you know, work out over time and these are benefits over time. [00:38:06] Speaker 03: You know, the other advantage is the whole idea also of ex-ante was, and this was in the compliance order, we're not looking at the violation. [00:38:14] Speaker 03: We're not looking at, you know, this is a stability violation and this is the reason that we're putting in the project. [00:38:21] Speaker 03: We're looking at who is using the project and who is using the project over time. [00:38:25] Speaker 03: And over time that will work out and the transmission owners recognize that where it will not work out is if the commission comes in after the fact and says, well, in this particular case, we've got one we might like a little better. [00:38:40] Speaker 03: We're not expressly finding that this isn't that the first one wasn't. [00:38:45] Speaker 03: permissible, but we're going to change it. [00:38:47] Speaker 03: That upsets the whole system and it upsets the whole idea of an ex ante system. [00:38:51] Speaker 03: And that's the one thing that I think is Judge Rogers' note. [00:38:54] Speaker 03: FERC never dealt with that argument. [00:38:56] Speaker 03: FERC never explained why its ruling wasn't going to upset this whole ex ante system that they put in place. [00:39:03] Speaker 03: Thank you. [00:39:05] Speaker 02: Thank you, counsel. [00:39:05] Speaker 02: Thank you to both counsel. [00:39:06] Speaker 02: We'll take this case under submission.