[00:00:00] Speaker 02: Case number 20-1295 et al. [00:00:02] Speaker 02: Excel Energy Services Inc. [00:00:04] Speaker 04: Petitioner versus Federal Energy Regulatory Commission. [00:00:08] Speaker 04: Mr. Killian for the petitioner, Mr. Fish for the respondent. [00:00:12] Speaker 01: Mr. Killian, good morning. [00:00:14] Speaker 00: Yes, good morning, your honor, and may it please the court. [00:00:17] Speaker 00: Under section 205 of the Federal Power Act, public utilities have to treat all their customers equally. [00:00:23] Speaker 00: And at this point in the case, I think there's no dispute that under section 205, the replacement procedures at issue here treat all customers equally. [00:00:31] Speaker 00: FERC has conceded that the procedures do not discriminate among existing generators already connected to PSCO's grid. [00:00:38] Speaker 00: Every existing generator is allowed to use the procedures, and PSCO would have no discretion to refuse them that right. [00:00:44] Speaker 00: The procedures also do not discriminate against new generators who want to connect to the grid. [00:00:49] Speaker 00: As FERC found in this case, and frankly in every other, the new and existing generators are simply not similarly situated for purposes of interconnection. [00:00:58] Speaker 00: And when entities are not similarly situated, there can be no discrimination as a matter of law. [00:01:03] Speaker 00: And so the replacement procedures satisfy section 205. [00:01:07] Speaker 02: They're also highly- No, hang on. [00:01:11] Speaker 02: The Federal Power Act prohibits [00:01:13] Speaker 02: Undue preference, undue preferences, not just discrimination in the pure form that you're talking about it between similarly situated entities, but undue preferences. [00:01:25] Speaker 02: And the commission's order here talked, abused that phrase, undue preference. [00:01:29] Speaker 02: And when it talked about discrimination, it said, in favor of discrimination, in favor of [00:01:36] Speaker 02: P.S. [00:01:37] Speaker 02: Colorado's own generators. [00:01:39] Speaker 02: So Willie was using discrimination. [00:01:41] Speaker 02: There was another form of work for undue preference for P.S. [00:01:45] Speaker 02: Colorado's own generators. [00:01:48] Speaker 02: Now, if that's right, then that's a form of behavior that is in terms prohibited by the Power Act. [00:02:01] Speaker 02: Is it not? [00:02:02] Speaker 00: I don't think so, Your Honor, for a few reasons. [00:02:05] Speaker 00: FERC has used, in this case and in other cases, the concept of preferential and discriminatory treatment as basically the same thing. [00:02:13] Speaker 00: Section 205 and 206 of the Federal Power Act are interpreted as empowering materia. [00:02:18] Speaker 00: And whether something is a preference or a discrimination or an advantage, [00:02:22] Speaker 00: In essence, the question is, is there someone who is being advantaged over someone else similarly situated who is being disadvantaged? [00:02:31] Speaker 00: And so I think the analysis is essentially the same. [00:02:34] Speaker 02: No, but the concept is, I think it may change with the baseline for whom [00:02:40] Speaker 02: the comparators are. [00:02:43] Speaker 02: If you're talking, imagine, I know this isn't your case, but imagine you have, excuse me, a non-independent generator like he has in Colorado, and it owns 99% of the existing generation capacity. [00:03:00] Speaker 02: There's one other [00:03:04] Speaker 02: non-affiliated generator. [00:03:07] Speaker 02: And it proposes a scheme that says, we're going to make things so much easier for existing generators to hang on to the places that they already have in the interconnected grid. [00:03:23] Speaker 02: They're going to get to hang on to their connection points by making it super easy for them to modify and update. [00:03:30] Speaker 02: Now, that clearly, how would that in that 99% or 99 out of 100 generators, to the extent that allowed them to hang on cement their position for the foreseeable future on that grid that necessarily shuts out new generation coming in, [00:03:51] Speaker 02: In a way that might not happen, so I think the last generators had to compete on even playing field with new generators that would that be. [00:04:00] Speaker 02: i'm not even going to use the adjective and do, but would that be a preference with that scheme prefer existing generation 99% of which is owned by the operator. [00:04:11] Speaker 00: No, I don't. [00:04:12] Speaker 00: I don't believe so, Your Honor. [00:04:13] Speaker 00: And the reason I resist the conclusion is that I don't think the last step of the analysis is right, that this even-handed procedure, which would apply even to that one non-affiliated generator the exact same way that it applies to the 99 affiliated generators in your hypothetical, [00:04:30] Speaker 00: would be a preference unless these new generators were somehow similarly situated. [00:04:35] Speaker 00: The point of interconnection, as FERC identified in order number 2003, the point of interconnection Q, I should say, was to provide a neutral and fair way to get new generators onto the grid. [00:04:47] Speaker 00: As FERC recognized in the Mid-Continent case, what we're dealing with here is essentially an oversight in the pro forma tariff. [00:04:54] Speaker 00: that at the time no one anticipated, no one was thinking about the fact that you would have replacements one day in the future, replacements that aren't really a modification in the sense that the proforma tariff uses that concept, and replacements that aren't a new interconnection request either because the entities are already interconnected. [00:05:13] Speaker 00: And so section 205, which is the only provision that's really at issue here. [00:05:17] Speaker 02: Just to be clear, your view is FERC does not have the power to say that a self-interested operator [00:05:24] Speaker 02: wants to set up this sort of rule change, this approach, this analytical change in a way that locks in, locks in its own generators at the expense of opportunities even for new generators to connect at all. [00:05:42] Speaker 02: FERCES can do nothing about that. [00:05:44] Speaker 00: Again, I wanna just push back on that last, that there's no opportunity for new generators to connect. [00:05:50] Speaker 00: They still have the exact same opportunity that Order 2003 guarantees them. [00:05:54] Speaker 02: They don't have the exact same opportunity they would have if those 99 owned, privately owned, operator owned, shall we say, generators had to compete for, as if they were competing for a new connection, had to compete with them for connections. [00:06:13] Speaker 00: Well, I think, well, number one, I don't think there's any evidence in the record that that's actually what's going on here, or even in the case of the 99 in your honor's hypothetical. [00:06:23] Speaker 00: The interconnection service is just a connection between an existing generator and the grid. [00:06:28] Speaker 00: If a new generator wants to provide power to the grid, then it just needs to be interconnected. [00:06:34] Speaker 00: It's not necessarily that they're going to reuse someone else's interconnection. [00:06:37] Speaker 00: And if the grid needs more power, the grid will obtain more power. [00:06:41] Speaker 02: It's easier if you reuse, then it's easier. [00:06:46] Speaker 02: You're not going to have to build new structure for the grid. [00:06:50] Speaker 02: You're not going to have to worry about overload on the grid. [00:06:54] Speaker 02: So it is different. [00:06:55] Speaker 00: It is different and it's those benefits in Europe to rate payers who don't have to pay for the unnecessary reconnections and building a brand new interconnection facilities in different places on the grid, which is why rate payers in states are highly supportive of these procedures where they've been adopted throughout the United States. [00:07:15] Speaker 02: This exact issue- If Ferck said in the 99 case, if Ferck said that design, the design of that scheme, design of that proposal, [00:07:26] Speaker 02: undermines Order 2003's goal of facilitating market entry. [00:07:35] Speaker 02: And it does so in the hands of the very entities that Order 2003 was most concerned about engaging in self-preference. [00:07:46] Speaker 02: And so if they said that in order, so because it undermines Order 2003's goals in those two respects, [00:07:53] Speaker 02: for striking it down. [00:07:55] Speaker 02: I'm not asking whether that's what they said in this order. [00:07:57] Speaker 02: I'm just asking in my hypothetical, would that be sufficient? [00:08:01] Speaker 00: I think that would put FERC in the position of reaching a result that's inconsistent with the one it reached in the MISO decision and every other one, because the nature of this procedure, whether the operator is affiliated. [00:08:13] Speaker 02: I just want to ask whether, let's pretend it's the first decision they make on this subject. [00:08:19] Speaker 02: They put aside inconsistent with precedent. [00:08:22] Speaker 02: first time this idea comes up, it's not MISA, but it comes up in my hypothetical company acts. [00:08:28] Speaker 00: Understand. [00:08:30] Speaker 02: Would that be a sufficient basis for rejecting it? [00:08:33] Speaker 00: And our first order argument is that would be insufficient because it is still a neutral and even-handed procedure. [00:08:39] Speaker 00: The point of Section 205 when it was adopted in the 1930s and when it was amended in the 1970s was to regulate integrated utilities and require them not to adopt neutral procedures. [00:08:52] Speaker 00: And the procedure would be facially neutral. [00:08:55] Speaker 00: There is no opportunity to discriminate in the application of the procedure. [00:08:59] Speaker 00: And as for found in all these other cases, the entities who are claiming to be affected by it negatively affected by it are just not similarly situated for purposes of the procedure. [00:09:08] Speaker 00: And so our first order argument judgment is that no, that would be permissible construction of the statute. [00:09:14] Speaker 00: But a second order argument is that it would put that determination squarely inconsistent with the one in MISO. [00:09:21] Speaker 00: Because by the nature of this generator replacement procedure, yes, it is going to be used by existing generators. [00:09:27] Speaker 00: That's what it means to, you have to be an existing generator in order to be in the position to replace in the first instance. [00:09:33] Speaker 00: And so on the MISO grid, which is orders of magnitude larger than PSCO's grid, every existing generator there is going to get the same [00:09:41] Speaker 00: advantage and putting air quotes around that. [00:09:44] Speaker 00: Because that's what it means to be an existing generator. [00:09:47] Speaker 04: And so first, yes, is part of your argument that your approach would in some way help new generators by clearing out the queue. [00:10:05] Speaker 00: Yes, that is part of the argument for found that in the mid can you explain? [00:10:09] Speaker 04: I don't understand exactly how that would work. [00:10:11] Speaker 00: Yeah, so under the current pro forma tariff, because of replacement request is treated like a new interconnection request, new interconnection requests have to go into the queue and replacement requests have to go into the queue and it takes a long time to process these requests through the queue. [00:10:30] Speaker 00: So by removing the generator replacement requests from the queue, the queue then becomes focused only on new generators. [00:10:39] Speaker 00: And so any new generator doesn't have to wait behind a replacement request in order to get through the queue. [00:10:45] Speaker 04: I'm just going to make up numbers, but would it work something like this? [00:10:48] Speaker 04: Imagine the queue has three generators are in it. [00:10:53] Speaker 04: New generator is first existing as second, and then new generator is third. [00:10:59] Speaker 04: And. [00:11:00] Speaker 04: each of those takes a year to process. [00:11:04] Speaker 04: And if you take that second one out of the queue, then the third in the queue, new generator number two gets processed after one year rather than after two years. [00:11:18] Speaker 04: Following your, okay, I then ask for if they think that's actually correct. [00:11:23] Speaker 00: Thanks for the clarification. [00:11:25] Speaker 00: Absolutely, that's our understanding, which is why this isn't a totally one-sided [00:11:30] Speaker 00: benefit. [00:11:32] Speaker 02: Is that right? [00:11:32] Speaker 02: What happens to the time? [00:11:33] Speaker 02: It still takes time to process the existing generators, correct? [00:11:37] Speaker 00: The existing, in grids where the replacement procedure is put in place, they're handled like a modification request, which means they're not done through the queue. [00:11:46] Speaker 00: They're done. [00:11:47] Speaker 02: Okay. [00:11:48] Speaker 02: But the resources are still being extended and diverted to that process. [00:11:53] Speaker 02: It can't be quite as clean as was suggested. [00:11:57] Speaker 02: You have to spend time doing paperwork and processing and making decisions about it, right? [00:12:01] Speaker 00: Yeah, but I think the fundamental importance, Judge Malat, is that any interconnection queue, you have to study them one at a time, because once then gets connected, the first one is connected to the grid, you have a new grid. [00:12:12] Speaker 00: And so now you analyze this, whoever is now at the front of the queue, not for what the impact will be on this newly constituted grid. [00:12:20] Speaker 00: And then that one gets connected to the grid. [00:12:22] Speaker 00: Whoever's behind it has a brand new grid. [00:12:24] Speaker 02: And I thought sometimes they could do them in groups. [00:12:26] Speaker 02: Is that not right? [00:12:27] Speaker 00: I think that may be possible, but my understanding is they are typically seriatim. [00:12:31] Speaker 00: Whereas the modification requests or the replacement request is simply a very abbreviated analysis. [00:12:37] Speaker 00: Are you changing your interconnection? [00:12:38] Speaker 00: Is the load going to change? [00:12:40] Speaker 00: And to Judge Walker's question, if you don't satisfy that requirement, if your replacement will in fact have a material impact on the grid, then you got to get back in the queue just like everybody else. [00:12:49] Speaker 00: So the grid then becomes focused [00:12:51] Speaker 00: only on generators who are going to have an effect that changes the grid in some way, simply maintaining the status quo, which is done through modification requests right now, and then would also be done through replacement requests are handled in this abbreviated fashion. [00:13:08] Speaker 02: In the queue as it exists, if [00:13:11] Speaker 02: If what happens is you have someone who's already in the grid and they retire their generator, they just retire it, not replacing it or modifying it, they just retire it, and then you take up the person who's next in the line of the queue, will their process go faster? [00:13:31] Speaker 02: Because let's assume that they're not going to generate more power onto the grid than the retired one did. [00:13:39] Speaker 02: Would that not facilitate their process? [00:13:42] Speaker 00: I would say it's possible, but it's not guaranteed because each of the interconnections is geographically based as well. [00:13:47] Speaker 00: And so if a generator connected in the Northwest corner retires and the next one in the queue wants to be in the Southeast corner of the grid, there may be no benefit, if you want to call it, no way to abbreviate the analysis. [00:14:02] Speaker 00: The place on the grid where the new load is introduced is not the most important part, but a very important part of the analysis. [00:14:11] Speaker 00: which is another reason why these replacement requests aren't necessarily gonna benefit any new generators. [00:14:21] Speaker 00: But I guess I just wanna emphasize this point, I've run over my time and before I sit down, I'd like to emphasize this point. [00:14:28] Speaker 00: I think FERC's construction of section 205 here, which essentially says that our affiliates participation in a neutral and generally applicable benefit [00:14:38] Speaker 00: that renders the procedures unlawful, that turns Section 205 on its head. [00:14:42] Speaker 00: Burke is saying that this is discriminatory or preferential because everyone can take advantage of it. [00:14:48] Speaker 00: And that is absurd. [00:14:49] Speaker 00: We don't have to discriminate against our affiliates. [00:14:52] Speaker 00: We don't have to carve our affiliates out of neutral procedures in order to satisfy a non-discrimination duty. [00:14:58] Speaker 00: And that is essentially what FERC has held here and what FERC advances in the court now, that the only way for us to not discriminate is to discriminate. [00:15:06] Speaker 00: And that's illogical. [00:15:07] Speaker 00: It's the essential reasoning beneath the order here, which is why this is the only order where FERC has rejected one of these procedures. [00:15:16] Speaker 02: For that reason- It's also the only application that involves administration by a non-independent. [00:15:23] Speaker 02: self-interested. [00:15:24] Speaker 00: We were the first, not the only. [00:15:27] Speaker 02: Well, Dominion has an independent entity doing its administration. [00:15:30] Speaker 02: Is there another one that has, it's like you, it's not independent and it doesn't have an independent entity doing the administration that they have granted? [00:15:38] Speaker 00: Not that I'm aware of, Judge Mallette. [00:15:40] Speaker 02: No, you're just, you're different. [00:15:41] Speaker 02: You're not similarly situated to the others. [00:15:44] Speaker 00: I strongly resist that conclusion, Your Honor, because the difference between being affiliated and unaffiliated doesn't affect whether or not the practice is discriminatory. [00:15:53] Speaker 00: If the practice is neutral on one of the largest grids in the United States, it's the fact that we are affiliated with 60% of the existing generators does not turn it into a discriminatory practice on our small grid in Colorado. [00:16:06] Speaker 00: And so because it doesn't violate the statute and because the procedure generates the exact same very large systemic benefits on Piesco's grid that it generates on MISO's grid, FERC cannot conclude that this is somehow not consistent with or superior to the pro forma tariff. [00:16:22] Speaker 00: The conclusion below for that reason is arbitrary, capricious, and contrary to law. [00:16:28] Speaker 01: Okay, we'll give you a couple minutes in reply. [00:16:30] Speaker 01: Mr. Fish. [00:16:30] Speaker 00: Thank you. [00:16:33] Speaker 03: Good morning, Your Honors, and may please the court, Jared Fish for the Commission. [00:16:37] Speaker 03: Mr. Killian just said that everyone can take advantage of their streamlined review policy. [00:16:42] Speaker 03: The only way he can say that is if he restricts the universe we're considering to existing generation and forgets about its Colorado's policies effect on new generation. [00:16:53] Speaker 03: That rests on an erroneous premise that this entire case turns on, and that erroneous premise [00:16:59] Speaker 03: is that new resources seeking to interconnect to PS Colorado's grid are not similarly situated to existing resources that seek to replace their generating facilities. [00:17:09] Speaker 04: Mr. Fish, can you pick up where Mr. Killian left off with regard to the independent entity that could be ordered to oversee the replacement of existing generation? [00:17:24] Speaker 04: It's just unclear to me how that [00:17:27] Speaker 04: how that helps new generators at all. [00:17:30] Speaker 04: Because in Dominion, the independent entity is there, I suppose, to make sure that Dominion doesn't discriminate between its own existing generators and other companies' existing generators. [00:17:48] Speaker 04: But that independent entity isn't involved at all, as I understand it. [00:17:52] Speaker 04: in the process for new generators. [00:17:55] Speaker 04: And in this case, your concern was that the discrimination would happen against new generators. [00:18:04] Speaker 04: So how would an independent entity help that at all? [00:18:07] Speaker 03: Your honor, this case is the only one on review. [00:18:11] Speaker 03: So I can't really speak to what the commission did in a later order in Dominion. [00:18:16] Speaker 04: Let's just make it a hypothetical. [00:18:18] Speaker 03: Well, the commission could find that in the, if you have an independent entity administering a streamlined interconnection review process, then it could weed out a discrimination in the facilitation of that process. [00:18:32] Speaker 03: But we rested this- Wait, wait. [00:18:35] Speaker 04: But the independent entity that is overseeing the process for existing generators would do nothing to protect new generators, correct? [00:18:47] Speaker 03: That may be correct, your honor, but we did not rest this decision on that principle. [00:18:53] Speaker 04: So I thought this decision rested on your concern that there would be discrimination against new generators. [00:19:01] Speaker 03: Exactly. [00:19:02] Speaker 03: That is correct, your honor. [00:19:03] Speaker 04: And the independent entity does nothing to prevent discrimination against new generators, correct? [00:19:10] Speaker 03: I believe that's probably true. [00:19:12] Speaker 03: I'm not going to prejudice any challenge to the dominion order which came after this case. [00:19:16] Speaker 03: But the court, even in the Altamont decision that PS Colorado cites, does not stand for the proposition that this court will reach out beyond the record here to another case, a subsequent case, where we departed from our policy and the decision on review to undermine an otherwise lawful decision on review. [00:19:34] Speaker 03: And this decision is lawful because we reasonably construed our order, order 2003, which says that for a non-independent [00:19:44] Speaker 03: system operator to depart from the default interconnection review process, it has to show that its proposal does as good as or better than the default in not favoring its own generation. [00:19:57] Speaker 04: Let me Mr. Fish share an analogy that's been on my mind. [00:20:01] Speaker 04: It is admittedly a very imprecise analogy. [00:20:04] Speaker 04: So I say it with some caution, but I'm trying to think in my head something to compare this to. [00:20:13] Speaker 04: The concern here is that, as you said a moment ago, that the entity that Excel may discriminate against new generators in an unfair way. [00:20:29] Speaker 04: So imagine that there's a principle of law, a Supreme Court precedent that says in the context of jury selection, old jurors and young jurors [00:20:39] Speaker 04: are not similarly situated. [00:20:42] Speaker 04: It's fine to strike old jurors because they're old. [00:20:47] Speaker 04: It's fine to strike new jurors because they're young jurors because they're young. [00:20:50] Speaker 04: I'm not saying that this would be a good precedent at all, but I'm just saying, go with me here. [00:20:54] Speaker 04: Imagine that that's the precedent. [00:20:56] Speaker 04: The precedent is young jurors, old jurors not similarly situated. [00:20:59] Speaker 04: And now there's a Batson challenge because an African-American juror struck [00:21:05] Speaker 04: The prosecution says, well, we struck that juror because of the jurors age. [00:21:10] Speaker 04: And the defendant comes back and says, well, that's pretext. [00:21:16] Speaker 04: I can find another juror, a different race, who is exactly the same who you didn't strike. [00:21:23] Speaker 04: And the only difference is, other than their race, their age. [00:21:27] Speaker 04: Now in that situation, it seems like the district judge would have to say, you're not comparing [00:21:34] Speaker 04: two similarly situated jurors who are different only because of their race. [00:21:38] Speaker 04: You're comparing jurors who are not similarly situated. [00:21:41] Speaker 04: One's old, one's young, one's old. [00:21:44] Speaker 04: Now, tell me why that analogy is not like this case. [00:21:48] Speaker 03: It's not like this case, Your Honor, because just because two, so there you're talking about under one scenario, whether two distinct sets of entities, persons are similarly situated or not. [00:22:04] Speaker 03: Here, the commission, where the commission found that new and existing resources are not similarly situated was in a totally different context. [00:22:12] Speaker 03: It was in a different case, considering a different set of issues where you had a an independent system operator mid continent. [00:22:21] Speaker 03: And there, at paragraph 63 of the mid-continent order, we said, in this circumstance, new and existing resources are not similarly situated. [00:22:30] Speaker 03: Why? [00:22:30] Speaker 03: Because the issue there was whether, for practical purposes, it made sense to streamline the interconnection reviews for existing generation. [00:22:38] Speaker 03: And we said, yes, it does. [00:22:40] Speaker 03: In that way, new and existing are different, because existing resources already went through the interconnection review process once before. [00:22:47] Speaker 03: But here, the issue is different. [00:22:49] Speaker 03: Here the issue is whether PS Colorado's proposal favors its own generation of which it owns 60% on its grid under order 2003. [00:23:01] Speaker 04: I understand how there are some factual differences here. [00:23:05] Speaker 04: Tell me how you can still win if I come to the conclusion that the MISO case establishes a principle [00:23:18] Speaker 04: that new generators and existing generators are not similarly situated. [00:23:23] Speaker 04: I know you don't think it stands for that principle as broadly as I just stated it, and you might persuade me of that through your briefs and through what you say, but assume just for the sake of this question that MISO stands for the principle that existing generators and new generators are not similarly situated. [00:23:40] Speaker 04: Is there still a way you can win this case? [00:23:41] Speaker 03: Absolutely, Your Honor, because here PS Colorado as a non-independent system operator is not similarly situated to MISO or Mid-Continent, which is an independent system operator. [00:23:53] Speaker 03: And that makes all the difference because Order 2003 is all about not allowing transmission providers to benefit their own generation. [00:24:02] Speaker 03: Well, that immediately distinguishes PS Colorado from Mid-Continent because Mid-Continent owns no generation. [00:24:08] Speaker 03: So there is no specter [00:24:09] Speaker 03: of mid-continent favoring its own resources, whereas here there is. [00:24:14] Speaker 03: And by the way, it's petitioner's burden under this court's precedent and transmission access policy study group. [00:24:21] Speaker 03: It's petitioner's burden to show that there is no reason for the difference in treatment. [00:24:25] Speaker 03: I just gave one that goes to the core of order 2003. [00:24:29] Speaker 03: And so once we accept that PS Colorado as a non-independent system operator is not similarly situated to mid-continent, which is an independent system operator, then under this court's Baltimore gas precedent, we don't need to explain a different outcome. [00:24:43] Speaker 03: And so the mid-continent case drops out of the equation. [00:24:46] Speaker 03: And the only question is whether for, in this case, we reasonably interpreted it our own order 2003, [00:24:53] Speaker 03: which says that a deviation from the default procedure must do as good as or better than the default and not allowing a transmission provider to favor it. [00:25:03] Speaker 04: And from whose perspective? [00:25:05] Speaker 04: And this is not a hostile question. [00:25:08] Speaker 04: I'm just trying to figure out how the standard works. [00:25:10] Speaker 04: When you say consistent with or superior to the default procedures, superior to the default procedures from the perspective of who? [00:25:20] Speaker 03: the commission in implementing the goals of Order 2003. [00:25:23] Speaker 03: And that is, as Judge Millett was stating, that was to ensure that there was an open marketplace, a competitive marketplace, where new resources are in the same playing field as existing, or new resources are in the same playing field as a transmission provider's own resources. [00:25:39] Speaker 03: And by the way, what PS Colorado is arguing here is pretty radical. [00:25:45] Speaker 03: There is no other case where the commission has [00:25:49] Speaker 03: said that we find undue discrimination where a transmission provider favors its own resources over independent resources except where you're only doing so over, you know, over new resources. [00:26:04] Speaker 03: You know, you're not discriminating against existing, but it's fine to discriminate in favor of your resources over new resources. [00:26:09] Speaker 03: We've never said that. [00:26:10] Speaker 03: And this is a principle of under discrimination that goes back to at least 1996 with order 888 where we did there for transmission access what we're doing here for interconnection access and so it's PS Colorado's formulation that that is pretty radical. [00:26:28] Speaker 03: And, you know, just to go back, Judge Walker I know you're not. [00:26:32] Speaker 03: Going back to my argument that new and existing are not similarly situated for this purpose. [00:26:36] Speaker 03: I know of no case and PS Colorado has cited none that says just because two sets of entities are not similarly situated for one purpose means that they're not similarly situated for all purposes. [00:26:48] Speaker 03: And, you know, here, we're talking about a different issue and if they're correct. [00:26:53] Speaker 02: What is the different issue. [00:26:54] Speaker 02: Can you just finish that thought, spin it out for me. [00:26:57] Speaker 03: The issue in mid-continent was whether it made practical sense to allow existing generators to go through a streamlined interconnection review process. [00:27:06] Speaker 03: And we said, yes, for all the reasons, yes, Colorado States, because there are efficiency benefits today. [00:27:14] Speaker 02: How are new and existing generators similarly situated in this situation in a way that they were dissimilarly situated in MISO? [00:27:24] Speaker 03: They are similarly situated here [00:27:26] Speaker 03: because for purposes of effectuating order 2003's goal of not allowing transmission providers to favor their own generation resources, it doesn't matter whether we're talking about favoring their own existing generation resources over third party owned existing generation resources or favoring their [00:27:45] Speaker 03: resources over new third party-owned generation resources. [00:27:48] Speaker 03: Order 2003 makes no such distinction between existing and new. [00:27:53] Speaker 03: It's just concerned with preferential treatment of one's own generation resources. [00:27:57] Speaker 03: I have a quick hypothetical if the court will indulge me. [00:27:59] Speaker 03: I see I'm over my time. [00:28:01] Speaker 03: Go ahead. [00:28:02] Speaker 03: Thank you, Your Honors. [00:28:03] Speaker 03: Say a city passes an ordinance that says all motor vehicles should be tested for emissions of carbon dioxide on an annual basis. [00:28:11] Speaker 03: And the city says, okay, well, we find that electric vehicles and gas powered vehicles are not similarly situated to effectuate that goal because electric powered vehicles have no emissions. [00:28:23] Speaker 03: So we're not gonna require electric powered vehicles to go through annual testing. [00:28:27] Speaker 03: Later, the city passes another ordinance that says all motor vehicles should have their tire treads tested on an annual basis. [00:28:33] Speaker 03: We're concerned that smooth tires cause more accidents and cause more injuries. [00:28:37] Speaker 03: In that circumstance, the electric car manufacturer cannot swoop in and say, wait, you can't apply your tire tread rule to us because you've already said in the emissions context that we are not similarly situated to gas-powered vehicles. [00:28:51] Speaker 03: Whether two entities are similarly situated or not depends on the goal and the issue that we're focusing on. [00:28:59] Speaker 03: The issue here, a preferential treatment by a transmission provider, simply did not exist in the Mid-Continent case, because Mid-Continent owns no resources on its grid, nor could it. [00:29:09] Speaker 03: It's an independent entity. [00:29:12] Speaker 02: And it would- I guess I'm still, I'm sorry, because I know you're going to say the jury can't consider it. [00:29:19] Speaker 02: But in this case, in a subsequent order, you approve a piece Colorado did because they have an independent entity [00:29:29] Speaker 02: I think just policing, as Judge Walker was asking, how this process is administered as between existing resources, same thing you did in Dominion. [00:29:39] Speaker 02: And so what I'm trying to square, and if you wanna repeat and just say, you can't even think about that, go ahead, but I hope you'll have a better answer than that. [00:29:49] Speaker 02: And that is, how did that fix this? [00:29:52] Speaker 02: I understand the problem you're telling me about here, [00:29:55] Speaker 02: But I don't understand how PS Colorado have an independent entity fix that problem. [00:30:00] Speaker 02: Can you help me understand that? [00:30:03] Speaker 03: Just tell me. [00:30:04] Speaker 03: There is a bit of daylight. [00:30:05] Speaker 03: So, you know, as PS Colorado itself argues, you know, in our initial order, we said there may be opportunities for discrimination. [00:30:13] Speaker 03: There could be opportunities for discrimination. [00:30:16] Speaker 03: And reasonably, that concern applies in two ways. [00:30:20] Speaker 03: It applies as concerns existing generation vis-a-vis new generation, and it could also, it could also adhere in a concern over implementation of an otherwise facially neutral policy that applies only to existing generation. [00:30:34] Speaker 03: So to the extent that we were at all concerned about that other issue here, [00:30:39] Speaker 03: then the independent administrator in Dominion and the subsequent PS Colorado case, you know, would would resolve that. [00:30:45] Speaker 02: But, you know, I really do anything in the orders here that says that was one of the two. [00:30:50] Speaker 02: It was a dual concern case. [00:30:52] Speaker 02: You were concerned about discrimination in the administration of this program as between existing generators. [00:30:58] Speaker 02: Is there anything in either the order of the rehearing order here that talks about that? [00:31:04] Speaker 03: Not beyond what I think would be a reasonable inference from paragraphs 35 and 36 of our initial order, but I think the stronger and the dispositive argument is this court in Altamont in Brooklyn [00:31:21] Speaker 03: Union and Baltimore Gas makes very clear that this court does not undermine or does not render unlawful and otherwise lawful order on review just because an agency swerves away in a subsequent order. [00:31:39] Speaker 03: The only question here is whether we comply with our precedent, and that requires first finding that we are similarly situated to the entities in our prior precedent. [00:31:49] Speaker 03: I just explained why we're not similarly situated to mid-continent. [00:31:52] Speaker 03: And if there is no unreasoned departure from similarly situated [00:31:57] Speaker 03: entities in our past precedent, then the only question is whether we acted lawfully in interpreting the governing law, which is order 2003 here. [00:32:05] Speaker 03: And like I said, order 2003. [00:32:07] Speaker 02: So it's just procedurally if PS Colorado goes, okay, now here we are in, in November 2021, and the wheels are coming off. [00:32:18] Speaker 02: because FERC let us do it with this independent entity, which isn't addressing at all the problem in either order. [00:32:26] Speaker 02: And they let Dominion do it with an independent entity, which again is not addressing this problem of undue preference vis-a-vis new generation. [00:32:38] Speaker 02: How could PS Colorado go come to FERC and say, you got to admit now that your concern was not undue preference vis-a-vis new, [00:32:48] Speaker 02: generation. [00:32:50] Speaker 02: And since that's not, we shouldn't even have to have the independent entity because you didn't for remote remotely for a second suggest that you were worried about discrimination in the 6040 existing generation. [00:33:03] Speaker 02: How would they do that? [00:33:04] Speaker 03: I'm not sure they could do that, Your Honor. [00:33:07] Speaker 03: I mean, one way might be to challenge the dominion or its own subsequent PS Colorado order and say this is unlawful because in the orders on review here, FERC, you didn't say that you need an independent administrator to remedy any [00:33:27] Speaker 03: perceived under discrimination, and so the subsequent PS Colorado order is unlawful. [00:33:33] Speaker 03: It's an unlawful departure from precedents. [00:33:35] Speaker 02: The only way they can get us to look at this problem, at least as they perceive it, that has now been exposed, at least one commissioner agreed, is to seek review of the order directing independent entity. [00:33:54] Speaker 02: I think they still have time to do that. [00:33:57] Speaker 03: I don't believe they do. [00:34:00] Speaker 03: I'm trying to remember exactly when. [00:34:03] Speaker 03: But let's see. [00:34:05] Speaker 03: That order was issued back in May. [00:34:09] Speaker 03: So I don't believe they do. [00:34:11] Speaker 03: But the writing was certainly on the wall. [00:34:13] Speaker 03: If they wanted to say that that order is an unreasoned departure from prior precedent, and certainly they would be similarly situated to themselves in the orders on review here, then [00:34:26] Speaker 03: then there's at least a basis for saying, OK, you committed an unreasoned departure from prior precedent. [00:34:33] Speaker 03: But I know of no case, and this court's case law goes sharply the other way, that says a court will reach out to a subsequent decision to render an otherwise lawful order unlawful. [00:34:44] Speaker 03: So I think it's an important procedural distinction. [00:34:51] Speaker 03: I would just close by saying their premise that new and existing resources are not similarly situated for all purposes, regardless of the context, just because at paragraph 63 of the mid-continent order, we said, in this circumstance, new and existing are not similarly situated, is simply erroneous on the law and would undercut our ability to exercise our wide discretion in combating under-discrimination. [00:35:16] Speaker 03: Thank you, Your Honors. [00:35:18] Speaker 01: All right. [00:35:18] Speaker 01: Mr. Killen, why don't you take two minutes? [00:35:20] Speaker 00: Thank you. [00:35:22] Speaker 00: It's not just the MISO order where FERC identified that new and existing are not similarly situated. [00:35:28] Speaker 00: In paragraph 13 of the rehearing order in our case, FERC reiterated that same finding. [00:35:33] Speaker 00: FERC has never abandoned the finding that new and existing generation are not similarly situated. [00:35:38] Speaker 00: Not before our case, not in our case, and not after our case, because it's an undeniable truth. [00:35:43] Speaker 02: The MISO decision- And then it does go on in that exact same order to say, look, rather, the problem here is, [00:35:50] Speaker 00: or participation in the neutral provision, yeah. [00:35:53] Speaker 02: Rather, the commission sought to ensure that PSCO, as the entity proposing reforms that stands to disproportionately benefit replacement of its own generation, is not afforded, where I began all this, undue preference over developers or owners of third party generation. [00:36:12] Speaker 02: So it was drawing the very distinction that Mr. Fish has referenced. [00:36:18] Speaker 02: As for these purposes, sir, you may be similarly situated, not similarly situated in one sense, but to the extent we have this concern, it continues or it exists. [00:36:29] Speaker 02: It is not affected by that difference. [00:36:31] Speaker 00: And our response, Judge Malat, is that that is not an appropriate concern in this context. [00:36:35] Speaker 00: When there is an even-handed procedure, it is not unlawful because it's even-handed. [00:36:41] Speaker 02: So this case boils down to that legal question, whether it's legitimate. [00:36:46] Speaker 02: under the Federal Power Act for them to have that concern about undue preference of their own existing [00:36:53] Speaker 02: versus new. [00:36:56] Speaker 02: That's really all that's said. [00:36:57] Speaker 00: That is the first order issue. [00:36:59] Speaker 00: Yes, that is somehow violates the act in order by our compliance with the act and treating everybody equally. [00:37:04] Speaker 00: We treat everyone the same, including ourselves, and therefore we violate the act. [00:37:09] Speaker 00: We challenge that logic as arbitrary and capricious. [00:37:12] Speaker 04: Mr. Killian, can you respond to Mr. Fish? [00:37:15] Speaker 04: Do you agree with Mr. Fish that we can't look at the orders that occurred after [00:37:19] Speaker 04: disorder. [00:37:20] Speaker 04: We just have to know we disagree. [00:37:23] Speaker 00: We do disagree with that. [00:37:24] Speaker 04: What's your what's your authority for disagreeing? [00:37:26] Speaker 04: Because he does have some solid precedence on his side there. [00:37:29] Speaker 00: Sure, and the cases he cites are cases where an entity who lost in its case points to subsequent cases, usually years after the fact and say, hey agency, you affirmatively changed your policy, apply that retroactively to me. [00:37:43] Speaker 00: But in our situation, the order number one came out a few weeks afterwards. [00:37:47] Speaker 00: The dominion order was a few weeks afterwards. [00:37:49] Speaker 00: And in that dominion order, there are several paragraphs where FERC is purporting to talk about our order. [00:37:56] Speaker 00: Fort completely recharacterizes the PSCO decision in paragraph 26 of the dominion order and says, actually, this was all just about discrimination against other existing generators. [00:38:08] Speaker 00: And as Judge Millett noted, and as then Chairman Danley noted in his concurrence, that doesn't appear on the face of our orders at all. [00:38:15] Speaker 00: A concern about PSCO somehow applying these procedures in a way that discriminates in favor of its affiliates and against unaffiliated existing generators. [00:38:24] Speaker 00: was a concocted rationale. [00:38:26] Speaker 00: And so we point to the Dominion Order, Judge Walker, to show that the FERC here is just bouncing around. [00:38:32] Speaker 00: Every time they get pushed on this, they come up with a brand new argument. [00:38:35] Speaker 00: And in this court, we think they're advocating a new argument as well, that the mere participation in a neutral benefit somehow renders it discriminatory or unduly preferential. [00:38:45] Speaker 02: The essential logic about- Why wasn't your avenue at that point, I understand your argument. [00:38:51] Speaker 02: Why wasn't your avenue then to seek review through the order approving plan with the addition of an independent entity and go look? [00:39:04] Speaker 02: We're getting hit from every direction. [00:39:05] Speaker 02: We don't know what's going on. [00:39:06] Speaker 00: I have to say, Judge, I've never seen someone who petitioned for something and obtained exactly what they petitioned for, then file a petition for review in this court and saying, I shouldn't have asked for what I got for. [00:39:16] Speaker 02: I know you're a good, you're a good lawyer. [00:39:17] Speaker 02: You would explain why you're actually still injured. [00:39:20] Speaker 00: I would do my best to that situation, Judge Malat, but I do think that it would present some serious questions that you're seeking on a petition for review, something that you did not ask the agency for in the first instance. [00:39:30] Speaker 00: We asked for it. [00:39:31] Speaker 00: We did it in this proceeding and we were rejected in this because you have not. [00:39:34] Speaker 02: Did you file another? [00:39:35] Speaker 02: Sorry, did you file another? [00:39:40] Speaker 02: application to have it approved with the independent entity? [00:39:44] Speaker 00: We did. [00:39:44] Speaker 00: That was the one. [00:39:45] Speaker 02: Could you have not then, at that application stage, said two things? [00:39:49] Speaker 02: One, we think you should go back and reconsider your initial decision in light of what you just did in Dominion Power, because these are not making sense to us. [00:40:03] Speaker 02: Or two, if you can make it make sense, then approve it with the independent entity. [00:40:08] Speaker 02: You could have done a two track approach in that application that would have allowed you to bring the Dominion story into the record and into the analysis we're going for. [00:40:21] Speaker 00: I'm not sure Judge Mallette that we could have done something like that. [00:40:25] Speaker 00: So, given that we're in this case, right here, where we did raise exactly these arguments. [00:40:31] Speaker 00: I mean, I do think we're not saying that for consciously changed policy in the dominion case and that that conscious policy change should be applied retroactively or benefit. [00:40:40] Speaker 00: What we're saying is that FERC has treated us differently. [00:40:43] Speaker 00: The APA principle of treating like cases alike does not require the court to turn a blind eye to the agency immediately switching its rationale in a few weeks afterwards and purporting to give an explanation for our decision that doesn't even withstand the actual assertions in our own decision. [00:41:01] Speaker 00: If I can conclude, Your Honors, Order 2003 is not anti-integrated utilities, and neither are Section 205 and 206. [00:41:09] Speaker 00: The solution that all the statute and the order 2003 proposed for integrated utilities was to require equal treatment. [00:41:16] Speaker 00: That is exactly what PSCO has proposed in this situation. [00:41:20] Speaker 00: And FERC's conclusion that our compliance with the statute somehow violates the statute is arbitrary, capricious, and contrary to law. [00:41:27] Speaker 01: All right. [00:41:28] Speaker 01: Thank you, counsel. [00:41:29] Speaker 01: Madam Clerk, would you call the next case?