[00:00:00] Speaker 00: Phase number 21-1163 et al, Cherokee County cogeneration partners LLC petitioner versus Federal Energy Regulatory Commission. [00:00:11] Speaker 00: Mr. Hughes for the petitioner, Ms. [00:00:13] Speaker 00: Berry for the respondent, Mr. Settling for the interviewer. [00:00:17] Speaker 06: All right, council for petitioner, we will hear from you. [00:00:22] Speaker 02: Good morning. [00:00:23] Speaker 02: May it please the court, Paul Hughes for petitioner Cherokee County cogeneration partners. [00:00:30] Speaker 02: There are a few essential points that are not in dispute in this case. [00:00:35] Speaker 02: The first is the existence of the Comparability Principle under the Federal Power Act. [00:00:41] Speaker 02: That arises from the statutory requirement that a public utility's rates must be nondiscriminatory. [00:00:48] Speaker 02: The second is that a generator may normally bring a FERC Section 205 proceeding to enforce its rights under this Comparability Principle. [00:00:59] Speaker 02: The question presented here is whether FERC's regulation implementing PURPA has stripped FERC of this jurisdiction. [00:01:07] Speaker 02: Generally, FERC does have jurisdiction. [00:01:10] Speaker 04: There's two factors, right? [00:01:12] Speaker 04: When you look at the regulation, which you don't challenge. [00:01:15] Speaker 04: One of which, of course, is the argument you raise in your brief of this court that the element of power you're talking about is not energy. [00:01:28] Speaker 04: or capacity. [00:01:29] Speaker 04: That's one factor. [00:01:31] Speaker 02: Yes, Your Honor. [00:01:31] Speaker 04: And the second factor is whether or not the arrangement was pursuant to PURPA, state implementation of PURPA. [00:01:42] Speaker 04: Yes, Your Honor. [00:01:44] Speaker 04: You can win on this case if you win on either factor, right? [00:01:49] Speaker 04: Yes, Your Honor. [00:01:52] Speaker 04: But the comparability question is subordinate to that, isn't it? [00:01:56] Speaker 02: Well, I think it's the initial place to begin, Your Honor. [00:01:59] Speaker 04: I don't see that, because I'm looking at what jurisdiction first. [00:02:04] Speaker 02: Your Honor, I agree with everything you said. [00:02:06] Speaker 02: We have to win on one of those two points. [00:02:08] Speaker 02: And if we win on either of those two points, then FERC erred and the court would vacate and remand. [00:02:13] Speaker 02: So I certainly agree. [00:02:14] Speaker 04: Well, why don't you focus on those two points? [00:02:16] Speaker 04: Because there's a challenge to both of them by FERC here in this court. [00:02:24] Speaker 02: Thank you, your honor. [00:02:24] Speaker 02: So to turn to the first point we raised in our brief, that this was not pursuant to a state's implementation of PURPA. [00:02:33] Speaker 02: The first point is Perk just did not address this precise argument. [00:02:37] Speaker 02: Perk addressed a different argument in saying that in its view, that the interconnection agreement was quote unquote, jurisdictional to South Carolina. [00:02:47] Speaker 04: But that's not what the regulation- Well, first of all, the problem is, did you address [00:02:51] Speaker 04: the issue properly before this court. [00:02:54] Speaker 04: Excuse me. [00:02:54] Speaker 04: Could you address it properly in the petition for rehearing? [00:02:59] Speaker 02: Oh, absolutely, your honor. [00:03:00] Speaker 02: So, for example, at Joint Appendix page 352, we made this argument quite clearly. [00:03:07] Speaker 02: We said the commission's sole rationale that the interconnection is not subject to the commission's jurisdiction is simply irrelevant. [00:03:14] Speaker 02: And I'll stop reading, but we continue to go on. [00:03:16] Speaker 04: I'm not sure I understand the argument you presented. [00:03:21] Speaker 04: in the petition for rehearing. [00:03:23] Speaker 04: What is the argument you presented in the petition? [00:03:27] Speaker 02: So, with respect to this first element we're discussing, Your Honor, as to whether or not this was an implementation pursuant to PURPA, what FERC had said in the initial order is they had said that this is subject to South Carolina jurisdiction, not FERC jurisdiction, and they stopped. [00:03:42] Speaker 02: What we explained in our rehearing petition was consistent with our original answer is that's asking the wrong question. [00:03:48] Speaker 02: The question is not whether it is FERC jurisdictional or South Carolina jurisdictional. [00:03:53] Speaker 02: It is whether it is pursuant to a state's implementation of FERPA. [00:03:57] Speaker 02: And those are not the same thing and FERC didn't answer the right question. [00:04:00] Speaker 05: But is this, in these couple of sentences here on page 352 enough to preserve the issue under our precedence, which are really very strict? [00:04:09] Speaker 02: I absolutely think so, Your Honor. [00:04:11] Speaker 02: We said in no uncertain terms, and this continues on page 352, we made exactly the argument, as we said in this middle paragraph, rather as explained in Cherokee's earlier pleadings, its sales of reactive service are not made pursuant to a state regulatory authority's implementation of Section 210 of PURPA and are instead fully subject to Commission regulation under Section 205 of the Federal Power Act. [00:04:36] Speaker 04: Well, why won't they? [00:04:37] Speaker 04: You don't explain. [00:04:38] Speaker 04: Well, and the petition for rehearing what you argue before us. [00:04:44] Speaker 02: Well, that is, I mean, that is the essential grab amount of this argument is that these are not subjects or do not fit within that regulatory framework. [00:04:53] Speaker 02: And FERC has made quite clear what that means in a 2005 regulation. [00:04:58] Speaker 02: This is 113 FERC 61020 paragraph 26. [00:05:02] Speaker 02: It says that these quote sales or rates pursuant to contracts or obligations approved by state regulatory authorities. [00:05:10] Speaker 02: In South Carolina, and this is in FERC's brief at page 9, in the quote-unquote small power production cogeneration facility order that they entered in 1981, that's order 81-214 at page 11, it says exactly the same thing. [00:05:25] Speaker 02: Both FERC and South Carolina agree that to be pursuant to a state's implementation of PURPA, it has to be filed with the Commission. [00:05:33] Speaker 02: In this large generator interconnection agreement, there's no evidence it was ever filed with the South Carolina Commission and doesn't qualify as a state's implementation of PURPA. [00:05:44] Speaker 04: Isn't it fair to say that, well, here's an interesting question. [00:05:53] Speaker 04: If there had been a dispute concerning the interconnection agreement, to whom would it have gone? [00:06:04] Speaker 02: It's not entirely clear, Your Honor, on the record. [00:06:06] Speaker 02: It's possible that that dispute could go to the South Carolina Commission. [00:06:09] Speaker 04: It seems to me, obviously, it would go to the South Carolina Commission. [00:06:13] Speaker 04: So then, isn't it implementation of PURPA? [00:06:16] Speaker 02: No, Your Honor, it's not an implementation of PURPA. [00:06:18] Speaker 02: Well, first, FERC never said it was an implementation of PURPA, and it may well not be because there are other ways to have interconnection agreements that are independent of PURPA. [00:06:26] Speaker 02: So, for example, [00:06:29] Speaker 02: Duke has to have an open access transmission tariff pursuant to FERC rules. [00:06:33] Speaker 02: That's FERC order 888, a FERC order that was implemented in 1996. [00:06:38] Speaker 02: That would be an independent standalone basis for the interconnection agreement that would be unrelated or irrelevant to PURPA. [00:06:45] Speaker 02: The essential point, though, is FERC didn't address whether or not this interconnection agreement was pursuant to PURPA, and that's the core issue. [00:06:53] Speaker 06: We're guessing here because... But FERC did cite [00:06:57] Speaker 06: quite clearly and explicitly its order 2003 cited it both in its initial decision and in its re-hearing. [00:07:07] Speaker 06: Wasn't that the jurisdictional grounds that FERC relied upon? [00:07:17] Speaker 02: And our central point, your honor, is that's asking the wrong question or answering the wrong question. [00:07:22] Speaker 02: They said that it is subject to South Carolina jurisdiction. [00:07:25] Speaker 02: And our essential point on this first [00:07:28] Speaker 02: wrong is that there are two distinct issues to which is it FERC or South Carolina jurisdictional. [00:07:35] Speaker 02: That's one issue that FERC addressed. [00:07:37] Speaker 02: FERC did not address the separate issue of was this an implementation of PURPA or pursuant to the state's implementation of PURPA. [00:07:46] Speaker 02: And the answer to that was unaddressed by FERC. [00:07:49] Speaker 02: And even the answering the question that is subject to FERC jurisdiction does not answer that second question as to whether or not is an implementation of PURPA. [00:07:57] Speaker 04: But again, what did you say in the petition for a hearing on that question? [00:08:02] Speaker 04: Well, that's I think precisely you have one sentence just as my colleague points out, but you don't, you're not, you didn't really make the argument you're making in your brief or making here. [00:08:14] Speaker 02: I think we do make precisely this argument in the brief, your honor. [00:08:17] Speaker 02: And what we're. [00:08:17] Speaker 02: explain to FERC is they have to find a basis to say that this is... Where besides that first sentence, what did you say? [00:08:25] Speaker 02: Well, it's the whole paragraph, Your Honor, and then the analysis carries over onto Joint Appendix page 353 as well. [00:08:33] Speaker 02: But in that paragraph, we explain that they make the argument about it being jurisdictional. [00:08:37] Speaker 02: We explain that that argument is irrelevant, that rather what the question is, is this pursuant to the state's implementation of PURPA, and that deciding the jurisdictional status is not deciding this separate, more precise question that's asked under the regulation. [00:08:55] Speaker 02: And so on that basis alone, we think the most straightforward disposition of the case is to recognize that Burke did not address the precise [00:09:02] Speaker 02: particular question that arises under the regulation that was presented to FERC, it did not answer this question after it was specifically teed up in the rehearing petition. [00:09:12] Speaker 02: And then the discussion we're having as to whether or not jurisdictional sweeps within that, that's the argument that FERC has made on the substance. [00:09:21] Speaker 04: I thought you were arguing here that FERC did not respond to the other question, which was the comparability standard. [00:09:33] Speaker 04: That's what I thought your major argument here was. [00:09:35] Speaker 04: Oh, and a re-hearing petition. [00:09:37] Speaker 02: No, Your Honor. [00:09:37] Speaker 02: Our point has been that FERC didn't respond to the fact that this was outside the scope. [00:09:42] Speaker 04: Did you not make the argument they didn't respond to the comparability principle? [00:09:46] Speaker 04: Oh, yes. [00:09:46] Speaker 04: We explained that as well. [00:09:48] Speaker 04: And what's that got to do with the price of tea? [00:09:50] Speaker 02: Well, Your Honor, that is part of the answer as to why [00:09:55] Speaker 02: The FERC's determination that this is subject to South Carolina jurisdiction is not the end of the matter because there is separate jurisdiction under sections 205 and 206. [00:10:03] Speaker 04: But I still see what the comparability principle has to do with the PURPA question. [00:10:09] Speaker 02: Well, Your Honor, the interconnection between those is because FERC seems to think that if this is subject to interpretation by the commission, by the South Carolina commission, excuse me, that takes it outside of FERC and the comparability falls out and that's wrong. [00:10:24] Speaker 02: And that's the point that we're making of why that's wrong. [00:10:27] Speaker 04: The comparability goes to the amount of money you're entitled to, really. [00:10:34] Speaker 04: It doesn't really go to jurisdiction. [00:10:36] Speaker 02: Well, I think it may go to both, Your Honor, because, again, this presses back against FERC's merits argument that the decision by FERC that this is South Carolina jurisdictional, in their view, disposes of this case because they suggest that takes the comparability claim off the table. [00:10:54] Speaker 02: And our explanation is that's just flatly wrong because the comparability principle exists independent of the interconnection agreement. [00:11:02] Speaker 02: under the principles of section 205 and 206, which apply unless they're stripped. [00:11:07] Speaker 02: And the court is quite correct in the initial question asked of me. [00:11:11] Speaker 02: Again, to find that FERC erred in dismissing, we do need to win on one of those two grounds. [00:11:17] Speaker 02: But the tie here is to explain why FERC's finding of that this agreement is South Carolina jurisdictional does not resolve the matter of the comparability principle. [00:11:32] Speaker 02: If I, I'd be pleased to turn to the second argument for a moment, although I see over. [00:11:37] Speaker 02: Thank you. [00:11:38] Speaker 02: If you can take one minute. [00:11:42] Speaker 02: Thank you, your honor. [00:11:43] Speaker 02: As to the second prong, we explain why reactive power doesn't qualify within energy or capacity. [00:11:50] Speaker 02: As we explain our briefs, these are very technical terms that FERC uses with purpose and throughout its regulations, it separately uses ancillary services of which reactive power is part. [00:12:02] Speaker 04: Council, I would make three points. [00:12:04] Speaker 04: The first of which is, I think you make an elegant argument in the brief on the energy and capacity point. [00:12:13] Speaker 04: However, number one, I think that argument was not presented in the petition for rehearing, and it is not covered by Columbia Gas, because from the very beginning, you should have been recognizing that you had to win on one of those two issues, so you had to present them in the rehearing petition, and you did not. [00:12:39] Speaker 04: And this is not like Columbia Gas, [00:12:41] Speaker 04: where the government comes up with an entirely new issue. [00:12:48] Speaker 04: It was an issue that you had raised in your initial answer, but you didn't raise in the petition for re-hearing. [00:12:56] Speaker 04: So even though it's an elegant argument, I don't think it's properly before us, number one. [00:13:01] Speaker 04: Number two, it's elegant, but it's not very persuasive. [00:13:08] Speaker 04: in my view. [00:13:09] Speaker 04: So even if you lose on jurisdiction, I think you don't really, you're not going to win on your definition of energy. [00:13:21] Speaker 04: That's just one judge's view. [00:13:23] Speaker 04: But I'm impressed at the argument. [00:13:27] Speaker 02: Your Honor, may I respond on the preservation question? [00:13:31] Speaker 04: Yeah, that's the key. [00:13:32] Speaker 04: Without it, you're dead. [00:13:34] Speaker 02: Thank you, Your Honor. [00:13:35] Speaker 02: And as the Court recognizes, it wasn't the answer. [00:13:37] Speaker 02: We explained what the proper construction of 601C was at the outset of this case. [00:13:44] Speaker 02: Perk, in its initial decision, did not quarrel, did not object to our understanding of what 601C made. [00:13:50] Speaker 04: Instead, it made its preliminary... Councilman, the problem is the petition for re-hearing. [00:13:55] Speaker 02: Well, and... [00:13:56] Speaker 02: I'm setting the background for why it was this didn't have to be in the petition for re-hearing because there was no error in the original answer as to 601C. [00:14:05] Speaker 02: We explained what 601C meant in the answer. [00:14:09] Speaker 04: FERC did not... No, wait a minute. [00:14:11] Speaker 04: You recognize you had to win on one of these two and you ignored the energy and capacity argument and petition for re-hearing. [00:14:20] Speaker 02: Well, because in the initial answer, FERC had made no quarrel with that. [00:14:25] Speaker 02: They had gone off the rails on a preliminary question. [00:14:28] Speaker 02: They had not made this error. [00:14:30] Speaker 02: And what I think Columbia Gas instructs is that we don't have to guess or predict an error that FERC might make upon rehearing. [00:14:39] Speaker 02: And I think that's the circumstance. [00:14:41] Speaker 02: I think what's instructive here is FERC, when it actually moved past the jurisdictional argument, knew that this was in the case. [00:14:49] Speaker 02: They spent three pages of their decision across several paragraphs, in fact, actively resolving this issue. [00:14:55] Speaker 02: And I think the fact that FERC engaged in this analysis [00:14:58] Speaker 02: rested its analysis on this, engaged with this, shows that FERC recognized it was properly within the case, it was properly before and on rehearing, and thus is properly an issue that Kenan should be considered by this court in this petition. [00:15:14] Speaker 04: This is another example of cases we see where counsel in the D.C. [00:15:21] Speaker 04: Circuit presents a much more persuasive case [00:15:26] Speaker 04: than experts before the agency do. [00:15:30] Speaker 02: Thank you, Your Honor. [00:15:32] Speaker 02: Happy to turn to the... I gave a speech about that once. [00:15:38] Speaker 02: Thank you, Your Honor. [00:15:40] Speaker 02: I think the Court understands our position on the substance. [00:15:42] Speaker 02: We think that FERC knows what it means when it says energy because it's written many regulations that distinguish energy andcillary services, and it treats those categories quite differently at times. [00:15:53] Speaker 06: All right, I think we have your argument. [00:15:56] Speaker 06: Let's hear for counsel from respondent. [00:16:08] Speaker 07: May it please the court, Luna Perry, for the Federal Energy Regulatory Commission. [00:16:12] Speaker 04: Counsel, you make some arguments which seem to me sort of silly. [00:16:17] Speaker 04: Number one, you argue it's moody. [00:16:20] Speaker 04: Why? [00:16:20] Speaker 04: There's money at stake here. [00:16:23] Speaker 04: If they're entitled to jurisdiction under your statute, there's money at stake. [00:16:32] Speaker 04: How can you say it's moot? [00:16:34] Speaker 01: Yes, Your Honor, I understand. [00:16:37] Speaker 04: You might have stronger arguments, but why make a really weak argument? [00:16:41] Speaker 04: And secondly, the argument that this was a declaratory statement that has no significance, as if this was an enforcement proceeding, also seems to me to be a rather silly argument. [00:16:55] Speaker 01: The primary argument there, your honor, was that this court has held that there is no statute which provides for direct review of commission orders interpreting PURPA. [00:17:04] Speaker 01: And the point is these orders do nothing else. [00:17:07] Speaker 04: But those are cases of an enforcement proceeding. [00:17:10] Speaker 04: For an effort to try to circumvent enforcement, that's not this case. [00:17:14] Speaker 01: There are cases where there are petitions filed directly with the commission that the commission acts on and this court has said [00:17:22] Speaker 01: that there is no jurisdiction over those because they only interpret her. [00:17:27] Speaker 01: So it, we felt that it's an issue that had to be raised because this court has said that commission interpretations of purpose are not subject to. [00:17:37] Speaker 04: Let me go to the issue. [00:17:41] Speaker 04: What is the relationship between [00:17:44] Speaker 04: The two criteria by which PURPA jurisdiction is established we just discussed. [00:17:52] Speaker 04: What is the relationship between that on the one hand and whether or not the co-generator is selling to more than one customer? [00:18:08] Speaker 04: What is the relationship between those two concepts? [00:18:12] Speaker 01: The relationship between those two concepts is that the mandatory purchase obligation under PURPA only applies to the extent that the utility is purchasing the total output of the qualifying facility. [00:18:28] Speaker 04: So the moment the generator sells to more than one [00:18:39] Speaker 04: customer, they're out of purpose as far as you're concerned. [00:18:42] Speaker 01: Then it becomes, well, at least it becomes commission jurisdictional then because it is selling an interstate commerce to a third party. [00:18:51] Speaker 04: But the, where it is, I don't know why you say interstate. [00:18:55] Speaker 04: It's selling wholesale, which could, could, could be two companies in South Carolina. [00:19:01] Speaker 04: It doesn't have to be in the state. [00:19:03] Speaker 01: The point is what PURPA did was it prevented qualifying facilities who interconnect with the grid from being considered FERC jurisdictional just because of that. [00:19:15] Speaker 01: But the point is if they interconnect to the grid and then their power is transmitted in interstate commerce to a third party, then that does become FERC jurisdictional. [00:19:26] Speaker 01: The PURPA situation is where they entirely sell all of their output to their interconnecting utility. [00:19:33] Speaker 01: And so under PURPA, PURPA gave an exception for that. [00:19:36] Speaker 01: So that is only state jurisdictional. [00:19:38] Speaker 04: Okay. [00:19:38] Speaker 04: All right. [00:19:39] Speaker 04: So in other words, if a code generator sells to more than one, it sells 10% of its power to another customer. [00:19:49] Speaker 04: It's out of PURPA. [00:19:51] Speaker 01: Well, it's out of state jurisdiction. [00:19:54] Speaker 01: It can still be a qualifying facility. [00:19:57] Speaker 04: Well, that's what I thought. [00:19:58] Speaker 04: You said a moment ago, it couldn't be a qualifying facility unless it sold all its power to one customer. [00:20:04] Speaker 01: No, it's not state jurisdictional. [00:20:05] Speaker 01: I'm sorry if I misspoke, Your Honor, but it's not state jurisdictional if it sells to more than one party, which is what Order 2003 said. [00:20:13] Speaker 04: So in other words, it's still purpose. [00:20:16] Speaker 01: It can still be purpose. [00:20:18] Speaker 04: OK, that wasn't clear in your briefs. [00:20:20] Speaker 04: I was a little confused. [00:20:22] Speaker 01: Yes, your honor. [00:20:22] Speaker 01: But it's just what we're talking about here is where the transaction is entirely within it. [00:20:28] Speaker 01: They're selling all of their output to the one interconnecting utility that under purpose defines that as being a state jurisdictional. [00:20:40] Speaker 04: So why was there ever any discussion about selling to a second customer? [00:20:47] Speaker 04: I don't even understand why I was in your briefs. [00:20:51] Speaker 01: The reason it was in the briefs was just because below, although they haven't raised it here, but below one of the rationales that the petitioner relied on was the fact that they were planning, perhaps, if the purchase agreement was not renewed to sell to third parties. [00:21:10] Speaker 04: So you were raising an issue in this court of appeals that wasn't raised below? [00:21:16] Speaker 04: it was raised below but they have impressed it there's not in their breeches not anywhere else so i'm sort of mystified okay so the bottom line is it can still be purpur if pursuant to purpur even if there's a sale to two customers [00:21:37] Speaker 01: It's not state jurisdictional on purpose if it's the sale to two customers. [00:21:42] Speaker 01: And this goes to the implementation. [00:21:45] Speaker 04: So then it would be, then it would be FERC's jurisdiction. [00:21:48] Speaker 04: That's right. [00:21:49] Speaker 04: For both parts, for both the original sale and the secondary sale? [00:21:56] Speaker 01: There could be circumstances where some of the sales are jurisdictional to FERC and some are not. [00:22:03] Speaker 04: Oh, how? [00:22:03] Speaker 04: Why? [00:22:05] Speaker 01: Well, it depends. [00:22:06] Speaker 01: But the point being in this case is that what purpose said was if all of your output is being sold to one you're connecting utility, then that is state jurisdictional. [00:22:20] Speaker 01: And therefore that's sale plus the interconnection connected with that sale are necessarily within the state's implementation of purpose. [00:22:31] Speaker 04: All right. [00:22:31] Speaker 04: Well, I don't what about the [00:22:33] Speaker 04: They can win on either argument. [00:22:37] Speaker 04: You make a very persuasive argument that they forfeited the energy and capacity. [00:22:42] Speaker 04: They didn't raise it in the position for rehearing. [00:22:46] Speaker 04: But what about pursuant to purpose? [00:22:49] Speaker 04: As they point out, they at least have a couple of sentences raising that argument. [00:22:54] Speaker 04: If they win on that, they win. [00:22:55] Speaker 01: I agree, Your Honor, that [00:22:58] Speaker 01: with the discussion earlier that there is only this one sentence in the rehearing request at JA 352 that says, as explained in Cherokee's earlier pleadings, it sells a reactive service or not made pursuant to a state regulatory authority's implementation of PURPA. [00:23:15] Speaker 01: And then there's a site to 292.601, and that's the only reference to 292.601 anywhere in their rehearing request. [00:23:24] Speaker 04: Well, let's assume they made the argument properly. [00:23:28] Speaker 04: then what about, they certainly make the argument before us, and how do you respond to their argument that South Carolina did nothing, Nishta, excuse me, that's several questions, shouldn't have done that, but South Carolina did nothing, so there's no implementation of purpose. [00:23:50] Speaker 04: What do you say about that? [00:23:52] Speaker 01: I would say that that's not the case at all, Your Honor. [00:23:55] Speaker 01: In the first place, they are citing for this reported requirement that... Wait a minute, did South Carolina do anything about this? [00:24:04] Speaker 01: Well, certainly South Carolina approved the purchase agreement. [00:24:07] Speaker 04: Ah, but that's not the key. [00:24:08] Speaker 04: What about the interconnection agreement? [00:24:10] Speaker 01: Well, the interconnection agreement, the commission pointed out at JA7, note 36 in the initial order, the commission pointed out that a schedule of the purchase power agreement itself specifies that interconnection service must be contracted for separately pursuant to the South Carolina generator interconnection procedures. [00:24:33] Speaker 01: And so the purchase agreement itself that South Carolina approved [00:24:38] Speaker 01: said, specifically, the service must be contracted for separately pursuant to their state interconnection procedures. [00:24:46] Speaker 04: Yes, but the petitioner's argument is that the reactive power, what is it called, reactive power? [00:24:53] Speaker 04: Reactive power, yes, your honor. [00:24:57] Speaker 04: It comes about because of the interconnection agreement, not the power agreement. [00:25:02] Speaker 01: But that's the point, Your Honor, is that the interconnection is also under South Carolina's jurisdiction. [00:25:08] Speaker 04: What did South Carolina do anything about the interconnection agreement? [00:25:12] Speaker 01: South Carolina? [00:25:15] Speaker 01: Their argument is that South Carolina was required to approve the interconnection agreement. [00:25:21] Speaker 04: Does South Carolina do anything? [00:25:24] Speaker 01: I am not sure, Your Honor, what South Carolina did with respect to the interconnection agreement. [00:25:29] Speaker 01: And there was nothing in the record that said one way or the other what they did. [00:25:32] Speaker 01: But there is nothing that requires that South Carolina approve this individual interconnection agreement. [00:25:41] Speaker 01: The reference that they make to the requirement that, now I can't find it. [00:25:54] Speaker 01: The reference that they make to the requirements that the. [00:26:00] Speaker 01: That it be filed is a statement from the notice of proposed rulemaking. [00:26:06] Speaker 01: At 113 for paragraph 61020. [00:26:08] Speaker 01: At paragraph 26. [00:26:14] Speaker 01: And I will note that that language that was discussed in the notice of proposed rulemaking that they are citing to was not the language that was adopted in the final rule. [00:26:25] Speaker 01: If you look at paragraph 671, you will see there that the commission says in paragraph 99, [00:26:36] Speaker 01: that it is not accepting that language that it originally had in the notice of proposed rulemaking. [00:26:43] Speaker 01: And this is at 114 for paragraph 61102. [00:26:47] Speaker 01: But they are adopting a language which is an issue here, which is pursuant to a state regulatory authority's implementation of PURPA. [00:26:55] Speaker 01: So the site that they are giving for the requirement that South Carolina approve this interconnection agreement [00:27:03] Speaker 01: Nothing says is not applicable because it's not even talking about the same language. [00:27:08] Speaker 04: Well, what is your view of the laws? [00:27:11] Speaker 04: If I can bring you back from the weeds, it does sell in order to have an implementation. [00:27:20] Speaker 04: According to purpose, the South Carolina Commission have to do anything. [00:27:27] Speaker 04: Let's just assume it. [00:27:29] Speaker 04: Blank slate. [00:27:31] Speaker 01: The commission and the Supreme Court, and if you look at FERPA versus Mississippi, 456 U.S. [00:27:39] Speaker 01: at 751, made the point specifically that states have latitude in their implementation of FERPA. [00:27:47] Speaker 01: This commission was not directing that they exercise their jurisdiction in any particular way. [00:27:53] Speaker 01: They could issue regulations. [00:27:55] Speaker 01: They could resolve things case by case. [00:27:57] Speaker 04: Counsel, you're not answering the question. [00:27:58] Speaker 04: South Carolina does nothing. [00:28:00] Speaker 04: Nothing at all, hypothetically, is that implementation of PURPA. [00:28:09] Speaker 01: When you say they do nothing, the point is they have interconnection procedures. [00:28:14] Speaker 01: They haven't done nothing. [00:28:16] Speaker 01: And the question is whether they have to have each individual, they have to approve each individual interconnection [00:28:23] Speaker 01: agreement, but they have interconnection procedures. [00:28:26] Speaker 01: It's not that they have done. [00:28:27] Speaker 01: That's what I was saying. [00:28:27] Speaker 04: They have regulations, but did that is an implementation under purpose if they do nothing with respect to this interconnection agreement. [00:28:40] Speaker 01: Implementation of purpose is specifically can be your theory is it was under South Collins jurisdiction. [00:28:48] Speaker 04: If there was any problem would have been brought up before South Carolina. [00:28:51] Speaker 04: Therefore, [00:28:52] Speaker 04: It's implementing pursuant to purpose. [00:28:56] Speaker 04: That's implicitly your argument, isn't it? [00:28:59] Speaker 04: That's right, Your Honor. [00:29:00] Speaker 04: Why don't you just say it? [00:29:03] Speaker 04: But you know what? [00:29:04] Speaker 04: I'm not sure you're right about that. [00:29:07] Speaker 04: But anyway, I understand your argument. [00:29:10] Speaker 01: Yes, your honor, and I would like to point out again, the record does not show. [00:29:14] Speaker 01: Yeah, it's a fair point. [00:29:17] Speaker 01: It's a fair point. [00:29:19] Speaker 04: It's a fair point. [00:29:21] Speaker 01: So we don't know what South Carolina did with respect to the interconnection. [00:29:25] Speaker 04: I was just trying to understand what the law. [00:29:28] Speaker 05: I have a question about reactive power. [00:29:32] Speaker 05: And I mean, just if you could explain to me, it means reactive power can sometimes be an ancillary service. [00:29:40] Speaker 05: Is that right? [00:29:43] Speaker 05: Yes, it can. [00:29:45] Speaker 05: But not in this circumstance. [00:29:46] Speaker 05: So how is this circumstance different from a situation in which it's an ancillary service? [00:29:53] Speaker 01: It goes, Your Honor, to the language of the PURPA regulations that are issued here, specifically the phrase, energy and capacity, or energy or capacity, which is used throughout the PURPA regulations. [00:30:10] Speaker 01: If you look at paragraph 16 of the commission's rehearing order, it points to the fact that at order 671, where these regulations were adopted, [00:30:20] Speaker 01: The order talks about electric energy, not energy or capacity, even though that's what's used in the regulations. [00:30:28] Speaker 01: And the reason why the commission does that is because the purpose statute says electric energy. [00:30:35] Speaker 05: And so the regulations. [00:30:38] Speaker 05: That's one part of your argument. [00:30:39] Speaker 05: The other part of their argument is that it's an ancillary service. [00:30:44] Speaker 01: Well, if I could, Your Honor. [00:30:47] Speaker 01: In order 671, they talk about order 6969 is where they first adopted the per per regulations. [00:30:57] Speaker 01: And when they were adopting those per per regulations, there were people who argued much like petitioners do here. [00:31:03] Speaker 01: That the purpose statute only says. [00:31:08] Speaker 01: Electric energy and therefore we don't have to pay for anything except for the costs of producing the energy, the variable costs of producing energy. [00:31:19] Speaker 01: We don't have to pay for the capacity, for example. [00:31:22] Speaker 01: that produces that is needed to produce that energy and the fixed costs associated with that. [00:31:27] Speaker 01: And the commission rejected that argument because it found that electric energy and this is it order sixty nine forty five federal register at one two two five. [00:31:40] Speaker 01: The commission rejected that specifically because it said electric energy in the PURPA statute is intended to have the same scope as electric energy does in section 205, which means that everybody acknowledges that under section 205, which says electric energy, just like PURPA does, everybody acknowledges the reactive power is within the scope of that regulation, within the scope of that statute. [00:32:10] Speaker 01: And so the commission was saying, we believe that the purple jurisdiction is coextensive in that sense with 205 because it uses the same phrase. [00:32:22] Speaker 01: And you have to remember that these regulations were promulgated in Order 69 in 1980. [00:32:29] Speaker 01: And at that time, as the commission discusses in Order 671, there were no independent generators. [00:32:37] Speaker 01: There were maybe a few, there was no market for independent generation. [00:32:42] Speaker 01: So there was no such thing at the time as an independent charge for ancillary services like reactive power. [00:32:49] Speaker 01: It wasn't until the 1990s, I believe 1990 was the first time the commission actually approved a separate charge for reactive power. [00:32:59] Speaker 01: And it was 1996 when they issued order 888. [00:33:03] Speaker 01: defining ancillary services and requiring them to be unbundled. [00:33:08] Speaker 01: But the commission made clear in Order 69 that it intended for electric energy under PURPA to be interpreted as broadly as electric energy under Section 205, which everybody agrees includes reactive power. [00:33:28] Speaker 06: Thank you. [00:33:29] Speaker 06: Are there further questions? [00:33:31] Speaker 05: Oh, thank you. [00:33:35] Speaker 06: All right, I believe council for intervener wish to be heard. [00:33:45] Speaker 03: Thank you, your honor. [00:33:47] Speaker 03: I think the problem in this petition case is when counsel before this court is making completely different arguments from the ones that were presented properly to FERC. [00:33:57] Speaker 03: As Judge Shulman properly pointed out, the argument that was presented before FERC was that somehow comparability principle was a standalone basis for jurisdiction, and that doesn't really make any sense, which is why counsel didn't front it here. [00:34:13] Speaker 03: Now, their argument on their lead point, whether the sales are pursuing the state regulation on purpose is somehow that because the interconnection agreement wasn't filed with the South Carolina PSC, somehow it's outside of purpose. [00:34:31] Speaker 03: There's nothing in the proper regs. [00:34:33] Speaker 03: or any orders of FERC that require South Carolina to mandate the filing of this kind of agreement? [00:34:41] Speaker 04: Did they make the argument, your opponents, that because nothing was filed in front of South Carolina, it was not implementing pursuant to FERPA? [00:34:56] Speaker 04: Did they make that argument in the rehearing petition or did they make it only in this court? [00:35:01] Speaker 03: I believe they made it only in this court. [00:35:03] Speaker 04: Then why didn't you say that? [00:35:05] Speaker 03: I believe that was attempting to say that, but I apologize. [00:35:07] Speaker 03: I was not as clear as I should have been. [00:35:09] Speaker 03: I will say that if they did make that argument, it wouldn't make a whole lot of sense. [00:35:13] Speaker 04: If my hand had had wheels should be a trolley car. [00:35:15] Speaker 04: The question is whether they made the argument. [00:35:17] Speaker 03: They did not make the argument. [00:35:19] Speaker 03: The other argument they didn't make on their other element, of course, is the is the argument that they should win on this independent basis. [00:35:26] Speaker 03: This this this is an this is an energy. [00:35:31] Speaker 03: Clearly, this was an independent basis on which they could win. [00:35:34] Speaker 03: So if they thought, hey, you messed up in your order. [00:35:38] Speaker 03: You didn't you didn't say that we should win on this independent basis. [00:35:41] Speaker 03: Surely you shouldn't have raised that. [00:35:43] Speaker 03: This isn't a situation like Columbia Gas, where they come over for a new reason that you should lose in its in its rehearing denial. [00:35:51] Speaker 03: And then, of course, the party is justly agreed. [00:35:55] Speaker 03: This is a basis on which they say independently we should win. [00:35:58] Speaker 03: Obviously, in that circumstance, the obligation to properly present that to FERC. [00:36:06] Speaker 03: Your honor, I have no further questions. [00:36:07] Speaker 03: I will almost be within my two minutes. [00:36:13] Speaker 06: All right, thank you. [00:36:14] Speaker 06: I think council for petitioner was out of time. [00:36:19] Speaker 06: We'll give you two minutes. [00:36:23] Speaker 02: Thank you, your honor. [00:36:25] Speaker 02: I just like to focus on one narrow point, if I may. [00:36:28] Speaker 02: And it's as the court has identified the essential [00:36:33] Speaker 02: constructs of the commission's decision on the point about pursuant to the state's implementation of FERC is all it says is that the interconnection agreement here is South Carolina jurisdictional and not FERC jurisdictional. [00:36:49] Speaker 02: And that's the sum total of the FERC decision. [00:36:52] Speaker 02: Council now, as they've made clear, have to defend that by saying that implicitly means it is made pursuant to purpose. [00:37:00] Speaker 02: We've explained reasons why we don't think that's correct. [00:37:03] Speaker 02: But the essential problem with FERC is FERC never said that. [00:37:07] Speaker 02: There's nothing that they can point to in the FERC Commission's decision that actually connects the dots between a finding that it is non-FERC jurisdictional and subject to the Commission's jurisdiction [00:37:18] Speaker 02: with the determination that this fits within what the regulation actually requires, and that is it is made pursuant to the state regulatory's implementation of FERPA. [00:37:30] Speaker 02: And that's the essential gap. [00:37:32] Speaker 02: All of the other issues we're talking about are coming up because FERC never actually answered the question it needed to answer. [00:37:39] Speaker 02: We would submit the straightforward resolution of this case is to recognize that this argument was plainly raised in the re-hearing petition. [00:37:46] Speaker 02: FERC didn't address it, and there should be a remand for FERC to actually address the question that the regulation obligates FERC to answer, and that counsel's argument now that doesn't appear anywhere in the position. [00:37:58] Speaker 04: Just one curiosity before you sit down. [00:38:01] Speaker 04: Why did you not submit your client, submit the interconnection agreement before FERC? [00:38:10] Speaker 02: for a forfer. [00:38:11] Speaker 04: Yeah, it's not in the record. [00:38:14] Speaker 02: That's true, Your Honor. [00:38:15] Speaker 02: And that goes to the point of this, as we had understood, it was a section 205 and 206 proceeding on the comparability principle. [00:38:22] Speaker 02: I agree with everything the court has said that this as that we have to get outside the regulation. [00:38:28] Speaker 02: But our point has all along been that this is no basis for us to be jurisdiction to be stripped. [00:38:35] Speaker 02: And that argument still holds. [00:38:36] Speaker 04: And is the argument my only problem with your argument is the [00:38:40] Speaker 04: Praise all along. [00:38:42] Speaker 02: Sorry, it's the phrase. [00:38:43] Speaker 04: It's the phrase all along. [00:38:45] Speaker 02: All along. [00:38:46] Speaker 04: Meaning you've been raising it all along. [00:38:48] Speaker 02: That's my only problem with your argument. [00:38:50] Speaker 02: Your Honor, just respectfully, we made this argument very clearly, re-hearing petition 352 to 353. [00:38:57] Speaker 02: FERC did not address it. [00:38:59] Speaker 02: There's simply nothing that makes the essential connection between jurisdiction and what the regulation requires. [00:39:05] Speaker 02: And for reasons we've described, we don't think they can make that argument as a substantive matter. [00:39:08] Speaker 02: We don't think that's right. [00:39:09] Speaker 02: But the answer is FERC didn't do it. [00:39:11] Speaker 02: And so council can't defend what FERC did to try to match up to the regulation based on argumentation or analysis that FERC itself never gave. [00:39:21] Speaker 02: Thank you. [00:39:23] Speaker 02: Thank you. [00:39:24] Speaker 02: We'll take the case under advisement.