[00:00:01] Speaker 00: Place number 20-1079 et al. [00:00:03] Speaker 00: New Jersey Board of Public Utilities petitioner versus Federal Energy Regulatory Commission. [00:00:09] Speaker 00: Mr. Scherenbeck for the petitioner, Ms. [00:00:11] Speaker 00: Chu for the respondent, Mr. Townsend for the respondent intervener. [00:00:18] Speaker 07: Mr. Scherenbeck, good morning. [00:00:19] Speaker 07: The floor is yours. [00:00:22] Speaker 06: Good morning, Your Honor, so may it please the court. [00:00:25] Speaker 06: This is a familiar administrative law case. [00:00:27] Speaker 06: An agency didn't meaningfully respond to critical arguments, and it thought its regulations could trump a statutory mandate. [00:00:35] Speaker 06: Those errors require vacater, and here they are particularly troubling, because FERC's failure to engage in reasoned decision-making [00:00:42] Speaker 06: leaves New Jersey ratepayers on the hook for hundreds of millions in costs for a project that was built in substantial part to serve New York, not New Jersey, and which continues to deliver important benefits to New York cost-free. [00:00:56] Speaker 06: I think there are really three distinct errors on review. [00:01:00] Speaker 06: First, in relieving Con Ed of all further cost allocations for the corridor project, FERC mistakenly thought that as long as its decision aligned with one piece of a FERC regulation, [00:01:11] Speaker 06: principle four of order number 1,000, didn't have to ask whether his decision comported with its duty under the Federal Power Act to ensure that rates accord with the cost causation principle. [00:01:21] Speaker 06: Second, FERC's decision to allow Linden to escape cost rested on a flawed premise, namely that by converting its transmission withdrawal rights, Linden gave up important benefits like reliable service and the right to have PJM upgrade the grid to accommodate Linden's needs. [00:01:38] Speaker 06: But that conclusion turns on the failure to meaningfully consider a critical issue. [00:01:43] Speaker 06: By opting for firm point-to-point service at the same time, Lyndon did not give up those benefits. [00:01:50] Speaker 06: And third, this court has held that FERC must consider whether the total effect of its rate decisions adds up to an unjust result, not just the reasonableness of each subsidiary part. [00:01:59] Speaker 06: And here FERC held just the opposite. [00:02:02] Speaker 06: That's so long as each part of its decision was sound, it didn't have to look at that bigger picture. [00:02:06] Speaker 06: which saddles New Jersey with hundreds of millions of costs and that error also separately requires Vacketer. [00:02:12] Speaker 06: So I would begin with Con Ed and the statutory duty is to conduct the cost causation analysis and this court has said and for good self I think is recognized that no one part of order 1000 is sufficient to trump that statutory mandate but if you look now but [00:02:29] Speaker 07: This case is about the imprecision or deviation, whatever you want to call it, from cost causation introduced by principle four of order 1000. [00:02:46] Speaker 07: And this court specifically upheld that in the South Carolina case. [00:02:54] Speaker 07: So to the extent the New York entities are, Con Ed is doing better than it would under pure cost causation, it's just because they're out of zone, their responsibility is limited by their contractual commitments. [00:03:15] Speaker 07: And their contractual commitment was crystal clear that once they get out of the Wheeling agreement, their responsibility ends. [00:03:24] Speaker 06: Yes, your honor. [00:03:25] Speaker 06: And we're not making a general challenge to principle for its soundness as one of the competing principles that must be balanced in a cost causation analysis or a cost allocation analysis. [00:03:35] Speaker 06: It's that here as applied singular attention to that factor was inappropriate and irrational. [00:03:43] Speaker 01: What about the point Judge Cass has made about the contract itself? [00:03:51] Speaker 01: Isn't the contract crystal clear that [00:03:55] Speaker 01: Con Ed has no liability once you stop service. [00:04:01] Speaker 06: It is your honor and we're challenging that like you challenge any tariff provision that's clear, but as applied on just and unreasonable and part of that contract. [00:04:11] Speaker 06: Yes, your honor, but the settlement itself actually made clear that it wouldn't be treated under the sort of extraordinary standards of mobile Sierra doctrine or as kind of anything special other than an ordinary contract that would be subject to just and reasonableness challenge, which is why I think [00:04:29] Speaker 06: FERC didn't lean on the 2009 settlement as anything that required any kind of different sort of analysis here. [00:04:37] Speaker 06: So we're not disputing the 2009 settlement allowed this and taking a step back as to why it is unjust and unreasonable to treat it this way and why principle four doesn't get you all the way there in relieving content of all costs. [00:04:51] Speaker 06: It's that [00:04:52] Speaker 06: Here, the 2009 settlement mandated that PJM build upgrades to serve the con ed wheel. [00:05:00] Speaker 06: And so principle four doesn't really address what do you do when one party is legally compelled to build the upgrades and then for simultaneously gives that other region, the right to exit when it sees the bill and. [00:05:13] Speaker 06: maybe FERC on remand after this court says you have to take another look at it, we'll start to think through how principle four should apply to that unique factual circumstance. [00:05:23] Speaker 06: But it's the one that's teed up here. [00:05:25] Speaker 07: What is unusual about what happened here? [00:05:31] Speaker 07: I mean, we just had a very long argument about stability issues are different from flow issues. [00:05:40] Speaker 07: You can understand that. [00:05:43] Speaker 07: What is different? [00:05:45] Speaker 07: What happened here that makes this something other than just the heartland application, a principle for where the upper bound on liability is what's in the contract? [00:06:07] Speaker 06: One answer is that the settlement legally compelled one region to build projects to serve New York. [00:06:17] Speaker 06: principle four to be talking about, to be imagining voluntary contract. [00:06:23] Speaker 06: And here, of course, the settlement was entered into by all the parties, but it can't immunize for all time and in all circumstances, inequitable distributions of costs. [00:06:34] Speaker 06: And so placing that burden, the compulsion to build the project, and then having a right to unilateral exit, [00:06:40] Speaker 06: That's what, as Con Ed saw fit, that's what really, I think, distinguishes this circumstance. [00:06:48] Speaker 06: Of course, if the corridor project could be abandoned, practically speaking, when Con Ed backed out, that might change the calculus. [00:06:57] Speaker 06: But that's another thing I think FERC would have to look at on remand. [00:07:01] Speaker 06: Here, the corridor project was already well underway when Con Ed terminated. [00:07:07] Speaker 06: And I want to focus on the nature of the error in the decision, because I think it's clear on the face of the order on review. [00:07:15] Speaker 06: that FERC thought so long as principle four was met here, it didn't have to do any other analysis. [00:07:20] Speaker 06: At the top of JA 153 in the rehearing order, it said that principle four required the result of relieving conative costs. [00:07:29] Speaker 06: It talked about benefits to New York as being irrelevant and immaterial at JA 152 and JA 153. [00:07:36] Speaker 06: At the very least, you have to balance all the different principles of order number 1000. [00:07:41] Speaker 06: And we think FERC failed to do that here. [00:07:45] Speaker 06: It also also said it wouldn't hold an evidentiary hearing to even consider those benefits and burdens that New York had imposed and was continuing to benefit from because they were irrelevant and immaterial. [00:07:57] Speaker 07: Yeah, the order does have language to that effect, but fairly read, it has an independent [00:08:07] Speaker 07: One ground is compliance with order 1000 and that's the end of everything. [00:08:16] Speaker 07: But there is another independent strand of reasoning in this order which is [00:08:24] Speaker 07: letting the New York entities out of responsibility is reasonable because they have foregone benefits and seems a little dicey as to Lyndon, but it seems pretty clear as to Con Ed. [00:08:42] Speaker 06: I agree on the benefits side that the Con Ed argument is weaker than the Linden argument. [00:08:49] Speaker 06: But on the burden side, the Con Ed argument is fairly strong. [00:08:54] Speaker 06: And at the very least, the commission didn't grapple with this question. [00:08:57] Speaker 06: I mean, the whole of the commission's analysis as to the extent to which Con Ed led to the creation of the corridor project is confined to a footnote, footnote 85. [00:09:11] Speaker 06: and on page 108 of the JA, and it says, PJM says, the corridor project would have been necessary, even if there were no flows to New York. [00:09:24] Speaker 06: And then without endorsing that analysis at all, it says, so we can't agree that the bulk of costs are being stranded, which I think implies maybe some substantial part other than the bulk is being stranded. [00:09:35] Speaker 01: And that's the end of- Incidentally, Council, FERC made a factual finding here [00:09:41] Speaker 01: did it not that the project would have gone forward without regard to the service into New York? [00:09:51] Speaker 06: Don't read the orders that way, Your Honor. [00:09:53] Speaker 06: I read the orders to allude to PJM's statement that they would have gone forward, but not to make that finding itself. [00:10:02] Speaker 06: At the very least, what FERC didn't do is grapple with PJM's earlier statements that we cite in our complaint and in our brief, saying that the substantial cause of the Corridor Project was these flows to New York, and reconcile that with PJM's change of tune. [00:10:19] Speaker 06: You know, I would say at J 263 PJM had earlier said fault current levels from the con Edison system were a cause. [00:10:28] Speaker 06: of the corridor project. [00:10:30] Speaker 06: And in the other proceeding that you just heard this morning, you have FERC saying, well, it's very difficult to determine who's the cause of a problem like this. [00:10:42] Speaker 06: But you had BJM earlier clear as day saying that the Con Ed system was a reason for it. [00:10:50] Speaker 06: And now you have FERC saying before you, well, we know the Con Ed system wasn't. [00:10:55] Speaker 06: And I don't know how to square all those things together. [00:10:58] Speaker 06: What I do know is you have to take a hard look at this issue if the reason for the corridor project was the Con Edison system and that could be a reason why Con Ed needs to continue to carry costs. [00:11:10] Speaker 06: And I take the FERC's major response here to be that our argument is a collateral attack. [00:11:17] Speaker 06: I think that's wrong for three reasons. [00:11:19] Speaker 06: The first is that [00:11:20] Speaker 06: They didn't raise this collateral attack issue below and basic Chenery principles and this court has applied them directly in the context of the collateral attack doctrine require the commission to raise it. [00:11:30] Speaker 06: The second is that that prior proceeding was distinct. [00:11:33] Speaker 06: It was about whether the content was continuing. [00:11:35] Speaker 06: Ours is on the assumption that it ended. [00:11:38] Speaker 06: And the third is that they were ensuing events [00:11:39] Speaker 06: that made the board take this route. [00:11:42] Speaker 06: Namely, it was not until this complaint was only filed after it was clear that all the costs would not be reallocated from Con Ed to Hunza to Linden, but onto New Jersey ratepayers. [00:11:53] Speaker 07: You can maybe debate whether this is best characterized as [00:12:03] Speaker 07: a collateral attack issue or an administrative issue, preclusion issue, or something else. [00:12:10] Speaker 07: But the fact of the matter is you're attacking your own settlement here. [00:12:17] Speaker 06: And I would point you, Your Honor, to the provision of the settlement. [00:12:21] Speaker 06: I believe it is on JA 618, paragraph 28. [00:12:26] Speaker 06: which says that the just and reasonableness standard is going to govern all future disputes about the terms of the settlement. [00:12:34] Speaker 06: It says mobile Sierra doesn't apply. [00:12:36] Speaker 06: You're not going to treat this like some kind of special contract that deserves some kind of special weight. [00:12:42] Speaker 06: And that the parties can bring challenges under the just and reasonableness standard, which I think is why the commission didn't make any kind of argument about mobile Sierra below. [00:12:51] Speaker 01: No, they did rely on the settlement. [00:12:55] Speaker 06: That's right, your honor. [00:12:57] Speaker 06: And our position is somewhat tautological because the settlement is just integrated into a part of the tariff. [00:13:01] Speaker 06: And it's like when the commission also says, well, the tariff allows Con Ed to escape these costs. [00:13:06] Speaker 06: Well, yes, that begs the question of whether it's unjust and unreasonable to apply the tariff here. [00:13:14] Speaker 06: And if there are no further questions on the Con Ed side. [00:13:17] Speaker 07: Let's move on to Lyndon. [00:13:19] Speaker 06: Yes. [00:13:19] Speaker 06: And we think that the [00:13:23] Speaker 06: The problem with the Linden analysis is that it leaves out an important part of the picture. [00:13:28] Speaker 07: If you consider the- I think you have a strong argument on the merits, but what boy walk me through where you spelled this out in your rehearing motion. [00:13:39] Speaker 06: Yes, your honor. [00:13:40] Speaker 06: So I would point the panel to pages 522 to 524 of the JA. [00:13:47] Speaker 06: That's our rehearing petition itself. [00:13:49] Speaker 06: And I'd say we raised it. [00:13:51] Speaker 06: The commission understood we raised it, which is why they addressed it. [00:13:53] Speaker 01: Why don't you read the point that you're making? [00:13:56] Speaker 06: Absolutely. [00:13:57] Speaker 06: I don't. [00:13:57] Speaker 06: So I understand. [00:13:59] Speaker 06: So what we say. [00:14:03] Speaker 06: I will. [00:14:04] Speaker 06: What they say. [00:14:04] Speaker 01: Let me first say in your brief, you make the point that the agency responded to the notion that you're raising. [00:14:14] Speaker 01: So therefore that's implicitly an indication that you raised it. [00:14:19] Speaker 01: That's not quite logically true. [00:14:21] Speaker 01: What Ferck made was a statement, but it's not a statement that was ever challenged by you, a statement concerning Lyndon. [00:14:32] Speaker 01: But I didn't see that, making the same point my colleague is, I didn't see where you challenge the inner relationship between the point-to-point concept and payment and the withdrawal. [00:14:50] Speaker 06: Yes, your honor. [00:14:51] Speaker 06: So I think we have three answers. [00:14:53] Speaker 06: And again, it's the specific language, the fact that the commission understood that we raised it. [00:14:57] Speaker 06: Please read, please read. [00:15:00] Speaker 06: And I will. [00:15:00] Speaker 01: I don't see that. [00:15:01] Speaker 01: I don't see the commission's response as an indication that they understood you raised it. [00:15:07] Speaker 01: They just made that statement. [00:15:09] Speaker 01: Now, where did you where did you actually raise it? [00:15:12] Speaker 06: Yes, your honor. [00:15:12] Speaker 06: So what we say, and this at first on page 522, we talk about New York ISO statements about continued transmission reliability and resource adequacy benefits. [00:15:25] Speaker 06: at 523 and 524. [00:15:27] Speaker 06: We say New York ISO has even acknowledged that amendment of the ISAs, that's the contracts that issue here for Lyndon and the continued connection to PJM does not limit New York from receiving reliability and capacity benefits via merchant tie lines like Lyndon. [00:15:45] Speaker 01: Yes, but that doesn't go to your much more sophisticated arguments that you make in your brief concerning the interrelationship between the point [00:15:55] Speaker 01: and the withdrawal. [00:15:57] Speaker 01: You make the argument in the brief that the change from firm to non-firm withdrawal in light of the point was really irrelevant in terms of benefits. [00:16:13] Speaker 01: I didn't see that in the rehearing and I certainly didn't see it in the FERC's response to your rehearing. [00:16:21] Speaker 06: So what I would say, Your Honor, is when we're talking about the acknowledged continued reliability and capacity benefits, that is this argument about point-to-point service. [00:16:34] Speaker 06: And then that's where I would transfer Your Honor's attention, if I could, to the order itself on rehearing, where the commission understood what we meant and then specifically addressed it in this context. [00:16:45] Speaker 06: Now remember, we're the only party that filed for rehearing. [00:16:50] Speaker 06: the commission is responding to the board's arguments. [00:16:53] Speaker 06: And it said, the commission explained that merchant transmission facilities with non-firm TWRs do not receive the same service and benefits because PJM can curtail or interrupt the withdrawal service for liability and economic reasons. [00:17:06] Speaker 07: Irrespective- What page are you reading from? [00:17:09] Speaker 06: J 151, your honor. [00:17:10] Speaker 06: It's paragraph 13. [00:17:12] Speaker 06: It's in that second sentence. [00:17:15] Speaker 06: Irrespective of the priority, [00:17:17] Speaker 06: of any upstream firm transmission service, right? [00:17:21] Speaker 06: So that's upstream firm transmission service. [00:17:24] Speaker 01: That's exactly what we're talking about. [00:17:26] Speaker 01: They made a statement, but it's one that you did not challenge with the rather elegant argument you put in before us. [00:17:38] Speaker 06: Well, I appreciate the compliment, your honor, but I think that I respectfully disagree about what was before the commission and that the commission understood the argument to be made. [00:17:47] Speaker 06: Because if you then go down to footnote 25, which is the footnote that follows this allusion to firm transmission service, you'll see the commission is saying the possibility of Hudson and Linden receiving capacity benefits from New York ISO [00:18:05] Speaker 06: is outside the scope of this complaint. [00:18:07] Speaker 06: That's the argument we're making on 522 and 524, that you have to look [00:18:13] Speaker 06: at the capacity and reliability benefits that Lyndon is still getting through New York ISO. [00:18:20] Speaker 06: And even if your honor thought, look, they didn't say point to point exactly. [00:18:24] Speaker 06: So I'm going to close my eyes to point to point. [00:18:27] Speaker 06: If that's where you were, I wouldn't go there. [00:18:29] Speaker 06: You'd have to agree that what we raised was the fact that Lyndon can continue to sell capacity in New York ISO. [00:18:36] Speaker 06: And the commission said, [00:18:38] Speaker 06: We don't have to look at that at all because that has to do with New York ISO's tariff. [00:18:43] Speaker 06: And I would submit your honor, that's irrational because an MTF exists between two markets. [00:18:49] Speaker 06: And to close your eyes in a cost causation analysis to the selling market altogether is to ignore a really critical piece of the cost causation analysis. [00:18:59] Speaker 01: So even if you thought that- Let's assume that you hadn't even made that argument that you make before us. [00:19:08] Speaker 01: And [00:19:08] Speaker 01: FERC was operating on the assumption that non-firm withdrawal was different because PMJ could reduce the withdrawal at any time. [00:19:25] Speaker 01: That could still allow Lyndon to sell in the capacity market, right? [00:19:34] Speaker 01: We don't know about that. [00:19:35] Speaker 01: That's a question for New York. [00:19:38] Speaker 06: hypothetically, but it's the why, it's the why that really gets you there. [00:19:43] Speaker 01: And if you look at page 1042, in other words, one of my question is, that could have been true, even under your, even if your argument hadn't been made. [00:19:53] Speaker 01: In other words, it trends on the rules and the capacity mark. [00:19:57] Speaker 01: And even if, for instance, Lyndon was not totally reliable, because its withdrawal rights could be [00:20:07] Speaker 01: curtailed at a certain time, that still might decide, New York might decide, it's still worthwhile to take them into the capacity market. [00:20:17] Speaker 01: So it doesn't follow necessarily that those are inconsistent. [00:20:22] Speaker 06: I would say two things, Your Honor. [00:20:24] Speaker 06: One is that, yes, of course, it depends on the structure of the New York ISO market, but if you're looking at the benefits that Lyndon receives from these rights, that to close your eyes totally to the benefits they receive in the New York ISO market is unjustified, or at least unexplained here. [00:20:39] Speaker 06: And then second, if you look at the why New York ISO agrees that they can continue to sell capacity into the New York market, [00:20:48] Speaker 06: you'll see it's because everything the commission said about the effects of conversion are wrong. [00:20:55] Speaker 06: And I just want to point you again to J-151 and that footnote 25, the independent power producers case that they're citing in direct response to the board's argument. [00:21:06] Speaker 06: In that proceeding, New York ISO says clear as day that conversion by Linden doesn't affect the reliability of the service they receive. [00:21:16] Speaker 01: That's- Let me ask you a practical question. [00:21:20] Speaker 01: If the decision had been contrary [00:21:26] Speaker 01: to the decision that FERC made and Linden was, the cost to Linden overwhelmed its revenue. [00:21:39] Speaker 01: Wouldn't Linden have been bankrupt almost immediately? [00:21:43] Speaker 06: That may be right, your honor, although, you know, whether Lyndon can continue as a going concern sort of, it might just be that they can no longer buy really cheap power and sell it into New York. [00:21:54] Speaker 06: I mean, that's, you know, sometimes you are a market participant and things don't work out, but that would be their argument as to the measure of cost allocations. [00:22:02] Speaker 01: I recognize that's the real world, real people rather than a legal argument. [00:22:08] Speaker 01: But I was wondering, you know, [00:22:12] Speaker 01: putting this cost on Lyndon would be like trying to get water out of a stone. [00:22:19] Speaker 06: Well, they really look, it depends on how badly New York wants this power, I suppose, and what Lyndon's actual contracts say. [00:22:26] Speaker 06: Because if the costs of buying the power in New Jersey go up, but New York still really wants this power, because there's a voracious desire for power, well then, you know, maybe those contracts will be negotiated and Lyndon will keep going. [00:22:38] Speaker 01: Is this a relevant consideration at all? [00:22:40] Speaker 06: I think it would be. [00:22:42] Speaker 01: Lyndon would have gone broke pretty quickly. [00:22:44] Speaker 06: I think, Your Honor, it would be relevant potentially to the measure of costs that Lyndon is going to bear, but not whether converting its rights is an on-off switch for those costs. [00:22:58] Speaker 02: Sure, Matt. [00:22:58] Speaker 02: Can I ask you another question on the maybe it's more to the merits of your loophole argument? [00:23:04] Speaker 02: FERC suggests that [00:23:06] Speaker 02: for point-to-point transmission, there are some baked-in costs of upgrades. [00:23:11] Speaker 02: So by, you know, so when Lyndon makes these point-to-point contracts, they are in fact contributing to the cost of upgrades through, you know, through those. [00:23:22] Speaker 02: So maybe, you know, if you could respond to that. [00:23:25] Speaker 06: Absolutely. [00:23:26] Speaker 06: I think FERC and the interveners pointed to other kinds of costs rather than the transmission enhancement charges that we're actually debating here. [00:23:36] Speaker 06: And we think they're both distinguishable. [00:23:39] Speaker 06: There's the upfront costs that a merchant like Lyndon pays when they interconnect to the grid. [00:23:45] Speaker 06: I would point you to opinion 503 at J733. [00:23:50] Speaker 06: Which distinguishes those upfront costs from the sort of ongoing costs that one has to pay to ensure reliable service in the regional plan process. [00:23:59] Speaker 06: And then as to the border rate, which is the rate attendant to point to point service that rate. [00:24:06] Speaker 06: bakes in a kind of generalized cost sharing of regional plan upgrade costs across the whole grid. [00:24:13] Speaker 06: So a utility in Ohio would be paying some fraction of the share of the cost of the Oregon corridor project because, well, you know, the grid is generally mutually beneficial. [00:24:26] Speaker 06: But what it doesn't do is allocate any of those direct costs [00:24:29] Speaker 06: And so it's to say they're paying some fraction of these costs through the border rate, a tenant to point-to-point service just isn't directly responsive to whether they should pay a share of the direct costs as a direct beneficiary. [00:24:43] Speaker 02: And so is it, I mean, just as a, just so I understand the baked in cost, what you're saying is, is a very small percentage compared to what the direct costs would be to pay for that. [00:24:54] Speaker 06: Yes, your honor, because it's distributed across the whole grid. [00:24:58] Speaker 06: Everybody in PJM, I should say, then it's just a fraction of the cost they would pay if they're being analyzed as a direct beneficiary of the project because their flows go right over it. [00:25:12] Speaker 06: And so, you know, and in fact, I'll just point you to there's also an illusion, I think, by interveners to an ongoing proceeding that covers the point to point service. [00:25:21] Speaker 06: And they say, well, look, if you have a debate about [00:25:24] Speaker 06: paying more, go take it down that line in the point to point service proceeding. [00:25:28] Speaker 06: But in that very proceeding, I'll point you to 177 FERC 63027. [00:25:34] Speaker 06: The ALJ has determined that transmission enhancement charges, that is the exact same thing we're talking about here, are outside the scope there. [00:25:44] Speaker 06: And so there's a bit of like a shell game going on where every single proceeding where the board raises these objections, FERC determines it's not the appropriate place to raise them, which is why we brought a holistic challenge to try to get at the totality of this question, which is the stranding of costs in New Jersey. [00:26:06] Speaker 06: If there are no further questions, I'll save what time I have for rebuttal. [00:26:10] Speaker 07: Trav? [00:26:11] Speaker 07: Judge Silberman? [00:26:12] Speaker 07: No questions. [00:26:13] Speaker 07: We'll give you a few minutes. [00:26:14] Speaker 07: Thank you. [00:26:14] Speaker 07: Thank you. [00:26:15] Speaker 07: Miss Chu. [00:26:20] Speaker 03: May it please the court, Susanna Chu for the commission. [00:26:25] Speaker 03: Judge Katsas, Judge Silverman, you're exactly right that this case is about contract principles. [00:26:31] Speaker 03: When you make a comment that the commission is not just [00:26:35] Speaker 03: taking a narrow view of order 1000 here, the commission actually did take a holistic view of what was happening here after the parties that challenged the cost allocation in the first case decided to exercise their contract rights and surrender firm transmission rights that had been the triggers for the cost allocation. [00:26:59] Speaker 07: Well, the contract point is very powerful to you [00:27:04] Speaker 07: on Con Ed, but I don't see how it moves the needle on Linden because one of the orders that we have before us is one in which FERC changed the underlying contract commitments to allow them to convert from firm and on-firm withdrawal, which may be a perfectly fine thing to do, but it just means you can't [00:27:33] Speaker 07: You can't assess the reasonableness of what's going on here just by saying, well, look at the antecedent contracts. [00:27:44] Speaker 01: A couple of points to that, Your Honor. [00:27:46] Speaker 01: Go ahead. [00:27:47] Speaker 01: I have a point I would like to make in connection with that. [00:27:51] Speaker 01: Go ahead and answer Judge Katz's question. [00:27:54] Speaker 03: Right, so the underlying form contract, the commission determined there that it would not be just and reasonable to hold Lyndon, to require it to continue to pay for service that it no longer wanted. [00:28:08] Speaker 03: This is a market, and here, these are business entities making judgments on a daily basis. [00:28:17] Speaker 03: And here, the commission held that [00:28:20] Speaker 03: it's not just unreasonable to hold a business to require it to continue to pay for a service that it considered to be too expensive. [00:28:29] Speaker 03: Now it's also important to remember that New Jersey Board of Public Utilities did not actually challenge that conversion. [00:28:36] Speaker 01: They did- Yes, your point, that's the point I was about to get. [00:28:40] Speaker 01: You claimed in your brief that that was not legitimately before us because you made a separate decision to allow [00:28:50] Speaker 01: the shift from firm to non-firm, and the petitioner never appealed. [00:29:00] Speaker 03: Right, Your Honor. [00:29:00] Speaker 03: In our brief, we did discuss that. [00:29:03] Speaker 01: What FERC seems to do is slice these cases up into little, very sliced now slices of salami, and nobody knows [00:29:14] Speaker 01: what the overall complications are. [00:29:17] Speaker 01: Is that a strategy on the part of FERC to make it? [00:29:19] Speaker 03: No, of course not, Your Honor. [00:29:21] Speaker 03: It's not a shell game. [00:29:22] Speaker 03: We're not slicing up these cases. [00:29:24] Speaker 03: This was an extraordinarily complex set of cases, of course, dating back to 2015 or even earlier. [00:29:31] Speaker 01: But when you made the decision to allow Lyndon to switch from firm to non-firm, was it your view that the implications on that [00:29:43] Speaker 01: for cost were all before everybody and therefore implicitly suggesting petitioners should have complained then if they had this objection. [00:29:57] Speaker 03: Yes, your honor, that is right. [00:29:59] Speaker 03: The commission made the decision to allow the conversions in the orders underlying the petitions in case numbers 20-1080 and 20-1081. [00:30:12] Speaker 03: The New Jersey Board of Public Utilities in its request for rehearing is just generally challenging the outcome, the fairness. [00:30:21] Speaker 03: They don't like the outcome. [00:30:24] Speaker 03: And the commission has considered throughout all of these proceedings and in the orders on review here, the actual outcome of these market rules. [00:30:37] Speaker 03: At the end of the day, the commission concluded that it was not unjust and unreasonable after the New York entities had already paid some significant amounts towards these upgrades. [00:30:49] Speaker 03: It was not unjust and unreasonable for New Jersey to bear the costs for upgrades that PJM had decided were needed. [00:30:57] Speaker 03: And they are necessary whether or not there were flows over these transmission lines to New York. [00:31:04] Speaker 01: My understanding of petition's position is [00:31:07] Speaker 01: They didn't object to the change from firm withdrawal to non-firm withdrawal because the cost implications were not obvious at that point. [00:31:19] Speaker 01: Is that correct? [00:31:23] Speaker 03: I think that maybe, I'm not exactly sure when petitioners believe that the cost implications were obvious, but in the commission's view, the cost implications were actually obvious years ago. [00:31:35] Speaker 03: Going back to the settlement agreement between Con Edison and New Jersey. [00:31:45] Speaker 01: You're not taking the position that there's collateral estoppel here. [00:31:51] Speaker 01: We actually do, Your Honor. [00:31:54] Speaker 01: This is an unfair collateral attack. [00:31:57] Speaker 01: Are you taking that position? [00:31:59] Speaker 03: We do actually believe it is an unfair collateral attack. [00:32:02] Speaker 03: I mean, of course we rest on the fact that the outcome here is just and reasonable. [00:32:05] Speaker 03: And the commission did make factual findings on this. [00:32:09] Speaker 03: As your honor was pointing out, the factual findings that these upgrades were required, they were needed in PJM, regardless of flows to New York. [00:32:17] Speaker 03: But yes, we are also making the collateral attack argument because this case does not arise in a vacuum. [00:32:25] Speaker 03: It arises against a whole series of orders [00:32:29] Speaker 03: addressing these contracts. [00:32:34] Speaker 01: There's a real problem that we've seen with respect to whether petitioner has legitimately raised before the agency in a rehearing petition, the rather interesting and persuasive argument they make before us. [00:32:53] Speaker 01: But let me ask you about the merits on that. [00:32:56] Speaker 01: Is it fair to say that the shift from [00:32:59] Speaker 01: firm to non-firm given the obligations on point to point and the benefits from point to point is really an illusion. [00:33:13] Speaker 01: That is to say the notion that with a non-firm withdrawal arrangement, Lyndon is really prejudiced in a position they would be in [00:33:29] Speaker 01: not being in a firm withdrawal, they make the argument just that with the point to point, it doesn't really matter. [00:33:40] Speaker 01: What's the answer to that? [00:33:43] Speaker 03: Well, so two things, your honor. [00:33:45] Speaker 03: Yes. [00:33:47] Speaker 03: First of all, the argument absolutely is waived. [00:33:49] Speaker 03: It's raised nowhere in New Jersey's hearing request. [00:33:53] Speaker 01: But on the merits. [00:33:54] Speaker 01: Indulge us. [00:33:55] Speaker 01: On the merits. [00:33:56] Speaker 01: Yeah, let's discuss it on the merits. [00:33:58] Speaker 03: Yeah. [00:33:59] Speaker 03: Yes, your honor. [00:34:00] Speaker 03: So on the merits, the commission did find that [00:34:08] Speaker 03: There is a difference between firm and non-firm withdrawals. [00:34:12] Speaker 03: PJM no longer has to plan for these megawatts going over its lines to Lyndon Hudson and Con Edison. [00:34:20] Speaker 03: These are, you know, they relinquish, Lyndon relinquished valuable rights in this case. [00:34:28] Speaker 03: The commission also found- I don't understand. [00:34:30] Speaker 01: I don't understand why PMJ no longer has to plan if in fact, [00:34:37] Speaker 01: the non-firm withdrawal rights give Lyndon everything they really had before. [00:34:43] Speaker 01: It's just a change of insignificance. [00:34:47] Speaker 01: Then why wouldn't PMJ have to plan for it? [00:34:50] Speaker 03: Well, the commission actually found that it does not give Lyndon everything that it had before because PJM can actually curtail those flows as needed. [00:35:01] Speaker 03: They can interrupt those flows. [00:35:03] Speaker 03: And the commission absolutely did find that [00:35:07] Speaker 03: And actually the independent power producers case that Mr Sharon back has referred to the commission did find that it is, it is the New York system operators decision, how to treat the power flows that are moving from New Jersey into New York, but FERC. [00:35:26] Speaker 03: from its perspective, the power flows, the withdrawal rights are not the same. [00:35:31] Speaker 03: And also, the commission did find that for this point-to-point service, Lyndon, Hudson, and other parties, they do pay a share of PJM upgrade costs as part of that. [00:35:45] Speaker 03: And that's in the complaint order at paragraph 57, JA111. [00:35:50] Speaker 01: Incidentally, Council, what's the status of Hudson in this case? [00:35:53] Speaker 01: Are they on appeal? [00:35:55] Speaker 01: Are they here before us? [00:35:57] Speaker 01: It's a little puzzling. [00:35:59] Speaker 03: I understand the question, Your Honor. [00:36:01] Speaker 03: Mr. Townsend will speak on behalf of Hudson, but our position is that New Jersey has waived all its arguments against Hudson. [00:36:11] Speaker 03: It has barely made any arguments about it throughout the opening brief. [00:36:15] Speaker 03: The brief seems to challenge Con Edison and Lyndon's lack of cost responsibility. [00:36:22] Speaker 03: Barely mentions anything about Hudson, except in a general way, the overall cost allocation. [00:36:28] Speaker 03: That's how we understand it. [00:36:31] Speaker 07: So can I ask you about the independent power order? [00:36:37] Speaker 07: Yes, Your Honor, of course. [00:36:38] Speaker 07: It seems a little bit hard to parse. [00:36:45] Speaker 07: Because on the one hand, FERC does repeat this point that if you have non-firm withdrawal rights, those can be curtailed regardless of priority of the upstream transmission point to point [00:37:14] Speaker 07: rights. [00:37:18] Speaker 07: But on the other hand, the New York ISO, its argument is not, gosh, these rights have been degraded in New Jersey, but they're good enough for us to allow the company into the capacity argument. [00:37:38] Speaker 07: That is not into the capacity market. [00:37:41] Speaker 07: That is not what they say. [00:37:43] Speaker 07: What they say is that the combination of firm point-to-point service and non-firm withdrawal rights is the same as having firm withdrawal rights. [00:38:01] Speaker 07: And FERC embraces that at least to the extent of saying it's reasonable enough to [00:38:11] Speaker 07: uphold their decision. [00:38:17] Speaker 03: Right, Your Honor. [00:38:18] Speaker 03: So I think you're looking at this decision. [00:38:21] Speaker 03: At JA 1051, the Commission discusses this. [00:38:29] Speaker 03: I think that the bottom line is that it is New York's decision, the system operator's decision, as to what level of [00:38:38] Speaker 03: firm transmission right is sufficient to be considered capacity in its market, but the Commission also says that we correctly previously recognized that non-firm transmission withdrawal rights can be curtailed. [00:38:54] Speaker 03: They can be curtailed [00:38:57] Speaker 03: before a firm transmission withdrawal can be curtailed. [00:39:02] Speaker 07: Which is to say that the Commission disagrees with New York's position that point to point, and now I'm just quoting from FERC's summary of New York's position, [00:39:20] Speaker 07: the New York ISOs position at 1042, you say their position is that what Lyndon now has is no different than long term firm transmission reservations which could only be curtailed as a result of a level five event. [00:39:38] Speaker 03: Yes, I see that your honor but that's, that's where the commission is just reciting the New York system operators opinion. [00:39:45] Speaker 03: So the commission's opinion is really then the discussion. [00:39:50] Speaker 07: Are you accepting that or not. [00:39:52] Speaker 03: And we are accepting it as the New York system operator saying it's adequate for its purposes. [00:39:59] Speaker 03: And this actually does lead to the border rate litigation that Mr. Scherenbeck mentioned. [00:40:06] Speaker 07: I keep interrupting you, but I'm just having real trouble with this because their theory for why it is sufficient for their purposes is that it's just as good as what Lyndon had before. [00:40:24] Speaker 03: Right. [00:40:24] Speaker 03: I think that their position is that because the firm point to point is it's firm, the transmission service within PJM is firm. [00:40:37] Speaker 03: Even if the withdrawal right is not firm, that's sufficient for New York's purposes. [00:40:42] Speaker 03: And that's really an answer for New York to provide, for the system operator to provide. [00:40:48] Speaker 01: They have decided it's sufficient. [00:40:50] Speaker 01: Excuse me, counsel. [00:40:52] Speaker 01: Is your response [00:40:54] Speaker 01: that New York simply thought this was good enough. [00:40:59] Speaker 01: It didn't for capacity market. [00:41:04] Speaker 01: And FERC affirmed that as a legitimate judgment. [00:41:10] Speaker 01: Yes, Your Honor, exactly. [00:41:12] Speaker 01: But it may be good enough for the capacity market, but not necessarily perfect. [00:41:20] Speaker 01: That it could be curtailed. [00:41:24] Speaker 01: So did you ever say that New York was correct to say firm withdrawal and non-firm withdrawal were equivalent? [00:41:40] Speaker 01: Did New York say that? [00:41:42] Speaker 01: And did you approve that? [00:41:46] Speaker 03: Do you understand my question? [00:41:48] Speaker 03: I believe I do, Your Honor. [00:41:49] Speaker 03: And I think you're exactly right, if I understand you correctly. [00:41:55] Speaker 03: You're right that New York never said that a firm transmission withdrawal right is the same as a non-firm withdrawal right. [00:42:05] Speaker 03: But it did say that combined with the firm point-to-point service that was adequate for purposes of the New York system operator. [00:42:16] Speaker 03: And the commission did find that that's a legitimate judgment for the New York system operator to make. [00:42:23] Speaker 01: Have I answered your question, Your Honor? [00:42:25] Speaker 01: I think so. [00:42:27] Speaker 01: How important was it to FERC that Lyndon would have gone broke pretty quickly if you imposed the costs that Perditioner wanted? [00:42:41] Speaker 03: I think that must have factored into [00:42:44] Speaker 03: the decision, Your Honor. [00:42:46] Speaker 03: But really, the commission's conclusions here are based on the operation of the contracts and of the Order 1000 principles. [00:42:56] Speaker 01: The contract, as my colleague Judge Katz has pointed out, is really relevant vis-a-vis Con Ed, not so much Lyndon. [00:43:08] Speaker 03: Right? [00:43:09] Speaker 03: Right, Your Honor. [00:43:10] Speaker 03: But in addition, I've only [00:43:14] Speaker 03: touched on it briefly here but we briefed it, there are prior orders of the commission that basically spelled out what would happen if New York entities relinquish these rights, and we discussed it in a brief but it's the 2017 Joint Operating Order and the 2019 Rehearing Order. [00:43:35] Speaker 03: in which we discussed the impact of Con Edison leaving the transmission service agreements. [00:43:44] Speaker 03: And it's also, it's opinion 503, which was cited in the orders where the commission found that, this is actually going back to 2009, that if a merchant transmission facility converts from firm to non-firm, [00:44:02] Speaker 03: that they would no longer be responsible for these transmission upgrades in PJM. [00:44:08] Speaker 03: So all in all, the commission here was looking at everything that had happened before and in the course of this case. [00:44:21] Speaker 03: And it did conclude at the end of the day, Judge Silverman, you were right, that the commission made the finding that [00:44:27] Speaker 03: PJM had determined that these upgrades needed to be built. [00:44:33] Speaker 03: It was absolutely critical for reliability that they be built. [00:44:37] Speaker 03: I know Mr. Scherenbeck actually referred to a page in the joint appendix to talk about how fault currents from New York may have caused the short circuits that JA 263, but that's, I believe, just a page in New Jersey board's complaint. [00:44:55] Speaker 03: The commission never made that finding. [00:44:59] Speaker 03: Now there's one last thing I'd like to touch on. [00:45:01] Speaker 03: I believe Mr. Townsend may speak more about this, but regarding the firm point-to-point service, the argument has been waived. [00:45:09] Speaker 03: However, that rate that has been discussed, the border rate, that actually is subject to a pending proceeding before FERC. [00:45:20] Speaker 03: There has been a settlement that was certified by an administrative law judge in December of 2017, under which the rates to [00:45:28] Speaker 03: Linden and Hudson would actually increase. [00:45:32] Speaker 03: Certainly Linden, possibly Hudson as well. [00:45:35] Speaker 03: The rates for that point-to-point service will increase. [00:45:37] Speaker 03: And that was a negotiated settlement between transmission owners and Linden and Hudson. [00:45:44] Speaker 07: And does that encompass the kind of tech transmission enhancement charges that we're talking about? [00:45:53] Speaker 03: It does. [00:45:53] Speaker 07: It does include some for different categories of costs. [00:45:57] Speaker 03: Right, your honor, it does it does incorporate these transmission enhancement charges, not to the extent that perhaps not to the extent that New Jersey. [00:46:07] Speaker 07: No, but it's a it's a category of it's a you it's a category of costs that you think is that issue in that proceeding. [00:46:14] Speaker 03: My understanding is that it is. [00:46:16] Speaker 03: I do want to caveat that the settlement has not yet been approved by the commission, so the commission hasn't spoken to it. [00:46:23] Speaker 03: But my understanding is the parties, at least the New York parties, view those costs as being part of that border rate. [00:46:31] Speaker 03: Judge Rao? [00:46:33] Speaker 01: I'm getting the impression these FERC decisions in these cases are like a Faulkner novel. [00:46:39] Speaker 01: They're just going on and on and on and on with the occasional [00:46:43] Speaker 01: orders being issued on which parties have to appeal, and you never put together the whole thing in one proceeding. [00:46:55] Speaker 01: And then you end up with different panels of the Court of Appeals deciding different parts of this. [00:47:01] Speaker 01: This is what I meant earlier when I said you seem to be slicing the salami very thin. [00:47:07] Speaker 07: Larry, you don't want this appeal to get bigger, do you? [00:47:14] Speaker 01: It's a good question. [00:47:15] Speaker 01: I think what happens is the same issue comes up in such a different, in such a minor different way. [00:47:24] Speaker 01: So it's not technically the same issue, but it's the same basic problem. [00:47:32] Speaker 07: Any further questions from my colleagues? [00:47:36] Speaker 07: No. [00:47:36] Speaker 07: Thank you, Ms. [00:47:37] Speaker 07: Chu. [00:47:40] Speaker 07: Mr. Townsend. [00:47:41] Speaker 05: Last but not least. [00:47:43] Speaker 05: Thank you, your honor, and may it please the court. [00:47:45] Speaker 05: I'll begin with where we just ended on the border raid proceeding. [00:47:49] Speaker 05: There is a separate proceeding in which all of the parties here are participants, and there is a certified settlement. [00:47:56] Speaker 05: And the border raid goes up 300% for the merchant transmission facility. [00:48:01] Speaker 05: So it's a very significant increase under the certified uncontested settlement. [00:48:06] Speaker 05: And that increase pays for, 100% of it pays for, [00:48:10] Speaker 05: regional plan costs, including the border rate. [00:48:14] Speaker 05: So it is simply not true that Lyndon is not paying for the cargo project. [00:48:19] Speaker 01: How much cost are they paying compared to their revenue? [00:48:24] Speaker 05: That, Your Honor, I don't know the dollar amount. [00:48:26] Speaker 05: I know it goes up 300% over what it was. [00:48:29] Speaker 05: And so it's quite a substantial increase. [00:48:32] Speaker 05: And at the end of a seven year period, it's much higher than that as well. [00:48:37] Speaker 05: And that was specifically put forward by the transmission owners [00:48:40] Speaker 05: after the merchant facilities gave up their firm transmission withdrawal rights, specifically to capture the cost of the corridor project and other regional plan projects. [00:48:52] Speaker 05: So this isn't a loophole. [00:48:54] Speaker 05: In fact, this was specifically identified in opinion 503 back in 2009. [00:48:59] Speaker 05: I point to the court to footnote seven of opinion 503. [00:49:06] Speaker 05: It's at page JA722. [00:49:08] Speaker 05: And it specifically says, [00:49:10] Speaker 05: Merchant transmission facilities can give up their firm transmission withdrawal rights and separately take firm point-to-point service if they pay for it. [00:49:20] Speaker 05: And Lyndon is paying for it through the border rate. [00:49:23] Speaker 05: So if the court reaches the merits of the issue, that would be the answer. [00:49:29] Speaker 05: We don't think the court gets to the merits because of the jurisdictional bar. [00:49:32] Speaker 02: So Mr Townsend, is it your view basically that the settlement is to the extent there's a loophole, the settlement is closing up that loophole. [00:49:42] Speaker 05: Your honor, I wouldn't I wouldn't agree that it's a loophole. [00:49:45] Speaker 05: This is something that has been identified since 2009 that that merchant facilities can take different services if they'd like, as long as they pay for them. [00:49:54] Speaker 05: So it isn't a loophole. [00:49:56] Speaker 05: But to the extent [00:49:57] Speaker 05: Transmission owners think that there isn't, there's an underpayment. [00:50:01] Speaker 05: They are getting those costs through the border rate. [00:50:04] Speaker 01: And yes. [00:50:05] Speaker 01: Council may ask a question. [00:50:07] Speaker 01: How long has it been since, in time, since the FERC order that's being appealed here that gave you the, whereby you switch or maybe even the earlier order, when you switch from a firm withdrawal to non-firm withdrawal, how much time has there been? [00:50:27] Speaker 05: It was in December of 2017 that the merchant facilities gave up their firm transmission withdrawal rights. [00:50:36] Speaker 01: Has there ever been an occasion where your withdrawal rights have been curtailed? [00:50:44] Speaker 05: I don't know if actually there has been an occasion. [00:50:51] Speaker 05: That would be up to PJM because the merchant facilities are also up to you. [00:50:57] Speaker 01: You know about it, of course, wouldn't you? [00:51:00] Speaker 01: My question is what goes to the proposition that the change from firm to non-firm is an illusion. [00:51:11] Speaker 05: Well, so two points, Your Honor, with respect to Hudson, Hudson has only non-firm rights, non-firm transmission. [00:51:19] Speaker 01: Hudson before us. [00:51:22] Speaker 05: We think that New Jersey has waived its challenge with respect to Hudson. [00:51:25] Speaker 05: It has not identified any issues with respect to the Hudson order, so. [00:51:29] Speaker 01: Yes, I think you're right about that. [00:51:31] Speaker 01: So I don't see why you're even talking about Hudson. [00:51:35] Speaker 05: Only because they're differently situated. [00:51:36] Speaker 05: I'll go to Lyndon. [00:51:39] Speaker 01: Just ask about Lyndon. [00:51:40] Speaker 05: With respect to Lyndon, there is this argument that there's a pairing of non-firm and non-firm. [00:51:46] Speaker 01: Has there ever been a circumstances where the withdrawal rights were curtailed? [00:51:51] Speaker 05: I am not aware of a circumstance like that. [00:51:55] Speaker 05: That would be up to PJM because PJM controls Lyndon. [00:52:00] Speaker 05: And so, Lyndon is a control. [00:52:02] Speaker 01: Also, if it's up to Lyndon, you're representing Lyndon, so you would know, wouldn't you? [00:52:07] Speaker 05: Well, there's nothing in the record to talk about the factual history, Your Honor, but I would just say that it's PJM that controls Lyndon and whether service is curtailed over Lyndon. [00:52:20] Speaker 05: If PJ, if there's an emergency, a blackout, Lyndon would have the ability to control, I'm sorry, PJM would have the ability to control the Lyndon facility. [00:52:29] Speaker 05: Whether that's happened since 2017, I'm sorry, I couldn't tell your honor whether that's happened, but it could happen. [00:52:37] Speaker 01: You make a good point, it's not part of the record, but I was just curious. [00:52:42] Speaker 05: Yes, and so again, [00:52:45] Speaker 05: If the court reaches the merits, I think opinion 503 and the border rate completely answer the objection here. [00:52:53] Speaker 05: Again, I would just say with respect to the jurisdictional issue, there were two paragraphs in the complaint order that discuss New Jersey's pairing argument, paragraphs 58 and 59. [00:53:06] Speaker 05: You will find those paragraphs mentioned nowhere in Lyndon in New Jersey's rehearing petition. [00:53:11] Speaker 05: They're never cited. [00:53:12] Speaker 05: Other paragraphs around it are cited, not these paragraphs. [00:53:15] Speaker 05: New Jersey did not press this argument on hearing. [00:53:18] Speaker 05: So we think there's a jurisdictional bar. [00:53:22] Speaker 05: Just very briefly with respect to, with Con Edison, the court has recognized that there are very clear contractual rights here that Con Ed exercised. [00:53:31] Speaker 05: New Jersey agreed to them back in 2009. [00:53:34] Speaker 05: Con Ed is not liable for cost allocations after its term of service. [00:53:39] Speaker 05: And its term of service naturally expired [00:53:42] Speaker 05: in April of 2017. [00:53:44] Speaker 05: There is under clear language of the contract, there is no further cost allocation. [00:53:51] Speaker 05: And Con Ed is not a customer of PJM today. [00:53:55] Speaker 05: With respect to the New York ISO, it had never agreed to pay for costs, a regional plan cost in PJM, and it had no notice that it might be liable for the cost of the corridor project. [00:54:07] Speaker 05: An involuntary allocation here to another region [00:54:11] Speaker 05: would be unprecedented. [00:54:13] Speaker 05: And it would be contrary to principle four of order 1000. [00:54:19] Speaker 05: And it's certainly not supported on the record here because the record shows that this project would have been needed to fix a New Jersey problem, regardless of power flows to New York. [00:54:30] Speaker 05: And I specifically direct the court to pages 460 to 465 of the joint appendix. [00:54:37] Speaker 05: PJM put in [00:54:38] Speaker 05: very detailed evidence showing that this project would be needed, regardless of any power flows to New York, even if those flows were zero, this project would have been needed. [00:54:48] Speaker 05: And so there is just no record here. [00:54:51] Speaker 05: And New Jersey put in no evidence to the contrary. [00:54:53] Speaker 05: There's no record that would support an involuntary allocation to another region. [00:54:58] Speaker 07: And so, yes, your honor, or just back to Lyndon for a minute. [00:55:05] Speaker 07: So you would you agree with FERC's current position, which is that for New Jersey purposes when Lyndon [00:55:21] Speaker 07: downgraded its withdrawal rights from firm to non-firm, but simultaneously upgraded by acquiring point-to-point. [00:55:32] Speaker 07: That was giving up rights that mattered, but [00:55:46] Speaker 07: for purposes of the New York tariff not giving up enough to prevent New York from reasonably saying [00:55:55] Speaker 07: your rights are still good enough to permit you to sell capacity in our markets. [00:56:00] Speaker 07: You agree with all of that? [00:56:02] Speaker 05: I agree with that, Your Honor, with one small point, which is I don't think it was simultaneous. [00:56:07] Speaker 05: I think Lyndon took firm point-to-point service at a later date. [00:56:11] Speaker 07: But yes, I agree that... Conditioned on the downgrade of the withdrawal, right? [00:56:19] Speaker 05: That's correct. [00:56:21] Speaker 05: And there was, as the court has recognized, there was a proceeding in which New Jersey was a party and did not seek judicial review, the New York capacity proceeding. [00:56:30] Speaker 07: So what is in that delta? [00:56:34] Speaker 07: I mean, what is Lyndon giving up that could conceivably matter to Lyndon if not the ability to sell [00:56:50] Speaker 07: energy and or capacity in New York, just, you know, the intuitive argument on the other side. [00:56:56] Speaker 07: This is this is not an all purpose energy company. [00:57:02] Speaker 07: This is a facility very specifically designed to transfer power from New Jersey to New York. [00:57:08] Speaker 05: Well, I don't think we had the answer to the New York capacity proceeding when Lyndon gave up its firm transmission withdrawal rights. [00:57:15] Speaker 05: So there was certainly a question as to whether Lyndon could sell capacity into New York. [00:57:21] Speaker 05: But these are two different services, the firm transmission withdrawal rights and the firm point to point service. [00:57:27] Speaker 05: They're subject to a different set of rules, different schedules in the tariffs. [00:57:31] Speaker 05: They're not necessarily identical services and the [00:57:36] Speaker 05: the proceeding in New York about capacity was just to consider whether what Lyndon can provide is sufficiently firm for sale in the New York capacity market. [00:57:49] Speaker 05: And that turns on a number of factors, benefits from interconnection and reliability benefits, the fact that PJM can control the Lyndon facility. [00:57:59] Speaker 05: These were part of the rationale in the New York ISO proceeding. [00:58:02] Speaker 05: So based on all of that, determined that it was [00:58:06] Speaker 05: not arbitrary, it was the New York ISO properly determined that they were sufficiently firm under the terms of the New York ISO tariff. [00:58:16] Speaker 05: But again, that wasn't a foreordained conclusion. [00:58:18] Speaker 05: New Jersey was making arguments in that proceeding and didn't seek judicial review. [00:58:23] Speaker 05: So there was certainly some risk here on Lyndon. [00:58:26] Speaker 05: Okay. [00:58:27] Speaker 07: Judge Rao, anything else? [00:58:29] Speaker 07: Judge Silverman? [00:58:30] Speaker 07: No. [00:58:31] Speaker 07: Okay. [00:58:32] Speaker 07: Thank you, Mr. Town. [00:58:33] Speaker 07: Thank you. [00:58:35] Speaker 07: General Sheerenbeck, her bottle. [00:58:38] Speaker 06: Thank you. [00:58:39] Speaker 06: Just a few points, I know it's been a long morning, that are directly responsive to what we've heard. [00:58:44] Speaker 06: The first, Judge Silberman, on the question of Hudson, the reason why we did not spend much time on Hudson in our brief is because they're not pairing, but Lyndon is. [00:58:53] Speaker 06: And so that's the reason why you're not seeing much about Hudson except in our totality argument at the end of our brief. [00:59:03] Speaker 06: I hear the commission has given two rationales for why allowing Linden to escape costs after conversion made sense. [00:59:12] Speaker 06: One was that PGM no longer had to plan for Linden, but what we can see in PGM's own manual, 581 to 82, is that they continue to plan for Linden just as they did before. [00:59:25] Speaker 06: We also know that PJM said now Linden service can be curtailed and the specific thing they said was that as a result of this conversion, they will be curtailed according to level three standards, but what we know is that [00:59:42] Speaker 06: that they will in fact only be curtailed for level five standards, which is the same as it was before. [00:59:48] Speaker 06: And that's what NISO said in the independent power producers order. [00:59:52] Speaker 06: And that is what NISO and PGM were explaining even in the order below. [00:59:58] Speaker 06: Now, to the extent that fact was only made crystal clear in the independent power producers order, that order came out after New Jersey filed for rehearing. [01:00:09] Speaker 06: So New Jersey would have had no opportunity to point to that specific statement in its rehearing petition. [01:00:15] Speaker 06: And I'm aware of this court's case law saying, sometimes there are arguments that only come to fruition upon rehearing and you don't fall to party. [01:00:26] Speaker 06: for not raising an argument, anticipating an event that didn't occur in its rehearing petition as a result. [01:00:32] Speaker 06: So that's another way of thinking about that waiver issue. [01:00:35] Speaker 01: Isn't that really, that's an evidentiary question or a factual question that would support the argument, but still the argument could well have been made at the time you filed for petition for rehearing. [01:00:52] Speaker 01: You didn't need New York [01:00:54] Speaker 01: the decision in the New York capacity market question in order to make that argument. [01:01:04] Speaker 06: It's a fair point, Your Honor. [01:01:05] Speaker 06: I would say it's factual. [01:01:06] Speaker 06: It also goes to the reasoning on the face of FERC's order. [01:01:09] Speaker 06: But I think we did raise it in our allusion to the continued reliability and capacity benefits that New York ISO had itself talked about in the orders on review. [01:01:21] Speaker 06: And to the extent I heard the commission say that our Lyndon challenges a collateral attack on the con ed order I hear that if that's if that's what they're arguing I think that's a new argument I don't understand how that could possibly be true. [01:01:37] Speaker 06: You know that that that that proceeding that was about the sort of operational base flow and whether that was a continuation of the Con Ed wheel was neither here nor there as to Lyndon and we could not have anticipated that Lyndon would try this unique maneuver and be believed of costs at that point. [01:01:57] Speaker 06: And opinion 503, which I also heard the commission talk about, can't be dispositive on that issue either, because opinion 503 occurred in a specific factual context, which is every merchant like Lyndon held firm TWRs. [01:02:10] Speaker 06: It's not until Lyndon tried this gambit that this situation ever arose. [01:02:16] Speaker 06: And finally, as to the border rate proceeding, I again just want to point the court to 177, FERC 63027, and in particular paragraph [01:02:26] Speaker 06: 88 because they're in the border rate proceeding that they're alluding to and saying that's going to deal with these transmission enhancement charges. [01:02:33] Speaker 06: The ALJ has said transmission enhancement charges are outside the scope of that proceeding. [01:02:37] Speaker 06: So what you have again is FERC citing every time a party brings a challenge to get at the core issue we're bringing up at Linden, the commission's answer is, well, I understand that's an ALJ decision that hasn't been adopted by the commission yet. [01:02:49] Speaker 06: So I don't want to overstate the matter, but what you find is FERC saying, [01:02:55] Speaker 06: Well, that's outside the scope. [01:02:56] Speaker 06: We just can't look at that. [01:02:57] Speaker 06: And so that's why we brought a consolidated challenge, Your Honors, and we think it's properly before the court. [01:03:03] Speaker 06: If there are no questions, we rest on our papers. [01:03:05] Speaker 06: Thank you very much. [01:03:06] Speaker 07: Thank you. [01:03:07] Speaker 07: The case is submitted.