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Case number 22-1221 et al.

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Everett D. Kansas Central Inc.

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et al.

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petitioners versus Federal Energy Regulatory Commission.

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Mr. Sheppard for the petitioners, Ms.

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Dillard for the intervener for the petitioners, Mr. Estes for the respondent, Mr. Vinnett for the interveners for the respondent.

[00:00:19] Speaker 08:
Good morning.

[00:00:20] Speaker 08:
Before we begin, I just wanted to acknowledge our dear colleague, Judge Davidson Till,

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who this will be his last hearing with us last time.

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Sitting with us, I am honored to work with him and very honored to actually occupy the seat that he vacated to make way for me, a seat that was occupied previously by Justice Scalia before Judge Santel.

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We thank you for your service and wish you well.

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Thank you, sir.

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Thank you, Judge.

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All right.

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Thank you, Mr. Shepherd.

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You may proceed.

[00:01:08] Speaker 04:
Good morning, and may it please the court.

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I'm sure for the petitioners, the averaging companies, and Grid Alliance.

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We've requested two minutes for rebuttal.

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Judge Wilkins, Judge Walker, and especially today, Judge Santel.

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Brooks orders below impose a new voting scheme for zonal reliability criteria in the Southwest Power Pool that can only result in a systematic denial of cost sharing for zonally and regionally beneficial transmission projects.

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That violates the cost causation principle and therefore the Federal Power Act because as this court has repeatedly held, PERT may not single out a party for the full cost of a project or even most of it if the benefits of the project refuse.

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For that reason, PERT may also not prohibit cost sharing for any projects included in a regional plan only to satisfy an individual utilities planning criteria, which is directly the opposite of PERT's total flow.

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To be just and reasonable, rates must reflect, to some degree, the cost actually incurred by the customer who must pay for them, and that degree cannot be zero.

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Apart from this unlawful result, the orders below also severely violate decision-making requirements under both the FPA and the APA, for example, among other things, by unlawfully shifting the burden of proof to protesters below and by disregarding relevant precedent.

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To the extent that the court reaches the final issue in this case, which is the directed briefing on the subject of procedural requirements regarding petitions for review, the petitioners continue to maintain that it is entirely sufficient and the most efficient way to solve the procedural issues that arise whenever for issues A, modification order after a petition for review has already begun, simply to amend the petition, not to require that an entirely new petition be filed with all the attendant burdens that are associated.

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Returning now to the real hard case.

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Perk and SPP say that the purpose of the voting changes that they imposed below was to promote transparency and consensus, and that this equitable input would, in Perk's view, abate the incentive transmission owners have as rational economic entities to develop upgrades that solely or disproportionately benefit their own customers.

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That's a laudable goal, but the risk of gold plating, which is the industry terminology for this kind of overbilled risk, has been present since the inception of the Part II of the Federal Pact in 1935.

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And there are lots of different remedies to deal with it, including, for example, post hoc prudence reviews.

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It used to be a regular feature on this court's service prudence in the 80s and the 90s.

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This, however, is the first time that FERC has attempted to allow

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Here, the proposed cure is worse than disease, because this is the first time that FERC has allowed transmission customers, not even writ large, but very small groups of transmission customers, the ability to, and the incentive, to veto ex ante any cost responsibility.

[00:04:04] Speaker 05:
Are there ever going to be instances where a project is done, let's say Evergy does a project, and it benefits only Evergy?

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I don't think that is possible given the nature of the way that the zones are built.

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It used to be the case up until 1999, and this court so held all the way up through that point, that FERC would generally impute benefits to everyone in a particular zone because the whole system was interconnected.

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The first time you see that change is in the Seventh Circuit's decision in 2009, the first of the Illinois Commerce Decisions, which then is repeated a couple years later on remand.

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And then this court turned the world back into a more of a synthetic response instead of these two antipodes and ODAC by saying no, whether it's what we want you to do for it is not write line rules one way or the other to actually do your job as an expert agency and figure out where the distribution of benefits is supposed to be.

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But to your question about what would happen here, it's part of the reason we put the maps to the extent that you're able to read them into the situation, into the

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because I think it's very apparent just by looking at the zones.

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When you're looking at these islands of these very small entities who are like Lesotho in South Africa, completely surrounded by other transmission projects, it's just not tenable that FERC is going to, that those projects are not going to benefit everyone in the zone.

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And that really gets to the heart of the dual log that's happening.

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What about a project that would benefit the company that makes the improvement?

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the benefits, then 99.5% of the benefits go to the company that did it.

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How often do you think that will happen?

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I think that that's normally the way that we would address this is to go back to the status quo ante.

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So prior to the changes that happened here, and this is one of the reasons why we kept talking about this as a solution in search of a problem,

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To the extent that there was ever a risk that there was going to be, as work puts it, they wanted to abate the incentive to build projects that would disproportionately advantage their own customers.

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There was a built-in cure because none of those smaller entities were ever going to be allocated, since it was all allocated per rata based on load.

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If they were only 1% below, it could still be allocated in a vastly disproportionate way.

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If 99.5% of the benefit is going to go to Evergy, and Evergy is only going to have to pay 90% of the cost, then that's what the math is.

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The other company is paying 20 times more than they're getting a benefit.

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Well, I don't think anyone's ever suggested that anyone's allocation ever go higher than their load ratio.

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And if we were in a more complicated system, very much unlike SPP, let's say in PJM where they have solutions based distribution factor analysis and other very precise ways of setting things advanced, SPP does not do that kind of study in the same way.

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So we're not going to get those kinds of precise results.

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Let me make a clarification with what you just said.

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You said you don't think anybody would say that there's an instance where

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a small a small player in the market is going to get less percentage.

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benefit, then they're paying the percentage of the cost.

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I think that that is a possibility if the system is entirely broken.

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What I was trying to say, Your Honor, is that no one, to my knowledge, has ever advocated a situation when one's cost responsibility would exceed their actual load within the zone.

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I suppose it is possible to conjure a situation.

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I'll concede the theoretical possibility that that could occur.

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Just as Fert conceded what they described as a theoretical possibility, we would regard as an absolute categorical imperative

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that that that people are going to reject those uh reject that the transition customer is going to reject any cost allocation to the extent that they can because i you're saying it hasn't happened yet no that's let me ask one more question uh if i if i may were there companies with a similar market position to evergy and grid alliance who supported this 2022 southwest plan

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Oh, a O. G. Are supporting intervener Ohio gas and electric who supported the support who supported the plan.

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Hmm.

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Well, it depends on how you're describing in terms of the

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Yes, so that's a complicated answer.

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There are, for example, transmission owning utilities who are primarily based like AEP is in a different RTO, but they have joint projects here.

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So, writ large, they're kind of, they look a lot like Average Year, they look a lot like OGE, but here, and they're SPP guys, they are here as half owners of merchant transmission facilities, for example.

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but um but if your honor's question is that is there anyone who looks like a vertically integrated utility who was in favor of this proposal sure there were some um particularly in the zones that were particularly hard to work out like zone 19 is this giant conglomeration of of of of ldc why would they have supported it so much if it was going to allow

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companies to free ride off.

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Well because in those situations and this is a situation where where there could be a case for transparency or collaboration but for something I'd like to discuss about the 28k letter we filed yesterday.

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But in those situations, you have much more evenly balanced things.

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It is much less irrational to look at a situation where there are three evenly balanced TOs in a particular situation and say, okay, you guys, argue amongst yourselves, figure out how you want to do this, come to some sort of conclusion.

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That's not what's happening here.

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The asymmetry is that we've got customers who are going against other customers.

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One side's got a TO, a vertically integrated TO representing them.

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The other one has a municipal or cooperative or some other form.

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But the problem here is you've got a one pricing zone where you've got people on the opposite side of the same street where they just happen to be inside the cooperative zone or they are on the side of the line versus the average side of the line.

[00:10:09] Speaker 04:
And in a situation where one side of the street can just say, ex ante, we don't want to pay for this because we're small.

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And even with our 1%, that's enough for us to cover half of the remaining distance once we account for the primary load serving entities load.

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there's no reason for them to negotiate with us.

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So I think that maybe I could help by saying our protest is a protest against the entire regime writ large because there is no exception for situations like ours or OGE's.

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So our three zones and the OGE zone, there's just a radical disproportionality that looks a lot more like the PSEG case in PJAM.

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That was a good order.

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The FERC was very intelligent to, in a situation where there was a massive proliferation of the number of transmission owners, to say, whoa, when this has brought their attention, we can't have a situation where, because of their numeracy, suddenly we're going to allow this body of entities that controls 2% to 3% collectively of the entire grid to override everyone else.

[00:11:08] Speaker 04:
So setting a 95% threshold there made some sense.

[00:11:12] Speaker 04:
I see them running close to my time.

[00:11:15] Speaker 04:
Did I answer your question, John?

[00:11:18] Speaker 08:
Yes.

[00:11:18] Speaker 08:
All right.

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Are there any further questions?

[00:11:22] Speaker 08:
We'll hear you on repeat.

[00:11:39] Speaker 01:
Morning, Your Honors.

[00:11:40] Speaker 01:
May it please the Court, I'm Carla Taylor on behalf of Intervenor Oklahoma Gas and Electric Company.

[00:11:49] Speaker 01:
Good morning.

[00:11:50] Speaker 01:
Good morning.

[00:11:51] Speaker 01:
First order doesn't pass the basic requirement of reason decision-making because there's no articulable principle that governs the succession of orders that it's issued over planning processes.

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If you go back to the PSEG order where it ruled with respect to voting processes in PJM, it said, well, if there's large transmission owners

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who have an overwhelmingly greater investment in the transmission assets, what they're planning proposals shouldn't be thwarted by a coalition of minority owners that collectively have a far smaller investment in the grid.

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But in this case, Burke has turned around and said, well, in this case, we are going to allow not just minority, we're not.

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If I understand the position of the petitioner correctly,

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they're saying or that your plan provides a situation in which if they're going to make improvements that they could be making, the smallholder can stand by and say, no, we don't approve it yet.

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It will go ahead and be done anyway because it needs to be.

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And then the smallholder will be getting a free ride departing from the cost causation principle.

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Are they wrong in that analysis?

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or am I wrong in my understanding of that analysis?

[00:13:22] Speaker 02:
Their analysis is that it will incentivize a departure from the causation principle because the smallholder

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will have an incentive to just vote no and still get the benefit because they will go forward with the project anyway if that's the only negative.

[00:13:42] Speaker 01:
That's exactly right, Your Honor.

[00:13:44] Speaker 02:
Why isn't that incentivizing a departure from the cost causation?

[00:13:50] Speaker 01:
So the way that this plan is structured, it actually, if you assume that everyone's going to behave in accordance with their, you know, rational economic behavior, the default is that the transmission owner who doesn't get their criteria approved is going to have to pay for the entire cost of the upgrade itself.

[00:14:09] Speaker 01:
So that's what happens if the criteria don't get through.

[00:14:11] Speaker 02:
So far, that's what they're saying.

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And if they will go ahead and do it themselves, then that causes

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the small holder to be in the position of a free rider with respect to that cost allocation.

[00:14:23] Speaker 01:
Right, the small owners have every incentive to be free riders.

[00:14:28] Speaker 01:
At the same time, at the first step, it's not even transmission owners who have a veto power, it's customers.

[00:14:33] Speaker 01:
Customers are the ones who pay the bill.

[00:14:36] Speaker 02:
Yeah, that's always.

[00:14:37] Speaker 01:
So there's absolutely no rational incentive for a customer at step one of the voting process to vote in favor of criteria proposed by a large transmission owner when if they vote no they're going to get the exact same upgrade for free because the transmission owner has the regulatory obligation to make appropriate upgrades to the assets in order to maintain reliability.

[00:14:59] Speaker 01:
So baked into this entire voting scheme are incentives to

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shoot down transmission upgrades that will have that they're going to have zonal benefits because the the customers and the small transmission owners know that they're going to get the same thing regardless of whether they vote yes or no.

[00:15:22] Speaker 08:
Park says that you didn't identify any

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some projects of 26 or so projects that we discussed that had significant tonal benefits.

[00:15:41] Speaker 08:
What's your response to that?

[00:15:43] Speaker 01:
So our response is that there's evidence in the record that there were at least between 2011 and 2020, 26 projects that SPP had identified based on local planning criteria that it directed to be built because they were going to have zonal benefits.

[00:16:05] Speaker 01:
So that is evidence in the record.

[00:16:06] Speaker 01:
Also, taking a step back,

[00:16:08] Speaker 01:
Their argument amounts, you know, the entire purpose of this voting enterprise is because SPP believes and we believe that there are going to be upgrade projects that have zonal benefits.

[00:16:22] Speaker 01:
That's the only reason to have a process for approving criteria for zonal planning.

[00:16:28] Speaker 01:
And now FERC is saying, oh, but there's no evidence that any projects are ever going to have zonal benefits.

[00:16:34] Speaker 01:
Well, that's contradicted by the 26 recognized projects from the past, but it also is an irrational way to analyze this entire endeavor, which is to say, okay.

[00:16:46] Speaker 02:
So it's a gamble that they're gonna want to make an improvement where they will want the approval by the largeholder

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that there's going to be long rolling.

[00:16:57] Speaker 02:
Is that is that first position?

[00:17:00] Speaker 01:
I'm not sure.

[00:17:03] Speaker 01:
So first position, I believe, is that we're going, you know, it doesn't matter if the criteria achieve cost causation, because there are going to be no projects identified through this zonal planning process that have zonal benefits.

[00:17:19] Speaker 01:
But that is, you know, that's nonsensical to say.

[00:17:23] Speaker 08:
And I think that brings us- In the standard, not just that they have some zonal benefits,

[00:17:30] Speaker 08:
substantial or unremembered wording.

[00:17:35] Speaker 01:
So that I think in the cost causation cases, I believe that is the is it the LSP case that use the word substantial and they do rely on that.

[00:17:46] Speaker 01:
If you look at starting with the Old Dominion case and going through LSP, a consistent theme in those cases is that FERC can't acknowledge that there's a category of projects that's going to have, whether it's regional or zonal benefits, benefits beyond the transmission or doing the

[00:18:05] Speaker 01:
And then I use a rule that is going to categorically exclude distributing the costs for those projects in the zone or region.

[00:18:15] Speaker 01:
And that's what this is, again, this entire voting process is premised on the idea that there are projects that are going to benefit the zone, but it's established a voting process with incentives begin.

[00:18:27] Speaker 01:
That means that it's going to categorically exclude cost sharing

[00:18:31] Speaker 01:
from those from for paying for those zonal projects because again if you assume that these companies which are all you know economical actors are going to obey rational incentives they're going to shoot down the criteria that would lead to upgrades being approved because they know they'll get the same benefit for free.

[00:18:54] Speaker 08:
Isn't there a fail safe in the event that you know all the parade of corbels that you and your

[00:19:02] Speaker 08:
colleague predict actually happened that with respect to a specific project, then a request could be made that the different cost sharing, essentially an exception from the tariff can be used for that project.

[00:19:27] Speaker 01:
So our understanding is that we would have two possible avenues if, as we expect, people behave rationally and start shooting down the appropriate criteria.

[00:19:39] Speaker 01:
One would be that we, as Rick says, we can go to SPP and seek a different zonal mechanism.

[00:19:46] Speaker 01:
as akin to zone 19, which has a separate scheme.

[00:19:50] Speaker 01:
But in order to do that, we would have to get some consensus in our zone, go to SPP.

[00:19:54] Speaker 01:
There are various committees that would have to ultimately be approved by the SPP Board of Directors.

[00:20:00] Speaker 01:
So it's not a question of just saying, hey, we would like an exception.

[00:20:02] Speaker 01:
And then, of course, ultimately be approved by FERC.

[00:20:05] Speaker 01:
And then the other would be that down the road, we could maybe bring a 206 challenge and try to get a different result.

[00:20:14] Speaker 01:
But I think that as petitioners identify, there would be a substantial concern that any subsequent challenge would be barred as a collateral attack on this order.

[00:20:24] Speaker 01:
This order is currently, the idea is to ex ante, establish rational criteria, a rational process for identifying zonal criteria.

[00:20:35] Speaker 01:
And so we're here to identify, to assess whether FERC has given a reason basis for approving SPP's proposal.

[00:20:43] Speaker 01:
And so we think the moment is now to assess whether they have, and the answer is that they have not, because this contradicts not only the PSAG order that they gave, recognizing the value of the importance of letting large transmission owners not be thwarted by tiny minority stakeholders,

[00:21:05] Speaker 01:
but also Order 890, where some commenters had actually asked that they give customers voting rights in the planning processes.

[00:21:13] Speaker 01:
And they said, no, customers don't need to have voting rights.

[00:21:17] Speaker 01:
Now they've designed an entire, and it's enough if they have a voice, and now they've designed an entire project, an entire planning system around giving customers not just voting rights, but veto power.

[00:21:32] Speaker 08:
Any other questions?

[00:21:33] Speaker 08:
Thank you.

[00:21:39] Speaker 08:
Let's hear from Burke.

[00:21:42] Speaker 03:
Mr. Estes.

[00:21:45] Speaker 03:
Can I match the stature of my opponents, at least in height?

[00:21:53] Speaker 03:
Good morning.

[00:21:54] Speaker 03:
I'm Matt Estes, here on behalf of the Federal Energy Regulatory Commission.

[00:21:59] Speaker 03:
I'd like to start with some questions Judge Santel asked about incentives.

[00:22:05] Speaker 03:
There are, in fact, as the commission found,

[00:22:09] Speaker 03:
incentives for large and small customers to agree to planning criteria.

[00:22:17] Speaker 03:
That's because large and small customers alike have veto power and so

[00:22:27] Speaker 03:
if the small customer vetoes a project that the large customer wants, the large customer in turn can just veto or not build projects the small customer wants.

[00:22:39] Speaker 02:
That seems to theorize that or bet that the small customers are going to have a desire to make some improvement later that would be a place where there would be a make-up miscall if they make a mistake here.

[00:22:57] Speaker 02:
I didn't see anything that established for me that there would necessarily be a balance that would cause that to be the way the balance would swing in the decision making by the small customer.

[00:23:10] Speaker 03:
It's an incentive ahead of time to agree on projects that will benefit.

[00:23:15] Speaker 03:
Let me give you the example that the commission gave in its order, which is the parties know that if they can't reach agreement on criteria, then the Southwest will

[00:23:27] Speaker 03:
do planning based solely on NERC criteria and regional criteria.

[00:23:34] Speaker 03:
And so the odds are that projects that don't meet those criteria won't be built.

[00:23:40] Speaker 03:
Well, a small owner or a customer might prefer that some additional projects be built.

[00:23:48] Speaker 03:
And the only way that it will have to happen is to reach an agreement

[00:23:54] Speaker 03:
with the transmission owner on what those projects should be.

[00:23:58] Speaker 03:
Likewise, Pevergy could do what they threatened they would do in their petition for rehearing before the commission, which is to build projects that only benefit their own customers and not the other customers who, again,

[00:24:16] Speaker 03:
might want a project that would provide benefits to the whole.

[00:24:20] Speaker 05:
Evergis attorney today's suggested that that's.

[00:24:24] Speaker 05:
Inconceivable that that a project could only benefit ever G. Well.

[00:24:30] Speaker 03:
That's not what ever told the Commission in its order, and it's also not.

[00:24:36] Speaker 03:
It's inconsistent with the entire premise of this proposal, which is not saying that's what they say.

[00:24:45] Speaker 03:
That's what they say, but that's not, they've also said they have the incentive to build projects that won't benefit the entire zone and the entire premise.

[00:24:56] Speaker 05:
You have a, I wouldn't expect you to, but do you have a JA site?

[00:25:01] Speaker 05:
I can find exactly what you're talking about there.

[00:25:03] Speaker 05:
Where they said one thing before and now they're saying something different.

[00:25:06] Speaker 03:
Yes.

[00:25:06] Speaker 03:
If you look at their rehearing order page 30, which is JA 298,

[00:25:12] Speaker 03:
They said that their incentive would be a project if they don't get joint allocation that they would, their incentive would be to build projects that didn't benefit their customers.

[00:25:26] Speaker 03:
They said something similar in their original protest at page 13, VA 131.

[00:25:32] Speaker 05:
Can I get your answer to that?

[00:25:37] Speaker 05:
Two questions that have been asked of opposing council.

[00:25:41] Speaker 05:
One is, do you know of companies in a similar market position to Evergy and Grid Alliance who supported Southwest's 2022 plan?

[00:25:56] Speaker 05:
And I'll just give you the second question and then you can take them in whatever order you want.

[00:26:01] Speaker 05:
Would it be possible down the road for a company like Evergee or Gridlines to bring a 206 challenge?

[00:26:08] Speaker 05:
Or are they right that it would be it would be barred as a collateral attack on something that's already been litigated?

[00:26:18] Speaker 03:
But my understanding is there are a number of companies that potentially are in the same position.

[00:26:25] Speaker 03:
I have to correct one thing that Councilor Everge said.

[00:26:31] Speaker 03:
AEP also owns a large integrated utility in the Southwest region and as does Excel.

[00:26:42] Speaker 03:
So those are large companies.

[00:26:43] Speaker 03:
I believe there may be other companies.

[00:26:46] Speaker 03:
And I think that's an important point because these companies don't agree that it's self-evident that there could never be agreement on these projects.

[00:27:01] Speaker 03:
And it's important to understand from their perspective, they are in the exact same position as the petitioners in this regard, that they are putting at risk their ability

[00:27:15] Speaker 03:
to gain allocation for zonal allocation for their project, their best possible cost allocation result under the new proposal is what they automatically would have had under the old proposal where they were automatically entitled to allocate their costs to the entire zone.

[00:27:38] Speaker 03:
Now, I'm sorry, I don't remember your second question.

[00:27:42] Speaker 05:
that the possibility of a 206 challenge down the road.

[00:27:46] Speaker 03:
Yes, it is possible.

[00:27:49] Speaker 05:
The Berks not going to come into court and say this is barred because it's a collateral attack, et cetera, et cetera, et cetera.

[00:27:56] Speaker 05:
What they just said a few minutes ago.

[00:27:58] Speaker 03:
No, because I mean, it would depend on what they say, but I would think what they would say is you're

[00:28:04] Speaker 03:
your original order was based on your prediction that consensus could be reached.

[00:28:12] Speaker 03:
But now here are facts showing that in fact there isn't any consensus is not possible.

[00:28:20] Speaker 03:
I'd also point out that the commission said that zones could propose amended voting procedures

[00:28:31] Speaker 03:
And I don't think the mechanism for doing that has been established yet, but that's another possibility.

[00:28:46] Speaker 05:
Going back to my first question and your answer to it about the other companies, why would a company with a similar market share

[00:28:53] Speaker 05:
be supportive in a way that Evergy and grid lines are not.

[00:28:57] Speaker 05:
You said that they were supportive, but why if it's not going to put them in any better position than they were in before and run the risk of them being in a worse place?

[00:29:07] Speaker 03:
I think it's because they disagree with the petitioners that there's no actual problem there.

[00:29:14] Speaker 03:
I think they're concerned that

[00:29:17] Speaker 03:
other transmission owners in their zone would be able to propose projects that impose costs on their customers that they don't think are justified.

[00:29:27] Speaker 05:
So if I'm following right, and this makes total sense to me, let's take Evergy's situation.

[00:29:33] Speaker 05:
Let's imagine that they have 90% of the market share in a particular zone.

[00:29:38] Speaker 05:
If a small company does a project,

[00:29:45] Speaker 05:
that Evergy thinks is only gonna benefit the small company, under the old system, Evergy would be on the hook for 90% of the costs, is that right?

[00:29:54] Speaker 03:
That's exactly right, Your Honor.

[00:29:56] Speaker 03:
I think that's why the vast majority of transmission owners and customers support this proposal.

[00:30:02] Speaker 05:
And that old system would violate the cost causation principle much more than the new system does.

[00:30:09] Speaker 03:
That's right.

[00:30:10] Speaker 03:
I think that was the choice the Commission had when presented with Southwest Proposal.

[00:30:16] Speaker 03:
They could reject the proposal and keep the system

[00:30:19] Speaker 03:
where it appears there is a problem where transmission owners could allocate to the entire zone projects that didn't benefit the entire zone, or they could approve Southwest proposal, which creates a mechanism where all entities in a zone can reach agreement on what types of projects should be allocated zonally.

[00:30:44] Speaker 03:
Yes, there is some possibility of free ridership

[00:30:49] Speaker 03:
But the commission believed that there are incentives when projects are proposed that do provide benefits to everybody in the zone, that there are incentives to agree to those.

[00:31:03] Speaker 03:
Otherwise, those projects might not happen.

[00:31:07] Speaker 03:
So I'd say another point is that the

[00:31:14] Speaker 03:
The commission looked at the evidence presented by the petitioners that free ridership would be of such significance as to cause causation problems.

[00:31:26] Speaker 03:
And that's part of the Old Dominion test.

[00:31:30] Speaker 03:
It's not just there's costs not allocated to customers that benefit, but also I think in the words of this court in Old Dominion, that there would be the allocation to the customers that do pay would be grossly disproportionate to the benefits that they receive.

[00:31:49] Speaker 03:
And in Old Dominion's case, the single zone was allocated 100% of the costs of two projects

[00:31:58] Speaker 03:
and they receive less than 50% of the benefits.

[00:32:02] Speaker 03:
Here, if we look at Averages Zone 9, they have 98% of the load, which means if they build a project, their customers are going to get at least 98% of the benefits.

[00:32:17] Speaker 03:
That's not a grossly disproportionate allocation.

[00:32:22] Speaker 03:
Their other zone is 88%, and that's what Oklahoma Gas and Electric is, 88%.

[00:32:28] Speaker 03:
So even if, in a worst case scenario, these companies build a project where there's no zonal allocation, there's still not a grossly disproportionate allocation of costs as compared to benefit.

[00:32:46] Speaker 05:
I know you only have a minute, so I'll ask fast and maybe you can answer it fast.

[00:32:50] Speaker 05:
In Old Dominion, I think it was high voltage power lines were the project at issue.

[00:32:55] Speaker 05:
And the court said, well, that's going to benefit everybody.

[00:32:58] Speaker 05:
What's an example of a project that might not benefit everybody as much as the projects in Old Dominion?

[00:33:07] Speaker 03:
Well, we could use the example that Oklahoma Gas and Electric gave of how they loop low voltage transmission lines when they get to a certain

[00:33:19] Speaker 03:
amount of use.

[00:33:20] Speaker 03:
Looping is basically creating another line that follows a single line so that if the one line goes down, then there's another line that can serve the load.

[00:33:31] Speaker 03:
Those low voltage facilities are used primarily in rural areas to serve a relatively small number of customers.

[00:33:40] Speaker 03:
So, looping that line will benefit those customers, but it's likely not going to benefit everybody in the zone.

[00:33:52] Speaker 03:
If there are no more questions, Your Honor, I would just like to say that it's been an honor appearing before Judge Sintel on his last day.

[00:34:01] Speaker 03:
He's held in highest esteem at the Commission, even when he rules against us.

[00:34:06] Speaker 02:
Thank you.

[00:34:07] Speaker 02:
Well, I would add that when I first got here, the Order 500 series was before us.

[00:34:12] Speaker 02:
It was a complex case.

[00:34:14] Speaker 02:
Completely reorganized the pipeline industry.

[00:34:17] Speaker 02:
And the three newest judges were drawn to that.

[00:34:19] Speaker 02:
I never believed it was an honest girl.

[00:34:22] Speaker 02:
That began my doubt just whether I should have taken the job.

[00:34:25] Speaker 03:
Thank you.

[00:34:28] Speaker 03:
Thank you.

[00:34:29] Speaker 02:
And by the way, I was also on 888 to came up with these reasons, RTOs to begin with.

[00:34:35] Speaker 03:
Well, we're going to miss you for the next big order.

[00:34:57] Speaker 09:
Good morning may it please the court not the net for the intervenors in support of for Council for a Southwest Power Pool more like to start first with Judge Walker's questions about other companies that supported SDP proposal.

[00:35:12] Speaker 09:
I think my colleague mentioned the Southwestern Public Service Company, an Excel affiliate.

[00:35:17] Speaker 09:
They are in a zone where they are the majority transmission owner.

[00:35:20] Speaker 09:
They own most of the transmission.

[00:35:21] Speaker 09:
They also support most of the load.

[00:35:25] Speaker 09:
They are on our brief in support of this proposal.

[00:35:28] Speaker 09:
The largest customer in their zone, Goldspread Electric Cooperative, who single-handedly could if they wanted to vote against criteria, and that would be more than the half of the remaining load,

[00:35:40] Speaker 09:
that is needed to support a criteria going forward, they also are on a brief and support this proposal.

[00:35:48] Speaker 09:
Another zone that has been addressed is the AEP zone.

[00:35:51] Speaker 09:
The AEP zone, AEP is the majority transmission owner and the majority load serving entity.

[00:35:56] Speaker 09:
They have six minority transmission owners in their zone.

[00:36:01] Speaker 09:
Each of those transmission owners under the previous tariff could have adopted whatever criteria they wanted,

[00:36:07] Speaker 09:
gave them to SVP, made SVP develop projects based solely on those criteria, and then AEP and all the other customers in the zone would have to pick up the costs.

[00:36:16] Speaker 09:
This is why this proposal was put out.

[00:36:18] Speaker 05:
So I know I asked the question, so if anyone's at fault, it's me, but is any of that in the record?

[00:36:25] Speaker 05:
And if it's not, then is there any way we can take judicial notice of something that's publicly available?

[00:36:32] Speaker 09:
I'm not aware of anything that's publicly available I could find out and perhaps file a 28-J letter in the future.

[00:36:39] Speaker 09:
Both of those companies, AEP, actually all the companies, AEP, Excel, and GoldenSpread are all on the record supporting this file.

[00:36:49] Speaker 09:
I would also note that in the Evergy zone, zone 14, there are two transmission owners.

[00:36:53] Speaker 09:
They're both petitioners here.

[00:36:54] Speaker 09:
One is Evergy, the other is GridLiance.

[00:36:56] Speaker 09:
Under the previous tariff, nothing would have prohibited GridLiance from developing their own criteria and making Evergy's companies, customers pick up the costs.

[00:37:04] Speaker 09:
So this is why this proposal was developed.

[00:37:07] Speaker 09:
It was important for SPP and its stakeholders to have a process where customers who are required to pay the cost of facilities would actually have a say in how those facilities were designed and developed.

[00:37:19] Speaker 09:
Under the previous construct, as I've noted, transmission owners could basically do what they want, and SVP's tariff obligated them, obligated SVP to apply those criteria.

[00:37:30] Speaker 09:
Now there's a check, check and balance on the whole system.

[00:37:33] Speaker 09:
The transmission owner can propose their criteria as part of the zonal process.

[00:37:37] Speaker 09:
Customers can propose their own criteria.

[00:37:40] Speaker 09:
They can discuss and then have a vote.

[00:37:42] Speaker 09:
And if nobody's criteria move forward, the SPP criteria will apply.

[00:37:46] Speaker 09:
And what's important to note there is that the SPP criteria are designed to address the NERC reliability standards, which are the mandatory federally enforceable reliability standards.

[00:37:57] Speaker 09:
they set the floor for what reliability folks may want in the zone.

[00:38:02] Speaker 09:
What we're talking about here is individual entities desire for reliability that exceeds what federal law requires.

[00:38:08] Speaker 09:
So this is sort of gravy on top of meeting, you know, the basic reliability standards that has imposed through the federal power.

[00:38:18] Speaker 09:
Looks like I'm out of time.

[00:38:19] Speaker 09:
I don't know if you have any other questions or

[00:38:22] Speaker 08:
Thank you very much.

[00:38:26] Speaker 09:
If I could just have one other second to address one other point.

[00:38:29] Speaker 09:
There's been talk about the 206, filing a future 206 complaint.

[00:38:33] Speaker 09:
I don't think that's the only avenue that petitioners might have if they do identify a project that has reliability benefits beyond just their own customers.

[00:38:41] Speaker 09:
They could pursue a one-off tariff change.

[00:38:44] Speaker 09:
They could pursue a mutual agreement with customers in the zone.

[00:38:47] Speaker 09:
They're not just limited to a 206 complaint to challenge this entire regime.

[00:38:51] Speaker 09:
There are other options.

[00:38:53] Speaker 08:
Thank you.

[00:38:53] Speaker 09:
Thank you very much.

[00:38:55] Speaker 09:
And Judge Santel, thank you for your service.

[00:38:57] Speaker 09:
Thank you.

[00:39:00] Speaker 08:
All right.

[00:39:00] Speaker 08:
I believe, um, Mr. Shepherd.

[00:39:08] Speaker 04:
All right.

[00:39:10] Speaker 04:
Thank you, Your Honor.

[00:39:11] Speaker 04:
I think that the first thing that I should address is the concept that there is some sort of co-equal gamble happening here.

[00:39:17] Speaker 04:
The center of gravity in all the questions that I'm hearing is some sort of notion that the transmission customers and the transmission owners are bargaining.

[00:39:26] Speaker 04:
They don't bargain.

[00:39:27] Speaker 04:
If you don't have more than one transmission owner, there's not going to be any force trading as between them.

[00:39:32] Speaker 04:
They are the ones who build projects.

[00:39:34] Speaker 04:
We've asked questions along the lines of, what if the transmission customer wants a particular kind of project?

[00:39:39] Speaker 04:
Ask.

[00:39:39] Speaker 04:
If SVP is planning, people say that it can be built without causing a problem with the system.

[00:39:44] Speaker 04:
No problem.

[00:39:44] Speaker 04:
I'm sure that the transmission owner will be very happy to build that project for them and collect a rate of return on it into the future.

[00:39:51] Speaker 04:
I think they're really mixing apples and oranges if the thought here is that there's forced trading going on against these entities as they relate to one another from the TO and the TC perspective.

[00:40:01] Speaker 04:
So I did not, I'm sad to say, come here entirely prepared to discuss the details of the voting alignments in all the zones where my clients don't operate.

[00:40:10] Speaker 04:
And I don't have a reason other than speculation to explain why AAP and Excel landed where they did, except that I would bet that they're pretty sure that they've got the votes to secure whatever it is they need to do.

[00:40:24] Speaker 04:
Perhaps because they're in a situation where they have multiple TOs with whom they could make a bargain and get over that extra 50%.

[00:40:30] Speaker 04:
That's not the case for us.

[00:40:31] Speaker 04:
It's not the case for us in Zone 9.

[00:40:33] Speaker 04:
It's not the case for us in Zone 6.

[00:40:34] Speaker 04:
It's not the case for us in Zone 14.

[00:40:36] Speaker 04:
So they can think it's wonderful, all that they want, but that has nothing to do with whether or not there's some viability to our claim because the way it impacts us.

[00:40:43] Speaker 04:
It's a badly written rule and it works terribly in our situation.

[00:40:48] Speaker 04:
That's why we're investing the time and the energy here to fight it.

[00:40:50] Speaker 04:
Will you predict it will work terribly?

[00:40:52] Speaker 05:
Perk predicts it will work well, and we owe some deference to Perk's expert predictive judgment.

[00:41:00] Speaker 04:
I don't think that's right, Your Honor.

[00:41:01] Speaker 04:
I don't think you owe any deference to their predictive judgment if what they're saying is nuts.

[00:41:06] Speaker 04:
If you're in a situation where you have one percent, you're one percent of the load,

[00:41:12] Speaker 04:
And you now have an opportunity to not put it on a sliding scale and say, oh, I'll take this much or this much.

[00:41:17] Speaker 04:
Because I think that's the way that the court's thinking about this, like it's on a sliding scale.

[00:41:21] Speaker 04:
This is not that way.

[00:41:22] Speaker 04:
They have the transmission customers at step one, just flip off and off switch.

[00:41:25] Speaker 04:
There's no discussion about why roughly commencing.

[00:41:28] Speaker 05:
Why is it nuts to think that the 1% company will vote for the 99%?

[00:41:35] Speaker 05:
project in exchange for the 99% companies voting for the 1% project, especially when the 99% company is only going to get 1% of help for their project.

[00:41:47] Speaker 05:
The 1% is going to get 99% help for their project.

[00:41:58] Speaker 04:
I think that your honor is still thinking of this as a situation where they're trading for, I suppose a transmission customer could say, we'd like you to build this thing.

[00:42:06] Speaker 05:
It's just like in Congress.

[00:42:07] Speaker 05:
You vote for my pork barrel project, that I don't really care about, in exchange I'll vote for your pork barrel project.

[00:42:17] Speaker 04:
that is not that's I mean you could vote for the zone of reliability requirements one supposes and in a stretch but the more immediate and obvious incentive is just to say no it's not like the that's in your short-term municipal that's in a company's short-term interest but that may be very much adverse to their long-term interest and I mean these are sophisticated players

[00:42:39] Speaker 04:
I'm not sure I agree with that characterization, but no, so we talked about that.

[00:42:45] Speaker 04:
We talked about the alignment of parties and other utilities.

[00:42:49] Speaker 04:
I'm not going to care to make excuses for Excel and AEP.

[00:42:51] Speaker 04:
I think they made a terrible choice here, but they must feel like they have a lock on whatever plans they have.

[00:42:55] Speaker 04:
Maybe it's our clients who are the ones who don't feel like they were able to cut a deal with people within it when they serially fight.

[00:43:00] Speaker 04:
But that's, I don't think that really is the correct way to analyze this case of whether or not someone else is willing to live with something that we weren't willing to live with.

[00:43:09] Speaker 04:
Wouldn't want to be in an HOA that operated that way.

[00:43:11] Speaker 04:
And I don't want to be in an RTO that operates that way either.

[00:43:14] Speaker 04:
And on the subject of collateral attack, yes, it is possible.

[00:43:17] Speaker 04:
I suppose there's some other way beyond a 206 complaint to come back.

[00:43:20] Speaker 04:
But whether it's a 206 complaint with some variation in a 205 is if we have 205 filing rights to change the SPP tariff, which we do not.

[00:43:27] Speaker 04:
There is no way to frame a complaint in 206 later, which is not going to regurgitate the exact same theory we brought to you here.

[00:43:32] Speaker 04:
Here, we see the poison pill is right in front of us.

[00:43:35] Speaker 04:
We're saying there's a poison pill.

[00:43:36] Speaker 04:
We don't want to take it.

[00:43:38] Speaker 04:
We don't want to eat the cyanide and then come back and challenge it later when we know that it's not gonna work.

[00:43:43] Speaker 04:
There are things that we would like to do.

[00:43:44] Speaker 04:
We need the agreement of the other utilities to do this.

[00:43:47] Speaker 04:
And finally, I think the court got this very thoroughly in the briefs, mandatory reliability standards by NERC, absolute rock bottom lowest common denominator.

[00:43:54] Speaker 04:
that we've been presented with the evidence in the record, at least 26 projects that never ever could be approved under this new system are in service right now.

[00:44:04] Speaker 04:
No one's questioning whether or not they have any value for anyone.

[00:44:06] Speaker 04:
But because they were built according to local and only local planning authority, which used to be the way things were prior to this order issuing, they can never be done now unless the company agreed to take 100% of the cost.

[00:44:20] Speaker 04:
that clarifies the record.

[00:44:23] Speaker 04:
Thank you for your time, Judge Santel.

[00:44:25] Speaker 04:
Glad you mentioned order 88.

[00:44:26] Speaker 04:
I don't know if you remember that I was clerking on that same case.

[00:44:30] Speaker 04:
All right, thank you.

[00:44:32] Speaker 08:
Thank you, counsel.

[00:44:33] Speaker 08:
We'll take the case under advice.