[00:00:00] Speaker 00:
Case number 23-1134 et al.

[00:00:02] Speaker 00:
Capital Power Corporation et al.

[00:00:05] Speaker 00:
Petitioners versus Federal Energy Regulatory Commission.

[00:00:09] Speaker 00:
Mr. Theissy for the petitioner, Ms.

[00:00:11] Speaker 00:
Pescella for the respondent, Ms.

[00:00:13] Speaker 00:
Warren for the interveners, for the respondent.

[00:00:19] Speaker 02:
Good morning.

[00:00:20] Speaker 02:
James Theiss on behalf of the Independent Generators.

[00:00:23] Speaker 02:
FERC approved a proposal by the transmission owners that suddenly and comprehensively eliminated

[00:00:29] Speaker 02:
those owners own obligation to pay for reactive power within my cell.

[00:00:34] Speaker 02:
That had the effect of immediately wiping out approximately $220 million in rates that independent generators had previously filed with FERC.

[00:00:44] Speaker 02:
There are many flaws in FERC's orders, but today I'd like to focus on two of them.

[00:00:48] Speaker 02:
First, FERC erred in allowing the transmission owners, who are again customers of reactive power,

[00:00:54] Speaker 02:
to immediately end reactive power compensation via a filing under Section 205 of the Federal Power Act.

[00:01:01] Speaker 02:
In 2010, FERC recognized that although a Section 205 filing could change Schedule II for newly connecting generators to the grid, generators should continue to be paid under their existing filed rates absent a Section 206 filing, eliminating them.

[00:01:18] Speaker 02:
Perk has now flip-flopped on that position, but its original explanation was the correct one.

[00:01:23] Speaker 02:
Perk should not have permitted transmission owners to use the expedient of a Section 205 filing to accomplish Section 206's purposes.

[00:01:30] Speaker 06:
How do you distinguish our decision in Dynegy, which seemed to suggest it was fine to proceed under 205?

[00:01:37] Speaker 02:
Well, in Dynegy, Your Honor, that dealt with a specific issue, which was, do the transmission owners have the right under the

[00:01:46] Speaker 02:
essentially a settlement agreement between MISO and the transmission owners to make a Schedule II filing.

[00:01:52] Speaker 02:
That did not answer the separate statutory question of whether doing so could have the effect of eliminating... Discussed that they proceeded under 205.

[00:02:01] Speaker 02:
Correct, Your Honor.

[00:02:02] Speaker 06:
Can you discuss that and that they could go forward?

[00:02:05] Speaker 02:
They could go forward to file a new Schedule II filing under Section 205 per their contractual arrangement.

[00:02:11] Speaker 02:
But I think what's critical and what's clear from both the underlying FERC order in that case

[00:02:15] Speaker 02:
as well as the briefing that FERC filed in this court, is FERC said that even though you could make a new schedule two filing pursuant to schedule 205, that would not eliminate all the existing compensation that generators who had already filed 205 rates of their own for annual cost-based reactive power revenue.

[00:02:35] Speaker 02:
That did not eliminate or abrogate those going forward.

[00:02:37] Speaker 02:
The only way to eliminate those or abrogate those going forward

[00:02:40] Speaker 02:
is through a section 206 filing.

[00:02:43] Speaker 02:
So even if the commission is correct that the transmission owners could make a 205 filing to change schedule two, and we have objections to that, including on just and reasonable grounds, but assuming that's the case, that would only apply to newly interconnected generators.

[00:02:59] Speaker 02:
It should not apply to generators who had already filed 205 rates with FERC.

[00:03:05] Speaker 06:
When you file a 205 rate,

[00:03:09] Speaker 06:
How long does it last?

[00:03:10] Speaker 06:
Is it done annually or would it last for perpetuity?

[00:03:14] Speaker 02:
Well, these are annual cost-based revenue requirements.

[00:03:17] Speaker 06:
It's essentially- Does it last a year at most before they would be filing a new one?

[00:03:20] Speaker 02:
No, they remain on file until they're changed or until they're canceled.

[00:03:24] Speaker 02:
In fact, ordinarily, when a generator no longer is collecting their rates, they're supposed to file a notice of cancellation with FERC.

[00:03:31] Speaker 02:
Because under the file rate doctrine, essentially generators are entitled to charge the rates that are actually on file with the commission.

[00:03:38] Speaker 02:
So it's not the case.

[00:03:39] Speaker 06:
And in fact, they ever change.

[00:03:40] Speaker 06:
It would only be new generators because obviously no one's even if it's not making as much money as they would like to.

[00:03:46] Speaker 06:
It's more money than nothing.

[00:03:47] Speaker 06:
So those rates are going to sit there.

[00:03:49] Speaker 06:
forever.

[00:03:49] Speaker 06:
So these generators will be locked in to get paid forever.

[00:03:52] Speaker 02:
Not at all, Your Honor.

[00:03:54] Speaker 02:
FERC itself through Section 206 filing or any complaint could file with FERC proceeding under Section 206 to say the rates that are currently on file are unjust and unreasonable.

[00:04:05] Speaker 02:
And here is a new just and reasonable rate that should replace it.

[00:04:08] Speaker 02:
And again, this was FERC's own position before this court in 2010.

[00:04:11] Speaker 02:
They don't actually dispute that this was.

[00:04:13] Speaker 02:
They simply changed their mind about

[00:04:15] Speaker 02:
about whether that was the proper result.

[00:04:17] Speaker 02:
But it's very clear that FERC agreed with this theory.

[00:04:21] Speaker 02:
And in fact, they did so, importantly, because the generators in that case were saying, this new schedule 2A that you're creating, which does the same thing as eliminating schedule 2 in our case, the schedule 2A in that 2010 case essentially said, going forward, transmission centers no longer have to pay compensation.

[00:04:38] Speaker 02:
So it's really an on-point decision, almost the exact same thing, other than the schedule 2A versus just eliminating schedule

[00:04:44] Speaker 02:
altogether.

[00:04:45] Speaker 02:
What FERC said, the generators in that case said, this is unduly discriminatory because you're essentially allowing our rates to be canceled through a 205 filing.

[00:04:53] Speaker 02:
And what FERC said in its brief to this court was, no, don't worry.

[00:04:56] Speaker 02:
Your existing rates are going to remain on file because there's no 206 filing.

[00:05:00] Speaker 02:
And I think what's really especially notable in that case, Your Honor, is that in doing so, FERC actually

[00:05:09] Speaker 02:
forced MISO to change a prohibition in schedule 2A that had said, going forward, anyone who's adopted schedule 2A will no longer receive compensation.

[00:05:21] Speaker 02:
And FERC said, no, you can't do that, because that would allow section 205 to accomplish section 206's purposes.

[00:05:29] Speaker 02:
So we'll approve your change in schedule 2 for newly interconnected generators on the condition that existing generators are entitled to compensation

[00:05:37] Speaker 02:
compensation until either FERC or a complainant comes forward with a Section 206 filing to eliminate those filed rates.

[00:05:47] Speaker 01:
Do transmission owners have a right to file, make 205 filings?

[00:05:53] Speaker 01:
I think this court in Dynagy said they do.

[00:05:56] Speaker 01:
Sure.

[00:05:57] Speaker 01:
So, I mean, it's just a very odd system to imagine both

[00:06:04] Speaker 01:
sides, both parties to the transaction have 205 rights and what?

[00:06:08] Speaker 01:
It's a race to FERC, whoever files first.

[00:06:12] Speaker 01:
It's the presumption subject only to a 206 override.

[00:06:16] Speaker 02:
I don't think that's exactly right, Your Honor.

[00:06:17] Speaker 02:
The way I'm thinking about this case, at least, and I think it's somewhat complicated.

[00:06:22] Speaker 02:
So I think there could be some reasonable grounds for disagreement.

[00:06:26] Speaker 02:
But the way I understand it is essentially, MISO has the right to amend its own tariff.

[00:06:30] Speaker 02:
There's the MISO tariff and the schedules attached to it, schedule two,

[00:06:33] Speaker 02:
So MISO has the right to change Schedule II.

[00:06:38] Speaker 02:
And if you look at the record at JAA 23 through 36, it shows the transmission owners filing and it shows what Schedule II used to look like.

[00:06:45] Speaker 02:
It used to have several long schedule or several long provisions that calculated or explained how to calculate reactive power rates and also how those costs would be passed along to MISO.

[00:06:56] Speaker 02:
transmission owners and other transmission service customers.

[00:06:59] Speaker 02:
So the way I think about it is that MISO has the right to revise schedule two.

[00:07:02] Speaker 02:
If they want to tweak the formula, for example, or if they want to say costs are going to be passed through a slightly different way, MISO also has the right to share that filing right with transmission owners.

[00:07:11] Speaker 02:
And that's what they did.

[00:07:12] Speaker 02:
And that's what this court actually held in Dynagy.

[00:07:14] Speaker 02:
What I think they don't have the right to do is to take a step under their own Section 205 rights that would abrogate, undermine, undercut, eliminate the rights of

[00:07:25] Speaker 02:
the independent generators.

[00:07:28] Speaker 01:
Suppose they had just filed first.

[00:07:29] Speaker 01:
They just filed and said, our rate for reactive power is zero.

[00:07:38] Speaker 02:
If they had done that, then we would be... If they had done that before anyone, before any independent generators had filed their own revenue requirements.

[00:07:47] Speaker 01:
When the generators filed revenue requirements.

[00:07:49] Speaker 02:
So in that case, that would have solved the 205-206 objection we're making now.

[00:07:54] Speaker 02:
And we would simply be arguing that that is not just unreasonable, which was the second point I was going to get to today.

[00:07:59] Speaker 02:
But obviously, that's not what happened here.

[00:08:00] Speaker 01:
No, I know.

[00:08:01] Speaker 01:
But it just seems like an odd circumstance.

[00:08:04] Speaker 01:
I mean, usually the 205 filer is the transmission owner, which is the regulated entity.

[00:08:12] Speaker 01:
And everything they do is jurisdictional because FERC can regulate transmission.

[00:08:20] Speaker 01:
Well, I think, yeah, I think there's there's a number of 205 rights.

[00:08:23] Speaker 01:
I mean, you know, if you had to pick between who's the more plausible 205 filer.

[00:08:32] Speaker 01:
It's the transmission owner.

[00:08:33] Speaker 01:
Well, I don't think so.

[00:08:35] Speaker 01:
Not the generator, who may not even be a public utility in your capacity as a generator.

[00:08:41] Speaker 02:
Well, I think there are utilities under the Federal Power Act, Your Honor.

[00:08:44] Speaker 02:
I think there's multiple different, it's a little confusing, because there's multiple different 205 filing rights at stake.

[00:08:49] Speaker 02:
The generators are utilities.

[00:08:50] Speaker 02:
They have 205 rights to file rates with FERC.

[00:08:54] Speaker 01:
LISO has 205 rights.

[00:08:56] Speaker 01:
They might have 205 filing rights

[00:09:00] Speaker 01:
to the extent they're selling electricity interstate in a wholesale market.

[00:09:07] Speaker 01:
But if we're just talking about the point of interconnection, right, the line between generating and transmitting, statute says FERC has control over the transmission, does not have control over the generation.

[00:09:25] Speaker 02:
Well, to be clear, Your Honor, I don't have any dispute in this case that independent generators had their own Section 205 rights to file for reactive power compensation.

[00:09:34] Speaker 02:
And in fact, if you look at, again, JA 2336, the old Schedule II, before essentially the transmission owners filed a new one that lopped off all the provisions that talked about calculating rates and passing on costs, said very explicitly that the generators possessed the unilateral right under Section 205 of the Federal Power Act

[00:09:55] Speaker 02:
to file to establish or revise its annual cost-based revenue requirements.

[00:09:59] Speaker 02:
I'm sorry, where's that?

[00:10:00] Speaker 02:
That's at page JA51.

[00:10:03] Speaker 02:
What document?

[00:10:04] Speaker 02:
That is the transmission owner's filing.

[00:10:06] Speaker 02:
It's at the beginning of our JA.

[00:10:08] Speaker 02:
It's JA51.

[00:10:09] Speaker 02:
It's in the stricken out section.

[00:10:12] Speaker 02:
But as you can see, there's two attachments to the transmission owner's filing.

[00:10:16] Speaker 01:
That's in schedule two, right?

[00:10:18] Speaker 02:
Right, but all I'm saying is that this affirmed

[00:10:21] Speaker 02:
until December 2022.

[00:10:22] Speaker 02:
This affirmed that they had the unilateral right to file under Section 205 for reactive power requirements.

[00:10:30] Speaker 01:
The right to make those revenue filings seems to be derivative of their tariff, which they filed under Section 205.

[00:10:40] Speaker 02:
To me, this just reaffirms the statutory right.

[00:10:42] Speaker 02:
This was what was it that, you know,

[00:10:44] Speaker 02:
This was the state of play in MISO for 20 years prior to this recent filing.

[00:10:49] Speaker 02:
And this basically said that, I mean, again, this did not grant us Section 205 rights to begin with.

[00:10:57] Speaker 02:
Generators like other utilities, like MISO itself, has the right to revise its tariff.

[00:11:02] Speaker 02:
Transmission owners have the right to file 205 to establish their own rights.

[00:11:07] Speaker 02:
Each party has their own rates.

[00:11:09] Speaker 02:
And I think part of the confusion in this case is, again, what MISO was doing was essentially revising a schedule that established the rate calculation mechanisms.

[00:11:18] Speaker 02:
But pursuant to that, approximately 400 generators filed annual cost-based revenue requirements with FERC.

[00:11:24] Speaker 02:
Those revenue requirements are sitting filed with FERC to this day, and have just become vestigial, essentially.

[00:11:29] Speaker 02:
because FERC has eliminated them.

[00:11:32] Speaker 02:
And I'd point you to the actual language of Section 206, which says it permits FERC to change a rate that is demanded, observed, charged, or collected.

[00:11:43] Speaker 02:
Demanded, observed, charged, or collected.

[00:11:45] Speaker 02:
So it doesn't speak only in terms of any rate that's on file.

[00:11:48] Speaker 02:
It can change a filed rate.

[00:11:50] Speaker 02:
It speaks more broadly to that.

[00:11:51] Speaker 02:
Anything demanded, observed, charged, or collected.

[00:11:53] Speaker 02:
So the idea that FERC could change one of our rates that has been demanded, observed, charged, or collected via a 205 filing seems to conflict directly with Section 206's guarantee.

[00:12:07] Speaker 02:
I'd also point you to one case in this court, Your Honor, the Chevron Texaco.

[00:12:11] Speaker 02:
We couldn't find any case that

[00:12:13] Speaker 02:
the factually exactly on point to this case, partly because we think it is an unprecedented theory from the other side.

[00:12:18] Speaker 02:
It's extraordinary.

[00:12:19] Speaker 02:
They're saying because there's no longer a cross-reference, your filed rates become meaningless.

[00:12:24] Speaker 02:
They don't cite any authority for that.

[00:12:26] Speaker 02:
The closest we found is the Chevron Texaco case.

[00:12:29] Speaker 02:
It's a DC Circuit case from 2004.

[00:12:30] Speaker 02:
We cited on page 8 of our brief.

[00:12:32] Speaker 02:
And what that court said, again, it's not totally factually analogous, but I think that the principle is important.

[00:12:37] Speaker 02:
It said, the precise question is whether under section 205, the commission could reject the pipelines correct.

[00:12:43] Speaker 02:
sorry, NGA case.

[00:12:44] Speaker 02:
So it's technically the parallel provision of the NGA.

[00:12:47] Speaker 02:
But it said, the question, precise question is whether the commission could reject the pipeline's correctly calculated surcharge filing because the commission no longer regarded the method of calculation to be just and reasonable.

[00:12:58] Speaker 02:
So that was a case involving the change of a rate mechanism like schedule two.

[00:13:02] Speaker 02:
And it said, essentially, if we determine that the rate mechanism is unjust and reasonable, does that mean that we should start rejecting under section 205 equivalent new rates that are filed?

[00:13:12] Speaker 02:
And what the court said in that case was no.

[00:13:14] Speaker 02:
Even where we've determined that the calculation mechanism, i.e.

[00:13:18] Speaker 02:
schedule 2 in this case, is unlawful, you still must use section 206 equivalent to change filed rates.

[00:13:26] Speaker 02:
And again, I think that case is especially important because it was the primary authority, or one of the primary authorities that FERC itself cited,

[00:13:32] Speaker 02:
in the 2010 proceeding when it said that the section 205 filing in that case to change schedule two did not change all the existing rates that had already been filed.

[00:13:45] Speaker 02:
That was my first point, Your Honor.

[00:13:46] Speaker 02:
I'm happy to continue answering questions about that.

[00:13:48] Speaker 02:
But I know my time is getting short.

[00:13:49] Speaker 02:
So I'm also happy to talk about the fact that we don't think the just and reasonable standard has been satisfied here.

[00:13:54] Speaker 02:
I think that's the other crucial error in this decision.

[00:13:58] Speaker 02:
FERC approved the transmission

[00:14:00] Speaker 02:
I'm going to go back to the fact that as Commissioner Danley noted in dissent, the transmission orders undisputedly proffered no supporting evidence.

[00:14:09] Speaker 02:
Rather, they relied exclusively on distinguishable FERC precedent policy.

[00:14:14] Speaker 02:
And as the dissenting commissioner noted, that gap meant that FERC simply could not know whether the proposed rate of zero dollars going forward for reactive power, which is a

[00:14:23] Speaker 02:
mandatory required service that FERC has repeatedly found is essential for grid reliability, should be compensated at zero dollars, and that there was substantial unrebutted evidence, I'm quoting, of the negative rate impacts that were submitted by the independent generators.

[00:14:38] Speaker 02:
So we also think there's just, even if you accept that this complied with the statutory scheme and you accept the FERC's

[00:14:45] Speaker 02:
You know, transition.

[00:14:47] Speaker 02:
We think that issue alone, that Section 205, 206 would resolve this case.

[00:14:50] Speaker 02:
You wouldn't need to get into anything else.

[00:14:51] Speaker 02:
We agree with you about that.

[00:14:55] Speaker 03:
And if we vacate and remand, what kind of order should we give with regard to the remand?

[00:15:02] Speaker 02:
Well, Your Honor, I think if you agreed with us on 205, 206, the order could simply... We agree with you that this was not Justin Breeze.

[00:15:10] Speaker 03:
We disagree with you about whether it could be filed.

[00:15:12] Speaker 03:
We disagree with you about whether it was Justin Breeze.

[00:15:14] Speaker 02:
Well, typically, in that circumstance, Your Honor, I think you would, in terms of the specific language to remand.

[00:15:22] Speaker 03:
This is a very friendly question.

[00:15:24] Speaker 03:
Yeah, I know I hear you.

[00:15:26] Speaker 03:
We would vacate.

[00:15:27] Speaker 03:
Right.

[00:15:27] Speaker 03:
And we would remand.

[00:15:28] Speaker 03:
There's some talk about a fuller hearing in the alternative.

[00:15:32] Speaker 03:
And I guess it hasn't always been clear to me why that's an alternative and not just part of what the remand order would look like.

[00:15:39] Speaker 03:
But I'm just asking for your help.

[00:15:41] Speaker 02:
Right, of course.

[00:15:42] Speaker 03:
Well, if you issue a remand order, what should we tell?

[00:15:45] Speaker 02:
If you determine that there was insufficient evidence, then I would vacate remand to the agency to conduct further proceedings.

[00:15:51] Speaker 02:
I think a hearing would be absolutely appropriate in the circumstance, considering it's ultimately a substantial evidence question.

[00:15:57] Speaker 02:
Is $0 going for newly interconnected generators going forward a just and reasonable rate?

[00:16:03] Speaker 02:
And that question ultimately goes to looking at costs plus a reasonable rate of return, I think is the classic.

[00:16:09] Speaker 03:
We could just order further proceedings and then FERC could choose to either conduct more of an evidentiary hearing or it could decide to try again with the evidence that's in front of it and that may or may not work out well for FERC.

[00:16:24] Speaker 02:
Yeah, well, I would suggest that, yes, if you were to remand on the ground, that it's not just unreasonable, that the language should make clear that they require evidence going forward.

[00:16:34] Speaker 02:
So I would think that they would not rely on the same record, but instead would either conduct a hearing or conduct further paper proceedings that required actual evidentiary submissions by the transmission owners and not simply as- And that's necessary because your point is not just that for

[00:16:51] Speaker 03:
did not reasonably explain his decision based on the evidence in front of it, but your position is there was no way for could reasonably explain this decision.

[00:17:01] Speaker 02:
As when they were limited by the evidence that that's right and that's what commissioner Dan Lee held your honor or wrote in dissent he said we simply cannot know he said he even took the position.

[00:17:13] Speaker 02:
that it's possible that $0 is an appropriate rate going forward.

[00:17:16] Speaker 02:
We strongly disagree with that.

[00:17:17] Speaker 02:
Again, it's a required critical service.

[00:17:19] Speaker 02:
We think there are statutory and constitutional questions to say that we're being required to perform a service that we're not doing for our own benefit, but for the benefit of the grid.

[00:17:27] Speaker 02:
Don't a lot of generators do it outside of MISO?

[00:17:32] Speaker 02:
Lots of generators do.

[00:17:33] Speaker 02:
But again, I think it's a fairly extraordinary theory for FERC to say, we're requiring you to provide the service, but we're not going to pay you for it.

[00:17:40] Speaker 02:
That's unusual in FERC.

[00:17:42] Speaker 02:
Most of the time, most required services, every other ancillary service that I'm aware of, FERC gives payment for it because it's required.

[00:17:50] Speaker 02:
If FERC doesn't want to pay for it, they can make it voluntary.

[00:17:53] Speaker 02:
But they won't do that because it is so important.

[00:17:55] Speaker 03:
But on this specific question of compensation, it's MISO in the recent past that has been the out.

[00:18:03] Speaker 02:
Well, I think there are, I think what I read in the records, there's six RTOs or ISOs, four of them until this latest order provided compensation.

[00:18:13] Speaker 02:
Now it's three and three.

[00:18:15] Speaker 02:
So it's an outlier.

[00:18:17] Speaker 02:
In fact, it's the other way around.

[00:18:19] Speaker 02:
But I will also say that in those other circumstances, which I think that Commissioner Janley and Descent noted were clearly distinguishable, my understanding is that this issue has never been raised.

[00:18:30] Speaker 02:
And I don't think FERC points to this issue being raised.

[00:18:33] Speaker 02:
You know, there was, again, it was very different circumstances, not the circumstance where hundreds of generators had received hundreds of millions of dollars for 20 plus years.

[00:18:41] Speaker 02:
And then with this simple expedient of Section 205 filing, wiping it all away and backdating it to the day after the filing was made.

[00:18:49] Speaker 01:
Why can't the agency can't can't can't the agency rely to some extent on their past views and past practice and past experience with this issue.

[00:19:02] Speaker 01:
It's not as if this is coming up for the first time.

[00:19:08] Speaker 01:
They've been saying for over 20 years that

[00:19:11] Speaker 01:
this reactive power within the dead zone, within the normal zone, shouldn't be compensated except as necessary to ensure equal treatment between affiliated and unaffiliated generators.

[00:19:30] Speaker 02:
your honor, to some extent, commission, of course, can rely on its prior precedent.

[00:19:34] Speaker 02:
And in fact, the California Public Utilities Commission, I think, says that.

[00:19:37] Speaker 02:
But I think that's an important case for this proposition, because what the California Public Utilities case, which was a 2021 case, said was you're allowed to rely on your prior decisions to the extent that they are factually the same and don't have relevant differences.

[00:19:51] Speaker 02:
But in a situation where there are relevant differences, it's not sufficient to say, well, we've decided this in these distinguishable circumstances, and therefore,

[00:20:00] Speaker 02:
You know, we have no obligation to come forward with substantial evidence.

[00:20:02] Speaker 01:
We have no relevant difference other than that generators have been taking advantage of this to get a payment that under the logic of order 2003, they probably shouldn't.

[00:20:17] Speaker 02:
Well, I mean, I think, well, I think, first of all, there's some relevant differences, which is there has been 20 years of

[00:20:23] Speaker 02:
of experience with this.

[00:20:24] Speaker 02:
I do think that changes things.

[00:20:26] Speaker 02:
And that changes things both from a reliance standpoint.

[00:20:30] Speaker 02:
I mean, a lot of these generators have entered into 10, 15-year power purchase agreements that relied on a separate stream of compensation that has now been taken away.

[00:20:37] Speaker 02:
There's also, and just in general, set rates and done other things without any longer any clear mechanism for recovering it.

[00:20:45] Speaker 02:
There's other questions that have been raised in the record.

[00:20:47] Speaker 02:
Again, all of these questions were raised on an evidentiary submission that was one-sided, according to Mr. Danley.

[00:20:52] Speaker 02:
only from the protest side.

[00:20:54] Speaker 02:
There was no evidence on the other side about things like reliability, about things like cost recovery, the ability to do that, undue discrimination.

[00:21:02] Speaker 02:
I think the Intervener's Brief talks a great deal about that.

[00:21:06] Speaker 02:
So I do think it's distinguishable.

[00:21:08] Speaker 02:
But I would also say, Your Honor, that FERC essentially sensed the dawn of Order 2003, which if you go back and look at it, the whole analysis of this question boils down to essentially one sentence, which says, because you're required to do this, we're not going to compensate you.

[00:21:24] Speaker 02:
So it was not a fully fleshed out order even at that time.

[00:21:28] Speaker 01:
Yeah, fair enough.

[00:21:30] Speaker 02:
But there's been precedent that's accreted on top.

[00:21:32] Speaker 02:
But FERC continually, including in the proceedings below, says you can't even attack that because

[00:21:36] Speaker 02:
That's a collateral attack on our prior order.

[00:21:39] Speaker 02:
So I don't even think this issue has been fully and adequately been raised in a proceeding such as this one to say, well, wait, take a step back.

[00:21:48] Speaker 02:
Why should $0 be an appropriate rate for a service that you're requiring?

[00:21:52] Speaker 02:
It's one thing if they say it's a voluntary service.

[00:21:54] Speaker 02:
You're free to provide it or not.

[00:21:56] Speaker 02:
But if you're going to require it, how could it possibly be that $0 is an appropriate rate?

[00:22:00] Speaker 02:
So at least that should be fleshed out, Your Honor.

[00:22:02] Speaker 01:
So that's why I just don't think the order itself

[00:22:06] Speaker 01:
2003 is thin on its face, but I think the accretion, correct me if I'm wrong, I think the accretion is the justification that when you're in that normal zone, the function of the voltage support that the reactive power gives you is just to enable the power to get from the generator into the grid.

[00:22:33] Speaker 01:
And that's different from

[00:22:35] Speaker 01:
reactive power outside the zone, which serves this function of getting power through the grid.

[00:22:42] Speaker 01:
And one you think of is, you know, it's on the generator.

[00:22:45] Speaker 01:
The other really starts to look like the grid is benefiting and they should pay for it.

[00:22:51] Speaker 01:
Right.

[00:22:51] Speaker 01:
That sounds like a pretty rational

[00:22:54] Speaker 02:
That, Your Honor, I think is the argument, that's the way I read the DC circuits.

[00:22:59] Speaker 02:
I'm sorry, the first brief in the DC circuit.

[00:23:01] Speaker 02:
I don't think, and we've looked, I don't think FERC made the finding that reactive power is being supplied for the generator's own benefit.

[00:23:09] Speaker 02:
We looked at the citations in FERC's brief to that point.

[00:23:11] Speaker 02:
And what they say is you're required to provide it.

[00:23:13] Speaker 02:
It doesn't say you're required to provide it because it serves you.

[00:23:16] Speaker 02:
It's true.

[00:23:17] Speaker 02:
It helps us get our power on the grid.

[00:23:19] Speaker 02:
But it serves a much broader reliability purpose for the entire grid.

[00:23:24] Speaker 02:
And there's a few reasons why I know that's to be the case.

[00:23:27] Speaker 02:
Number one, again, it's required.

[00:23:30] Speaker 02:
So again, it would be surprising to me that they would not make it voluntary if it was purely for our benefit.

[00:23:36] Speaker 02:
Number two, on page 23, they say that it

[00:23:39] Speaker 02:
The FERC says on page 23 of its brief that the requirement for active power so grid reliability is not threatened.

[00:23:46] Speaker 02:
And that's based on, Your Honor, a long line of FERC statements in many orders.

[00:23:51] Speaker 02:
I'll point you to a couple.

[00:23:52] Speaker 02:
On JA 156, there's a quotation to a FERC staff report that says generators would be unlikely to provide reactive power if it were not compensated going forward.

[00:24:02] Speaker 02:
So again, that kind of shows that this capability of not only producing reactive power but being able to absorb it as well would not necessarily be offered as a discrete service if it were not a requirement.

[00:24:14] Speaker 02:
One other point, order 888, which is the sort of seminal order from 1996 that FERC used to restructure the markets and required the unbundling

[00:24:22] Speaker 02:
Exactly, and required reactive power as a separate service.

[00:24:27] Speaker 02:
It's cited in our brief occasionally, but it says that reactive service is necessary to maintain the integrity of the transmission system.

[00:24:34] Speaker 02:
And again, it's provided both by transmission service providers, but also by generators who interconnect for their own purposes, but also for broader reliability.

[00:24:43] Speaker 02:
One other point in this, and I think this is almost conclusive, FERC admits on page 38 of its brief

[00:24:48] Speaker 02:
that wind generators, renewable resources who interconnect to the grid, were not required to supply this reactive power capability service at all until 2016.

[00:24:59] Speaker 02:
So between 2003 and 2016, wind generators had no obligation to provide the service.

[00:25:06] Speaker 02:
To me, that is conclusive proof that at least for wind generators and probably other renewable resources, this is not purely for the generator's own benefit.

[00:25:14] Speaker 02:
It's clearly for the grid's benefit.

[00:25:16] Speaker 02:
So it's an extraordinary theory to me to say,

[00:25:18] Speaker 02:
that they are requiring the service that we must provide, and we're going to give you $0 for it.

[00:25:25] Speaker 02:
And because we made the statement back in 2003 without a great deal of analysis, you're essentially stuck with it in perpetuity.

[00:25:32] Speaker 02:
We think we should be able to challenge it for purposes of this proceeding, and substantial evidence is lacking to show that the proper rate going forward is $0.

[00:25:41] Speaker 06:
Let me ask you a technical question.

[00:25:43] Speaker 06:
Sure.

[00:25:43] Speaker 06:
Is this reactive power?

[00:25:46] Speaker 06:
Is it just the same power the generators put out, but it's just steered to a different purpose?

[00:25:52] Speaker 06:
Or is it some unique form of electricity?

[00:25:56] Speaker 02:
My understanding, Your Honor, and I'm not a technical expert, is that it's a different type of electricity.

[00:26:03] Speaker 02:
It's essentially

[00:26:04] Speaker 02:
Reactive power is measured in voltage amperes versus real power is measured in wattage.

[00:26:12] Speaker 02:
So wattage is actually the real power that powers devices and things like that, whereas reactive power is

[00:26:18] Speaker 02:
essentially helps electricity flow throughout the grid and maintains proper, proper voltage levels.

[00:26:23] Speaker 06:
So it's essentially what special, I mean, I know they talk about the connection pieces, but do you have to have special equipment to generate this or is it easily just a byproduct of ordinary generation?

[00:26:38] Speaker 02:
So for synchronous resources, traditional thermal generating resources, coal, oil, gas, those sorts of things.

[00:26:46] Speaker 02:
It is a byproduct of the process.

[00:26:48] Speaker 02:
It's the same equipment, creates both real power and reactive power.

[00:26:53] Speaker 02:
There's no dispute that for.

[00:26:55] Speaker 06:
So if it's just sort of a diversion off of your regular electricity, what do you do to make it turn into reactive power?

[00:27:03] Speaker 02:
I think it has to do, and again, I'm not a technical expert, but my understanding is it has to do with adjustments that could be made on the plant side to either absorb or produce reactive power to maintain appropriate voltage levels throughout the grid and make sure energy is flowing smoothly and there's no blackouts.

[00:27:20] Speaker 06:
If you didn't have to mandate that electrical power would not get diverted, you would have more electric power to put out onto the grid and that you would get compensated for.

[00:27:30] Speaker 02:
If in the rare circumstance where reactive power is needed outside the dead band, we would continue to be compensated.

[00:27:35] Speaker 06:
No, I'm just talking about if, for example, if it were and I'm trying to understand if when they require this reactive power, are they taking electrical, their resources or power that you would otherwise be able to put into the grid and get money for?

[00:27:52] Speaker 02:
Right.

[00:27:53] Speaker 02:
So I think the answer to that, my understanding is the answer to that is no for thermal, for synchronous resources because they produce power

[00:28:00] Speaker 02:
They have to purchase special equipment to produce reactive power and there is an opportunity cost for producing reactive power in that

[00:28:18] Speaker 02:
The more reactive power they produce, the less real power they produce.

[00:28:22] Speaker 02:
So there is actually a difference for that.

[00:28:24] Speaker 02:
And I think that's undisputed in the record.

[00:28:26] Speaker 02:
I think there's statements that, again, that's on page 56 or 57 that we talk about of our brief, that renewable uses separate equipment and there's opportunity costs.

[00:28:36] Speaker 02:
But I think beyond that, too, it's a little misleading to even talk about incremental costs.

[00:28:40] Speaker 02:
That's what FERC wants to rely on a lot.

[00:28:42] Speaker 02:
incremental costs, fuel costs, maintenance costs, things like that.

[00:28:44] Speaker 02:
But for the past 20 years, FERC has well recognized that there are costs associated with reactive power.

[00:28:52] Speaker 02:
In fact, they have approved filings by 400 generators for $220 million in annual cost-based revenue requirements.

[00:29:00] Speaker 02:
This is detailed filings that generators make with testimony and expert analyses and data that says, here's the cost that it costs us to produce reactive power.

[00:29:11] Speaker 02:
Now it's true, it's using the same equipment for synchronous resources, but that doesn't mean there's no costs associated with it.

[00:29:16] Speaker 02:
It just needs to be allocated between the real power you're producing and the reactant.

[00:29:20] Speaker 06:
What are the costs that they missed?

[00:29:23] Speaker 02:
the cost that they missed.

[00:29:24] Speaker 06:
Yeah, because they talk about you got the equipment already and you're already making electricity.

[00:29:30] Speaker 02:
Well, they simply... What made up that 220?

[00:29:33] Speaker 06:
They say it's minimal and you guys say it's 220 million.

[00:29:36] Speaker 02:
Well, FERC has said it's 220 million, because again, those were the annual cost-based revenue requirements.

[00:29:41] Speaker 02:
What it determined were our costs for producing it.

[00:29:44] Speaker 02:
It was calculated using something called the AEP methodology, which basically is a FERC case-based methodology that divides the

[00:29:53] Speaker 02:
calculates the power between reactive and real power for a particular asset.

[00:29:58] Speaker 02:
And FERC now in its brief says, well, that's just a legal construct.

[00:30:02] Speaker 02:
Well, yes, it is a legal construct, but it's one that's been established and that FERC has accepted for 20 years, which is to say that it acknowledges that for cost of service rate making, which is what ancillary services like reactive power are, you need to look at the costs for each of those services.

[00:30:17] Speaker 02:
And therefore you should

[00:30:18] Speaker 02:
divide the cost between the real power you're creating and the reactive power.

[00:30:22] Speaker 02:
And under cost causation principles, whereby you have to ensure that the cost you're incurring are being paid by the customers who actually use that service.

[00:30:31] Speaker 02:
That's why you have to divide it that way.

[00:30:32] Speaker 02:
Because the customers of real power are different from the customers of reactive power.

[00:30:37] Speaker 02:
Real power is purchased by end users.

[00:30:39] Speaker 02:
Reactive power is purchased by transmission customers to help power move smoothly throughout the grid.

[00:30:44] Speaker 06:
There's a lot of math, but I'm still not understanding what it is that you need to get compensated for.

[00:30:50] Speaker 06:
And this is sort of essential to your takings argument and your arguments about.

[00:30:55] Speaker 06:
It's strange.

[00:30:57] Speaker 06:
They say, look, it's just this piece of equipment.

[00:31:00] Speaker 06:
You have it.

[00:31:00] Speaker 06:
There's really no other cost to this.

[00:31:03] Speaker 06:
And you say $220 million.

[00:31:04] Speaker 06:
I'm trying to understand the difference of what makes up that $220 million.

[00:31:11] Speaker 06:
So it's not just a piece of equipment.

[00:31:13] Speaker 06:
Maintenance?

[00:31:17] Speaker 06:
Is it labor?

[00:31:18] Speaker 06:
We could have used this for regular electricity.

[00:31:20] Speaker 06:
That's what I'm struggling with is the gap between the two sides.

[00:31:23] Speaker 02:
Right.

[00:31:24] Speaker 02:
So again, I think there are some incremental costs.

[00:31:26] Speaker 02:
We all agree for wind and solar.

[00:31:29] Speaker 02:
Burke says they're not very many.

[00:31:30] Speaker 02:
They're separate equipment costs.

[00:31:32] Speaker 02:
But I think the broader point and the more important point is that in general, to determine a rate is just and reasonable for cost of service rate making, you have to determine that you're recovering your costs plus a reasonable rate of return.

[00:31:45] Speaker 02:
There's something called the cost causation principle that says if you have certain

[00:31:49] Speaker 02:
This is discussed on 26 and 27 of our reply brief.

[00:31:51] Speaker 02:
If you have certain costs, those need to be paid by the customers actually taking them.

[00:31:57] Speaker 02:
So if you spend $100 million on a new, I'm just making a number up, obviously, but on a new generation facility, then you need to allocate your costs of that 100 million between the real power you're producing, which might be 80 million, and the reactive power you're producing, which might be 20.

[00:32:10] Speaker 02:
Again, I'm making these up.

[00:32:11] Speaker 02:
But the reason is because then the $20 million you get is your annual cost-based revenue requirement that is passed along to the customers of

[00:32:18] Speaker 02:
that cost-based service, which in this case are the transmission customers, most of whom are the transmission owners on the other side.

[00:32:28] Speaker 06:
Any questions?

[00:32:29] Speaker 06:
Thank you very much.

[00:32:30] Speaker 06:
We'll give you a few minutes for rebuttal.

[00:32:31] Speaker 02:
Thank you.

[00:32:40] Speaker 04:
Good morning, Your Honors.

[00:32:40] Speaker 04:
Beth Pacella for the Commission.

[00:32:42] Speaker 04:
I'm going to start with talking about the AEP methodology that Judge Millett was just asking about.

[00:32:48] Speaker 04:
The commission explained that the AP methodology doesn't show that there are actually any costs incurred to produce reactive power.

[00:32:56] Speaker 04:
It's simply a legal construct.

[00:32:58] Speaker 04:
It's an allocation factor that was created long ago to apportion.

[00:33:03] Speaker 04:
It was created back when there wasn't unbundling and transmission and generation was all owned by the same company.

[00:33:11] Speaker 04:
And so when the commission

[00:33:13] Speaker 04:
said it's okay to just apportion the cost of the same equipment among real and reactive power.

[00:33:19] Speaker 04:
And that's how it was done.

[00:33:20] Speaker 06:
So now we have generators who... Did FERC err in approving as just unreasonable all these rate filings by generators to recover these costs?

[00:33:30] Speaker 06:
I think that's something that the commission is

[00:33:32] Speaker 04:
looking at now and I improved all of these for the revenue requirements under this AEP methodology.

[00:33:39] Speaker 04:
It did.

[00:33:40] Speaker 06:
It did.

[00:33:41] Speaker 06:
I didn't see anything in the record that said that they were, you know, padding the bills, that there was anything content wise wrong about these bills, that there was anything invalid about bills.

[00:33:52] Speaker 06:
There was no filing.

[00:33:53] Speaker 06:
There is no finding.

[00:33:54] Speaker 06:
That's the whole 205 206 issue that these rates that they had filed were not

[00:34:00] Speaker 06:
just and reasonable.

[00:34:01] Speaker 04:
Well, there's no finding because there didn't need to be a filing finding regarding that here, your honor.

[00:34:06] Speaker 04:
But if I could they were filed.

[00:34:08] Speaker 04:
They were filed.

[00:34:09] Speaker 06:
Yes, they're did they not have to be just and reasonable and filed.

[00:34:13] Speaker 04:
So revenue requirements.

[00:34:16] Speaker 04:
The commission found they were just and reasonable at the time in light of the AP methodology.

[00:34:22] Speaker 04:
But revenue requirements, if I could just explain.

[00:34:29] Speaker 04:
The revenue requirements, as the commission explained at Rehearing Order 617, paragraph 47, note 61, they're just an offer to sell reactive power on a general applicable basis at a standard rate.

[00:34:41] Speaker 04:
They don't establish an obligation on any party to purchase the service.

[00:34:45] Speaker 04:
And so when they, under this AEP methodology, divided up their costs among real and reactive power, it's a fiction, is what the commission is now explaining in the orders here.

[00:34:58] Speaker 04:
It always was a fiction because it was just a legal construct, how to divide things up.

[00:35:02] Speaker 04:
Now the commission's looking at it and it explained here.

[00:35:05] Speaker 06:
Wait, sorry.

[00:35:07] Speaker 06:
I don't understand this fiction.

[00:35:08] Speaker 06:
I assume with those rates that were on file, they couldn't have charged transmission owners a higher rate than that number.

[00:35:17] Speaker 06:
Correct.

[00:35:18] Speaker 06:
I mean, that sort of they had to chart.

[00:35:19] Speaker 04:
They could only charge transmission owners the rate that they filed the rates in their revenue requirements are used as part of their their cross reference to schedule to because that's the amount that schedule to would use to then calculate.

[00:35:35] Speaker 04:
the rate that they were paid for reactive powers.

[00:35:39] Speaker 06:
They couldn't have said, once they said $100 for how many volts of reactive power.

[00:35:49] Speaker 06:
They couldn't have charged someone $200, right?

[00:35:52] Speaker 06:
No.

[00:35:53] Speaker 06:
No, it was a real on file FERC rate that they had to comply with.

[00:35:57] Speaker 06:
That's not a fiction.

[00:35:58] Speaker 06:
People were paying for 20 years.

[00:36:00] Speaker 04:
The fiction is how it's divided up.

[00:36:03] Speaker 04:
So you have, let's say you have $100 in costs to produce reactive power, to generate power, including producing reactive powers the commission found at little or no costs.

[00:36:15] Speaker 04:
The commission under this AEP methodology allowed entities to take that $100 and I'm going to obviously make this simple and say 50-50.

[00:36:24] Speaker 04:
I don't really know how the APM methodology is kind of complicated.

[00:36:28] Speaker 04:
But let's say it's 50-50.

[00:36:29] Speaker 04:
So you tell us that half your costs are for generation of real power and half your costs are for producing reactive power.

[00:36:40] Speaker 04:
But that's not true.

[00:36:41] Speaker 04:
Commission explained here, based on its experience, and I understand there's no evidence in the record about this, but the commission is allowed to, and there are many cases that say this, the commission can rely on economic theory and predictive judgment.

[00:36:56] Speaker 04:
The court has completely said that time and time again that it's perfectly legitimate for the commission to base its findings on basic economic theory.

[00:37:03] Speaker 04:
and on predictive judgment, and that that satisfies substantial evidence where it has done so correctly.

[00:37:08] Speaker 06:
The economic theory where they're applying, when they said that this doesn't cost anything, when we know at least for non-synchronous generation, they have to buy, they don't make this as a byproduct, and they have to buy special equipment.

[00:37:20] Speaker 04:
That's not correct, Your Honor, and the Commission explained that.

[00:37:23] Speaker 04:
If you look at, if you look, for example, at the rehearing order.

[00:37:28] Speaker 06:
It's not a byproduct of what they create.

[00:37:30] Speaker 06:
It is a byproduct of what they create.

[00:37:32] Speaker 06:
I forget what they call them.

[00:37:33] Speaker 04:
It's an inverter and the inverter is no as the commission explained at the hearing order.

[00:37:39] Speaker 04:
Paragraph 30 at J a 606 the commission explained that they use their inverter to convert their real power to alternating current so that they can inject it onto the system so.

[00:37:50] Speaker 04:
It is a little bit different than synchronous.

[00:37:52] Speaker 06:
They don't create alternating current.

[00:37:54] Speaker 04:
They don't, but they can't get their real power on the system unless they do this conversion.

[00:37:59] Speaker 06:
And in order to do this conversion... How did the folks do it for like six or seven years when they weren't required, the wind folks, when they weren't even required to provide... The wind folks were exempted and they didn't have to provide reactive... Okay, so then they were able to get their... They used some other method to convert their power.

[00:38:14] Speaker 06:
Is that in the record zone?

[00:38:16] Speaker 04:
I'm sorry?

[00:38:17] Speaker 06:
Is that in the record?

[00:38:18] Speaker 06:
My understanding was they were not required to provide reactive power.

[00:38:21] Speaker 04:
They were not.

[00:38:21] Speaker 06:
Reactive power is not required for wind power, at least, to get onto the grid.

[00:38:25] Speaker 06:
Well, it is now.

[00:38:26] Speaker 06:
No, no, reactive power was... I'm sorry, mechanically.

[00:38:29] Speaker 04:
Reactive power was.

[00:38:30] Speaker 04:
It's just other entities were providing it for them if it was needed.

[00:38:34] Speaker 06:
Why wouldn't it just have been a byproduct of their own power?

[00:38:37] Speaker 04:
Actually, I take that back.

[00:38:38] Speaker 04:
I'm incorrect about that.

[00:38:39] Speaker 04:
If there was a study to show that reactive power was needed for that particular wind generator to get their power onto the system, then they did have to provide reactive power.

[00:38:49] Speaker 04:
It was just very expensive.

[00:38:50] Speaker 04:
So they could provide reactive power.

[00:38:52] Speaker 04:
It was all based on the cost.

[00:38:54] Speaker 04:
And then since in 2016, the commission determined that

[00:39:00] Speaker 04:
The technology had changed.

[00:39:02] Speaker 04:
It's no longer expensive for wind power to use an inverter.

[00:39:05] Speaker 04:
They use inverters now.

[00:39:07] Speaker 04:
And they've been using them just naturally.

[00:39:09] Speaker 04:
They're just wind generators just use inverters to create real power and to produce reactive power.

[00:39:15] Speaker 04:
So they're no longer exempted.

[00:39:17] Speaker 06:
I understand, but it just sounds like this is more complex and simply saying there's no, you said it was an economic theory that FERC relied on that we're supposed to refer to that there's no loss here.

[00:39:28] Speaker 04:
Let me try again if I can.

[00:39:30] Speaker 06:
20 million sounds like more than minimal cost to me.

[00:39:32] Speaker 04:
So right, but again, that's a legal construct.

[00:39:35] Speaker 04:
We're just saying 50% here, 50% there.

[00:39:37] Speaker 04:
It was done for convenience.

[00:39:39] Speaker 06:
It wasn't a reasonable calculation.

[00:39:41] Speaker 04:
The commission, whether that's just unreasonable is something I think the commission is addressing now.

[00:39:47] Speaker 03:
And you said that a couple times, it'd be quite extraordinary to have done all this for so many years.

[00:39:53] Speaker 03:
Is it 400 times a year and doing it for 20 years to the tune of $200 million and then to say actually the whole time we were paying people for nothing?

[00:40:03] Speaker 04:
Well, that, so, I mean, the alternative, Your Honor, is for the Commission to continue to

[00:40:11] Speaker 04:
allow people to be paid for nothing.

[00:40:13] Speaker 03:
You would have been rushing to file a 206 filing and say this, we've just discovered, stop the presses.

[00:40:19] Speaker 03:
This is a gigantic transfer of money to people who don't deserve it.

[00:40:24] Speaker 03:
That's as unjust and unreasonable as we could get.

[00:40:27] Speaker 04:
I don't know what to say about that, your honor.

[00:40:30] Speaker 04:
I don't have an answer to that.

[00:40:32] Speaker 04:
The commission has done a rulemaking.

[00:40:33] Speaker 04:
Don't you have a 206 filing?

[00:40:37] Speaker 04:
We have the commission's rulemaking that order 23, is it 22, I'm sorry.

[00:40:46] Speaker 04:
There's a rulemaking, the notice of proposed rulemaking that's out there now, thank you, is pending and the commission is addressing that on a more global basis.

[00:40:55] Speaker 04:
Here it had a section 205 filing submitted by the transmission, submitted by the MISO and proposed by the transmission owners.

[00:41:04] Speaker 04:
And so that's what the commission had before it.

[00:41:05] Speaker 06:
And let me just explain again,

[00:41:07] Speaker 06:
When did FERC realize that this was all sort of an unjust and unreasonable transfer of funds?

[00:41:15] Speaker 04:
My guess is the realization happened a while after the notice of inquiry was put out.

[00:41:22] Speaker 04:
So there was a notice of inquiry that came before the notice of proposed rulemaking, and the commission started rethinking about this.

[00:41:28] Speaker 04:
Was that before or after the transmission owners filed here?

[00:41:31] Speaker 04:
I don't know the date of the notice of inquiry.

[00:41:37] Speaker 04:
That's in.

[00:41:37] Speaker 04:
It was before, before they filed, I guess.

[00:41:43] Speaker 04:
So, but if I could, I haven't explained, I don't think well, the non-synchronous generating facilities.

[00:41:49] Speaker 06:
Sorry, I just want to have a time out on just, I will let you get into that.

[00:41:52] Speaker 06:
I just want to make sure.

[00:41:52] Speaker 06:
Of course.

[00:41:53] Speaker 06:
So, FERC already had a notice of inquiry out before the transmission owners filed this amendment.

[00:42:02] Speaker 06:
Is that what you're saying to me?

[00:42:03] Speaker 06:
Apparently so.

[00:42:04] Speaker 06:
Apparently.

[00:42:06] Speaker 04:
It is part of the record here.

[00:42:08] Speaker 06:
It is mentioned in the record here.

[00:42:09] Speaker 04:
The Notice of Inquiry was about whether there should be compensation for reactive power within the standard range because there is no cost.

[00:42:18] Speaker 06:
Why would that have been out when you already had Order 2003 out?

[00:42:21] Speaker 04:
It's saying you shouldn't get compensation.

[00:42:25] Speaker 04:
Because the point is that

[00:42:26] Speaker 04:
Because under order 2003, transmission owners had the option to pay their own or affiliated generators and therefore, as a matter of comparability, had to also pay other generators.

[00:42:38] Speaker 04:
And the commission was questioning and is still questioning in the notice of proposed rulemaking.

[00:42:43] Speaker 04:
Whether anybody should get paid.

[00:42:44] Speaker 04:
Whether anybody should get paid.

[00:42:45] Speaker 04:
And it has determined in this post-record notice of proposed rulemaking

[00:42:49] Speaker 04:
Preliminarily that no one should be compensated for this so transmission notice can't.

[00:42:54] Speaker 06:
Well it hasn't quite determined that because it's asked for comment on.

[00:42:57] Speaker 06:
Right that's why I say preliminarily.

[00:42:59] Speaker 06:
Well that wouldn't say preliminarily because it's trying it says how should we even if we were to decide that going forward the rule should be no compensation how does one transition.

[00:43:09] Speaker 06:
these existing payment schemes.

[00:43:12] Speaker 06:
But if, as Judge Walker was saying, it turns out, as at least the rationale Burke provided here suggests, that this whole thing has been sort of a scam, that they haven't been spending a penny but collecting $220 million.

[00:43:25] Speaker 06:
I think that's the question.

[00:43:27] Speaker 06:
I would have thought Burke would have

[00:43:30] Speaker 06:
jumped a lot sooner.

[00:43:31] Speaker 04:
I don't know what to tell you about that, Your Honor, other than what I'm defending here is this set of orders.

[00:43:41] Speaker 04:
And I'm not defending the post-record

[00:43:44] Speaker 06:
notice proposed rulemaking I know you're not doing that it's just it feels like I don't know what to say a lot of confusing message I don't I think for this on you but from first you know instead we got 20 years of 220 I'm sure the numbers change we'll just say roughly 200 million dollars a year and cost approved is just rates approved is just unreasonable with charge and pay under under a prior and that happens you have that

[00:44:07] Speaker 06:
then you have order 2003 saying well we don't think folks should get paid but if you want to get paid just make sure they get paid too so it's fine to keep paying this i mean that's what 2003 says it's fine if you all want as long as you do it evenly to keep paying and that's preliminarily when we have this going it's nothing it's nothing there's no cost there to justify

[00:44:26] Speaker 06:
these expenses.

[00:44:27] Speaker 06:
That's right.

[00:44:28] Speaker 06:
And then we have an NPRM that comes out and says, well, we need to figure this out.

[00:44:33] Speaker 06:
And if we do, what do we do with existing rates suggesting that you shouldn't sort of cut them off instantaneously as happened here?

[00:44:40] Speaker 06:
So it's just sort of a very confusing.

[00:44:41] Speaker 04:
So no one argued on this record here that it should be phased in.

[00:44:44] Speaker 04:
That's a construct from the reply brief.

[00:44:48] Speaker 04:
They never argued that it should be phased in.

[00:44:50] Speaker 04:
The reliance interest is that it shouldn't happen at all.

[00:44:54] Speaker 04:
That's their argument.

[00:44:54] Speaker 04:
and and they did not reasonably rely on this when you have reliance interest is as strong as it is because there's not going to be a phase they never your honor i'm sorry they never said anything about a phase and they never proposed a phase into the commission it was never presented to the commission i don't know what the commission would have done if they had asked for a phase

[00:45:17] Speaker 03:
saying like this is just kind of like the logical implication of a different argument and that seems like this seems like a logical implication of their reliance argument that I have more reliance on tariff if it's providing me you know 200 million dollars last year and it's going to go to nothing this year then I would have a reliance interest on that tariff if as it's phased down

[00:45:44] Speaker 03:
10 years from now, 20 years from now, I'm only getting $1 million.

[00:45:48] Speaker 03:
But $1 million is less to Reliance than $200 million.

[00:45:51] Speaker 04:
The commission's point on Reliance is that it could not be reasonable based on the longstanding rule before Order 2003, all the commission's cases, including 2003, and all the precedent since that has said you should not be recovering for these costs for your own benefit.

[00:46:11] Speaker 03:
I read that.

[00:46:12] Speaker 03:
I understand that point.

[00:46:15] Speaker 03:
I'm not opining on its strength or its weakness.

[00:46:18] Speaker 03:
I'm just saying I think it's a stretch to say that when they did make a reliance argument as front and center as they did, I think it's a stretch to then say, well, they forfeited any argument that there should be a phase in.

[00:46:34] Speaker 03:
The reason the reliance argument is strong is because there was not a phase in.

[00:46:38] Speaker 04:
I think that in the circumstances here, we have a Federal Power Act section

[00:46:42] Speaker 04:
313B requirement that you specifically raise any matters you want to present to the court on rehearing to the commission.

[00:46:49] Speaker 04:
And they've never raised this throughout the proceeding.

[00:46:51] Speaker 04:
It's just not a circumstance.

[00:46:53] Speaker 04:
The commission did not have that question before it.

[00:46:55] Speaker 04:
It didn't.

[00:46:56] Speaker 04:
And so I can't tell you what the commission would.

[00:46:58] Speaker 06:
It's them raising, but FERC approved an overnight change.

[00:47:03] Speaker 06:
October 30th, I still have the stream of income coming.

[00:47:06] Speaker 06:
I'm making my plans.

[00:47:07] Speaker 06:
October 31st, what?

[00:47:09] Speaker 06:
And November 1st, gone?

[00:47:11] Speaker 06:
Right?

[00:47:12] Speaker 06:
$220 million or $550,000 per generator?

[00:47:15] Speaker 06:
Gone?

[00:47:16] Speaker 04:
Gone.

[00:47:18] Speaker 06:
Within 24 hours.

[00:47:20] Speaker 06:
And so that is, if you don't have to look at what they raise, that is a different reliance interest for FERC to grapple with.

[00:47:28] Speaker 06:
$550,000 at McGetton for 20 years.

[00:47:31] Speaker 06:
Gone in 24 hours.

[00:47:33] Speaker 06:
No time.

[00:47:34] Speaker 06:
who adjust contracts.

[00:47:36] Speaker 06:
No time to deal with it.

[00:47:37] Speaker 04:
This is literally what the parties agreed to if they entered into an interconnection agreement with something like section 9.6.3.

[00:47:46] Speaker 06:
That begs the question of whether they agreed

[00:47:49] Speaker 06:
that could be changed through 205 or 206, which would require FERC or the complainants to show that what they were doing was unjust and unreasonable.

[00:47:59] Speaker 06:
If their rates were unjust and reasonable, I would agree they have no basis for relying on continuing to get unjust and unreasonable rates.

[00:48:08] Speaker 06:
But FERC's answer just assumes that not only there could be this change, but it could be done

[00:48:14] Speaker 06:
Any time they came up with a different just and reasonable number, as opposed to the protections of a 206 process.

[00:48:20] Speaker 04:
I'm sorry, Your Honor.

[00:48:20] Speaker 04:
I don't understand how that begs the question of whether it would be a 205 or 206, because what they agreed to was that their compensation would be whatever schedule two says.

[00:48:31] Speaker 04:
It was dependent on that.

[00:48:33] Speaker 06:
It begs the question because it asks, how would that number be changed under this tariff within the framework of the commission's law, the law that governs the commission?

[00:48:44] Speaker 06:
And that is, as long as our rate is just and reasonable, it cannot be changed.

[00:48:51] Speaker 04:
But the revenue requirement wasn't changed.

[00:48:53] Speaker 04:
The revenue requirements stand.

[00:48:56] Speaker 04:
They're there.

[00:48:56] Speaker 04:
And again, these entities agreed.

[00:48:59] Speaker 04:
And I just can't emphasize that enough.

[00:49:02] Speaker 04:
If I could just take one quick moment to talk about what they agreed to.

[00:49:08] Speaker 04:
If we look at 9.6.3, and it says, it says, they agreed that payments for providing reactive power within the standard rates would be contingent on the contents of tariff schedule two, which

[00:49:31] Speaker 04:
which these MISO and the TOs have the authority to change.

[00:49:35] Speaker 04:
The text is, payments for reactive power shall be pursuant to any tariff or rate schedule filed by the transmission provider.

[00:49:44] Speaker 04:
It's very plain and simple.

[00:49:47] Speaker 06:
Against the backdrop of a legal system where when there's a rate on file,

[00:49:52] Speaker 06:
A rate's not just what charge.

[00:49:54] Speaker 06:
A rate is also what is paid.

[00:49:55] Speaker 06:
A rate is on file.

[00:49:58] Speaker 06:
That's not right here, Your Honor.

[00:49:59] Speaker 06:
It's just unreasonable.

[00:50:00] Speaker 06:
It's not correct here.

[00:50:01] Speaker 06:
I thought we started this conversation earlier with agreeing that their rates were on file and had been found to be just and reasonable by FERC.

[00:50:08] Speaker 04:
Their revenue requirements were on file, but revenue requirements

[00:50:14] Speaker 07:
That's just and reasonable.

[00:50:15] Speaker 04:
And they were on file as just and reasonable, but the revenue requirements are just what we would like to charge, what we would like to charge, as I explained already during this argument.

[00:50:26] Speaker 06:
What we would like to charge, what we will charge.

[00:50:30] Speaker 06:
What we will charge.

[00:50:31] Speaker 06:
And then there's a backdrop legal system that says, those don't change.

[00:50:37] Speaker 06:
unless they're shown to be unjust.

[00:50:38] Speaker 04:
And they're unchanged.

[00:50:39] Speaker 04:
Their revenue requirement is unchanged, Your Honor.

[00:50:42] Speaker 06:
What changed here is... Schedule 2 said the rates will be set to zero.

[00:50:47] Speaker 06:
That was what found.

[00:50:48] Speaker 06:
No, not... Schedule 2 rates will be set to zero.

[00:50:52] Speaker 06:
J.A.

[00:50:52] Speaker 04:
42?

[00:50:53] Speaker 04:
Schedule 2 rates are set to zero, not their revenue requirements.

[00:50:57] Speaker 04:
Schedule 2 cross-references their revenue requirements because it takes the information in their revenue requirements.

[00:51:03] Speaker 04:
That sounds like a legal fiction.

[00:51:05] Speaker 04:
It's really not, seriously.

[00:51:07] Speaker 06:
Will they still get $220 million a year under this decision?

[00:51:11] Speaker 04:
Or will they get zero?

[00:51:12] Speaker 04:
Well, first of all, it's not $220 million a year.

[00:51:15] Speaker 04:
The generators are a small portion of that.

[00:51:17] Speaker 04:
But whatever the number is, they will get it through other means.

[00:51:21] Speaker 06:
So that's a separate question.

[00:51:22] Speaker 06:
They will get, so they will not get it by charging the transmission owners as they have been for 20 years.

[00:51:28] Speaker 06:
Correct?

[00:51:28] Speaker 06:
Because they agreed to that, Your Honor.

[00:51:30] Speaker 04:
Because they agreed to zero.

[00:51:33] Speaker 04:
No, the revenue requirement doesn't go to zero.

[00:51:35] Speaker 04:
The rate in schedule two is zero, Your Honor.

[00:51:37] Speaker 04:
And I'm sorry, I'm not explaining as well.

[00:51:39] Speaker 04:
Schedule two, which they agreed would be the basis of their compensation.

[00:51:43] Speaker 04:
Again, payment for reactive power shall be pursuant to any tariff or rate schedule filed by the transmission provider.

[00:51:51] Speaker 04:
Which means whatever Schedule 2 says is how they will be paid.

[00:51:56] Speaker 04:
So they agreed to this.

[00:51:58] Speaker 04:
And they understood, and if they didn't, they should have, that the commission's precedent is you only have to get paid under Schedule 2 if the transmission owner is paying its own or affiliated generators.

[00:52:12] Speaker 04:
And there's case after case in which the commission

[00:52:15] Speaker 04:
allowed entities to stop paying under schedule two because they were no longer paying.

[00:52:20] Speaker 04:
It allowed payments under schedule two to be eliminated time and time again.

[00:52:27] Speaker 04:
That happened over and over again.

[00:52:29] Speaker 06:
The best precedent for 205 being allowed to reduce

[00:52:35] Speaker 06:
rates to zero to terminate charges, as intervener has said, change what is payable to generators from what's on file with her.

[00:52:44] Speaker 06:
What's your best case?

[00:52:46] Speaker 06:
I'm worried about tariffs being written now in a way that allow amendments.

[00:52:50] Speaker 06:
I don't understand.

[00:52:51] Speaker 04:
I'm sorry, Your Honor.

[00:52:53] Speaker 04:
This is simply because this is what the generators agreed to by joining, by entering into these generator interconnection agreements.

[00:53:01] Speaker 04:
They waived their 205 rights, yes.

[00:53:03] Speaker 06:
Their 206 rights?

[00:53:04] Speaker 06:
They waived their 206 right?

[00:53:06] Speaker 04:
Well, everybody has a 206 right.

[00:53:08] Speaker 04:
I don't think you can waive your 206 right.

[00:53:09] Speaker 04:
You can waive your 205 right to make your own filings.

[00:53:13] Speaker 06:
Did they waive the right?

[00:53:16] Speaker 06:
You're saying they waived the right to have their rates changed, reduced to zero.

[00:53:21] Speaker 06:
Their rates were not changed reduced to zero.

[00:53:24] Speaker 06:
The payments that they would receive.

[00:53:27] Speaker 06:
They waived that right.

[00:53:28] Speaker 06:
That's right.

[00:53:29] Speaker 06:
They wouldn't have to proceed under 206 to modify change.

[00:53:32] Speaker 06:
That's exactly right, Your Honor.

[00:53:34] Speaker 06:
So that's exactly what I said.

[00:53:35] Speaker 06:
I don't see an express waiver.

[00:53:36] Speaker 06:
I mean, normally for waivers of legal rights, we require something more explicit than this.

[00:53:41] Speaker 06:
I'm just, they agree to this.

[00:53:42] Speaker 06:
I think this can be read in saying it leaves open what the process is.

[00:53:46] Speaker 06:
Yes, we understand there's a process here, but if that process is to change

[00:53:52] Speaker 06:
to eliminate, to render nullity, inugatory, the filed rates that we have, it will now be zero rather than whatever... They're not zero.

[00:54:00] Speaker 04:
Their revenue requirements may still exist to this day with the same number that they had before, Your Honor.

[00:54:05] Speaker 04:
And if the entities if the generators ability to charge these customers for this service is nullified because they agree to because they only because only because they agree to do so.

[00:54:16] Speaker 06:
I think we're going to circles on this, but I think that what has happened to critical point that they could have demanded.

[00:54:24] Speaker 06:
Prior to this amendment, what would happen if a transmission customer didn't pay whatever, again, I can't do the math, but whatever this filed charge was that they had, what would have happened?

[00:54:36] Speaker 04:
If they didn't pay the schedule to charge, because that's the thing that was paid, was the schedule to charge, not the revenue requirement.

[00:54:42] Speaker 04:
If they didn't pay this, I don't know what would happen.

[00:54:45] Speaker 04:
I mean, I'm sure there's procedures to make sure that

[00:54:48] Speaker 04:
entities pay their rates, charges.

[00:54:52] Speaker 07:
Go to MISO first, maybe, and then FERC.

[00:54:54] Speaker 04:
I'm sure you go to MISO first, and there's some procedure.

[00:54:57] Speaker 04:
I'm sure the tariff has procedures for non-payment.

[00:55:00] Speaker 04:
But that's a Schedule II issue.

[00:55:01] Speaker 04:
Nobody was paying the revenue requirement of the generators.

[00:55:08] Speaker 04:
No one was paying that.

[00:55:09] Speaker 04:
What they were paying was a Schedule II charge.

[00:55:12] Speaker 04:
and schedule two incorporated the information in this tariff file.

[00:55:16] Speaker 06:
Based on the revenue requirement, just in part, just in part amongst customers.

[00:55:21] Speaker 04:
It's a whole, it is, and it is explained in the, in the record, how it's calculated.

[00:55:26] Speaker 04:
It's a whole bunch of steps and there's formulas and, but it is used.

[00:55:30] Speaker 04:
They do use the revenue requirement, but it is not the charge.

[00:55:34] Speaker 06:
How much each transmission owner was going to pay.

[00:55:36] Speaker 06:
Yeah.

[00:55:37] Speaker 06:
And you're saying they waive the right to have that change.

[00:55:39] Speaker 06:
Absolutely showing of unjust and unreasonableness.

[00:55:41] Speaker 06:
by this language.

[00:55:44] Speaker 06:
I'm just saying what other tariffs in the future could, say, have language in there that says whatever payments you're going to get for other services can be changed at the will of a majority.

[00:55:56] Speaker 04:
But that would never happen if entities didn't agree to that.

[00:56:01] Speaker 06:
They didn't understand that.

[00:56:03] Speaker 04:
They didn't agree that that's what they signed up for.

[00:56:06] Speaker 04:
That's not correct, Your Honor.

[00:56:07] Speaker 04:
I think that this is truly

[00:56:09] Speaker 06:
If I ask them, they're going to say they agreed that they waived their right to any 206 protections for this change?

[00:56:13] Speaker 04:
I don't think it's the 206 issue.

[00:56:15] Speaker 04:
I think it's that they... That's their argument is that it is.

[00:56:17] Speaker 04:
And you're saying that they waived... Oh, you mean that they waived them having to file a 206.

[00:56:20] Speaker 04:
I'm sorry.

[00:56:20] Speaker 04:
I was misunderstanding.

[00:56:22] Speaker 06:
I think... They don't think that.

[00:56:25] Speaker 04:
Well, they're arguing that now.

[00:56:27] Speaker 04:
It's unreasonable to believe that in light of the general rule, which is that you should not be paid for providing reactive power than the standard range.

[00:56:37] Speaker 04:
And the reason for that is because there's little or no cost to doing so, which the commission explained here.

[00:56:43] Speaker 04:
It's because synchronous and non-synchronous both have to, the primary purpose

[00:56:50] Speaker 04:
of being a generator is to get your real energy onto the system.

[00:56:56] Speaker 04:
And for both synchronous and non-synchronous, the only way to get your energy onto the system is to have capital structure that will allow you to produce real power, which also, by chance, produces reactive power.

[00:57:10] Speaker 04:
There's nothing different about non-synchronous generators.

[00:57:14] Speaker 04:
The inverter that they use to be able to convert their real power

[00:57:19] Speaker 04:
to the correct, to AC instead of DC, which is what it would be, to get the real power into the system, they have to use that inverter.

[00:57:29] Speaker 04:
So it's just, then they also have to have this inverter to the same inverter to produce reactive power.

[00:57:37] Speaker 04:
There's no difference.

[00:57:39] Speaker 04:
There's little or no cost for any of this.

[00:57:42] Speaker 04:
And they have other options to recover these costs.

[00:57:47] Speaker 06:
In order 2003 B, Burke said it was through order 2003, was not affecting existing compensation arrangements.

[00:57:57] Speaker 06:
Did MISO have at that time, because I think MISO was a couple of years older than this, have an existing practice and schedule for compensation of reactive power?

[00:58:08] Speaker 06:
I'm sorry, so in order 2003, B-B supplement.

[00:58:13] Speaker 06:
Yeah, yeah, yeah.

[00:58:14] Speaker 06:
It says it is not affecting existing compensation arrangements.

[00:58:19] Speaker 06:
Didn't we so have an existing compensation arrangement?

[00:58:22] Speaker 04:
So if there were, I mean, there's no claim here that there are grandfathered compensation arrangements.

[00:58:27] Speaker 04:
Oh, whether this tariff provision, I don't know, Your Honor.

[00:58:31] Speaker 04:
I mean, no one's argued that, so it's not something I'm aware of.

[00:58:35] Speaker 04:
I just don't know.

[00:58:36] Speaker 04:
It's not part of this record.

[00:58:39] Speaker 06:
Okay, but there's it is public law 2003 B is public record.

[00:58:44] Speaker 04:
No, I understand that.

[00:58:45] Speaker 04:
I just don't know.

[00:58:46] Speaker 04:
I don't know what agreements might have existed in my so before order 2003.

[00:58:54] Speaker 04:
No one's made any claims about that.

[00:58:55] Speaker 04:
So I just don't know.

[00:58:56] Speaker 04:
And it's not part of this record.

[00:58:59] Speaker 04:
If I could just take a minute to

[00:59:02] Speaker 01:
Or I'll be done.

[00:59:03] Speaker 04:
Just want to give you some wrap up time.

[00:59:05] Speaker 01:
Thank you so much.

[00:59:06] Speaker 01:
Just one quick question.

[00:59:08] Speaker 01:
Can you give me a sense of your point that the generators have other means of getting compensation?

[00:59:15] Speaker 01:
Of course.

[00:59:15] Speaker 01:
I mean, it seems clearly right.

[00:59:19] Speaker 01:
in the abstract, right?

[00:59:21] Speaker 01:
If they can't get this compensation from the transmission owners, it's a higher cost of doing business and either some regulator will let them pass that along or the market will just take into account.

[00:59:37] Speaker 01:
But what's the time frame on that?

[00:59:44] Speaker 01:
I mean, I think the answer to what I just said was, yeah, sure.

[00:59:48] Speaker 01:
But we enter in these power contracts.

[00:59:50] Speaker 01:
I think your friend said they do this years in advance.

[00:59:55] Speaker 01:
They're locked into whatever price they're locked into.

[00:59:59] Speaker 04:
That's the power purchase agreements.

[01:00:00] Speaker 01:
How do you solve the short-term problem, the transition problem?

[01:00:06] Speaker 04:
Well, let me say this.

[01:00:07] Speaker 04:
How do they deal with that?

[01:00:09] Speaker 04:
And I do want to answer that.

[01:00:10] Speaker 04:
And please forgive me.

[01:00:12] Speaker 04:
is frustrating you because I am getting there and I'm not avoiding it.

[01:00:15] Speaker 04:
They could have included something in their power purchase agreements that would have said, schedule two now gives us compensation for this, but we understand based on the commission's longstanding precedent that this could change at any time.

[01:00:28] Speaker 04:
And so we want to include in these power purchase agreements a provision saying if schedule two compensation goes away, we want this level of compensation.

[01:00:36] Speaker 04:
So they could have done that in the first place.

[01:00:38] Speaker 04:
But to answer your question,

[01:00:41] Speaker 04:
And I'm sorry, now I forgot what it was, Judge Katz.

[01:00:45] Speaker 01:
I mean, I guess that is the answer.

[01:00:46] Speaker 01:
How do they deal with the transition?

[01:00:48] Speaker 04:
Oh, in the markets.

[01:00:49] Speaker 04:
I mean, there is no transition problem.

[01:00:51] Speaker 01:
Future contracts for power 10 years from now, they're fine.

[01:00:54] Speaker 01:
Oh, yeah, right.

[01:00:56] Speaker 01:
What do they do for the... They go to the markets.

[01:00:59] Speaker 04:
And the commission pointed specifically to specific tariff provisions that give them the opportunity to include these in their

[01:01:11] Speaker 04:
Capacity and energy market rates and it address make them less competitive.

[01:01:16] Speaker 06:
No because this is happening to everybody No, it's not transmission generators can pass the cost on to their retail customers But there are up their bids at the capacity auction.

[01:01:25] Speaker 04:
So well, that's it won't be able to that's generation so You know, they keep saying that there's low resources low resources in the market So I don't understand why they think that they wouldn't be able to include these but the Commission again explained that

[01:01:40] Speaker 04:
that they can do this and that there are plenty of generators that have to, I mean, independent generators

[01:01:49] Speaker 04:
There are plenty of them that are part of the market.

[01:01:52] Speaker 06:
The competing in these markets get to pass this cost on to retail customers.

[01:01:57] Speaker 06:
They don't.

[01:01:59] Speaker 06:
So transmission generators don't have to go up their bids at the capacity markets to cover this cost.

[01:02:07] Speaker 06:
They do.

[01:02:08] Speaker 06:
So in that way, it's not.

[01:02:10] Speaker 04:
They didn't make that argument until their reply brief, Your Honor.

[01:02:14] Speaker 04:
They never argue to the commission that this will make us less competitive, that we don't have a real opportunity.

[01:02:21] Speaker 04:
That specific argument was never raised in the commission until the library.

[01:02:24] Speaker 06:
Burke needs to show that this is gonna work to deal with this, and it's not logic.

[01:02:29] Speaker 06:
I'm no genius, but it's pretty obvious that if you're gonna have to do this, you're gonna have to up your, the only way to do it is to up your bids, and it's right there on the face of the order that transmission doesn't have to do that.

[01:02:39] Speaker 06:
I'm putting two and two together, that means

[01:02:42] Speaker 06:
It's not going to be a competitive market.

[01:02:44] Speaker 04:
I understand what you're saying, Your Honor.

[01:02:45] Speaker 04:
But again, we have the Section 313B requirement, and they did not argue to the Commission ever.

[01:02:51] Speaker 07:
This didn't occur to Kirk.

[01:02:53] Speaker 04:
I can only tell you what the Commission's orders say, and the Commission responds.

[01:02:56] Speaker 04:
Use your words.

[01:02:58] Speaker 03:
It sounds like basic economics.

[01:03:00] Speaker 04:
I understand what you're saying, Your Honor, but that doesn't mean that this Court has, and I apologize.

[01:03:05] Speaker 04:
I don't mean to be disrespectful.

[01:03:06] Speaker 04:
This Court does not have jurisdiction to address the specific issue

[01:03:11] Speaker 04:
that they don't have a fair opportunity because they will be undercut in the markets compared to, they will be undersold in the markets.

[01:03:19] Speaker 04:
That specific argument was not raised to the commission.

[01:03:23] Speaker 04:
So I don't know what the commission's answer to that would be.

[01:03:25] Speaker 04:
And if they had raised that to the commission, who knows?

[01:03:28] Speaker 04:
Maybe the commission might've made a different decision.

[01:03:30] Speaker 04:
I don't know.

[01:03:32] Speaker 03:
What about renegotiating the long-term contracts?

[01:03:35] Speaker 03:
It sounds, at times in the briefing, it sounds like you propose that as a possible solution.

[01:03:42] Speaker 03:
And I don't, and maybe it is, I don't understand how that would work if I'm on the other side of that contract and you come to me and you say, I would just like to pay you less.

[01:03:53] Speaker 03:
It seems like I would just say no.

[01:03:55] Speaker 04:
Of course, and the commission acknowledged that.

[01:03:56] Speaker 04:
The commission itself specifically said

[01:04:00] Speaker 04:
at rehearing order paragraph 40 J 612, the commission acknowledged that generators may not be successful in renegotiating those agreements.

[01:04:08] Speaker 04:
So that's why it then turned to the energy and capacity markets.

[01:04:12] Speaker 04:
And it explained, again, the specific provisions that set all that out.

[01:04:16] Speaker 04:
And I'll say that while Commissioner Clements did concur concerned about whether these methods would work to the first order, she did not submit a concurrence to the rehearing order.

[01:04:30] Speaker 04:
where the commission addressed all of these matters and presumably was satisfied with those answers.

[01:04:39] Speaker 06:
I promise to give you a couple minutes.

[01:04:41] Speaker 04:
Yes, I appreciate that.

[01:04:42] Speaker 04:
I appreciate that very much.

[01:04:43] Speaker 04:
I just wanted to hit the opportunity cost point.

[01:04:47] Speaker 04:
And just little points, and I'm sorry if we're past that.

[01:04:53] Speaker 04:
But as the commission explained to the hearing order, JA 605 paragraph 29 and note 92,

[01:05:00] Speaker 04:
Operating a generating unit within the standard range does not affect the generation output of a unit.

[01:05:05] Speaker 04:
So they will sell the exact same amount of energy, whether they're providing in the standard range or not.

[01:05:11] Speaker 04:
There's no opportunity cost.

[01:05:12] Speaker 04:
There's only an opportunity cost if you're providing reactive power outside the standard range.

[01:05:16] Speaker 04:
Because it's just, I don't really understand why.

[01:05:21] Speaker 04:
But there's some difference.

[01:05:23] Speaker 04:
I guess, yeah.

[01:05:25] Speaker 04:
And it really is for their own benefit.

[01:05:29] Speaker 04:
Maybe understands that when it's when commission did find that it's solely for their benefit.

[01:05:38] Speaker 04:
If you look at well, what it said was reactive power.

[01:05:42] Speaker 04:
It said it rehearing order paragraphs 53 to 54 JA 621 to 22 and I've also marked down initial order paragraph 62.

[01:05:51] Speaker 04:
The commission's point is that to maintain appropriate transmission grid voltage levels that within the standard range

[01:05:59] Speaker 04:
is to maintain appropriate voltage levels.

[01:06:01] Speaker 07:
I'm sorry, which paragraph are you reading?

[01:06:02] Speaker 04:
Oh, yeah, I'm sorry.

[01:06:03] Speaker 04:
I'm not reading from a paragraph.

[01:06:04] Speaker 04:
I'm reading from my own notes.

[01:06:05] Speaker 04:
But it's hearing order, paragraphs 53 to 54J, 621 to 622.

[01:06:10] Speaker 04:
And then in the initial order, paragraph 62J419.

[01:06:14] Speaker 04:
And the commission's point is that when you provide it within the standard range, you're providing it to maintain appropriate transmission grid voltage levels to allow the real power to enter the grid.

[01:06:27] Speaker 04:
So the only purpose for that is so that you can enter the grid.

[01:06:32] Speaker 06:
And if you don't want to provide this... I can see them saying that's the sole purpose of reactive power.

[01:06:37] Speaker 04:
I'm sorry.

[01:06:38] Speaker 06:
And otherwise you wouldn't have these ranges, you know, at a minimum, right?

[01:06:41] Speaker 06:
These ranges are guesses as to... No, what the commission is saying is that... I'm just not seeing it.

[01:06:46] Speaker 06:
So to maintain appropriate... You have to have reactive power to get your stuff onto the grid, for sure.

[01:06:52] Speaker 06:
That's the point.

[01:06:54] Speaker 06:
I don't see them saying that's exclusively what the reactive power obligations are for, that it doesn't also serve a large, within this range, it's not also serving a larger purpose.

[01:07:04] Speaker 06:
It's not precisely tied to their output.

[01:07:07] Speaker 04:
It is absolutely precisely tied to their output.

[01:07:09] Speaker 07:
That's the whole range, the dead band range?

[01:07:13] Speaker 04:
No, you have to be able to be prepared.

[01:07:16] Speaker 04:
It's a capability requirement.

[01:07:17] Speaker 04:
You have to be prepared to provide it.

[01:07:20] Speaker 04:
and if it's needed when you inject onto the system.

[01:07:23] Speaker 04:
So it is absolutely related just to you injecting onto the system.

[01:07:27] Speaker 04:
This isn't something, if the transmission owner says, we need you to provide additional reactive power outside the standard range to help us get things across the system, which is for the transmission owner's benefit, then you get compensated for that.

[01:07:43] Speaker 06:
I'm just not seeing it.

[01:07:45] Speaker 06:
It also gets back into this tension of why there's been all this payment for 20-something years.

[01:07:51] Speaker 06:
But anyhow, that's it.

[01:07:52] Speaker 04:
That's because of 2020.

[01:07:55] Speaker 04:
It's because of 2003's comparability standard.

[01:07:57] Speaker 04:
That's really why those payments have been made, not because there's been a fine.

[01:08:02] Speaker 07:
Paragraph 54 is the one that you read as the commission says.

[01:08:05] Speaker 04:
Well, it's 53 to 54 and initial order, paragraph 62.

[01:08:09] Speaker 04:
I also wrote down C also, paragraph

[01:08:12] Speaker 04:
see also paragraphs 23 to 24 on JA60102.

[01:08:15] Speaker 04:
And, you know, long standing precedent supports this point.

[01:08:20] Speaker 04:
I say Bonneville, Eon, Southwest Power Pool, Michigan Electric, Detroit Edison, Arizona Public Service Commission, all company, all of those cases, you know, that's where the commission, that's where order 2003 came from, the older cases,

[01:08:38] Speaker 04:
and commissioners consisted with that precedent.

[01:08:40] Speaker 04:
The whole basis is it's for your own benefit.

[01:08:43] Speaker 04:
And you don't have to provide it if you don't interconnect.

[01:08:46] Speaker 04:
That's the voluntariness.

[01:08:47] Speaker 04:
The voluntariness is you decide if you want to interconnect.

[01:08:49] Speaker 04:
This is a matter of an obligation so that you don't harm the system when you're injecting on.

[01:08:57] Speaker 07:
Thank you.

[01:09:07] Speaker 05:
Good morning.

[01:09:08] Speaker 05:
I'd like to start by clearing up some of the misconceptions and, you know, there's 20 years, 220 million has been thrown around a lot.

[01:09:20] Speaker 05:
But the key was in when petitioners council said 2016.

[01:09:24] Speaker 05:
This is not in this particular record, except in a presentation that the transmission owners attached to their answer to the protests of the original filing.

[01:09:37] Speaker 05:
2016 what changed?

[01:09:40] Speaker 05:
Technology had changed.

[01:09:42] Speaker 05:
So let me go back.

[01:09:44] Speaker 05:
Around the time of the unbundling, transmission owners owned generation and they needed to divide the costs, the costs that were purely transmission and the costs that were for this ancillary service.

[01:09:59] Speaker 05:
There are six ancillary services, but one of them is reactive.

[01:10:03] Speaker 05:
And there was a particular subset of costs, and that was the AEP allocation, was how do we figure out how much of the costs of this plant should be dedicated to the capability to provide React?

[01:10:16] Speaker 05:
So that's where we start.

[01:10:19] Speaker 05:
And at the time, the schedule two that was in the pro forma tariff said that we compensate for generators.

[01:10:29] Speaker 05:
So it's in the transmission tariff

[01:10:33] Speaker 05:
but to support the transmission system and the injection, the safe and reliable injection of generation, you need to have this bandwidth.

[01:10:41] Speaker 05:
This standard zone, I think, is what Ms.

[01:10:45] Speaker 05:
Pichalla called it.

[01:10:46] Speaker 05:
So that's where we start.

[01:10:49] Speaker 05:
And at that time, and Petitioner's Council mentioned, Wynn wasn't required to provide reactive leading and lagging.

[01:11:03] Speaker 05:
absorbing and producing because they couldn't.

[01:11:06] Speaker 05:
The technology was such that they couldn't.

[01:11:09] Speaker 05:
And what had to happen instead, and I think Herk Council alluded to, you have to do a study.

[01:11:17] Speaker 05:
You're going to hook up a generator.

[01:11:19] Speaker 05:
What do you have to do?

[01:11:20] Speaker 05:
One of the things that used to happen was for some of the renewables, they had to add equipment in their interconnection.

[01:11:30] Speaker 05:
And that's what

[01:11:32] Speaker 05:
provided the reactive support to inject their power.

[01:11:36] Speaker 05:
Fast forward in 2016, and this was in the Solar Energy Industries Association presentation that was attached to the transmission owner's answer, the technology had advanced and these inverters, which were required to transform the real power or the power that they put out into AC power to put onto the grid,

[01:12:03] Speaker 05:
also as a byproduct produced reactive power.

[01:12:07] Speaker 05:
So now they could be required.

[01:12:09] Speaker 05:
And FERC in order 827 said, renewables, wind and solar, you now have to, you are required to stay within that dead band, that 0.95 to 0.95, as close to unity as you can get it to provide the voltage support.

[01:12:29] Speaker 05:
And PS, I'm no engineer,

[01:12:32] Speaker 05:
I have heard reactive power likened to the foam on beer, the head of foam.

[01:12:40] Speaker 05:
The transmission, like a trampoline wall that pushes back and keeps the power inbounds.

[01:12:50] Speaker 05:
It is a slightly different form of electric energy.

[01:12:53] Speaker 05:
Traditionally, the synchronous resources, thermal, you had to back off

[01:13:01] Speaker 05:
your production of real power to produce reactive.

[01:13:05] Speaker 05:
And that was part of the rationale for getting paid for it was you had to literally give up some real power to produce reactive.

[01:13:14] Speaker 06:
You said there's six ancillary services for the other five, whatever they are, do generators get compensation for those?

[01:13:25] Speaker 05:
There is one that is

[01:13:28] Speaker 05:
Well, one that has been added occasionally, which is generator imbalance, where they have to pay.

[01:13:34] Speaker 05:
If they schedule, say I'm going to flow 100 megawatts, but they only flow 95, they have to supply the extra five.

[01:13:42] Speaker 06:
I'm asking, do they compensate those ancillary services, things that they have?

[01:13:46] Speaker 05:
They're not all for generators.

[01:13:49] Speaker 05:
reactive, I think, is the one that generators supply generators were doing this division transmission transmission when FERC order 888 FERC unbundled.

[01:14:00] Speaker 05:
Yeah, no, sorry that transmission owners had generators and they had to divide.

[01:14:08] Speaker 05:
purposes of schedule two but most six ancillary services I thought it was for their generation is that true or not true no it's it's for transmission six ancillary services that are needed to support transmission schedule one is scheduling three is frequency response which has to do with the frequency of the electric

[01:14:33] Speaker 05:
I'm not an engineer.

[01:14:34] Speaker 05:
This is a test, but no, they're all related to transmission and reactive support is related to transmission.

[01:14:44] Speaker 05:
But crucially schedule two is just the generator piece of it.

[01:14:50] Speaker 05:
There are other ways to get paid for reactive when you're outside the dead band, when you're not a generator.

[01:14:57] Speaker 05:
But the key was that generators are required to keep it within that dead band

[01:15:02] Speaker 05:
to safely inject their power.

[01:15:05] Speaker 05:
So that is related to their interconnection.

[01:15:08] Speaker 05:
And because at the time of 2003, transmission owners had generation, they were paying that generation, FERC said, well, to be comparable, if you're paying your own generation, you should pay other generation.

[01:15:22] Speaker 05:
And that was how, for the last 21 years, the MISO tariff has worked.

[01:15:28] Speaker 05:
But it wasn't until

[01:15:29] Speaker 05:
2016 and Order 827 that suddenly we had all these renewables submitting revenue requirements saying this is what I would like to be paid under Schedule 2, which says the transmission owner, the transmission provider, MISO, will collect the money and disperse it according to those revenue requirements.

[01:15:54] Speaker 05:
But that's not the charge.

[01:15:56] Speaker 05:
The Schedule 2 charge is for the

[01:15:59] Speaker 05:
that we need to be able to provide.

[01:16:00] Speaker 05:
Reactive service that transmission owners need.

[01:16:02] Speaker 06:
Okay Any questions?

[01:16:04] Speaker 06:
Thank you very much for that helpful explanation.

[01:16:06] Speaker 05:
Thank you.

[01:16:08] Speaker 06:
Make the ties will give you three minutes.

[01:16:16] Speaker 02:
Thank you, Your Honor.

[01:16:16] Speaker 02:
I will try to be brief.

[01:16:18] Speaker 02:
Uh just a few a few quick points.

[01:16:20] Speaker 02:
Number one just ending where we're picking up where, uh, my friend.

[01:16:24] Speaker 02:
My friend just

[01:16:29] Speaker 02:
that essentially MISO provides.

[01:16:31] Speaker 02:
MISO has to provide these services to customers.

[01:16:35] Speaker 02:
But the difference between those services and reactive power is that all other five are voluntary for the compensation or for the generator to provide or not as they see fit, and all five are compensated.

[01:16:47] Speaker 02:
Reactive power is the exception.

[01:16:49] Speaker 02:
Number two, with respect to recovering costs through other means, I would point, excuse me,

[01:16:58] Speaker 02:
Actually, never mind.

[01:16:58] Speaker 02:
I'm sorry, I lost the site.

[01:17:00] Speaker 02:
I would point to page 66 of our brief, where we did preserve the argument.

[01:17:05] Speaker 02:
And we point to where we preserve the argument below, that this discrimination, as you pointed out, Judge Millett, is going to affect our bids in other markets, even if we are facially equalized at the schedule two level.

[01:17:19] Speaker 02:
That doesn't mean that our costs of recovery are the same.

[01:17:22] Speaker 02:
And I think the-

[01:17:28] Speaker 01:
Can you help me understand?

[01:17:29] Speaker 01:
Is this a transition issue because you're locked into contracts for the next number of years, or is this a permanent issue going forward?

[01:17:39] Speaker 02:
I think it's both, Your Honor.

[01:17:41] Speaker 02:
I think there are long-term power purchase agreements.

[01:17:44] Speaker 01:
On the transition, just give me a sense of how bad you think that problem is.

[01:17:49] Speaker 01:
Is it a one-year problem?

[01:17:51] Speaker 01:
Is it a five-year problem?

[01:17:53] Speaker 02:
As I understand it, power purchase agreements can

[01:17:56] Speaker 02:
be very lengthy 101520 years and so presumably some of those power purchase agreements are going to be in effect for a long time.

[01:18:04] Speaker 02:
Beyond that just investments in general it's bilateral contracting power purchase agreements investors who funds new generation resources did so in the parties agreed on a certain amount of compensation, knowing that

[01:18:16] Speaker 02:
Currently, they had rates on file that would be there until Section 206 filing, finding them unreasonable.

[01:18:20] Speaker 02:
So it's not that they expected to see them in perpetuity.

[01:18:23] Speaker 02:
It's that they expected to at least have the 206 right preserved.

[01:18:28] Speaker 01:
I get that.

[01:18:29] Speaker 01:
What I'm not getting is.

[01:18:31] Speaker 01:
Once we're passed whatever right transition period.

[01:18:34] Speaker 01:
Well, so beyond is relevant beyond that.

[01:18:37] Speaker 02:
It's it's it's it's the point that judge that mentioned, which is that transmission owners who are vertically integrated historically and independent generators are differently situated.

[01:18:47] Speaker 02:
for purposes of recovering rates.

[01:18:51] Speaker 02:
It used to be that everybody could recover their rates through this ancillary service, reactive power charge.

[01:18:56] Speaker 02:
Unfortunately, now that that is gone, we have no obvious means to recover, perhaps through capacity market offers, but that would make us uncompetitive with the transmission owners who don't have to recover their costs that way.

[01:19:08] Speaker 02:
Transmission owners can recover their costs through retail rates, assuming state commissions approve them.

[01:19:13] Speaker 06:
So that's going to be an ongoing discrepancy and that's covering it through your contracts.

[01:19:19] Speaker 01:
Sorry, I guess I'm just not understanding that the costs are what they are.

[01:19:23] Speaker 01:
And when you're selling power as an independent, your competitor who's integrated is selling power.

[01:19:32] Speaker 01:
You know, those transactions might be regulated by state commissions, right?

[01:19:39] Speaker 01:
Or you're just competing in the market, but

[01:19:42] Speaker 01:
I mean if part of the cost of doing this is the cost of producing reactive power to get the energy from your generator to the consumers,

[01:19:53] Speaker 01:
whoever is selling is going to have to take that into account and whoever is buying is going to have to take that into account.

[01:20:00] Speaker 02:
I think that would be right, Your Honor, if we're all selling into the same market.

[01:20:03] Speaker 02:
I think the key here is that we're talking about two different markets.

[01:20:06] Speaker 02:
There's MISO, which requires the provision of reactive power service.

[01:20:11] Speaker 02:
That service is purchased by transmission customers, mostly transmission owners and others.

[01:20:16] Speaker 02:
Yes, local utilities, exactly, moving power to end users, separately.

[01:20:22] Speaker 02:
So it used to be that both local utilities and generators could recover their costs through the ancillary service charge.

[01:20:28] Speaker 02:
Now nobody can.

[01:20:29] Speaker 02:
But the transmission owners can recover those costs by selling to end consumers.

[01:20:38] Speaker 02:
So they will be able to charge higher rates.

[01:20:39] Speaker 02:
We don't sell directly to end users.

[01:20:42] Speaker 02:
So that discrepancy will stay.

[01:20:44] Speaker 01:
They're integrated.

[01:20:46] Speaker 01:
They own the distributor, downstream distributor, as well as upstream generator.

[01:20:52] Speaker 01:
That's right.

[01:20:53] Speaker 02:
Transmission is the legacy utilities prior to essentially order 888.

[01:21:00] Speaker 02:
So they're more vertically integrated.

[01:21:02] Speaker 01:
OK, but that retail sale, I assume, is going to be regulated by some state commission, which is going to say, OK, this is

[01:21:13] Speaker 01:
this is a legitimate cost or it's not, right?

[01:21:18] Speaker 01:
If it's the same cost as producing the power, it's gonna get counted once.

[01:21:26] Speaker 01:
If it's a different cost, it's gonna get counted twice.

[01:21:30] Speaker 01:
Someone's gonna decide what is the appropriate price for a service that includes the need to have enough reactive power to get the good onto the transmission.

[01:21:42] Speaker 02:
I think that's right, Your Honor.

[01:21:44] Speaker 02:
But I think the record showed that it's easier to have state regulators approve these sorts of costs.

[01:21:50] Speaker 02:
But I think our broader point is that there's really no evidence in the record submitted by the transmission owners on this point.

[01:21:54] Speaker 02:
This was a one-sided record, as Commissioner Danley noted.

[01:21:57] Speaker 02:
And I think one point I think that maybe is a better answer to all of your questions is that in the notice of proposed rulemaking that FERC itself put out, it says on, I'm looking at the Federal Register site, but it's Federal Register 89, FEDREG,

[01:22:11] Speaker 02:
21465.

[01:22:12] Speaker 02:
It says, we seek comment on whether, and if so, how the elimination of separate reactive power payments will affect generating facilities' ability to recover their costs in the markets that currently provide reactive power compensation.

[01:22:25] Speaker 02:
They also seek comment on whether separate compensation will affect investment decisions to build or finish building generation facilities.

[01:22:34] Speaker 02:
So even FERC now is treating this as an open question.

[01:22:37] Speaker 02:
I'll point out that the notice of proposed rulemaking, although we disagree with many of the factual findings, is quite interesting.

[01:22:42] Speaker 02:
And then it also asks things like about reliance interest, about a transition period, whether that's necessary, whether this would affect reliability.

[01:22:51] Speaker 02:
So again, the idea that they say, we didn't need any evidence because this is already all settled, I think is totally belied by this notice of proposed rulemaking.

[01:22:59] Speaker 02:
Very quickly on the phase in point, I think they said we waived the argument that there should be a phase in.

[01:23:05] Speaker 02:
I don't think that's true.

[01:23:06] Speaker 02:
At page JA 142, we specifically mention

[01:23:08] Speaker 02:
A stakeholder process would have allowed a grandfathering period of legacy resources.

[01:23:13] Speaker 02:
I think in general, our 206 argument is essentially saying, leave our rates alone, even if you're going to change it going forward.

[01:23:19] Speaker 06:
So even if not... Clients specifically argued on JA 396 for a phase-in period to FERC, which FERC did not address that argument.

[01:23:28] Speaker 02:
I don't have that in front of me.

[01:23:31] Speaker 06:
EDF and Orsted.

[01:23:34] Speaker 02:
I take it, yes.

[01:23:35] Speaker 06:
Those are protest filers.

[01:23:38] Speaker 02:
Beyond that, it's not really our job in a 205 filing to propose things that won't hurt us quite as much.

[01:23:44] Speaker 02:
I think our job was to say this is an illegal filing.

[01:23:46] Speaker 02:
So one other quick point, Your Honor, which is that?

[01:23:50] Speaker 03:
Can I assume we think that something like this could be filed with 205?

[01:23:56] Speaker 03:
No, you disagree.

[01:23:57] Speaker 03:
And assume we think you're not entitled to this setup in perpetuity.

[01:24:04] Speaker 03:
We could still rule in your favor vacating remand on the grounds that the reliance question was not appropriately addressed by FERC.

[01:24:12] Speaker 03:
And on remand, they need to deal with that.

[01:24:14] Speaker 02:
Absolutely, Your Honor.

[01:24:16] Speaker 02:
If FERC doesn't dispute, the vacator would be the proper remedy.

[01:24:19] Speaker 02:
So that would be the appropriate if you were to determine that they failed to establish that it's just unreasonable.

[01:24:25] Speaker 02:
A final quick point is just that

[01:24:27] Speaker 02:
Fork emphasizes section 9.6.3 of our agreement.

[01:24:30] Speaker 02:
Very often they say we agreed to this and waived our rights.

[01:24:33] Speaker 02:
Fork Council did not fully quote the entire provision of 9.6.3, which is that reactive power will be compensated pursuant to a tariff filed by the transmission provider, MISO.

[01:24:45] Speaker 02:
and approved by FERC.

[01:24:47] Speaker 02:
That was the point that was left out, and approved by FERC.

[01:24:50] Speaker 02:
I think that language alone suggests that any filing would have to comply with the Federal Power Act, because FERC cannot, by definition, approve one that violates it.

[01:25:00] Speaker 02:
So I don't think there's anything in this language, certainly no explicit waiver, and nothing in this language that suggests that we're somehow ceding our 205 rights or 206.

[01:25:08] Speaker 02:
FERC has to do so.

[01:25:10] Speaker 02:
And it would just be extraordinary, ultimately,

[01:25:12] Speaker 02:
This were affirmed because then, as Judge Bled, I think you mentioned, tariffs could be written going forward to allow a sort of kill switch.

[01:25:21] Speaker 02:
That would say, it doesn't matter if you've spent years lodging all your cost-based revenue requirements on file, we can cut it off with a Section 205 filing.

[01:25:30] Speaker 02:
And by the way, we don't even need to look at any evidence of just and reasonable rates.

[01:25:35] Speaker 06:
Thank you very much.

[01:25:36] Speaker 06:
For both counsel, the case is submitted.