[00:00:00] Speaker 00:
Case number 21-1256 et al.

[00:00:04] Speaker 00:
Central Hudson Gas and Electric Corporation et al.

[00:00:07] Speaker 00:
Petitioners versus Federal Energy Regulatory Commission.

[00:00:10] Speaker 00:
Mr. Tompkins for the petitioners.

[00:00:12] Speaker 00:
Mr. Kaiser for the intervener for the petitioners.

[00:00:15] Speaker 00:
Mr. Perkins for the respondents.

[00:00:17] Speaker 00:
Mr. Strauss for the New York State Public Service Commission.

[00:00:20] Speaker 00:
Mr. Tabatt for the respondent interveners.

[00:00:26] Speaker 08:
Good morning, Mr. Tompkins.

[00:00:27] Speaker 08:
Good morning.

[00:00:28] Speaker 08:
Proceed.

[00:00:29] Speaker 07:
May I please the court?

[00:00:30] Speaker 07:
Jason Tompkins for petitioners, the New York transmission owners.

[00:00:34] Speaker 07:
With me at council table is my colleague Andrew Tunnel.

[00:00:37] Speaker 07:
I'll endeavor to reserve three minutes for rebuttal.

[00:00:42] Speaker 07:
Transmission owners must own and operate system upgrades required by generator interconnections on a nonprofit basis.

[00:00:50] Speaker 07:
Due to a 1200% increase in the number of generator interconnection requests within NISO in the years leading up to this filing, the transmission owners requested from FERC the ability to earn a return on new upgrades going forward.

[00:01:05] Speaker 07:
They did this through two alternative filings.

[00:01:08] Speaker 07:
Each independently would lead to the same end result.

[00:01:12] Speaker 07:
The first was a section 205 filing, a request to amend the tariff.

[00:01:18] Speaker 07:
The issue before this court on that order is one of contract meaning.

[00:01:24] Speaker 07:
Section 310 of the ISO agreement reserves the transmission owner's rights to seek costs plus a reasonable return on investment.

[00:01:33] Speaker 07:
The easiest way to determine whether the transmission owner's filing fell within those words is to look at exactly what they requested.

[00:01:40] Speaker 07:
Joint Appendix page 13 shows a red line of the chair of amendment which requests, and I quote,

[00:01:47] Speaker 07:
a facilities services agreement that provides for the transmission owners recovery of its funded costs plus a reasonable return on investment.

[00:01:55] Speaker 07:
Thus, by the plain terms, what the transmission owners requested falls precisely within the same terms as what they reserved in the ISO agreement.

[00:02:05] Speaker 03:
Let me ask you about that 310 issue.

[00:02:07] Speaker 03:
You have not put a dollar figure on any past costs.

[00:02:15] Speaker 03:
that you're trying to recoup.

[00:02:16] Speaker 03:
And you have not put a dollar figure on any future costs that you're trying to recoup.

[00:02:24] Speaker 03:
I know you may think that that isn't important, but is that correct?

[00:02:30] Speaker 07:
We did put a dollar figure on some past costs.

[00:02:34] Speaker 07:
Where is that?

[00:02:35] Speaker 07:
In Mr. Novak's testimony, where he discusses the five types of risks that transmission owners are subject to.

[00:02:42] Speaker 07:
ownership of all transmission facilities, including the system upgrades.

[00:02:46] Speaker 07:
He gave examples of NERC penalties of Public Service Commission penalties and negative rate adjustments of cyber security penalties.

[00:02:59] Speaker 07:
And he did put a dollar figure on all of those things.

[00:03:01] Speaker 07:
Those are at joint appendix 108 through 116.

[00:03:08] Speaker 03:
Okay, if if

[00:03:12] Speaker 03:
I'm trying to figure out the difference between a risk and a cost.

[00:03:16] Speaker 03:
And imagine I have an air conditioning cost.

[00:03:20] Speaker 03:
And there's a heat wave.

[00:03:23] Speaker 03:
My air conditioning cost goes up.

[00:03:25] Speaker 03:
The expense goes up.

[00:03:26] Speaker 03:
But we wouldn't call the heat wave a cost, right?

[00:03:30] Speaker 03:
We would just call it a cause of the cost.

[00:03:34] Speaker 03:
You see where I'm going with this?

[00:03:36] Speaker 07:
Well, that's correct.

[00:03:38] Speaker 07:
And I think one of the examples given in the testimony from Mr. Novak of that type of risk is the flip side of that, which is instead of a heat wave, a cold snap.

[00:03:48] Speaker 07:
Like the cold snap that occurred in Texas in 2021, that is a risk that resulted in hard costs.

[00:03:57] Speaker 03:
But doesn't that just illustrate the difference between a risk and a cost?

[00:04:01] Speaker 03:
So, again, the cold snap is not a cost.

[00:04:06] Speaker 03:
The cold snap is a cause of cost.

[00:04:10] Speaker 03:
Not every cause of a cost is itself a cost.

[00:04:14] Speaker 07:
Well, that's true.

[00:04:14] Speaker 07:
But I think the important thing there is that once those risks come to fruition, they result in a cost that the investors have to bear.

[00:04:22] Speaker 07:
And so taking this back to the fundamentals of Bluefield and HOPE, utilities, public utilities are entitled to earn a return.

[00:04:30] Speaker 07:
on all property used in public service.

[00:04:33] Speaker 07:
And investors are investing with acknowledgement that their return satisfies their desire that the risks are covered.

[00:04:41] Speaker 07:
And here we have a barge category of risks that are not currently covered in the return on investment that the investors are looking at.

[00:04:49] Speaker 03:
So you would call the cold snap a cost?

[00:04:53] Speaker 07:
We would, under this provision, we would say that it is a cost.

[00:04:58] Speaker 07:
And I believe that AMRIN recognize that these costs or that these risks have real costs in the real world.

[00:05:07] Speaker 08:
Do you need to win on that point?

[00:05:12] Speaker 08:
And that's a counterintuitive, possibly counterintuitive understanding of cost, but it's not a cost.

[00:05:23] Speaker 08:
It's a risk, and if you're driving up the risk, you should get a greater rate of return.

[00:05:28] Speaker 08:
So you have to account for this problem either through the cost route or the rate of return route.

[00:05:36] Speaker 07:
So two points on that, Your Honor.

[00:05:39] Speaker 07:
No, I don't think we have to win on risk being perfectly equal to cost.

[00:05:44] Speaker 07:
The first reason is what I mentioned before with Hope and Bluefield, even absent risks,

[00:05:50] Speaker 07:
the Hope and Bluefield established that under the regulatory compact, public utilities should earn a return on their property that is committed to public service.

[00:05:59] Speaker 07:
Here, even though they did not initially fund the system upgrades required by the generator requests, they were conveyed to our clients, and our clients do own them.

[00:06:10] Speaker 07:
It's now their property that's being used, and they're not earning any sort of profit on that.

[00:06:15] Speaker 07:
So fundamentally, it violates the principles of Hope and Bluefield.

[00:06:19] Speaker 07:
Secondly, there's also the other part of the 310 reservation, which is return on investment.

[00:06:27] Speaker 07:
And that fits very neatly with what I think the transmission owners are trying to do here.

[00:06:31] Speaker 07:
They were trying to add these system upgrades into rate base and return on investment.

[00:06:37] Speaker 05:
Is that really fair?

[00:06:39] Speaker 05:
So it seems to me, what FERC says is that what you're actually trying to do is change the rules so you can make new investments by now funding the system upgrades that you can't currently fund.

[00:06:50] Speaker 05:
And one thing this

[00:06:52] Speaker 05:
to make new investments.

[00:06:59] Speaker 05:
So where does that argument go wrong?

[00:07:03] Speaker 07:
I believe that's a circular argument.

[00:07:06] Speaker 07:
The return on investment would be meaningless if we can't request permission to make the investment.

[00:07:10] Speaker 05:
You can absolutely.

[00:07:11] Speaker 05:
Well, I think that's a good argument.

[00:07:13] Speaker 05:
I think one thing you could definitely do is say, make a filing that says, for investments we've already made, we are not getting a reasonable return on investment, and it needs to be increased.

[00:07:25] Speaker 05:
But what you can't do, Ferg is saying, is ask for permission without getting consent from the ISO under this filing provision to allow you to make new investments.

[00:07:37] Speaker 07:
I think if we were to make that first filing, Your Honor, Ferg would say it would violate the prohibition on retroactive rate making.

[00:07:43] Speaker 07:
I don't believe that we have the ability to recoup any of the costs or compensation for any of the risks for system upgrades that were implemented prior to our filing of Section 2.

[00:07:54] Speaker 05:
They say repeatedly in the orders in the briefs that you could make a filing arguing that the risk assessment built into your rate of return is insufficient.

[00:08:06] Speaker 07:
They say we can make a filing to adjust the return on equity.

[00:08:10] Speaker 07:
component that is correct that actually shows that inconsistency shows why they're wrong about our filing right to begin with the section you're talking about that the advice I'll call it deferred gave is primarily in paragraph 69 of the rehearing order I believe that's joint appendix 836 and it states as your honor just paraphrase that to the extent the transmission owners believe returns are inadequate

[00:08:38] Speaker 07:
compensate them for the enterprise-wide risk presented by owning, operating, and maintaining their entire transmission system, which includes system upgrades.

[00:08:47] Speaker 07:
They retain the right to file under Section 205 of the FPA to seek to modify their base ROEs.

[00:08:57] Speaker 07:
ROI, Return on Investment, the words used in the Reservation of Rights, is a mathematical formula that's set forth at Joint Appendix 8485.

[00:09:08] Speaker 07:
ROE is a variable within one of the factors of ROI.

[00:09:15] Speaker 07:
So FERC is saying we could request to adjust one component of ROI, the return on equity component, but they're saying we can't adjust the other variable, the rate base.

[00:09:29] Speaker 07:
We believe that inconsistency shows that the transmission owners had the filing rights.

[00:09:33] Speaker 07:
whether it's in ROE or in the rate base, the filing right was there.

[00:09:39] Speaker 07:
The fact that FERC believes it should be in ROE instead of rate base may affect the ultimate analysis if FERC were to address the merits of the proposal, but it doesn't affect the transmission owner's rights to ask for that return in the first place.

[00:09:57] Speaker 08:
Why can't, put aside the question about retroactive rate making, just conceptually, why can't one solve the problem you're facing by adjusting ROE?

[00:10:18] Speaker 08:
Your theory is the enterprise is becoming more risky

[00:10:25] Speaker 08:
as the transmission owners are forced to undertake all these additional responsibilities.

[00:10:32] Speaker 08:
And if they can't expand the rate base, there's more risk and no greater return.

[00:10:42] Speaker 08:
You could solve that problem either by expanding the rate base or expanding the return on equity to the people who are bearing the risk.

[00:10:51] Speaker 07:
So I'll say it's possible.

[00:10:55] Speaker 07:
It might be possible to compensate in that way.

[00:11:00] Speaker 07:
I'll tell you why we think it's not the best solution.

[00:11:03] Speaker 07:
But before saying that, I'll just point out that whether it's the best solution or not, we don't think affects the threshold issue of whether we have the right to ask for it.

[00:11:13] Speaker 07:
And we wish to have that debate at FERC, that this was a new theory.

[00:11:16] Speaker 07:
This ROE theory was brand new in this proceeding.

[00:11:20] Speaker 07:
We didn't get the opportunity to engage with FERG on which of those things is best because they rejected us at the threshold question of whether we could even ask for it.

[00:11:28] Speaker 07:
So it doesn't affect that, but we believe that the ROE solution is an entire mismatch with the actual risk because ROE is designed to encompass risk related to the rate base.

[00:11:42] Speaker 07:
That's why it's multiplied by the rate base to give that return.

[00:11:47] Speaker 07:
So adjusting the ROE to account for risk outside the rate base creates a situation where the facility contributing the risk, the new system upgrade,

[00:11:58] Speaker 07:
isn't in the rate base.

[00:12:00] Speaker 07:
It's contributing zero to the rate base.

[00:12:02] Speaker 05:
This seems like sort of the core issue on the Section 206 claim.

[00:12:07] Speaker 05:
And FERC says in its orders that the enterprise-wide risk assessment does exactly what you say it doesn't, that it is a measure of the overall risks posed by the enterprise as a whole, including system upgrades that aren't in rate base.

[00:12:25] Speaker 05:
And it seems like

[00:12:28] Speaker 05:
You claim the opposite, but I want to know what the basis is for that.

[00:12:33] Speaker 05:
Is it anything more than the logic that you just set out?

[00:12:36] Speaker 05:
Is there a document somewhere that says risks posed by upgrades not in rate base are not considered in enterprise wide risk?

[00:12:44] Speaker 07:
It no, it's from at this point is primarily that logic because we never got to step to even in the two or six order.

[00:12:52] Speaker 07:
You speaking to a six to six has two different steps.

[00:12:56] Speaker 07:
We have a similar argument as we have to a five step one requires that bird conclude or assess whether the existing rate.

[00:13:03] Speaker 07:
is unjust, unreasonable, or unduly discriminatory.

[00:13:06] Speaker 07:
It's only at step two that FERC decides what's the best replacement rate.

[00:13:10] Speaker 07:
The problem here is that FERC collapsed the two and said, because we believe that these costs or risks can be accounted for in return on equity, we don't think you've shown that the existing rate is unjust, unreasonable, or discriminatory.

[00:13:26] Speaker 07:
The problem with that though is that

[00:13:29] Speaker 07:
whether the problem, whether future system, the risk of future system upgrades can be handled through ROE is that currently it's not.

[00:13:41] Speaker 07:
The evidence that we have in the record from Mr. Novak is that our current ROE does not account for the risk of this.

[00:13:48] Speaker 07:
And so based on the fact that Ameren concluded that these risks are real and accept the economic logic of this class of risk,

[00:13:57] Speaker 07:
and they're currently uncompensated.

[00:14:00] Speaker 07:
They're not in rate base and they're not in ROE means that the existing rate.

[00:14:06] Speaker 05:
What's the evidence that they're not currently compensated.

[00:14:10] Speaker 07:
Mr. Novak, I can get for.

[00:14:13] Speaker 07:
This is 6.49 to 6.50.

[00:14:17] Speaker 07:
I have to confirm the pages on that.

[00:14:20] Speaker 07:
If I have any time left for a bottle, I can get that for you.

[00:14:25] Speaker 07:
But yes, Mr Novak testified that it is not currently account.

[00:14:30] Speaker 07:
These risks are not currently accounted for in ROE.

[00:14:33] Speaker 07:
In our rehearing petition, I believe it might be page 14 of a rehearing petition.

[00:14:40] Speaker 07:
I don't know the JA side off hand.

[00:14:42] Speaker 07:
We also explained that our current transmission rate was developed before the proforma interconnection system even existed.

[00:14:53] Speaker 07:
So it couldn't possibly account for these risks.

[00:14:56] Speaker 07:
And so under 206, we believe it's step one.

[00:14:59] Speaker 07:
Because the risks are real and because they're not currently compensated in either rate base or ROE, FERC should have moved on to step two.

[00:15:09] Speaker 07:
And then we could have the debate with FERC that

[00:15:12] Speaker 07:
You're asking about Judge Garcia about whether ROE is better or transmission on our funding is better.

[00:15:19] Speaker 08:
Suppose we agree with you on the threshold waiver question and you win the 205 piece of this.

[00:15:31] Speaker 08:
And suppose also that when we think about the 206 piece of this, we agree with you that FERC didn't adequately explain what I'll just call the Ameren problem.

[00:15:48] Speaker 08:
Take those two things as a given.

[00:15:50] Speaker 08:
They still in the 206 order,

[00:15:55] Speaker 08:
say something else, which is you can solve your problem in the way I was suggesting, which is making a 205 filing to seek a greater rate of return.

[00:16:13] Speaker 08:
That would seem to be a live issue on the assumptions I've asked you to accept.

[00:16:21] Speaker 08:
Why isn't that

[00:16:24] Speaker 08:
independent and adequate ground to support the 206 order.

[00:16:33] Speaker 08:
And put aside the ancillary implementing amendments just on the court 206 point.

[00:16:38] Speaker 07:
The court 206 point, I think it goes back to what I said a second ago, which is the fact that for believes there is an alternative to seeking it doesn't mean that the existing rate is just and reasonable.

[00:16:50] Speaker 07:
And under this court's decision and

[00:16:52] Speaker 07:
a mayor of Maine, FERC has to make that threshold decision about whether the existing rate is unjust and unreasonable.

[00:17:00] Speaker 07:
And for the reasons I stated a minute ago, we believe that FERC's decision that it is, is arbitrary and capricious and without substantial evidence.

[00:17:09] Speaker 07:
We had evidence that they're not currently compensated.

[00:17:12] Speaker 07:
And under that framework,

[00:17:15] Speaker 08:
It's a weird 206 where you're filing a 206 complaint, attacking your own tariff.

[00:17:24] Speaker 08:
Just trying to process it.

[00:17:27] Speaker 07:
It is.

[00:17:28] Speaker 07:
There were two alternatives trying to accomplish the same thing.

[00:17:33] Speaker 07:
As I said at the beginning, these are alternatives.

[00:17:36] Speaker 07:
So we believe that if you grant the petition on the 205 issue, you need not

[00:17:42] Speaker 07:
reach the 206 issue and FERC would have to determine whether the transmission owners proposed rate is just reasonable.

[00:17:51] Speaker 08:
I mean, you've challenged both orders and if you win on 205, we still have to deal with your 206 challenge.

[00:18:00] Speaker 07:
Yes, and we believe both should be vacated and remanded.

[00:18:04] Speaker 07:
But I was just pointing out that I think that you could reach one and not the other.

[00:18:10] Speaker 03:
Do we have to deal with the 206 if we agree with you on the 205?

[00:18:15] Speaker 03:
Let's say we agree with you on the 205 and it goes back to FERC and you get to argue with FERC about whether your new proposed tariff is just and reasonable.

[00:18:24] Speaker 03:
Let's say you convince them, then that would move the 206 issue, right?

[00:18:29] Speaker 07:
Yes, we believe it would.

[00:18:30] Speaker 07:
We believe you only have to reach 205.

[00:18:32] Speaker 07:
At that point, FERC would have to determine whether our proposal is reasonable.

[00:18:36] Speaker 07:
And even if FERC's proposal is also reasonable, as FERC has pointed out, there are multiple ways to seek this compensation.

[00:18:45] Speaker 03:
The heart makes a big deal that you don't disclose these risks to investors.

[00:18:51] Speaker 03:
Is it true you don't disclose them to investors?

[00:18:53] Speaker 07:
That is not true.

[00:18:54] Speaker 07:
Mr Novak pointed out that the

[00:18:58] Speaker 07:
parent companies, the publicly traded affiliates of our clients do in fact disclose these categories of risks.

[00:19:04] Speaker 07:
But recall, these are prospective risks.

[00:19:08] Speaker 07:
They're current risks with the smaller portion of nonprofit appendages that the clients are operating.

[00:19:14] Speaker 07:
But this filing is prospective only.

[00:19:17] Speaker 07:
This was meant to deal with that 1200% increase that was requested in 2019.

[00:19:24] Speaker 07:
that's going to more than double the number of nonprofit appendages within the system.

[00:19:32] Speaker 08:
Thank you.

[00:19:32] Speaker 08:
We'll give you time.

[00:19:48] Speaker 09:
Mr Kaiser.

[00:19:49] Speaker 08:
Welcome, sir.

[00:19:51] Speaker 04:
Thank you.

[00:19:52] Speaker 04:
May it please the court, William Kaiser, for the intervener supporting the petitioners.

[00:19:57] Speaker 04:
FERC's enterprise wide risk theory creates a dangerous precedent that left to stand will completely undermine the cost of service rate making models established by the Supreme Court and Federal Power Commission versus HOPE.

[00:20:09] Speaker 04:
FERC's theory would require investor-owned utilities to own and operate certain portions of their business as a nonprofit.

[00:20:18] Speaker 04:
So under this theory, when a generator decides it wants to interconnect to the system, the utility has to lend its expertise to assess that interconnection, determine what facilities are needed to be built, build those facilities, own those facilities, operate those facilities, maintain those facilities, and do so with no compensation.

[00:20:36] Speaker 08:
My hope is not

[00:20:37] Speaker 08:
great case for you, right?

[00:20:40] Speaker 08:
It says don't really look inside the black box of how the remaking works.

[00:20:48] Speaker 08:
You just make a bottom line assessment of whether the numbers are broadly reasonable.

[00:20:57] Speaker 04:
It does, but hope does establish the compensation mechanism.

[00:21:00] Speaker 04:
And here FERC is trying to take that completely away by denying the utility the opportunity to make the investment.

[00:21:06] Speaker 04:
That's how hope establishes that utilities are compensated by being able to make that investment.

[00:21:11] Speaker 04:
And so here, the commission is trying to, with a sleight of hand, deny the opportunity for investment.

[00:21:17] Speaker 04:
And so that is why it undermines hope.

[00:21:21] Speaker 08:
What do you think?

[00:21:23] Speaker 08:
The only way to solve this problem is to put that investment into the rate base, as opposed to just adjusting the rate of return.

[00:21:35] Speaker 04:
The problem with adjusting the rate of return, and I appreciate your question to counsel for the petitioners, is that two things.

[00:21:42] Speaker 04:
First, it results in a cost shift.

[00:21:45] Speaker 04:
So the ROE

[00:21:47] Speaker 04:
when a higher ROE is applied to rate based on the FERC's theory, it would go to transmission customers.

[00:21:54] Speaker 04:
Here, we're talking about charging generator interconnection customers for the cost of their interconnections.

[00:22:00] Speaker 04:
So it goes to a different set of customers first.

[00:22:03] Speaker 04:
But more importantly, it also results, FERC's ROE methodology just isn't fine tuned enough to be able to pick up the risks of particular classes of facilities.

[00:22:15] Speaker 04:
So it's a methodology that's good for adjusting overall risk to a business model as a whole, but not for particular classes of facilities.

[00:22:22] Speaker 04:
It's just not fine tuned enough to do that.

[00:22:27] Speaker 08:
So you're saying you would adjust the return on equity, which allows you to

[00:22:36] Speaker 04:
charge the transmission owner to charge more but that's getting passed through to the to transmission customers that's right because under the regular rate making methodology it goes straight to the roe itself goes to transmission customers here they're the new york transmission owners are trying to establish the cost that would go to generators i got it thanks i'm out of time but i'm happy to answer questions okay thank you thank you

[00:23:14] Speaker 08:
All right.

[00:23:17] Speaker 08:
Mr. Perkins, whenever you're ready.

[00:23:19] Speaker 06:
May it please the court, Jason Perkins for the commission.

[00:23:22] Speaker 06:
There was a lot to respond to topside, but I think one of the things that I started out with would be the question about cost versus risks under Section 310A of the agreement.

[00:23:35] Speaker 06:
So the bottom line question that FERC was trying to answer in this interpretive question was, was changing the investment rules for system upgrades necessary to recover all of their transmission owners reasonably incurred costs plus a reasonable return on investment?

[00:23:53] Speaker 06:
in applying that provision have to find a reasonably incurred cost.

[00:23:56] Speaker 06:
And the word plus matters a lot in this phrasing because it applies to costs that you have to recover, actual dollars and cents, plus any reasonable return on investment that's associated with those costs.

[00:24:08] Speaker 06:
So what the commission was doing here was essentially looking to see whether or not there were dollars and cents at issue in this filing.

[00:24:15] Speaker 06:
And it was actually a policy-driven filing trying to change who incurs the

[00:24:20] Speaker 06:
encourage the investment.

[00:24:21] Speaker 06:
The ones who actually put money into this right now, into the current system, are the generators.

[00:24:26] Speaker 06:
The generators pay for their own facility.

[00:24:28] Speaker 06:
They pay for the interconnection facilities, the line that runs to the grid.

[00:24:32] Speaker 06:
And they also pay for the upgrades on the grid that we're talking about here, which are integrated with the rest of the system, which are, according to petitioner's own words, virtually indistinguishable from the rest of their facilities.

[00:24:45] Speaker 06:
And they present the same risks that the rest of their facilities present.

[00:24:49] Speaker 06:
I think in interpreting these words and understanding what the transmission owners wanted, the real thing at risk here was the returns they were already receiving on the rest of their system as a whole.

[00:24:58] Speaker 06:
That's the concern that a lot of the testimony gets into about negative revenue adjustments and NERC penalties.

[00:25:06] Speaker 06:
The profit margin that they already received might be eroded by those things because they can't necessarily recover some of those penalties and some of those problems from their customers.

[00:25:14] Speaker 06:
So they essentially need to protect their profits, and that's why they came in to make this particular filing.

[00:25:21] Speaker 06:
And FERC interpreted that as saying the problem is maybe you have a risk return mismatch based on what you are currently earning, but that's an issue for the return on investment type of question.

[00:25:33] Speaker 08:
So that was my instinct as well coming in this morning, which is they have a plausible

[00:25:44] Speaker 08:
um, explanation why they have an amaranth problem and you have a plausible response that you don't necessarily need to expand the rate base in order to solve.

[00:26:01] Speaker 08:
Okay, but now I'm a little, um,

[00:26:05] Speaker 08:
less comfortable with that hearing, um, two concerns from your friends on the other side.

[00:26:14] Speaker 08:
One is that going down that path creates a retroactive rate making issue.

[00:26:21] Speaker 08:
And two is, um, the intervener's point that, um, if you go that route, you're imposing the costs on the wrong set of customers.

[00:26:32] Speaker 08:
So what are your responses to those two concerns with doing this through ROE rather than the rate base?

[00:26:41] Speaker 06:
Right.

[00:26:42] Speaker 06:
So I think to take the second one first, who are the right set of customers to pay for these things.

[00:26:48] Speaker 06:
The risks are for the system as a whole.

[00:26:51] Speaker 06:
And there's nothing in the testimony that says that these risks are distinguishable for system upgrades themselves.

[00:26:56] Speaker 06:
I mean, my understanding, not an engineer, but my understanding is if you looked at the system, you took a picture of the transmission facilities they have in New York and you handed them to an electrical engineer, they couldn't tell you which ones were system upgrades or which ones were part of their system.

[00:27:10] Speaker 06:
and so there's not really a difference in kind of the risk that's happening here it's maybe an increment to the overall risk of the system and the types of things they talk about are the same things they already face today so you think that's so um i mean there's a cost causation principle as you know it seems perfectly

[00:27:31] Speaker 08:
coherent to say that all of these costs are being imposed by the new interconnection and so the new interconnecting generators should bear those costs.

[00:27:44] Speaker 06:
I think they do bear the costs in the sense that they are going to be the ones paying for this either way.

[00:27:49] Speaker 06:
So the capital costs are going to come from the generators eventually.

[00:27:52] Speaker 06:
It's just a question of whether or not a profit margin should also go to the utilities, whether they should be the only ones to provide capital in the end for those types of upgrades.

[00:28:00] Speaker 06:
But in terms of why it's fair, I guess, that the rest of the customer base should pay, there's a general understanding, going back to order 2003 in this area, that these are facilities that upgrade the grid generally.

[00:28:15] Speaker 06:
And so the actual usage of these facilities goes to everyone that takes service from the grid.

[00:28:20] Speaker 06:
And so in some areas of the country, you do have transmission customers essentially funding credits back to the generator for fronting the money for this.

[00:28:30] Speaker 06:
So it's not unfair.

[00:28:31] Speaker 06:
for transmission customers to have some cost exposure.

[00:28:35] Speaker 06:
In the current system, which the transmission owners don't mention a whole lot, but it is true, they recover the operations and maintenance costs of these facilities from the general customer base.

[00:28:45] Speaker 06:
Because again, I don't think that they are determining which facilities are actually system upgrades, trying to have a separate line item for that.

[00:28:52] Speaker 06:
OK.

[00:28:52] Speaker 06:
So what about the first point?

[00:28:54] Speaker 06:
The first point again was, sorry.

[00:28:57] Speaker 08:
Let me see if I got it.

[00:29:01] Speaker 08:
Oh, about the concern, if you do this through ROE, it's retroactive.

[00:29:07] Speaker 08:
Oh, in a case where you're changing the return for old investments based on risks and problems that are happening from this new upgrade investment.

[00:29:20] Speaker 06:
Right, yeah.

[00:29:21] Speaker 06:
So I think

[00:29:23] Speaker 06:
I guess there's two things with that.

[00:29:25] Speaker 06:
One is I don't think there are any examples specifically tied to system upgrades.

[00:29:29] Speaker 06:
So we don't have a loss that we're actually talking about.

[00:29:32] Speaker 06:
A risk is a probability of a loss or a potential loss.

[00:29:35] Speaker 06:
So there hasn't been an actual loss that's been demonstrated specific to system upgrades that they've had to face.

[00:29:42] Speaker 06:
Their profit margin hasn't been eroded specifically yet.

[00:29:45] Speaker 08:
I mean, big picture, right?

[00:29:47] Speaker 08:
The world is changing.

[00:29:48] Speaker 08:
They have to do.

[00:29:50] Speaker 08:
large amounts of new upgrades because of this green energy initiative and that changes things.

[00:29:58] Speaker 06:
And right, I think that that changes things.

[00:30:01] Speaker 06:
And adjustment to their previous investments is going to be prospective.

[00:30:07] Speaker 06:
But it is hard to see how they are left holding an economic injury, a specific economic injury from this.

[00:30:14] Speaker 06:
I think it really doesn't move past the hypothesis stage of there being a problem here.

[00:30:19] Speaker 06:
And so while there is a retroactive rate-making constraint on what the commission could do in the future,

[00:30:25] Speaker 06:
It's not clear that, especially when they haven't valued any risks, if you look at the rehearing order, and you see roughly paragraphs 63 through 65, if you haven't actually valued the risks, we don't know how much it's worth to you.

[00:30:38] Speaker 06:
And so that's why it's a question of an overall enterprise type of risk, that you get paid for the money you actually put into the system.

[00:30:46] Speaker 06:
You don't necessarily get paid for the money that other people put in the system.

[00:30:49] Speaker 06:
And that's a longstanding commission policy under contributions and aid to construction agreements that you see.

[00:30:55] Speaker 06:
I think that's a good reference as well in the hearing.

[00:30:57] Speaker 03:
You say the risks are hypothetical, but in Council's first answer to my question, he pointed to some penalties in the past that have had to be paid.

[00:31:06] Speaker 03:
Why is that a non-hypothetical real cost?

[00:31:11] Speaker 06:
Sure, I think it's certainly a real risk.

[00:31:14] Speaker 06:
But again, as the commission was explaining it, it's the type of thing a transmission owner already faces.

[00:31:19] Speaker 06:
And so there's already a place in the rate making calculus to take into effect those types of risks that they might face a cost that they can't recover from customers.

[00:31:28] Speaker 03:
I thought his point was that these penalties would not have existed if it weren't for the system upgrades.

[00:31:39] Speaker 06:
They certainly the risk of them certainly exists today because they are applied to the transmission facility base generally like all all facilities that will be subject to their penalties.

[00:31:50] Speaker 06:
These aren't different in kind from them.

[00:31:53] Speaker 06:
It's just the fact that the system is a little bigger.

[00:31:56] Speaker 03:
There's some risk today.

[00:31:58] Speaker 03:
There was always some risk.

[00:32:00] Speaker 03:
They argue the system upgrades increase the risks.

[00:32:03] Speaker 03:
You say, well, whether they increase the risks or not, that hasn't been born out in a non hypothetical concrete way.

[00:32:12] Speaker 03:
And they come back and say, yes, actually it has.

[00:32:15] Speaker 03:
We have had these penalties that we would not have had absent the system upgrades.

[00:32:19] Speaker 06:
I mean, I don't think that any of the penalties they actually point to are necessarily tied to system upgrades.

[00:32:25] Speaker 06:
If you look at the risk catalog they give you, a couple pages of kind of a summary of what the types of risks that they're talking about, they're not identifying anything specific to system upgrades themselves that have caused that.

[00:32:37] Speaker 06:
It's just the general possibility.

[00:32:39] Speaker 03:
Can you point to a FERC precedent that when it's calculating the return on equity,

[00:32:47] Speaker 03:
it has considered these types of uncompensated risks, regulatory, reliability, cybersecurity, environmental operation.

[00:32:56] Speaker 06:
I don't know that there's a FERC precedent that explicitly walks through what those are worth, like what the values are and why the specific ROE adjustment is being made for that.

[00:33:07] Speaker 06:
But they are the same type that we recognize generally as the transmission risk being subject to.

[00:33:12] Speaker 03:
Would you give me some comfort if you can give me some

[00:33:16] Speaker 03:
precedent where at least that has happened.

[00:33:19] Speaker 03:
And the reason is, your argument I think relies a lot on, well, these shouldn't be in the right base, but it's perfectly fine for these to be considered if the transmission owners ask us to add them into the return on equity.

[00:33:37] Speaker 03:
But if that's never actually happened before, then that seems like it might be sort of a false promise.

[00:33:46] Speaker 06:
Well, I think we're still in the relatively early stages of this concept in that I'm not sure that the concept was really talked about or understood much before maybe there were hearing requests that eventually led to the Ameren decision.

[00:34:00] Speaker 06:
So I don't know that there's going to be a deep well for precedent on this particular issue when it comes to looking at it.

[00:34:05] Speaker 06:
And this is really the first case where we got into actual evidence about these types of risks.

[00:34:10] Speaker 03:
And we have all that would support

[00:34:13] Speaker 03:
my suspicion that maybe this actually can't be added to the return on equity because it's new and because it's new, we don't know.

[00:34:21] Speaker 03:
It's an unknown.

[00:34:24] Speaker 03:
But your briefings just seems very certain that it can be.

[00:34:28] Speaker 03:
It seems like your argument depends on the promise that this can be considered in the return on equity calculation.

[00:34:35] Speaker 06:
Well, I think as the petitioners were saying,

[00:34:39] Speaker 06:
One of the previous speakers was saying that the return on equity adjustments for particular risks, it's not necessarily the type of analysis that lends itself to an exact line drawing between one risk and an ROE increment.

[00:34:54] Speaker 06:
If we did that, then we would have to have extremely complex types of formulas that look at each individual risk.

[00:35:00] Speaker 06:
And so in general, we follow the HOPE standard, looking at enterprises with comparable risks.

[00:35:07] Speaker 06:
You look at their credit ratings, their rates of return, and then you look to see where these companies should be in that mix.

[00:35:13] Speaker 06:
And so we have to look at it on a company-wide basis.

[00:35:16] Speaker 06:
That's how they raise capital.

[00:35:17] Speaker 06:
They don't raise capital for particular facilities.

[00:35:19] Speaker 06:
So that's how the system and the economics actually work for the companies here.

[00:35:26] Speaker 03:
If I can just kind of, yeah, sorry.

[00:35:27] Speaker 03:
No, please.

[00:35:30] Speaker 03:
zoomed to like 10,000 foot level and but it does sort of inform a little bit of my skepticism about first promise that don't worry we're not going to let you put it in the in the rate base but we'll probably let you put it in the rate of return.

[00:35:43] Speaker 03:
Ameren strongly suggested that generator funding is unjust didn't go all the way there but it strongly suggested and then American Clean Power

[00:35:56] Speaker 03:
didn't do anything to suggest that transmission owner funding is unjust.

[00:36:03] Speaker 03:
It said there's a discrimination concern that was raised and it wasn't reasonably explained why that concern wasn't legitimate, but it didn't kind of put any faith in the discrimination argument ultimately being a winner on substance.

[00:36:21] Speaker 03:
And so coming out of those two decisions, Ameren and American Clean Power, I would have guessed that FERC was going to go with transmission owner funding when it was at issue.

[00:36:35] Speaker 03:
And if it was going to make the ISOs across the country uniform, it would make them uniform in favor of transmission owner funds.

[00:36:44] Speaker 03:
I think there's been a show cause order that suggests the exact opposite is what FERC has decided, that they're going to abandon transmission owner fund, which, again, Ameren came pretty close to saying it's required.

[00:36:56] Speaker 03:
And American Clean Power didn't do anything to really criticize.

[00:37:01] Speaker 03:
And they're going to impose generator funding, which Ameren came pretty close to saying is unjust.

[00:37:06] Speaker 03:
I guess coming out of Ameren and American Clean Power and coming out of FERC's arguments and American Clean Power, I'm surprised.

[00:37:15] Speaker 03:
And that surprise leads to some skepticism.

[00:37:19] Speaker 06:
Okay, yeah, I hear you.

[00:37:21] Speaker 06:
I think that the way that we understand the Ameren case when we described this in the complaint order, I think it's Paragraphs 3132, is that it recognized an argument that FERC failed to respond to.

[00:37:32] Speaker 06:
And so we had to take that argument seriously and in this

[00:37:36] Speaker 06:
this proceeding, there was actual evidence trying to put meat on those bones to determine whether or not.

[00:37:41] Speaker 08:
Recognized and laid out in some detail and quite colorfully by Judge Stilberman.

[00:37:47] Speaker 08:
Right.

[00:37:47] Speaker 08:
I have the same reaction to Judge Stilberman.

[00:37:50] Speaker 06:
Right.

[00:37:50] Speaker 06:
But if you look at the, and we're not trying to refight the emirate order or the emirate proceeding, because we understand that these are serious concerns that the commission has to take seriously.

[00:37:59] Speaker 06:
That's why it's doing it in this case.

[00:38:01] Speaker 06:
And it's looking at some of the similar issues in other regions as well on an ongoing basis.

[00:38:06] Speaker 06:
But the issue with treating Ameren as determining the issue generally is that there were some assumptions built into that analysis, one of the assumptions being that the risks and the size of facilities are material enough that it creates economic injury to the transmission owners.

[00:38:27] Speaker 06:
That's a provable case.

[00:38:28] Speaker 06:
That is susceptible to real world facts.

[00:38:32] Speaker 06:
And so I think it's reasonable for the commission, especially in line with this court's

[00:38:36] Speaker 06:
206 section 206 cases to expect there to be some kind of real-world evidence of a problem and I think it states a fine hypothesis but one of the things and if you look at the descent in Ameren it basically says there isn't a lot of evidence in this record to say it's actually possible yet.

[00:38:54] Speaker 06:
And then if you look at the dissent on the hearing order from Commissioner Glick, it also says there's not really a whole lot of evidence of this.

[00:39:01] Speaker 06:
Then in this case, you get an actual look at the evidence, and it doesn't value the risks.

[00:39:06] Speaker 06:
It doesn't say that they reported these particular risks to investors.

[00:39:11] Speaker 06:
And we don't get a clear sense as to what the actual dollars and cents problem is for the transmission owners.

[00:39:19] Speaker 06:
So we were treating it as an issue that they can bring back to us in the sense of needing a more fine-grained return equity analysis, if they think that's possible.

[00:39:29] Speaker 05:
At the end of the day the answer to clarify something you just said so you said they There's no evidence.

[00:39:36] Speaker 05:
They reported these risks to their investors by that Do you mean these types of risks associated with system upgrades in particular correct or?

[00:39:45] Speaker 05:
Okay, because conceptually.

[00:39:47] Speaker 05:
Yeah, I understood Fork to be saying that these types of risks are

[00:39:54] Speaker 05:
based by the grid as a whole are accounted for in the ROE analysis.

[00:40:01] Speaker 05:
And so what we're discussing now is just whether there's a distinct dollar figure on that type of risk borne by system upgrades as opposed to the rest of the TOs grid.

[00:40:12] Speaker 05:
OK.

[00:40:13] Speaker 06:
And there's nothing to suggest that, in general, that the enterprise level of analysis is wrong, that we need to be looking at particular facilities, that the enterprise level should take care of concerns that the risks that they have generally.

[00:40:27] Speaker 06:
And so if they were reporting those to investors, if there were credit rating issues related to this matter, then there would be an urgent need to do something.

[00:40:35] Speaker 05:
But they're fundamentally, I understood the point to be, that these risks

[00:40:39] Speaker 05:
whether they're to this portion of the grid, they're the exact same kind faced by the rest of the grid.

[00:40:46] Speaker 05:
And our enterprise-wide risk analysis looks at, it's not fine-grained, it's a blunt instrument, but you're looking, you consider these kinds of risks in the ROE analysis.

[00:40:57] Speaker 05:
Is that right?

[00:40:58] Speaker 05:
That's right.

[00:40:59] Speaker 05:
OK.

[00:40:59] Speaker 05:
And what you are acknowledging today essentially is, if they could show that the system upgrades, due to the system upgrades or otherwise, those risks are not adequately being compensated, they could make a filing with more evidence and raise their return on equity.

[00:41:21] Speaker 05:
Right.

[00:41:22] Speaker 05:
OK.

[00:41:22] Speaker 05:
One of their arguments on this point, the Section 206 issue, is essentially

[00:41:29] Speaker 05:
We bore the burden of showing that this kind of risk is not compensated for.

[00:41:33] Speaker 05:
But we did.

[00:41:33] Speaker 05:
We met that burden with Novak's testimony.

[00:41:37] Speaker 05:
And he does say, the determination of the authorized return is set by reference to the risks associated with investing in the rate base.

[00:41:46] Speaker 05:
And then the FERC orders essentially just say, no, it's set.

[00:41:51] Speaker 05:
as to a whole, but it sounds like on both sides, there are just claims going out.

[00:41:56] Speaker 05:
What's the right way for us to think about the burdens?

[00:41:59] Speaker 05:
And why shouldn't we be concerned that there isn't a FERC order out there that explains how this works?

[00:42:06] Speaker 06:
Right.

[00:42:06] Speaker 06:
So I think under the 206 analysis, their burden was to show the current system is economically unfair to them.

[00:42:14] Speaker 06:
And the way that they chose to define what economic unfairness looks like

[00:42:18] Speaker 06:
is that they claim that we have an increment in risk of the same kind we already face.

[00:42:23] Speaker 06:
And so to FERC, that looks like a return on equity question.

[00:42:27] Speaker 06:
And when it comes to these sort of phrases of what it gets applied to and what it doesn't get applied to, that's where the idea of the contributions to native construction agreements example comes up.

[00:42:37] Speaker 06:
You're not entitled to return on every single facility that happens to be part of your system.

[00:42:41] Speaker 06:
As the record here indicates, these are facilities that are transferred over a nominal cost to

[00:42:48] Speaker 06:
to the utilities.

[00:42:49] Speaker 06:
So they didn't put any money into these facilities for them to be built.

[00:42:52] Speaker 06:
So why would they be paid for an investment they didn't make?

[00:42:55] Speaker 06:
So I think there's a lot of issues related to just basic concepts that this type of theory has to encounter, and that's one of them.

[00:43:04] Speaker 06:
And so to make it work, to take into account these potential types of problems within the current framework, this looks like a return on equity issue for the investments they've already made, because that is the profit margin that is at risk when it comes to potential things that can go wrong in the future.

[00:43:21] Speaker 05:
I have two more questions.

[00:43:22] Speaker 05:
Yeah.

[00:43:23] Speaker 05:
One, there's been discussion of these kinds of risks resulting in actual penalties.

[00:43:27] Speaker 05:
I don't remember seeing that argument in the briefing, but if that's true,

[00:43:32] Speaker 05:
Wouldn't that be now an incurred cost that they could make a filing and make the case they've not been compensated for in their rate, seek an adjustment for that?

[00:43:40] Speaker 05:
Or would FERC object to that?

[00:43:42] Speaker 06:
I think it depends on the type of penalty.

[00:43:44] Speaker 06:
Penalties aren't necessarily tolerable in rates, because it sort of depends on the circumstances.

[00:43:50] Speaker 05:
My understanding of the- But if it was a more traditional cost, one of the risks here is just failure of system upgrades, right?

[00:43:58] Speaker 05:
And if something breaks, it costs a million dollars to fix it.

[00:44:01] Speaker 05:
they can make a 3.10 filing to recover that cost.

[00:44:05] Speaker 06:
That's right.

[00:44:06] Speaker 06:
And that is, in our interpretation of that provision, that's what that is for, is to help them make sure that they get into their rates the costs that they actually face in the types of responsibilities that are already assigned to them by the tariff.

[00:44:18] Speaker 06:
Not to rearrange responsibilities, but to make sure that they are not left holding an expense that would otherwise be recoverable, but just isn't accounted for in their rates.

[00:44:26] Speaker 06:
So I think when you talk about these these penalties and examples, it is a long set of testimony here, but we shouldn't confuse length with on point issues.

[00:44:40] Speaker 06:
The types of penalties they are talking about are ones that are generally faced, again, as we've discussed.

[00:44:48] Speaker 06:
And I'm not sure that any of these specific examples relate to a system upgrade specific facility failing.

[00:44:55] Speaker 06:
or resulting in penalties.

[00:44:58] Speaker 05:
The last question was actually about the discriminatory rate issue.

[00:45:03] Speaker 05:
They argue that the fact that MISO and other operators, the TOs there, are allowed to do these

[00:45:12] Speaker 05:
this type of funding and they're not makes this a discriminatory rate.

[00:45:16] Speaker 05:
And I'm just, I want to clarify what exactly FERC's response is because in the brief, there seems to be maybe a categorical legal argument that disparate rates affecting different regions simply can't ever be discriminatory.

[00:45:30] Speaker 05:
Is that really the argument or is it more of a fact specific finding?

[00:45:35] Speaker 06:
I think it's a little more fact specific than that.

[00:45:36] Speaker 06:
I think the issue that

[00:45:38] Speaker 06:
Fork did reject the principle of the argument that you can look at one rate in isolation and say that just because another region has it, the lack of it in ours must be unjust and unreasonable.

[00:45:49] Speaker 06:
The only fact that they kind of helped support that notion with is that system upgrades were increasing in their region.

[00:45:55] Speaker 06:
And so I think that FERC rejected the principle that you can just look at another region and say, I'll have what they're having.

[00:46:02] Speaker 06:
But this is the type of claim they make that is susceptible of evidence that could have been paired with other things.

[00:46:09] Speaker 06:
And so I don't think that there is, not only there is that legal, frontline legal issue, there is also just a failure to carry a burden as a normal section 206 type of case as well.

[00:46:20] Speaker 05:
Thank you.

[00:46:22] Speaker 06:
And looking at.

[00:46:24] Speaker 03:
Did you need to finish with your answer to him to judge Garcia?

[00:46:26] Speaker 06:
I was just saying in joint appendix at 100 is where it talks about revenue losses for shareholders.

[00:46:31] Speaker 03:
Sometimes it sounds like when you're this is going back to the 205 issue when you're telling us what costs mean in 310 a you're saying costs means investment.

[00:46:43] Speaker 03:
It doesn't mean expenses is in my understanding that to be.

[00:46:48] Speaker 03:
In the ballpark of your argument.

[00:46:50] Speaker 06:
So reasonably incurred costs would be expenses in the sense that if you look at the description in paragraph 22 of the rate order, that description, it talks about costs that are recoverable and rates that are just recoverable.

[00:47:07] Speaker 03:
So if we do think of it as expenses, then imagine I'm running a business and I have 100% likelihood of a $1 expense.

[00:47:19] Speaker 03:
And I have a 10% likelihood of a $10 million expense next year.

[00:47:26] Speaker 03:
The first one is certain.

[00:47:28] Speaker 03:
Second one, not certain.

[00:47:30] Speaker 03:
But isn't the second one a bigger expense?

[00:47:35] Speaker 06:
Well, I don't think that we're talking about particular magnitudes of dollars here.

[00:47:39] Speaker 03:
I guess, why shouldn't I think of the second one as an expense?

[00:47:43] Speaker 03:
A 10% likelihood of a $10 million

[00:47:47] Speaker 03:
expense.

[00:47:48] Speaker 03:
That seems like an expense, and you just told me an expense is a cost.

[00:47:52] Speaker 06:
Well, I think that the rehearing order does explain that costs you incur to mitigate risks or address risks are costs, like they are recoverable.

[00:48:00] Speaker 06:
So if there's something that the transmission errors can point to that they are doing to account for the risks that result in costs, those they're saying it's a risk of an expense going forward.

[00:48:15] Speaker 03:
Right.

[00:48:15] Speaker 03:
And

[00:48:16] Speaker 03:
They say that's a cost.

[00:48:18] Speaker 03:
And if it's a cost, we get to make a 310A filing.

[00:48:22] Speaker 03:
And I thought a minute ago you were sort of saying, yeah, an expense and a cost are basically talking about the same thing.

[00:48:32] Speaker 06:
Right.

[00:48:32] Speaker 06:
Well, I think

[00:48:35] Speaker 06:
I think the current rate structure allows them to get recovery of things that are operating expenses or capital expenses.

[00:48:41] Speaker 06:
So if you can think of your potential cost as going to be one of those two things, and there's an obvious investment responsibility you already have that's tied to this, then it's possible to think of this provision is covering it.

[00:48:54] Speaker 06:
The problem is it doesn't relate to actual policy changes of the tariff.

[00:48:58] Speaker 06:
If you look at section 3.03 of the agreement, that hands over all the rate filing responsibility to the system operator.

[00:49:05] Speaker 06:
And only this cars it out.

[00:49:08] Speaker 03:
I think this is my last question.

[00:49:09] Speaker 03:
Sure.

[00:49:09] Speaker 03:
The two concerns that Judge Katzis began with that were kind of captured from arguments made by the petitioner and the intervener, I thought one of your responses to him would be that those are new arguments, raised oral arguments, so we can't consider them.

[00:49:24] Speaker 03:
But is that fair?

[00:49:28] Speaker 03:
Or were they made in the briefs?

[00:49:30] Speaker 03:
Just reiterate it more at oral.

[00:49:31] Speaker 03:
Which specific argument are you referring to?

[00:49:35] Speaker 05:
Retroactive rate.

[00:49:36] Speaker 06:
I don't think the word retroactive is in the briefs, maybe.

[00:49:39] Speaker 06:
So I think that there were things raised in the case about that, but it is not a specific argument saying that the current system is creating a retroactive rate-making problem.

[00:49:53] Speaker 06:
I don't know that that was fully developed.

[00:49:56] Speaker 06:
We're looking at the current economics of the system and whether or not the transmission owners are facing actual

[00:50:01] Speaker 06:
economic struggles to maybe on rebuttal.

[00:50:03] Speaker 06:
I'll ask that.

[00:50:04] Speaker 03:
It seems like if it's not in the blue brief or the intervener, you can't consider it.

[00:50:09] Speaker 06:
I would I would think so.

[00:50:10] Speaker 06:
But but that is an issue that has been tossed out in the general scheme.

[00:50:14] Speaker 06:
This this type of.

[00:50:16] Speaker 08:
But I mean, generally speaking, their position is you have to solve the Amarin problem.

[00:50:24] Speaker 08:
A you have to solve the Amarin problem one way or the other.

[00:50:28] Speaker 08:
Right.

[00:50:30] Speaker 08:
We prefer a rate based solution to a return on equity solution, but they made both arguments.

[00:50:36] Speaker 08:
I mean, they're seeking relief one way or the other.

[00:50:39] Speaker 06:
Right.

[00:50:40] Speaker 06:
But I think the Amarin problem is actual capital attraction.

[00:50:43] Speaker 06:
That's the end point that the Amarin case is making.

[00:50:46] Speaker 06:
Assuming that the transmission owner there were correct, they were facing a capital attraction problem.

[00:50:52] Speaker 06:
There was an opportunity to put an evidence of that here, and it just didn't happen.

[00:50:55] Speaker 06:
So I think that once you get to the specific facts of these types of cases, that's where you get a full rate determination.

[00:51:02] Speaker 06:
And again, Amarin was a failure of the commission to respond to that argument in the first place.

[00:51:07] Speaker 08:
OK.

[00:51:08] Speaker 08:
Anything else?

[00:51:10] Speaker 08:
Thank you.

[00:51:11] Speaker 08:
Thank you.

[00:51:11] Speaker 08:
Thank you.

[00:51:31] Speaker 08:
Mr. Strauss, good morning.

[00:51:33] Speaker 01:
Good morning, your honor.

[00:51:38] Speaker 01:
So I'll make sure you can hear me clearly.

[00:51:39] Speaker 01:
Scott Strauss for the New York State Public Service Commission.

[00:51:43] Speaker 01:
Meeting the goals of New York's 2019 climate law is going to require both new power plants and new transmission facilities to deliver their output.

[00:51:52] Speaker 01:
Under participant funding, which has been part of the New York rate design for 20 years,

[00:51:57] Speaker 01:
The developer funds the upgrades using the most cost-effective financing available in the marketplace.

[00:52:02] Speaker 01:
Now, petitioners are attempting to eliminate it through a Section 205 filing, but they can't do that because they lack the authority to make that filing, which you have as a square peg round hole problem here.

[00:52:13] Speaker 01:
Agreement Section 3.10 authorizes Section 205 filings to recover costs that the transmission provider has incurred

[00:52:22] Speaker 01:
or to adjust the return applied to investments that the transmission owner has in fact made.

[00:52:28] Speaker 01:
Those rights are not implicated here.

[00:52:30] Speaker 01:
Petitioners have not identified costs they've incurred or investments that they have in fact made that they can't recover.

[00:52:36] Speaker 01:
What they're trying to do, and Judge Garcia, I think you had it right in your questioning earlier, they're trying to use this provision to change the rate design so that they can make additional investments on which they can then earn returns.

[00:52:48] Speaker 01:
But they can't get there from here to there.

[00:52:49] Speaker 01:
That's why they have to go to Section 206.

[00:52:52] Speaker 01:
Now in section 206 fails because they simply don't have the evidence to support the burden they bear to show that the existing.

[00:52:58] Speaker 08:
Before you get to 206, let's just push a little.

[00:53:02] Speaker 08:
I understand your argument why.

[00:53:05] Speaker 08:
They're not.

[00:53:08] Speaker 08:
Talking about costs, but the reservation in the tariff also lets them do a 205 filing to seek a reasonable return on investments.

[00:53:21] Speaker 08:
related to services under the tariff.

[00:53:25] Speaker 08:
And I mean, the commission has moved pretty far today towards saying there may be issues here, but they are related to return on investment.

[00:53:40] Speaker 08:
Correct.

[00:53:41] Speaker 08:
So why isn't this at least a

[00:53:46] Speaker 08:
Litigable issue on the appropriate return on investment and you might they might or might not win their 205 case before FERC but I think you must understand your honor.

[00:53:57] Speaker 01:
I agree with you They have a remedy here.

[00:54:00] Speaker 01:
The remedy is to attempt to seek a return or an increase in their return on investment

[00:54:05] Speaker 01:
I'm not suggesting they can't file a case to change their ROE going forward if they want to do that.

[00:54:10] Speaker 01:
What I'm saying is you can't use the 205 route to change the rate design.

[00:54:15] Speaker 01:
That's what they're trying to do.

[00:54:16] Speaker 01:
They're trying to change the rate design so that they get the right to make investments that they currently cannot make.

[00:54:22] Speaker 01:
That's why they're here.

[00:54:23] Speaker 01:
They're here because they want the right to make an investment on which they can then incur a return on.

[00:54:30] Speaker 01:
So what they've said is we're subject to all of these uncompensated risks.

[00:54:35] Speaker 01:
They don't quantify them.

[00:54:37] Speaker 01:
They don't actually show any evidence of real financial distress, such as would be necessary to justify that kind of relief.

[00:54:45] Speaker 01:
They don't tell you that they're on credit watch.

[00:54:47] Speaker 01:
They don't tell you that their credit ratings have gone down.

[00:54:49] Speaker 01:
They don't tell you that their borrowing costs have increased or that they can't detract capital.

[00:54:53] Speaker 01:
They don't tell you any of those things.

[00:54:55] Speaker 01:
And by the way, this case was filed in December of 2021.

[00:54:58] Speaker 01:
It has been almost three years.

[00:55:00] Speaker 01:
If they had evidence during that time.

[00:55:03] Speaker 01:
Amarin did say it would make it harder to attract capital.

[00:55:08] Speaker 01:
Amarin said they were not reaching the merits of those questions.

[00:55:11] Speaker 01:
They raised them as issues and sent them back to the commission.

[00:55:14] Speaker 01:
The court was very clear, page 880, F3rd, 582, that they were not reaching the merits.

[00:55:19] Speaker 01:
And the court also said in Amarin that they understood that investors invest on the entire enterprise, not particular portions.

[00:55:26] Speaker 03:
I agree with you that Amarin said we're not reaching the merits.

[00:55:30] Speaker 03:
But I think, I did understand them to say, though it may still possibly be a just,

[00:55:38] Speaker 03:
rate to do generator funding, it is going to make it harder to attract capital.

[00:55:45] Speaker 01:
I think where you can link Ameren in this case, which are essentially mirror images.

[00:55:49] Speaker 01:
In Ameren, you had transmission owner self-funding in the tariff.

[00:55:53] Speaker 01:
There was an effort to dislodge it.

[00:55:55] Speaker 01:
In this case, you have participant funding in the tariff and effort is being made to dislodge it.

[00:56:00] Speaker 01:
What links them is evidence.

[00:56:02] Speaker 01:
That's what this case is really about.

[00:56:04] Speaker 01:
Is there any showing here that these transmission owners are facing real financial distress under the current scheme?

[00:56:12] Speaker 03:
Commissioner Danley's statement, I'll read it here.

[00:56:15] Speaker 03:
While it may be difficult to assess with precision the risk assumed by a transmission owner operating a system upgrade, the one thing we do know is that it is not riskless.

[00:56:26] Speaker 03:
It cannot be.

[00:56:29] Speaker 01:
Is that right?

[00:56:31] Speaker 01:
Might there be a risk in adding facilities to your system?

[00:56:35] Speaker 01:
There could be.

[00:56:36] Speaker 01:
And then if there could be, even if it's

[00:56:40] Speaker 03:
If there could be, it seems like that almost by definition makes it at least a teeny bit harder to attract investment.

[00:56:47] Speaker 01:
But you have to make a showing to that effect.

[00:56:50] Speaker 01:
You have to demonstrate that there's that problem.

[00:56:53] Speaker 01:
These transmission owners have made no showing on this record that they are facing any risk-attracting capital.

[00:56:59] Speaker 01:
And I'm not saying that this means you lose.

[00:57:00] Speaker 03:
No, no, I get it.

[00:57:02] Speaker 03:
But it does seem like you don't need to make a showing of what seems like a pretty basic economic concept, which is if there's going to be some increase in risk, which is conceded,

[00:57:13] Speaker 03:
then it will be somewhat harder to attract investment.

[00:57:16] Speaker 01:
And if you can make that showing, or if it's obvious, then you have a route to change your return.

[00:57:22] Speaker 01:
You have a route to try to take.

[00:57:23] Speaker 01:
You have a remedy.

[00:57:24] Speaker 01:
They are not without a remedy here, just not the one that they're seeking.

[00:57:28] Speaker 01:
I'd also tell you that while they're here, to seek a change in their return on equity, an attempt to demonstrate that it doesn't.

[00:57:36] Speaker 01:
Through 205.

[00:57:36] Speaker 08:
Oh, absolutely.

[00:57:37] Speaker 08:
And they haven't done that in this 205 filing?

[00:57:41] Speaker 01:
They have not.

[00:57:41] Speaker 01:
They have sought to change the rate design here to allow them to make investments on which they will earn the existing return on equity.

[00:57:48] Speaker 01:
They haven't asked to adjust the return on equity.

[00:57:51] Speaker 08:
I'll check that.

[00:57:51] Speaker 08:
You don't think they made an alternative?

[00:57:54] Speaker 01:
Not to my knowledge, no, sir.

[00:57:56] Speaker 01:
No, sir.

[00:57:56] Speaker 01:
The other thing I want to point out is that while expressing concern here about the risks they are facing, the fact is that the New York climate law will require them to build additional amounts of planned transmission.

[00:58:11] Speaker 01:
And far from touting the risks, they are touting the benefits.

[00:58:15] Speaker 01:
The transmittal letter to their 205 filing in this case that's in the appendix at page 10 refers to the need for there to be a significant expansion of the transmission

[00:58:24] Speaker 01:
to integrate renewables.

[00:58:25] Speaker 01:
I'm sorry, that's at page eight.

[00:58:27] Speaker 01:
At page 10, they say, they are committed to incorporating clean energy drivers into their transmission capital planning to ensure that their local transmission networks can meet the needs.

[00:58:38] Speaker 01:
What this means is that they are going to engage in substantial planned transmission, which they will fund, they will invest in, they will put in an investment base, and they will earn a return on.

[00:58:48] Speaker 01:
And I called the court's attention to the brief of my colleague from the American Clean Power Association at page 14.

[00:58:54] Speaker 01:
They referenced testimony that petitioner Con Edison informed the Securities and Exchange Commission in 2020 that it had identified $4.5 billion in local transmission investments that would be needed to meet the goals of the climate law.

[00:59:09] Speaker 01:
Those investments, to the extent they are planned, they are going to go into rate base.

[00:59:14] Speaker 01:
And to the extent that they overhaul the transmission system, which they say in their brief at page six is needed, they're going to spend money on investing in facilities to meet the new needs.

[00:59:24] Speaker 03:
Why are those not system upgrades that the generators are responding to?

[00:59:28] Speaker 01:
Because they're going to plan the system to meet the needs in advance.

[00:59:31] Speaker 01:
If they do it correctly, they do their job right, and they right size the system correctly, the need for these interconnection related upgrades should be minimized.

[00:59:38] Speaker 01:
I also want to point out, council mentioned during the argument something that I

[00:59:44] Speaker 01:
1200% increase in interconnection upgrades or requests or something along those lines.

[00:59:49] Speaker 01:
I note that there's a graph in there brief at page seven, I believe, that shows that there was something like $1.2 billion in interconnection funded upgrades in 2019.

[01:00:01] Speaker 01:
In fact, FERC had asked them in a deficiency letter

[01:00:06] Speaker 01:
to say that was an estimated number.

[01:00:08] Speaker 01:
What was the final number?

[01:00:09] Speaker 01:
The final number was actually about a quarter of that, or $300 million.

[01:00:12] Speaker 01:
That's not an insignificant number.

[01:00:15] Speaker 01:
But if you look at the overall picture of their risk profile, as FERC did, there's no evidence to indicate that their return is too low or they otherwise are facing financial distress.

[01:00:28] Speaker 05:
So a quick question about Commissioner Danley.

[01:00:30] Speaker 05:
about Commissioner Daley himself?

[01:00:31] Speaker 05:
Yeah, and whether his opinion.

[01:00:34] Speaker 05:
Oh, his opinion, yeah.

[01:00:36] Speaker 05:
And whether, because I think, I just wanted you to tell me if this is right, because I think your fundamental point is that perhaps there is a marginal risk that goes up, and perhaps then they should be able to increase their return on investment.

[01:00:50] Speaker 05:
They could make that showing.

[01:00:52] Speaker 05:
But most importantly, that's not what they're asking for.

[01:00:54] Speaker 05:
Exactly.

[01:00:55] Speaker 05:
They're asking for a change to the rule to ask for a new investment.

[01:00:58] Speaker 05:
Exactly.

[01:00:59] Speaker 05:
Stanley did not say he thought they should be able to do that.

[01:01:02] Speaker 01:
Right.

[01:01:03] Speaker 01:
Right.

[01:01:03] Speaker 01:
And remember that what we're talking about here is essentially a technical matter of electricity rate design, which the Supreme Court has said in FERC V EPSA is something on which the commission gets a great deal of deference.

[01:01:16] Speaker 01:
Thank you, Your Honor.

[01:01:16] Speaker 08:
Thank you, Counsel.

[01:01:27] Speaker 08:
Morning is it to bot to bot to back your back Mister take back.

[01:01:32] Speaker 02:
Good morning, your honors may please the court Gabriel say back on behalf of the generator interveners.

[01:01:37] Speaker 02:
Your honors, I wanted to briefly hit 2 points that reinforce those that have already come forward in the discussion today.

[01:01:43] Speaker 02:
Both of which are linked to what the New York transmission owners are actually disclosing to their investors and because of that speak to whether they have met their burden of proof under section to 6.

[01:01:52] Speaker 02:
The first is that the disclosures to investors of any risks related to system upgrades by the transmission owners are only at a generalized level.

[01:02:01] Speaker 02:
I would refer the court to the testimony of our witness Michael Goggin beginning at JA 513.

[01:02:06] Speaker 02:
None of the examples that the transmission owners have cited in their testimony actually have anything to do with a system upgrade specifically.

[01:02:14] Speaker 02:
These are examples of

[01:02:15] Speaker 02:
Broad categories of risks that utilities in New York or elsewhere may have been responsible for, but none of them are specifically linked to the category of facility that they are before the court discussing today.

[01:02:27] Speaker 02:
It's really a generalized risk faced by the overall enterprise.

[01:02:34] Speaker 02:
The second point, which is related to that, is that the transmission system operates as an integrated whole.

[01:02:41] Speaker 02:
The transmission owners and the New York independent system operator

[01:02:44] Speaker 02:
have the responsibility of running the whole system from the lower voltage facilities to the higher voltage facilities, from Niagara Falls to New York City, as an integrated whole.

[01:02:55] Speaker 02:
But from a capital and rate-based perspective, it's actually more of a quilt.

[01:03:00] Speaker 02:
Sorry, more of?

[01:03:01] Speaker 02:
A quilt.

[01:03:02] Speaker 02:
There are different aspects of the system that can operate with different rates of return.

[01:03:09] Speaker 02:
The commission cited one in their brief, which are contributions in aid of construction, which the commission has always held that if a utility receives a contribution, maybe of land from a municipality to help build a substation or transmission line, that is not included in the rate base.

[01:03:25] Speaker 02:
There could be network upgrades that generators fund.

[01:03:27] Speaker 02:
There could be fully depreciated assets, which are no longer included in rate base after they're depreciated.

[01:03:34] Speaker 02:
And as my colleague from New York indicated,

[01:03:36] Speaker 02:
There can be large-scale plan transmission.

[01:03:40] Speaker 02:
Each of those things may have a different role in the capital structure and whether they're included in the rate base, which really means that the relevant discussion here is regarding what the overall enterprise risk profile is.

[01:03:55] Speaker 02:
The ROE, as the commission rightly noted,

[01:03:58] Speaker 02:
is the way that stitches together those pieces of the quilt and assesses whether the enterprise as a whole is healthy.

[01:04:04] Speaker 02:
And I think to Judge Walker's questions regarding Amarin, I think the court's concern there was whether, I guess, if I'm stretching the metaphor too far, one piece of that quilt could become oversized and skew it.

[01:04:19] Speaker 02:
And that, again, circles back to the Section 206 burden here.

[01:04:23] Speaker 02:
and the fact that the transmission owners have not disclosed any material risk.

[01:04:29] Speaker 02:
And indeed, as my colleague from New York noted, the only reference to the state policy drivers that are pushing forward the major grid changes in New York, the only references that are expressly made to investors here are regarding the investment opportunities that occur from this large plant's transmission.

[01:04:49] Speaker 02:
I'd refer the court there to J a 5.18 in 5.19 and J a 4.91 in our protest before for we identified 2 of the New York transmission owners.

[01:04:58] Speaker 02:
I believe one of them was the four and a half billion.

[01:05:00] Speaker 02:
Another was another 400 billion.

[01:05:02] Speaker 02:
So 4.9 billion that is being disclosed to investors from the same source that is spurring the need for network upgrades in New York.

[01:05:10] Speaker 02:
But the network upgrades are not specifically mentioned at all.

[01:05:12] Speaker 02:
They are only rolled into these generalized categories of risk.

[01:05:15] Speaker 02:
For those reasons, the commission rightly found that petitioners had not met their Section 206 burden.

[01:05:20] Speaker 08:
Thank you, counsel.

[01:05:22] Speaker 02:
Thank you, Your Honor.

[01:05:29] Speaker 08:
Mr. Tompkins, we'll give you three minutes.

[01:05:31] Speaker 07:
Thank you, Your Honor.

[01:05:33] Speaker 07:
Judge Garcia, to go back to the question you asked about the record evidence, Mr. Novak's testimony that the current ROE doesn't account for the system upgrade risk.

[01:05:42] Speaker 07:
I think you found it because you quoted something when Mr. Perkins was here, but it is Joint Appendix 649 through 650.

[01:05:51] Speaker 07:
Judge Walker, you asked Mr. Perkins about, for

[01:05:57] Speaker 07:
including such assets or such risk in ROE.

[01:06:01] Speaker 07:
In response to that, I would just like to read this quote.

[01:06:05] Speaker 07:
Quote, the commission in the Ameren remand orders found that transmission owners do, in fact, have at least some uncompensated risk when forced to operate network upgrades paid for through generator funding.

[01:06:16] Speaker 07:
This is consistent with the Ameren Court's finding that FERC's precedents do not provide compensation for several classes of risk that transmission owners allege will accompany construction and operation

[01:06:27] Speaker 07:
of the network upgrade facilities.

[01:06:29] Speaker 07:
The existence of such uncompensated risk supports the transmission owner's basic contention that they are entitled to be compensated now for operating the upgrades.

[01:06:39] Speaker 07:
That quote is from FERC's brief to this court in the American Clean Power Association case.

[01:06:46] Speaker 08:
Judge.

[01:06:46] Speaker 08:
It seems like there has been remarkable unanimity today for the proposition that

[01:06:57] Speaker 08:
If you think that your.

[01:06:59] Speaker 08:
Rate of return.

[01:07:02] Speaker 08:
Is becoming too low.

[01:07:04] Speaker 08:
In light of these increased risks that you are forced to bear.

[01:07:09] Speaker 08:
From generator funded upgrades.

[01:07:14] Speaker 08:
You can.

[01:07:16] Speaker 08:
Seek an adjustment in your rate of return through a 205 filing.

[01:07:22] Speaker 08:
Yes, OK, that's correct.

[01:07:23] Speaker 08:
It did your.

[01:07:25] Speaker 08:
Current 205 filing, which is before us, ask for that relief in the alternative.

[01:07:34] Speaker 07:
It asked for an adjustment of the rate of, excuse me, the return on investment.

[01:07:40] Speaker 07:
It did not ask to adjust the ROE, the return on equity component of that, but it did ask to adjust the rate base.

[01:07:48] Speaker 05:
Rate base only.

[01:07:50] Speaker 07:
Rate base only, which is a component of return on investment.

[01:07:53] Speaker 05:
That seems, you know, at least partially incomplete.

[01:07:57] Speaker 05:
It asks for a change in the rules so you could make new investments to increase your rate base.

[01:08:03] Speaker 07:
The only way to change the rate base is to ask to make the new investments.

[01:08:08] Speaker 07:
That's the problem here is that we can't put the existing system upgrades into rate base.

[01:08:12] Speaker 07:
We can only do this prospectively.

[01:08:14] Speaker 07:
So the only way to change, there are multiple ways I guess we could change return on investment.

[01:08:19] Speaker 07:
one would be to, because return on investment is a mathematical formula, right?

[01:08:23] Speaker 07:
It's weighted average cost of capital times rate base.

[01:08:27] Speaker 07:
So to change the return on investment, we could ask to change one of those components, both of those components.

[01:08:33] Speaker 07:
We asked to change the rate base part of that.

[01:08:36] Speaker 08:
But not return on equity.

[01:08:38] Speaker 07:
not return.

[01:08:39] Speaker 07:
We did not ask because as FERC acknowledged, that was a new concept that came out of their orders in this case.

[01:08:45] Speaker 07:
That was not an option that had previously been in any FERC order.

[01:08:52] Speaker 07:
But the rate-based adjustment is traditionally how these risks are accounted for.

[01:08:58] Speaker 07:
As Mr. Perkins said, the system upgrades become part of the transmission system and are just like every other asset, every other facility on that transmission system carrying the same risks.

[01:09:08] Speaker 07:
The risk of every other facility is in rate base.

[01:09:12] Speaker 07:
And that's why there's this mismatch to put these specific facilities into ROE.

[01:09:20] Speaker 07:
And this is a significant problem.

[01:09:21] Speaker 07:
In 2019, system upgrades accounted for 7% of the total transmission plant.

[01:09:32] Speaker 07:
If all 1.2 billion had been approved,

[01:09:35] Speaker 07:
That would eclipse that entire 7%.

[01:09:37] Speaker 07:
It would be more than double it.

[01:09:39] Speaker 07:
The 300 million that ultimately were implemented in 2019, you increase that percentage by over 2%.

[01:09:47] Speaker 07:
I think the 7% was around 900 million in system upgrades.

[01:09:51] Speaker 07:
So the 300 million is another 1 third.

[01:09:54] Speaker 07:
And that's continued to increase.

[01:09:55] Speaker 07:
And we expect it to continue to increase in the future.

[01:09:59] Speaker 07:
I'll just end with this.

[01:10:01] Speaker 07:
In the Amerenoral argument,

[01:10:04] Speaker 07:
when Ferg said there was no harm to utilities, Judge Silberman said, this is an attack on the business model.

[01:10:12] Speaker 07:
First, you take it finger by finger, and then you take it arm by arm.

[01:10:16] Speaker 07:
That's where we are.

[01:10:17] Speaker 07:
At this point, the arms are being taken.

[01:10:19] Speaker 03:
Thank you, Your Honor.

[01:10:21] Speaker 03:
Can I ask a kind of more technical question?

[01:10:23] Speaker 03:
Oh, sure.

[01:10:24] Speaker 03:
That was a very strong, emphatic conclusion.

[01:10:29] Speaker 03:
The two concerns that Judge Katz has raised that I think were inspired by concerns that you and the intervener raised.

[01:10:36] Speaker 03:
One was the retroactivity problem.

[01:10:38] Speaker 03:
One was this will be cost shifting to the wrong customers problem.

[01:10:42] Speaker 03:
Are those identified in your brief and in the intervener petitioners brief or not?

[01:10:51] Speaker 07:
I think the concepts are definitely there, but that's a step two problem.

[01:10:58] Speaker 07:
The issues before this court, in our view, are step one problems.

[01:11:01] Speaker 07:
In the 205, it's whether we have the filing rights, and then step two would be debating whether our proposal was reasonable.

[01:11:09] Speaker 07:
The 206, the question is, is it unjust and reasonable discriminatory?

[01:11:13] Speaker 07:
If so,

[01:11:14] Speaker 07:
What's the replacement rate?

[01:11:15] Speaker 07:
What's the good solution?

[01:11:16] Speaker 07:
I think the retroactivity goes to that question about, is ROE even possible as a solution?

[01:11:25] Speaker 07:
We don't think we ever got there, which is why we need to remand to FERC to have that debate.

[01:11:30] Speaker 03:
I appreciate that.

[01:11:31] Speaker 03:
And sorry for stepping on your mic drop.

[01:11:33] Speaker 07:
It's OK.

[01:11:33] Speaker 03:
Thank you.

[01:11:34] Speaker 03:
Thank you.

[01:11:35] Speaker 03:
Case is submitted.