[00:00:00] Speaker 00:
K-122-1334 et al.

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NRG Arkansas LLC et al.

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petitioners versus Federal Energy Regulatory Commission.

[00:00:09] Speaker 00:
Ms.

[00:00:10] Speaker 00:
McCormick for the petitioners, Mr. Perkins for the respondent.

[00:00:15] Speaker 03:
Ms.

[00:00:15] Speaker 03:
McCormick, good morning.

[00:00:17] Speaker 01:
Good morning, Your Honor, and may it please the court.

[00:00:20] Speaker 01:
I'm Marnie McCormick here on behalf of the Petitioning Energy Operating Companies.

[00:00:25] Speaker 01:
Entergy brought this petition because the Federal Energy Regulatory Commission acted arbitrarily and capriciously when it rejected a tariff change that would have relieved harmful conditions in the mid-continent region.

[00:00:41] Speaker 01:
The commission's order leaves us with the impression that if a tariff permits even the mere possibility that someone might exercise market power, then that tariff is unjust and unreasonable.

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But the potential for market power exists in any market.

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And the commission has well established ways of sniffing out market power and dealing with it.

[00:01:06] Speaker 03:
A little more than a potential.

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I mean, they said your client would have a 40 plus percent share within a couple of years in the South sub region.

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Yes, Your Honor, they did.

[00:01:17] Speaker 03:
Not in ground shoe territory here.

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We contend, though, that that

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Well, there are layers of arbitrariness here.

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And one of them is that the commission relied upon very speculative comments that are essentially in pleadings, not in evidence, to point to

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the market monitors comments and protests for that fact and in contravention of sworn testimony that supported Mid Continence application.

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That's one problem here.

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The commission itself has said repeatedly that mere speculation is not a basis for an opponent to undermine the credibility of testimony supporting an application.

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So the commission gave us no.

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You think it was arbitrary for them to rely on the written submission of the experts whom they engage to?

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address these issues market monitor.

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I think the APA requires that an agency has to draw a line from evidence to its findings.

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That line has to be something that is logical and that gives the court enough information to undertake a reasonable

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Evaluation of whether the agency's decision actually makes sense, but I would like to I'll just jump ahead to to the point that the court has raised that you know we've detailed in our brief the process problems with first decision here, but.

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I'm preparing for today.

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I got down further in the weeds and the reasons that the commission articulated the sparse reasoning that's in these commission orders aren't reasonable themselves.

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And you raised the second reason that FERC gave for its decision here, and that is this idea that Entergy is going to be able to, or may be able to, exercise market power in mid-continent south if the commission approves this proposal.

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But even if we put aside that the commission just parroted speculative comments for that proposition,

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Mid Continent proposed to implement this process on a regional basis only, not on a sub regional basis.

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So even if that help you because the requirement, the problem they what they're concerned about is applying this requirement in the southern region.

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And you say, oh well, but the requirement would

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Also apply in the northern region.

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So the difference between regional and sub regional application of this mechanism is for in a regional application.

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a load serving entity in the south is not limited to buying capacity in the south.

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That's what would happen if you applied this mechanism on a sub-regional basis.

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But applying it on a regional basis makes it possible for a load serving entity in the south to buy capacity from the north to satisfy this minimum capacity obligation.

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And the commission did

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pointed to some constraints in the system to support this idea that they would be inviting the exercise of market power.

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But the constraints between the North and the South concern delivery of energy, the physical delivery of energy.

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They do not constrain or pertain to where you can buy capacity.

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So.

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I mean, it's capacity to have electricity in the future.

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If there are constraints, there are transmission constraints that will kick in when the delivery happens.

[00:05:36] Speaker 01:
Possibly, but we don't know that for sure.

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It's not a wall or a limitation.

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It's a constraint.

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And sometimes it applies and sometimes it doesn't.

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I guess another way of asking, why would the geographic market for capacity be broader than the geographic market for delivery of the energy, the electricity itself?

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You could get, you can get capacity from the north to the south.

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It's just, you can't get all capacity from the north to the south at any given moment.

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But that's a pretty fact intensive question that the commission never got to.

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And just the basis, I mean, the things that the commission articulated in its order are not logical reasons for not imposing this

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mechanism at all.

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The other thing that the Commission said to an attempt to justify its decision was that the Commission has excused sellers in the Mid-Continent region from submitting to market power screens

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in the Mid-Continent region because the commission said that the auction in Mid-Continent has a disciplining effect on the bilateral market rates in the region and the commission said it would have to revisit that decision if it adopted Mid-Continent's proposal.

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But the commission didn't say why that matters and why that is an impediment to adopting the mechanism here.

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And as Commissioner Danley pointed out in his dissent, the commission can revisit that issue.

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I think it's more important for the court to understand that the commission has sort of set up this false construct here.

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The commission cites its order 861 in this passage of its order.

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And that is the decision where the commission said that mid-continent sellers don't have to submit to these indicative screening

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And that's because there's an option, but the commissioner, the commission here incorrectly implies that this is some sort of binary choice that you either have to you have an auction for everything, or you apply market power screens.

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that's not actually supported by the commission's order 861.

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There, sellers argued that the commission should force all sellers, even in Mid-Continent, to submit to these screening processes, even though the commission was adopting the

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capacity auction in this region.

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And in response to those arguments, the commission said that most sales are through bilateral contracts in regions like Mid-Continent and long-term sales of capacity are generally competitive.

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And the commission cataloged

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other processes and other tools that are available to both the agency and buyers to detect market power and to mitigate it.

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So it was never the commission's position that the auction ensures that there's no market power.

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It's just that the commission has said there are other ways to deal with the prospect of market power.

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So this is not a logical reason

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to just flatly reject mid-continent's proposal.

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And the most glaring example.

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You have the burden of showing the proposal is just unreasonable.

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Mid-continent did, yes.

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And if the commission has some concerns or doubts, as it had, and if any of them is valid,

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It's within the commission's discretion then to just simply deny the petition.

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It has not been shown to be, or alternatively, if it's interested, to pursue the matter, as the dissenting judge, commissioner had suggested.

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Now, that's a good deal of discretion, right?

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And it is a little disappointing to see how

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Commission may seem to have been just uninterested in refining or letting you refine your mid-continent's position so as to meet its concern.

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But is there any more than that?

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I'd say so here.

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I mean, there are instances where an application just in a vacuum does not produce or provide a rational basis for the agency to grant the application.

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That's not what we have here.

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Mid-continent actually produced two

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sets of sworn testimony and a study supporting the application.

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But there's also the documents submitted to the commission that cast some doubt on.

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Cast some doubt.

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Mid-continent's document was the Brattle Group study, is that right?

[00:11:02] Speaker 01:
Mid-continent did have the Battle Group.

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So then the monitor put in some contrary concerns that you haven't dispelled.

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Commission took them into account.

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and decided that was enough to impair the proposal under section 205.

[00:11:25] Speaker 01:
Right.

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And again, the piece of the monitor's comments that the commission relied on actually were criticizing

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a proposal that Mid-Continent is not making in this proceeding.

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The monitor was criticizing a proposal that Mid-Continent said it was going to take up in a couple of years after further studies.

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But that market monitor comment that the commission seized on doesn't apply to the regional application of this minimum capacity obligation.

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And that's why, I mean, there is a limit to the agency's discretion.

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The agency, there has to be a rational basis for what the agency says.

[00:12:09] Speaker 01:
And the agency pointed to a piece of the monitor's comments that

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we say do not support what the commission did here.

[00:12:20] Speaker 05:
Well, I correct in recalling that the concern raised by the monitor was one, it may have been directed to what would become a subsequent phase if this proposal had been adopted, right?

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You're saying, well, if you do this, it's going to have knock-on effects later on that are concerned.

[00:12:46] Speaker 01:
But again, it's not rational to disregard the initial proposal based on what might happen in the future, because Mid-Continent made clear that it would undertake further study with the commission in the future before the proposal was to make this effective on a subregional basis.

[00:13:06] Speaker 01:
And Entergy actually, to just cut through all of that, once the monitor

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raised this concern about a future implementation of the mechanism, Entergy made a commitment that it would make long-term surplus capacity available at embedded cost-based rates.

[00:13:26] Speaker 05:
Well, the commission raised some, or maybe it's council now, but there were obviously some ambiguities about that.

[00:13:32] Speaker 01:
That's what the commission said.

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That's not an ironclad guarantee of anything and some terms that would need to be interpreted.

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for sure.

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But it's right.

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The commission said, we don't really understand what you mean here and you're asking us to approve this mechanism based on some future filing.

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But the commission has.

[00:13:52] Speaker 05:
Exactly.

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Now why isn't that enough to say the present filing doesn't meet standards for

[00:13:57] Speaker 01:
I think that's a good question.

[00:14:03] Speaker 01:
I think that's a good question.

[00:14:06] Speaker 01:
I think that's a good question.

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then the commission permits the seller to mitigate its market power if it follows certain processes in its rule.

[00:14:23] Speaker 01:
That's rule 35.38 and it's actually the last page of the attachments to

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the commission's brief here.

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And that rule uses the very same terms that Entergy offered in its commitment.

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So it's a bit disingenuous for the agency to say it doesn't know what Entergy meant when it said that because Entergy was actually tracking the language of a commission rule.

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And the commission in this situation gave no rational explanation.

[00:14:51] Speaker 05:
Is this about committing to cost-based rules?

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I'm sorry?

[00:14:55] Speaker 05:
Is this about committing to cost-based rules?

[00:14:57] Speaker 01:
Yes.

[00:14:59] Speaker 01:
Yes.

[00:14:59] Speaker 04:
Are you waiving your argument about standing?

[00:15:04] Speaker 01:
No, Your Honor.

[00:15:06] Speaker 01:
The record Mid-Continent explained there were two reasons why it was proposing this mechanism.

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One was because there's immediate threat to the reliability of the Mid-Continent system.

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And number two.

[00:15:20] Speaker 04:
How does that harm your client?

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Entergy is a vertically integrated utility in this region.

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And because of that, it is subject to state regulation, has an obligation to build and maintain generating resources to make sure that there's enough capacity to serve its customers under a variety.

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What do you mean by unreliable?

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the system.

[00:15:44] Speaker 01:
If there's not enough capacity to serve customers that I mean the system as a whole everybody has to work together and maintain a system that's electrically balanced and to do that you have to make sure that what's put into the system roughly very closely equals what's taken out and when there's not enough capacity or power to put into the system then you threaten

[00:16:07] Speaker 01:
the functionality of the system and all members including Entergy of this region are threatened by a threat to the reliability of the system and I would just make one note on standing this court in another case in 2022 confirmed that Entergy does have standing

[00:16:27] Speaker 01:
to challenge the commission's rejection of a mid-continent proposal that affects how costs and burdens are allocated in the region.

[00:16:35] Speaker 01:
And that is a styled energy Arkansas.

[00:16:38] Speaker 04:
Is it cited in your brief?

[00:16:40] Speaker 01:
It is not, Your Honor.

[00:16:41] Speaker 01:
The site is 40F4689, and it's an opinion authored by Judge Wilkinson.

[00:16:49] Speaker 04:
Did you tell counsel through FERC that you were going to raise that case before argument?

[00:16:55] Speaker 01:
No, Your Honor, I didn't.

[00:16:56] Speaker 01:
I saw it as I was appearing.

[00:17:00] Speaker 01:
I apologize, Your Honor.

[00:17:06] Speaker 03:
Thank you.

[00:17:06] Speaker 03:
We'll give you a rebuttal.

[00:17:07] Speaker 01:
Thank you.

[00:17:15] Speaker 02:
May please the court Jason Perkins for the commission and just to pick up on that last piece.

[00:17:20] Speaker 02:
I'm aware of the energy Arkansas case from two years ago and I think it actually supports the commission's position on standing here because what happened in that case is about in a regional economic projects is how we refer to it and the transmission cost allocation for those things.

[00:17:36] Speaker 02:
The commission did reject a MISO filing in that case, but it also imposed its own cost allocation rate in that case.

[00:17:44] Speaker 02:
And so there was a new change in the rules that would have affected parties in the market.

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There's no change in the rules here.

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In this particular case, the commission rejected a proposal.

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And so the same legal relationship is applied.

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Rejected a proposal that would have allowed a large seller of capacity to get

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a higher price when people have to buy in the bilateral market outside of the auction context.

[00:18:13] Speaker 03:
That's the whole premise of your merits.

[00:18:17] Speaker 02:
Correct.

[00:18:18] Speaker 02:
But I guess a few clarifying points there.

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I don't believe that energy is saying that the potential ability to exercise market power is what the injury is here.

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they're saying that the reliability concerns that may have motivated MISOs of underlying filing, that is the source of your injury.

[00:18:37] Speaker 02:
That's actually- Well, they're saying two things.

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The grid reliability, which Judge Randolph was pressing on, and then I thought they have a second theory, which is just classic pocketbook injury.

[00:18:50] Speaker 05:
They would get higher rates if this were adopted.

[00:18:53] Speaker 02:
So I thought that I understood you to be saying higher rates because of the reliability issue.

[00:18:59] Speaker 02:
The idea being that there are load serving entities who are not getting the capacity ahead of time.

[00:19:04] Speaker 05:
The theory is the auction is under compensated, correct?

[00:19:07] Speaker 05:
And this was meant to provide more revenue than the auctions providing, justified on the ground that it will trigger signals for entry.

[00:19:19] Speaker 02:
I think one of MISO's concerns was planning long enough in advance in order to get enough supply and concerns that the auction price wasn't necessarily serving that purpose.

[00:19:31] Speaker 02:
I will mention that there has been a subsequent proceeding that deals with some of those types of issues.

[00:19:36] Speaker 02:
Just the seasonality proceedings?

[00:19:38] Speaker 02:
So that was sort of the parallel case of this one, but there's actually been a subsequent one beyond that.

[00:19:43] Speaker 02:
commission docket number er 23 29 77.

[00:19:46] Speaker 02:
So there is continued focus on these issues at the commission.

[00:19:51] Speaker 05:
So let's see if this is correct.

[00:19:54] Speaker 05:
It seems to me that the commission, the issue raised by this petition, it has to do with planning, with sort of long-term planning.

[00:20:05] Speaker 05:
I mean it does raise this question of all is the injury imminent?

[00:20:10] Speaker 05:
And I think they've covered themselves by saying that rates would be better, but

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That degradation of the system and its reliability is not something that's going to happen overnight.

[00:20:24] Speaker 05:
And the commission presumably has some responsibility to anticipate this and to deal with it and preclude collapse later on.

[00:20:35] Speaker 05:
That's challenging not only with regards to standing where we ordinarily talk about imminent harm, but I think I've covered that.

[00:20:43] Speaker 05:
But it's also disturbing when that's the circumstance and the commission doesn't express or show any interest in pursuing a possible way of addressing.

[00:20:56] Speaker 05:
I think that's what Commissioner Danvy was concerned about.

[00:21:01] Speaker 02:
Right.

[00:21:02] Speaker 02:
But I would note that because there are multiple proceedings here from MISO, I think described in MISO's original filing, they have a reliability imperative, what they talk about, a series of filings to keep refining and improving their approach to capacity markets and resource adequacy.

[00:21:19] Speaker 05:
Filings by these parties?

[00:21:20] Speaker 02:
Filings by MISO to address those issues.

[00:21:24] Speaker 02:
And that is, in some sense, a good thing in that MISO is the one who's able to devise the proposals, put that before the commission, work it through their stakeholder processes.

[00:21:34] Speaker 02:
That all happened in this case, as you saw from their filing.

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And so the commission is not reaching out to impose its own rules or its own ideas on MISO.

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And because of the continued attention to these issues, I think you will see the

[00:21:50] Speaker 02:
continued improvement of myself processes, but that's all to say that this particular process of this particular proposal and it's in the joint appendix at 6.19 to 6.22 that.

[00:22:04] Speaker 02:
basically turned a blind eye to the potential for market power that was inherent in the actual proposal made.

[00:22:12] Speaker 02:
What the proposal essentially was is currently under the preexisting tariff, all of the potential capacity purchases could go through the auction.

[00:22:20] Speaker 02:
So all of the prices in the bilateral market are reflecting what might happen in the auction.

[00:22:26] Speaker 02:
This proposal was essentially to take a whole class of potential capacity commitments and move it outside the auction.

[00:22:32] Speaker 02:
where there's no market mitigation, where there's no market monitoring that's specifically devoted to this.

[00:22:38] Speaker 02:
And so it created a market power problem.

[00:22:41] Speaker 02:
That's what the commission saw as detailed in the orders.

[00:22:44] Speaker 02:
But there was no solution.

[00:22:45] Speaker 05:
But it was taking 50% away from the whole.

[00:22:49] Speaker 02:
Right.

[00:22:50] Speaker 02:
But a very substantial portion of it.

[00:22:52] Speaker 05:
And so for... You can't really say there's no disciplining effect from the auction.

[00:22:59] Speaker 02:
Because you would have to show that you have accumulated those capacity commitments before the auction actually runs.

[00:23:06] Speaker 02:
The last day of the offer window.

[00:23:09] Speaker 05:
Right.

[00:23:09] Speaker 05:
And so up to 50% could still go through the auction.

[00:23:11] Speaker 02:
Up to 50% would still go through the auction.

[00:23:13] Speaker 02:
But as the commission detailed, it has basically premised the approach to market monitoring for this type of product on the existence of the auction and on recourse to the auction.

[00:23:24] Speaker 02:
So if you create a separate lane where there aren't rules, there isn't mitigation, then there needs to be a new approach.

[00:23:29] Speaker 02:
And that's something that was actually

[00:23:33] Speaker 02:
partially addressed in the commission's deficiency letter.

[00:23:35] Speaker 02:
The commission, as to your earlier point about whether or not there was a chance to refine the proposal, the commission put MISO on the spot and said, please answer these questions.

[00:23:44] Speaker 02:
And included in that was questions about transparency, questions about the liquidity of the bilateral market.

[00:23:50] Speaker 02:
And so it should have been very obvious, especially with the market monitor's protest.

[00:23:54] Speaker 02:
The market monitor actually works for MISO, essentially.

[00:23:57] Speaker 02:
that there would be problems with market power that needed to be addressed more than just saying we'll study it later.

[00:24:03] Speaker 02:
What the actual proposal was is we'll study it in two years.

[00:24:07] Speaker 02:
That wasn't good enough for the commission.

[00:24:09] Speaker 02:
And I think that preventing a market rule from taking effect that could have led to an exercise of the market power is squarely within what the commission's rate making judgment should be.

[00:24:20] Speaker 05:
Some clarification, if I may, about the auction.

[00:24:23] Speaker 05:
Is it a second bid?

[00:24:24] Speaker 05:
Second bid is what everyone pays, second highest bid, or is it the highest bid?

[00:24:30] Speaker 02:
In terms of what the clearing price is?

[00:24:31] Speaker 02:
Yeah.

[00:24:32] Speaker 02:
I think it's the marginal bid that's accepted.

[00:24:34] Speaker 02:
That's the highest, the last bid.

[00:24:35] Speaker 02:
Yeah, the highest bid.

[00:24:37] Speaker 05:
And when the commission talks about going, or anyone talks about going to a, they characterize that as a vertical demand curve, right?

[00:24:45] Speaker 02:
Under the pre-existing rules, it's actually the subject of ER 2329.77.

[00:24:49] Speaker 05:
So, there was another ask.

[00:24:54] Speaker 05:
Yes.

[00:25:02] Speaker 05:
Markets, the auction is described as being annual.

[00:25:05] Speaker 05:
And at some point, it's referred to as a spot market.

[00:25:09] Speaker 05:
How can that be?

[00:25:10] Speaker 05:
Is it a contract for a year or is it for the next 24 hours?

[00:25:13] Speaker 02:
It's a good question.

[00:25:14] Speaker 02:
Spot market often is used in that sort of real time sense.

[00:25:18] Speaker 02:
But I think the market monitor explains it in the comments what it means by that.

[00:25:22] Speaker 02:
So the auction process runs every year.

[00:25:26] Speaker 02:
And so right now, after the acceptance of seasonal rules, it runs for four upcoming seasonal periods.

[00:25:33] Speaker 02:
But the process runs once a year.

[00:25:34] Speaker 02:
So you have to figure out your capacity commitments for the four upcoming seasons.

[00:25:39] Speaker 02:
And in terms of it being a spot market, it's the last place where you can get capacity before you have to own up to those commitments.

[00:25:47] Speaker 02:
So an entity that doesn't have a real spot market.

[00:25:50] Speaker 02:
Not a real spot market.

[00:25:52] Speaker 05:
No, but I mean, it's the last place where you can fill up your uncontracted needs.

[00:25:57] Speaker 05:
Exactly.

[00:25:57] Speaker 05:
But then there's a storm and you need to go to the spot market, a real spot market.

[00:26:02] Speaker 02:
Well, that would be for energy, right?

[00:26:04] Speaker 02:
So in the actual planning year, there's a problem.

[00:26:06] Speaker 02:
You have to go to the energy market.

[00:26:08] Speaker 02:
Right.

[00:26:09] Speaker 02:
It's also described as an imbalance market.

[00:26:11] Speaker 02:
It's also described as a balancing market.

[00:26:14] Speaker 02:
And so you can actually offload capacity that you may not need.

[00:26:17] Speaker 02:
So that's why it sort of has this notion.

[00:26:20] Speaker 02:
RTO is similar in that respect.

[00:26:24] Speaker 02:
So MISO is a little different in the sense that the auction happens pretty much right before the planning year begins.

[00:26:30] Speaker 02:
So there's only a matter of weeks or maybe a few months before you actually have to have the commitments.

[00:26:35] Speaker 02:
And that's different from some of the other markets.

[00:26:37] Speaker 02:
So there is sort of a short-term element to it.

[00:26:39] Speaker 03:
Thank you.

[00:26:41] Speaker 03:
What's your answer to your friend said there's a disconnect between the market power concern, which was Miso South and the scope of the proposal, which is full Miso, which enables utilities in the South capacity for Miso North.

[00:27:05] Speaker 02:
Right, so if you look at the rehearing order at paragraph 13, that explains that the proposal applies to capacity contracts that enforces network constraints, sub-regional constraints, and local clearing requirements.

[00:27:19] Speaker 02:
Basically, the short answer is that there is sort of an isthmus between the two major parts.

[00:27:26] Speaker 02:
An isthmus between the two major parts.

[00:27:29] Speaker 02:
Meaning it's costly to

[00:27:31] Speaker 02:
transport being that you can't necessarily rely on the limited capacity that connects the two portions of the region to deliver the power that you're most interested in.

[00:27:39] Speaker 02:
So that's what a constraint is, is that it leads to a situation where you have two different sub regions that call planning areas.

[00:27:47] Speaker 02:
And so for the most part, what the commission is saying there is that buyers in the south sub region are going to mostly look within the south sub region.

[00:27:57] Speaker 02:
It's theoretically possible to get capacity from elsewhere, but that's really what defines it.

[00:28:02] Speaker 02:
It's harder.

[00:28:02] Speaker 02:
Yeah, it logically defines the market.

[00:28:04] Speaker 02:
OK.

[00:28:05] Speaker 05:
So the text of note 38 in that paragraph and the footnote itself seem to me to think that you could rely on that sufficient to resolve this matter.

[00:28:27] Speaker 02:
Right.

[00:28:27] Speaker 02:
So the reference to needing to rethink the process.

[00:28:34] Speaker 02:
Right.

[00:28:34] Speaker 02:
So that's the idea about indicative screens, that it's not required right now in MISO.

[00:28:39] Speaker 02:
And so we have to rethink that process.

[00:28:41] Speaker 02:
That's something that MISO could do in creating, like we were saying, creating a separate lane for these types of capacity procurements.

[00:28:47] Speaker 02:
What are the rules that apply in a separate lane?

[00:28:50] Speaker 02:
Maybe it's something like that.

[00:28:51] Speaker 04:
but the commission would have had to come up with itself and impose that on the myself proposal under energy power marketing from this court that's not what the commission is supposed to do in this particular posture you haven't had a chance an opportunity to reply to the claim in the reply brief regarding standing i'd like you to give the give you that opportunity as i understand it

[00:29:17] Speaker 04:
Entry G raises two types of injury.

[00:29:22] Speaker 04:
One is based on the possible unreliability of the grid.

[00:29:28] Speaker 04:
And the other is a sort of, for lack of a better term, a free rider.

[00:29:34] Speaker 02:
Would you please address both of those injuries?

[00:29:37] Speaker 02:
Sure, right.

[00:29:38] Speaker 02:
And I think the thing that ties them together is that they're both a function of the existing terror.

[00:29:43] Speaker 02:
So not the proposal, but what's happening under the MISO existing terror.

[00:29:49] Speaker 04:
If the circumstances are correct, they're circumstances that existed both before and after FERC's order in this case.

[00:29:58] Speaker 02:
That's correct.

[00:29:58] Speaker 02:
No change in the current tariffs, so no change in legal relationships.

[00:30:02] Speaker 04:
I would say that... So FERC's order didn't cause

[00:30:06] Speaker 04:
at least the causation problem or the causation question used in standing analysis seems to be absent.

[00:30:17] Speaker 02:
Right.

[00:30:17] Speaker 02:
I think that's right.

[00:30:18] Speaker 02:
And in terms of what protects energy against those potentially bad outcomes, they have the ability to file a complaint at the commission saying the existing tariff is unjust and unreasonable.

[00:30:28] Speaker 04:
Which is how they can protect themselves.

[00:30:30] Speaker 02:
Exactly.

[00:30:31] Speaker 02:
Right.

[00:30:31] Speaker 02:
It's not that they don't have a potential remedy here.

[00:30:34] Speaker 02:
It's just that it's not related to this particular proceeding.

[00:30:36] Speaker 02:
And the basis for the proceeding, or that got myself interested in this idea, doesn't necessarily mean that there's a legally protected interest that a party that joins the proceeding might somehow get.

[00:30:49] Speaker 02:
So really.

[00:30:49] Speaker 04:
As far as unreliability of the grid is concerned, how is that certainly not actual?

[00:30:58] Speaker 04:
And how is it imminent?

[00:31:01] Speaker 04:
I think I've seen references in the record that it may happen in the future 10 years from now or so.

[00:31:10] Speaker 04:
Does that meet the standard for eminence?

[00:31:13] Speaker 02:
I'm not sure that we have made an eminence argument exactly.

[00:31:17] Speaker 02:
I think it's a little bit unclear.

[00:31:19] Speaker 02:
The MISO process, as we were discussing before, is relatively short term in terms of how you get the capacity commitments.

[00:31:25] Speaker 02:
It essentially assumes that there are existing facilities that you can get

[00:31:31] Speaker 02:
capacity from, that's the whole idea of it's not incentivizing new entry because it's short term.

[00:31:36] Speaker 04:
But also, doesn't it assume that nothing will, that if there is a threat, that nothing's going to occur within the next 10 years or however it might materialize?

[00:31:49] Speaker 02:
Right.

[00:31:49] Speaker 02:
I mean, I think it is a short term horizon.

[00:31:51] Speaker 02:
So it is not looking out.

[00:31:52] Speaker 04:
This is a typical third party.

[00:31:55] Speaker 04:
We're relying on the actions, not of the commission, but of third parties.

[00:32:01] Speaker 02:
Right, in terms of the load serving entities, the theory about the other load serving entities not doing a good job, that's a problem with the existing tariff.

[00:32:09] Speaker 02:
That's an issue that could happen anyway.

[00:32:11] Speaker 05:
One of the commission's rationale here, the market power, is specifically that energy might gain market power.

[00:32:19] Speaker 05:
It's been denied that possibility.

[00:32:25] Speaker 02:
Well, again, I don't know that... So why isn't that is standing?

[00:32:28] Speaker 02:
I'm not sure that there's a legal entitlement to market power, either.

[00:32:31] Speaker 02:
And so I think that's why.

[00:32:33] Speaker 05:
The higher prices, I mean, it's a pocketbook issue.

[00:32:35] Speaker 05:
They would get higher prices for their.

[00:32:38] Speaker 05:
They're vertically integrated.

[00:32:41] Speaker 05:
They would benefit from that.

[00:32:42] Speaker 02:
Right.

[00:32:42] Speaker 02:
So I think what that kind of theory gets at is there's a potential benefit here on the table for a party.

[00:32:50] Speaker 02:
And I think in a situation where if the commission had accepted

[00:32:54] Speaker 02:
the proposal and energy wanted to intervene in support of the commission from accepting that proposal, there would be some kind of new benefit here or new change in relationship that would be taken away if the commission were to lose that case.

[00:33:07] Speaker 02:
But under this case, there's really no change in the fact that there might be a different market.

[00:33:13] Speaker 05:
There are innumerable cases where the problem is a loss of a business opportunity, some regulation that precludes someone from doing

[00:33:20] Speaker 05:
Something that would be profitable.

[00:33:22] Speaker 02:
Sure, but here, MISO actually made the filing.

[00:33:25] Speaker 02:
Entergy is not the filing entity.

[00:33:27] Speaker 02:
So in terms of whose injury, in terms of what's lost here, MISO wasn't able to change their tariff in the way that they intended to.

[00:33:33] Speaker 02:
That's a procedural injury that could give rise to standing, but MISO is not the petitioner.

[00:33:37] Speaker 02:
I'm not sure that MISO filed a brief here, so we don't know what their views are.

[00:33:42] Speaker 02:
But what it comes back to is that this is essentially an attempt to rely on

[00:33:48] Speaker 02:
the ideas of what third parties are going to do and what a different party did in their particular proceeding.

[00:33:57] Speaker 03:
Anything else from my colleagues?

[00:33:58] Speaker 03:
Okay, thank you.

[00:33:59] Speaker 03:
Thank you.

[00:34:12] Speaker 01:
I want to respond to counsel's comments about the standing case that I cited in my initial argument.

[00:34:21] Speaker 01:
To be clear, in that case, there were two things that Entergy was complaining about.

[00:34:26] Speaker 01:
One was the commission's rejection of MISO's proposal.

[00:34:32] Speaker 01:
The second was FERC's adoption of something else.

[00:34:35] Speaker 01:
And the court treated both of those points separately and said,

[00:34:41] Speaker 01:
for both reasons, Entergy had standing in that case.

[00:34:44] Speaker 01:
So I don't know how we would square, it would be a departure from that ruling to say that Entergy doesn't have standing in this case to challenge MISO's or FERC's rejection of MISO's proposal.

[00:34:59] Speaker 03:
I also wanted- Are you relying on the standing theory that Judge Ginsburg is suggesting?

[00:35:08] Speaker 03:
which seems to be perfectly straightforward.

[00:35:10] Speaker 03:
You're a large seller of capacity, and FERC declined to change the rules in a way favorable to capacity.

[00:35:20] Speaker 01:
Right.

[00:35:20] Speaker 01:
The record shows that energy is harmed by the status quo.

[00:35:27] Speaker 03:
So it has nothing to do with grid reliability.

[00:35:29] Speaker 01:
Well, it's the second.

[00:35:31] Speaker 03:
The second theory does not depend on your first.

[00:35:34] Speaker 01:
That's right.

[00:35:36] Speaker 03:
That's how I had understood it.

[00:35:38] Speaker 04:
Your second theory depends upon what?

[00:35:41] Speaker 04:
The idea that if the auction or if 50% has to be gathered together before the auction, that they'll turn to Entergy to get it, to get the capacity and that when they turn to Entergy, they're going to negotiate higher prices and therefore Entergy will earn more.

[00:36:06] Speaker 01:
That's right.

[00:36:07] Speaker 04:
That's somewhat inconsistent with your market power problem, isn't it?

[00:36:12] Speaker 01:
Well, no.

[00:36:13] Speaker 01:
I mean, I think market power suggests that.

[00:36:15] Speaker 04:
And it's also that causation chain.

[00:36:19] Speaker 04:
I may not have that correct, but that causation chain is not spelled out in your brief at all.

[00:36:27] Speaker 01:
Well, what we said in our brief or pointed out is what MISO pointed out in its testimony was that the auction before this proposal enabled some load serving entities to buy capacity at a fraction of the cost of what it cost to build and maintain the generating resources.

[00:36:46] Speaker 03:
And so the- Whether you call it

[00:36:51] Speaker 03:
avoiding freeloading or market power.

[00:36:57] Speaker 01:
The point is you can get a higher price, higher prices, but but what what everyone here was shooting for was fair prices.

[00:37:05] Speaker 01:
Market power suggests that you would be charging uncompetitive.

[00:37:10] Speaker 03:
That's your merits are right.

[00:37:13] Speaker 03:
Okay, anything else?

[00:37:15] Speaker 03:
Okay, thank you.

[00:37:15] Speaker 01:
Thank you.