[00:00:00] Speaker 03: Case number 23-1334, Industrial Energy Consumers of America et al. [00:00:06] Speaker 03: Petitioners versus Federal Energy Regulatory Commission. [00:00:09] Speaker 03: Mr. Stark for the petitioners, Mr. Perkins for the respondents, Mr. Street for the intervener. [00:00:16] Speaker 05: Mr. Stark, good morning. [00:00:19] Speaker 02: Good morning, your honors. [00:00:21] Speaker 02: Thank you for the opportunity to present here today. [00:00:24] Speaker 02: May it please the court, Ken Stark for the petitioners. [00:00:29] Speaker 02: This case concerns the application of the Just and Reasonable Rate Standard in the Federal Power Act to the Federal Energy Regulatory Commission's issuance of a financial incentive to a utility to engage in transmission project development when the rights to that project have not been demonstrated. [00:00:49] Speaker 02: There's a threshold issue that's presented on project eligibility. [00:00:53] Speaker 02: How can the FERC award an incentive [00:00:57] Speaker 02: to a specific entity or a specific project without knowing for sure whether in fact that entity has the rights to the project. [00:01:05] Speaker 05: Can I ask you what the status of the, oh I'm sorry, go ahead. [00:01:09] Speaker 05: What the status of the state court? [00:01:11] Speaker 02: Yes, the status of the state court litigation and your honor, I will highlight some key points here. [00:01:17] Speaker 02: When the application was filed with the FERC in May of 2023, [00:01:22] Speaker 02: There was an Iowa Supreme Court decision that had enjoined enforcement of the law to which project rights were claimed. [00:01:29] Speaker 02: The current status today is it's ongoing. [00:01:31] Speaker 02: However, the incumbent utilities in the state of Iowa are no longer challenging the constitutionality of the statute in question, which rendered the preferential right for the in-state incumbents to claim rights to an interstate regional transmission project. [00:01:47] Speaker 05: And what's left of the case? [00:01:49] Speaker 02: The case is still being argued with respect to the scope [00:01:52] Speaker 02: of the injunction. [00:01:54] Speaker 02: Because the MISO, the grid operator, has a tariff provision that requires it to apply state rights of first refusal laws, there's a question about the obligation of the incumbent utility that was assigned the project by MISO, the grid operator. [00:02:12] Speaker 02: And so what is still being challenged is the scope and the applicability of the injunction. [00:02:17] Speaker 02: But the injunction that this has been permanent [00:02:21] Speaker 02: at this point in time, the only way to prevent irreparable harm to the competitive developers, the competition of the utility here today is deceased through the issuance of that injunction. [00:02:33] Speaker 02: So that the applicability of the injunction actions taken under the injunction are still being litigated today, but the constitutionality of the statute in question is no longer being challenged. [00:02:43] Speaker 02: And that rofer statute is off the books. [00:02:45] Speaker 06: Wasn't the injunction based on the constitutionality of the statute? [00:02:48] Speaker 02: Yes. [00:02:49] Speaker 02: And yes, your honor. [00:02:49] Speaker 02: And the why is the injunction still being litigated if the scope of it and the applicability of it? [00:02:55] Speaker 02: The project. [00:02:56] Speaker 06: I'm sorry. [00:02:56] Speaker 06: Why wouldn't they vacate the injunction if there's no longer a challenge to the merits? [00:03:01] Speaker 02: Well, it's about whether the there's arguments with respect to the retroactive applicability of the injunction. [00:03:07] Speaker 02: So the litigants commenced the competitive developers in Iowa commenced the litigation October of 2020, July of 2020. [00:03:17] Speaker 02: 22, the grid operator, MISO, effectuates an automated assignment by just noting this in an Excel file and posting on its website that the project in question, LRTP 13, Skunk River IP of a project, what's at issue today, as well as four other Iowa-based projects, is assigned to the local TO, the local transmission owner. [00:03:39] Speaker 06: I understand that, but that doesn't go to the legal issue, which is [00:03:43] Speaker 06: The injunction was presumably granted because there was a finding of. [00:03:47] Speaker 02: Yes, so the likelihood of the adjunction by the district court. [00:03:53] Speaker 02: So there was a temporary injunction. [00:03:55] Speaker 02: The Supreme Court was specific with respect to enforcement of the law. [00:03:58] Speaker 02: Questions arose. [00:03:59] Speaker 02: Well, does it apply to these specific projects? [00:04:01] Speaker 02: The grid operator effectuated assignment in July of 2022. [00:04:04] Speaker 02: And then in December of 2023, the district court [00:04:09] Speaker 02: issues of permanent enjoyment, and it is very specific as to the projects, including ORTP 13. [00:04:16] Speaker 06: But was the permanent injunction based on this constitutional issue that now is no longer valid? [00:04:22] Speaker 02: Yes. [00:04:22] Speaker 02: It's all flowing. [00:04:23] Speaker 06: So it's not just that they're not appealing the constitutional issue. [00:04:25] Speaker 06: It's not that they think it's coming. [00:04:27] Speaker 06: I'm just trying to understand why this injunction is still in place and isn't vacant if nobody thinks that this is unconstitutional. [00:04:34] Speaker 02: Well, my understanding of the Iowa litigation is with respect to just the scope and the applicability of the injunction. [00:04:42] Speaker 04: So the fight is, my understanding is- No, but clarify for us, the state Supreme Court, was it holding that the right of first refusal statute was unconstitutional under state constitution? [00:05:04] Speaker 02: that the state, the Supreme court was temporary enjoyment of it, determining that the plaintiffs challenging the constitutionality had a high likelihood of success from the merits. [00:05:15] Speaker 02: And so it was remanded back. [00:05:17] Speaker 04: So it's remanded and that aspect of the case is still going on, correct? [00:05:25] Speaker 02: Part of the case is still going on, not the constitution. [00:05:28] Speaker 04: What I don't understand, I'm following up on [00:05:32] Speaker 04: Judge Pan's question, I thought the Iowa Supreme Court had a holding and basically that holding required the lower courts, both the intermediate appellate court and the trial court to change their previous holdings. [00:06:02] Speaker 04: So that as a matter of law has been decided by the Iowa Supreme Court and it's binding on everyone, correct? [00:06:16] Speaker 02: That's my understanding. [00:06:18] Speaker 04: Now the question is, does it apply to this automatic assignment that MISO does? [00:06:27] Speaker 04: Is that correct? [00:06:28] Speaker 02: Correct. [00:06:29] Speaker 02: That is an open question. [00:06:32] Speaker 02: Correct. [00:06:34] Speaker 06: So is it the case that the district court found this right of first refusal provision unconstitutional when it granted the permanent injunction, but nobody's appealing that? [00:06:46] Speaker 06: Is that what you're saying now? [00:06:47] Speaker 06: All they're appealing now is the scope of the injunction. [00:06:49] Speaker 06: That's my understanding. [00:06:50] Speaker ?: OK. [00:06:51] Speaker 06: I think now I understand what's happening. [00:06:53] Speaker 02: Yes. [00:06:55] Speaker 06: So there's another threshold issue here, which is standing. [00:06:58] Speaker 06: Can you explain why you believe that the organizations you represent, which represent consumers, have standing in this case? [00:07:10] Speaker 06: Because you're not the regulated parties. [00:07:12] Speaker 06: And so that's generally more difficult. [00:07:15] Speaker 02: Certainly, honor. [00:07:16] Speaker 02: So the abandoned plant incentive is a practice affecting rates under the Federal Power Act. [00:07:21] Speaker 02: Nobody disagrees. [00:07:23] Speaker 02: The orders below are final. [00:07:25] Speaker 02: The final agency actions, no one disagrees. [00:07:28] Speaker 02: An issue has been raised not by FERC, who recognizes that the final orders below effectuate an increase in the expansion of the scope of that beneficial assurance of that incentive from 50% potential future cost recovery [00:07:44] Speaker 02: to 100% potential future cost recovery, that cannot be relitigated or challenged in any future cost recovery proceeding. [00:07:53] Speaker 02: So that is the injury in the agreement today. [00:07:57] Speaker 04: And we would look- Well, let me ask you about that. [00:07:59] Speaker 04: I'm not clear. [00:08:00] Speaker 04: The order 879 arose out of a notice and comment proceeding. [00:08:12] Speaker 04: where the 100% recovery was identified. [00:08:21] Speaker 04: So your clients and anyone else had an opportunity to comment then, but now the 879 order is controlling [00:08:38] Speaker 04: so that anyone or any entity that applies for this special treatment has the right to seek 100% reimbursement. [00:08:56] Speaker 04: That's not an issue that is before FERC, is it? [00:09:01] Speaker 04: I mean, I understand the eligibility of the intervener to apply for this is a separate question, but [00:09:10] Speaker 04: anyone who is eligible for this special treatment has the right to ask for 100%. [00:09:17] Speaker 04: And that's not a litigable issue, if you understand. [00:09:23] Speaker 04: You can't say, well, they only ought to get 50% or they only ought to get 75%. [00:09:29] Speaker 02: certainly your honor, and I would like to address two elements of that order 679, which was promulgated in around 2006. [00:09:37] Speaker 02: And there was a rehearing order order 679 a and at least one of the petitioners, the coalition mice or transmission customers did request rehearing of that order to the best of and raise concerns with respect to [00:09:53] Speaker 02: the applicability of Section 219 of the Federal Power Act and how the Commission was looking to apply its Just and Reasonable Rate Standard, which is expressly incorporated. [00:10:02] Speaker 02: sections 205 and 206, the Just and Reasonable Rate Standards, expressly incorporated in 219. [00:10:08] Speaker 02: And we did take that issue, at least one of the petitioners here today as a member of other industrial customers said, we're very concerned that this just provides excessive costs. [00:10:17] Speaker 04: No, I understand all that, Council. [00:10:19] Speaker 04: What I'm getting at is 679 and 679A, those are final, are they not? [00:10:27] Speaker 02: They are, but at the point in time, what we're seeing here is now the commission has been applying 679A. [00:10:33] Speaker 02: And so we did not know at the time how exactly it would be applied. [00:10:36] Speaker 02: We're challenging the applicability of the increase to a hundred percent in this instant case, because it's- So is that a collateral attack on 679? [00:10:49] Speaker 02: We're really challenging the commission's applicability of 679 to the facts of this case. [00:10:58] Speaker 04: All right, but that's a separate question from whether or not a properly qualified applicant is entitled to 100% of recovery. [00:11:10] Speaker 02: Correct. [00:11:11] Speaker 04: That's already been decided by 679, hasn't it? [00:11:15] Speaker 02: Correct. [00:11:16] Speaker 02: That has been decided by 679, and yes. [00:11:19] Speaker 04: Thank you. [00:11:20] Speaker 02: Our consumers have taken policy disagreements with that decision. [00:11:23] Speaker 02: Right. [00:11:25] Speaker 02: The issue is that the total package of incentives requested have not been demonstrated to be narrowly tailored to the risks and challenges presented. [00:11:36] Speaker 06: But before you get to that, can you stick with standing? [00:11:38] Speaker 06: Like, I don't understand why you have standing. [00:11:41] Speaker 06: It seems to me that your theory is that somewhere down the line, you might have to [00:11:50] Speaker 06: bear the burden of paying for these abandoning or these costs these prudently incurred costs, but that's down the line. [00:12:00] Speaker 06: And it's highly contingent. [00:12:03] Speaker 06: And it's also not clear to me why the rates are going to go up because of this because [00:12:10] Speaker 06: Who's paying for this project if it's not abandoned? [00:12:12] Speaker 06: Isn't it through rate increases anyway? [00:12:15] Speaker 06: So I don't really understand that aspect of it. [00:12:18] Speaker 02: The issuance of the incentive itself is something that we cannot challenge in any later proceeding. [00:12:23] Speaker 06: That doesn't mean you have standing, though. [00:12:26] Speaker 06: That happens sometimes. [00:12:28] Speaker 06: People comment all the time about rules. [00:12:30] Speaker 06: That doesn't mean they have standing in an Article III court that appeal that. [00:12:35] Speaker 02: Right, so I would look at the San Diego case from this court where this court determined that the denial of an incentive to a utility was sufficient to warrant standing in that case because the court recognized and it spoke in terms of the inability of the utility to seek that future benefit in a future proceeding. [00:13:00] Speaker 06: That is a utility though, utility is a regulated party and so their standing is a bit more apparent. [00:13:05] Speaker 06: And I think in that case, too, there was a reasoning that the inability to get a commitment now that those costs would be covered later was affecting their ability, for example, their capital costs and other things. [00:13:23] Speaker 06: So that's very different from what's happening here, where you're representing consumers. [00:13:27] Speaker 06: The consumer's interest is just that their rates might go up somewhere down the line. [00:13:34] Speaker 06: I find it difficult to buy an argument that says any time agency action affects consumer rates going up, consumers have standing to challenge that agency act. [00:13:47] Speaker 02: Right. [00:13:48] Speaker 02: Essentially, if this court were to find no standing, this issue would be capable of repetition and would avoid judicial review because we cannot challenge the incentive scope. [00:13:57] Speaker 06: That's a mootness issue, is it not? [00:13:58] Speaker 06: I'm talking about standing, not mootness. [00:14:00] Speaker 02: Right. [00:14:01] Speaker 02: Well, if I could play this out with maybe a hypothetical, if there's $100 million that is sought for cost recovery in the future and the 100% potential rule applies, it's 100% that would need to be litigated and challenged in the future as opposed to the 50%. [00:14:21] Speaker 06: But what if it's not abandoned? [00:14:22] Speaker 06: What if the project's not abandoned? [00:14:24] Speaker 02: Well, if the project's not abandoned, the commission and in the San Diego case recognized that this is a two-stage process here. [00:14:32] Speaker 02: This is not an automatic, and there's not speculation upon, go ahead. [00:14:36] Speaker 06: I think San Diego is distinguishable, because that was actually a regulated party, and it's easier for them to achieve standing. [00:14:43] Speaker 06: And there were immediate costs to the utility of not having that guarantee. [00:14:49] Speaker 06: In your case, [00:14:51] Speaker 06: How is this an immediate and concrete injury when it could be that this project won't even be abandoned and you won't have to pay anything? [00:14:59] Speaker 02: Well, there's an immediate transfer of risk that happened on the day in August 2023 that the first order was issued because that's the date by which a potential cost recovery can be sought in the future. [00:15:13] Speaker 02: So for the immediate transfer of risk away from the utility to the consumers, I think is sufficient, even if we can't quantify it. [00:15:22] Speaker 06: So, but who's going to pay for this project if the project's not abandoned? [00:15:26] Speaker 06: Is it through rate increases? [00:15:29] Speaker 02: Through formula rate process at FERC. [00:15:32] Speaker 06: So that's why I just don't understand. [00:15:34] Speaker 06: If it's not abandoned, there's a rate increase and you're going to pay for it. [00:15:38] Speaker 06: If it is abandoned, there'll be a rate increase you're going to pay for it. [00:15:42] Speaker 02: How are you injured? [00:15:43] Speaker 02: We would be precluded from challenging the components of the incentive in terms of, and we have two different legal standards here too that I think is worth highlighting, two different legal tests. [00:15:54] Speaker 02: At stage one, we have the nexus test, which I meant whether it's tailored to the investments, whether that goes to the merits. [00:16:01] Speaker 02: Right. [00:16:02] Speaker 02: And then in any future cost recovery proceeding, it's the prudent standard that applies. [00:16:08] Speaker 02: And that's whether a manager that was in the shoes of the utility, the instant utility that is seeking cost recovery, would have done the same thing under the same circumstances and incurred costs in the same way. [00:16:22] Speaker 04: So let me follow up. [00:16:24] Speaker 04: So, excuse me, Council, finish your answer. [00:16:27] Speaker 02: I was just going to say, the future cost recovery, the prudence review does not protect, does not provide the protection for consumers to challenge the cost because of the expansion of the incentive. [00:16:40] Speaker 02: But go ahead, Your Honor. [00:16:41] Speaker 04: I was looking into competitor standing. [00:16:45] Speaker 04: And of course, none of your clients, as I understand it, use a utility. [00:16:48] Speaker 04: So they're not competitors. [00:16:51] Speaker 04: to ITC, but what I'm trying to figure out is, are your clients concerned that once the commission approved ITC's application at step one, that even before step two, ITC may incur costs [00:17:21] Speaker 04: that then when we get to step two, which may be either abandonment or moving ahead with the project, that those costs will be borne by your clients because the [00:17:44] Speaker 04: ITC will be able to include those costs in the rate base that your clients have to pay? [00:17:53] Speaker 02: Yes, Your Honor, that is part of the concern. [00:17:59] Speaker 04: Well, I was trying to see that worked up in your brief because your argument is your standing is self-evident. [00:18:09] Speaker 04: And the cases you cite, it seems to me, don't demonstrate that for some of the reasons that Judge Pan has identified. [00:18:18] Speaker 02: is I do want to clarify one of the petitioners, a resale power group of Iowa represents municipal utilities. [00:18:26] Speaker 02: So some of them are in municipal utilities. [00:18:28] Speaker 02: They are subjected to the transmission rates of ITC that they have to pass through to the residential customer. [00:18:33] Speaker 04: So I just want to clarify from a standing- But they're not a competitor in the sense that they would take over the project, right? [00:18:44] Speaker 02: No, no, they're not a competitor. [00:18:47] Speaker 04: All right, so then following up. [00:18:50] Speaker 02: But there are municipal entities, I should say. [00:18:53] Speaker 02: As far as I know, they're not a competitor. [00:18:55] Speaker 02: But municipal entities have partnered with other transmission utilities on projects. [00:19:03] Speaker 04: Well, all I'm trying to say is when I was looking for an analogy here, [00:19:11] Speaker 04: I couldn't find it at least as I understand the matter because I was trying to follow through on FERC's footnote concession that it is not arguing that you lack standing as to the competitive element. [00:19:32] Speaker 04: And I was trying to understand and I'll ask the FERC attorney exactly what that means. [00:19:39] Speaker 02: Right, that was note five on, I think, page 27. [00:19:42] Speaker 02: I think that's where they're speaking. [00:19:44] Speaker 02: That's sort of the argument we were trying to make earlier about FERC recognizing that the proportion of recoverable costs cannot be related later. [00:19:53] Speaker 04: What do you mean by the proportion? [00:19:56] Speaker 02: The increase from 50% to 100%. [00:19:59] Speaker 04: But my previous questions were trying to clarify that order 679 makes it clear that [00:20:11] Speaker 04: an applicant can apply for 100%. [00:20:14] Speaker 04: That's not subject to further review unless FERC decides to amend order 679. [00:20:23] Speaker 04: But what you can do at step two is say, some of these costs are not prudent, but to the extent FERC finds they're prudent, then the recovery can be up to 100%. [00:20:39] Speaker 04: I didn't see footnote five as suggesting that was subject to consideration at step two. [00:20:51] Speaker 02: Right, and I will clarify your honor, there has been a pending rulemaking or transmission incentives that's been pending with the commission for a couple of years where they are reevaluating. [00:21:00] Speaker 04: So just to... Well, what we're dealing is with what's on the books now. [00:21:07] Speaker 02: Correct. [00:21:07] Speaker 02: And we would ask this court to focus on our statutory purpose of Section 219, which is to benefit consumers by ensuring reliability and reducing the cost of delivered power. [00:21:18] Speaker 04: So following up at step two, suppose ITC comes in with a proposal to recover, I don't know, $500 million for doing X. [00:21:31] Speaker 04: And the consumers come in and offer evidence as to either why that wasn't a prudent decision, either in whole or part. [00:21:42] Speaker 04: Isn't that the time to raise all those issues? [00:21:46] Speaker 02: But we can challenge whether a proportion of the costs are prudently incurred or not. [00:21:51] Speaker 02: But the scope by which we have to challenge prudence, the costs that could be recovered have been expanding. [00:21:59] Speaker 02: So it's, and the challenge is, and we will point out that the very- Expanded how? [00:22:05] Speaker 02: The scope of recovery has been expanded. [00:22:07] Speaker 02: And so when you look at the- That's in order 679. [00:22:10] Speaker 04: In other words, if ITC can show that these costs are prudent and FERC agrees with that, [00:22:24] Speaker 04: Unless Order 679 is amended retroactively, ITC can recover 100% of that prudent cost, right? [00:22:36] Speaker 02: Yes, I mean, there is a factor in the Order 679 nexus test that there needs to be a demonstration that the resulting rates will be just and reasonable. [00:22:44] Speaker 02: And we don't believe that has been demonstrated. [00:22:47] Speaker 04: But that can be argued at step two, can't it? [00:22:53] Speaker 02: Yes, it can. [00:22:55] Speaker 02: And assume, as we highlight in the PATH case, which is one of the few for cases, it's very difficult to raise and overcome the prudence, the prudent incurment of costs. [00:23:06] Speaker 02: And assume that there, and even the PATH case, the challengers in that litigation [00:23:12] Speaker 02: extensive evidentiary hearings, and we're only able to demonstrate imprudence as to limited buckets of costs with respect to some double recovery issues, some marketing and advertising costs, and some other miscellaneous costs. [00:23:25] Speaker 02: So even if the petitioners are able to mount a successful evidentiary hearing, it's to try to challenge the prudence of those costs incurred. [00:23:35] Speaker 02: Because of the expansion of the [00:23:37] Speaker 02: dollar amount, there's going to be a significant amount that we're still going to be on the hook for a higher amount than we would be if there was 50% of the scope. [00:23:48] Speaker 02: That's the point we've been trying to emphasize here. [00:23:51] Speaker 02: That's something that we can't challenge again under the prudent standard in that future cost recovery proceeding. [00:23:58] Speaker 05: All right, if there are no more questions, your time is up. [00:24:01] Speaker 05: We'll give you a couple of minutes. [00:24:01] Speaker 02: Thank you, Your Honor. [00:24:03] Speaker 05: Mr. Perkins? [00:24:16] Speaker 01: May it please the court, Jason Perkins for the commission. [00:24:19] Speaker 01: And just to jump right in on the standing piece that has been talked about here already. [00:24:24] Speaker 01: So the relationship that's created by the incentive order is described at length in the San Diego case. [00:24:31] Speaker 01: That is the basis of why the commission isn't challenging standing here. [00:24:34] Speaker 01: There's a new legal relationship created by the [00:24:38] Speaker 01: incentives order and it gets to what the difference is. [00:24:41] Speaker 06: These are consumers and the San Diego case, it was a regulated utility. [00:24:46] Speaker 06: Can you explain why they have standing? [00:24:48] Speaker 01: Sure. [00:24:48] Speaker 01: So the baseline policy is what we call our opinion number 295 policy where it's risk sharing. [00:24:54] Speaker 01: So even if you demonstrate prudence for all the abandoned plant costs that you incurred, you only get, if you're the utility, you only get recovery of 50% of that. [00:25:03] Speaker 01: You have to share the risk of abandoned plant with your customers. [00:25:07] Speaker 01: These orders here in this proceeding change that relationship as to this project. [00:25:12] Speaker 01: It would be 100% of all prudently incurred costs. [00:25:15] Speaker 01: And the commission has explained in order, the incentives rule, order 679, [00:25:19] Speaker 01: is not going to relitigate that issue later, the nexus test. [00:25:23] Speaker 01: So the amount of prudently incurred cost recovery will be 100% costs if there is a later proceeding. [00:25:29] Speaker 06: And if there is no abandonment, who's paying for the costs of construction? [00:25:33] Speaker 01: Right. [00:25:34] Speaker 01: So to that question, the general rule as to when you put the project costs into rates is when the project goes into service. [00:25:42] Speaker 01: So the utility has to carry the costs of developing this project until it actually gets put into service. [00:25:49] Speaker 01: if it meets its in-service target, it's 2029 in this case, then the whole cost of the project go into rates in 2029. [00:25:57] Speaker 04: So if ITC is spending money now, engineering studies, architectural design, et cetera, in anticipation of this project going forward, [00:26:13] Speaker 04: Those can be recovered, can they not? [00:26:15] Speaker 04: Even though under either the project going forward or the project being abandoned. [00:26:22] Speaker 04: So once FERC approved the order, there are legal consequences now. [00:26:31] Speaker 01: There's a new legal relationship now in terms of risk transfer. [00:26:34] Speaker 01: That's what San Diego talks about. [00:26:35] Speaker 04: Talk to me about it, if you will, in dollars and cents. [00:26:40] Speaker 04: I understand your point about when the rate takes effect and all, but ITC has won at step one and [00:26:53] Speaker 04: you know, operations project 2029, it can't wait. [00:26:58] Speaker 04: It's got to get engineering, et cetera, studies done now. [00:27:02] Speaker 04: So that's gonna cost it money. [00:27:06] Speaker 04: Can it recover those funds? [00:27:10] Speaker 04: And let's, in my hypothetical, assume that any utility would incur engineering costs [00:27:22] Speaker 04: like this, won't those funds be recoverable from the petitioners? [00:27:31] Speaker 01: They would be if they're demonstrated to be prudent, but they're not recoverable right now. [00:27:35] Speaker 04: Well, my hypothetical is they are prudent. [00:27:37] Speaker 01: Yeah. [00:27:38] Speaker 04: They're not recoverable right now. [00:27:39] Speaker 04: So what I'm trying to understand in terms of the standing question and your footnote five is if ITC [00:27:52] Speaker 04: undertakes an engineering study right now in connection with this project going forward. [00:28:05] Speaker 04: And whatever happens to the project, it has incurred these costs. [00:28:13] Speaker 04: And in my hypothetical, they are prudent. [00:28:18] Speaker 04: So while we don't know specifically [00:28:23] Speaker 04: how much ITC is going to spend on engineering costs. [00:28:29] Speaker 04: In my hypothetical, the amount that they seek to recover is deemed to be prudent by the commission and the petitioners have failed in my hypothetical to demonstrate, to overcome the presumption with evidence. [00:28:52] Speaker 04: So in that scenario, my hypothetical, is there not a real impact now, even though we don't know the dollar amount, precisely because the legal relationship has changed? [00:29:11] Speaker 01: So in that hypothetical, I think that speaks to a different type of incentive, because there are incentives such as the construction work in progress incentive that's discussed in the incentives rule, where if you are starting to spend money on a project and it's capital money you're going to put into the project, you can start recovering it in your rates. [00:29:29] Speaker 01: That's a different incentive. [00:29:31] Speaker 01: So that hypothetical is possible. [00:29:33] Speaker 04: My hypothetical. [00:29:34] Speaker 04: is dealing with the incentive that's at stake here? [00:29:38] Speaker 01: Not under this incentive. [00:29:39] Speaker 01: It's not possible for them to start putting this money, that kind of money, in rates right away. [00:29:43] Speaker 01: They have to have a later, as they say in the orders, a later Section 205 proceeding to do that under this incentive. [00:29:49] Speaker 04: All right. [00:29:49] Speaker 04: So that's my point, though. [00:29:51] Speaker 01: Yes. [00:29:51] Speaker 01: Right. [00:29:53] Speaker 04: At what point do the consumers? [00:29:57] Speaker 04: It's not until the 205 proceeding? [00:30:00] Speaker 01: to actually see it in rates, that's right. [00:30:03] Speaker 01: But the legal relationship is changing. [00:30:06] Speaker 04: But I need to understand this clearly. [00:30:08] Speaker 04: I understand as far as the consumers are concerned, there is a 205 proceeding. [00:30:23] Speaker 04: So what is permissibly in that rate base [00:30:29] Speaker 04: It could be, in my hypothetical situation, these engineering studies, right? [00:30:36] Speaker 01: Right. [00:30:37] Speaker 01: Right. [00:30:37] Speaker 01: There are, as I understand it, it's a little outside of our record here, as I understand it, there have been costs that have been incurred related to this project. [00:30:45] Speaker 01: So there is some number that's working its way through ITC Midwest books that they are responsible for now. [00:30:50] Speaker 01: They could ask for that recovery later. [00:30:54] Speaker 01: But that, because they haven't gotten incentives that allow them to include that now, it will have to depend on a future to abide proceeding. [00:31:02] Speaker 01: But the change that these orders represent into the rate making process is that difference between risk sharing 50% up to 100% of previously incurred costs. [00:31:11] Speaker 06: But with respect to standing, that only happens if there is an abandonment. [00:31:17] Speaker 06: And we have case law that says this injury has to be immediate, concrete, et cetera. [00:31:22] Speaker 06: So even if there is a shift in risk, there is no change right now. [00:31:27] Speaker 06: And the fact that there might be different rates is highly contingent. [00:31:34] Speaker 01: Right. [00:31:34] Speaker 01: I think all of that is true. [00:31:36] Speaker 01: I think what is important to the commission in an institutional sense is that we don't relitigate these issues later, in that we're making a decision under the incentives rule as to what the nature of the project is. [00:31:46] Speaker 01: That's fine. [00:31:46] Speaker 04: I'm just talking about standing right now. [00:31:48] Speaker 01: Right. [00:31:48] Speaker 01: Right. [00:31:48] Speaker 04: But we think that- All I'm talking about, to be clear, is standing. [00:31:52] Speaker 04: Right. [00:31:53] Speaker 04: All right? [00:31:53] Speaker 04: So I don't know how you can answer Judge Pan's question the way you did and answer my question the way you did. [00:32:06] Speaker 04: Well, I'm ITC. [00:32:09] Speaker 04: I'm excited about this project. [00:32:12] Speaker 04: I've got engineers working on it. [00:32:17] Speaker 04: You know, no one would suggest that that isn't a type of cost that's potentially prudent in a 205 proceeding. [00:32:28] Speaker 04: So isn't there all I'm trying to understand is can [00:32:36] Speaker 04: The consumers challenge all of this at step two. [00:32:42] Speaker 04: And you're responding to me, yes, in a 205 proceeding, correct? [00:32:50] Speaker 01: They can challenge the prudence of step two. [00:32:51] Speaker 01: Sorry if I didn't explain that. [00:32:53] Speaker 04: No, that's correct. [00:32:54] Speaker 04: They can challenge that these expenditures are not prudent. [00:33:01] Speaker 01: In step two, that's right. [00:33:02] Speaker 01: But they can't challenge the existence of this incentive that we ordered in this case. [00:33:07] Speaker 01: The existence of the incentive is now, and that can't be relegated later. [00:33:11] Speaker 01: That's our point about preclusion. [00:33:13] Speaker 04: Right, but under step two of the incentive, challenges to the prudence of the cost can be raised. [00:33:21] Speaker 01: That's right. [00:33:21] Speaker 04: And as I understand your answer, they can be raised in the 205 proceeding. [00:33:26] Speaker 01: Right. [00:33:27] Speaker 01: But the nexus tests, subsection A of the rehearing order, that is not subject to re-hearing, that is not subject to re-litigation later. [00:33:35] Speaker 01: And the reason why is that we want certainty of that finding. [00:33:38] Speaker 06: That's fine. [00:33:39] Speaker 06: I'm just interested in standing. [00:33:40] Speaker 06: And it seems to me that you should not have an institutional interest in supporting consumers to have standing any time there's agency action that could [00:33:49] Speaker 06: possibly, potentially, contingently affect their rates down the line? [00:33:54] Speaker 01: I think this is a very peculiar case in that regard, and it's just because of the way the commission has structured a two-step process here. [00:34:00] Speaker 06: But your position would be that any consumer that wants to challenge the granting of an abandonment incentive has standing? [00:34:09] Speaker 01: In the first step, that's right. [00:34:11] Speaker 06: And I don't see how that comports with our case law about immediate harm. [00:34:15] Speaker 06: And I actually don't see how this comports with the commission's interests, because it implies that any consumer can challenge any action that you take that could affect their rates further down the line. [00:34:29] Speaker 06: And that would be a lot of your agency action. [00:34:31] Speaker 01: Sure. [00:34:31] Speaker 01: We certainly don't endorse that concept. [00:34:34] Speaker 01: I think it's just limited to the various- But that's their theory of standing. [00:34:37] Speaker 06: This will affect my rates later, so I have standing. [00:34:40] Speaker 06: And you are supporting them? [00:34:43] Speaker 01: Just within the context of these very limited orders, that's all. [00:34:46] Speaker 01: But if that is the way the court decides the case, that- No, no. [00:34:49] Speaker 04: But following up on Judge Pan's questions, I mean, we have a lot of cases out there. [00:34:56] Speaker 04: pee-backing on the Supreme Court about the imminence of injury. [00:35:02] Speaker 04: And my questions have been an attempt in this two-step process to explore whether or not, just like this court has held that companies don't have to go out of business before they have standing to challenge a regulation that's affecting them, here, [00:35:26] Speaker 04: It's an interesting situation. [00:35:29] Speaker 04: These consumers are the middlemen in the process. [00:35:34] Speaker 04: It's not you and me as homeowners. [00:35:37] Speaker 04: So their concern, as I understand it, and that maybe I misunderstood it, and that's what I thought Judge Pan's questions were getting at, that they are in the process of saying, [00:35:56] Speaker 04: we didn't have an opportunity at step one to raise some of these issues. [00:36:06] Speaker 04: Or if we did, we lost. [00:36:09] Speaker 04: And consequently, at step two, we are no longer going to be able to pursue those issues because of the presumption [00:36:22] Speaker 04: of prudence that will exist at step two during the 205 process? [00:36:31] Speaker 01: The presumption of prudence is not imposed by these orders. [00:36:35] Speaker 01: That's a general policy on how we do sort of prudence reviews in any sort of section 205 context where it comes up. [00:36:42] Speaker 01: So that's not traceable to these particular orders. [00:36:44] Speaker 01: And we've been very clear that the whole prudence inquiry is open for a potential step two proceeding here if it even occurs. [00:36:51] Speaker 01: So that's a separate parallel issue as to how the commission does prudence analysis. [00:36:59] Speaker 04: And not to belabor this too much, but what precisely did FERC mean in footnote five? [00:37:08] Speaker 04: It was not challenging standing as to, I mean, I understand the court has to decide standing, but I just want to understand what the agency thought it was conceding. [00:37:21] Speaker 01: What we were conceding is that [00:37:25] Speaker 01: We have changed the legal relationship as it comes to risk between the utility and the customers. [00:37:32] Speaker 01: We rendered a final order in that regard. [00:37:34] Speaker 01: We will give it preclusive effect in later proceedings. [00:37:37] Speaker 01: We cited our Duquesne Light order on the top of that page. [00:37:42] Speaker 01: That's a second step order that essentially gives full effect to the first step order. [00:37:46] Speaker 01: It's not subject to relitigation later. [00:37:48] Speaker 01: And so we're interested in whether or not [00:37:52] Speaker 01: the preclusion attaches to this round. [00:37:55] Speaker 01: And I think under this course precedence, it would have to be one or the other. [00:37:58] Speaker 06: If they have no standing, they don't get to challenge this in the later round. [00:38:01] Speaker 06: So I don't understand why you're giving up standing. [00:38:04] Speaker 04: I'm sorry. [00:38:05] Speaker 04: I couldn't hear Judge Pan's question. [00:38:08] Speaker 06: It seems to me that what the commission is saying is their interest is in not having to relitigate this in a later round. [00:38:16] Speaker 06: But if there's no standing, they don't have to do that. [00:38:18] Speaker 06: So I don't understand why they're giving up standing in this appeal. [00:38:23] Speaker 01: Just that it undermines the certainty of the incentive given. [00:38:26] Speaker 01: And so ITC Midwest will have to relitigate the nexus test after they've already received the incentive. [00:38:32] Speaker 01: And so that's why it's not as reliable of an incentive that we gave. [00:38:36] Speaker 06: I don't understand that. [00:38:37] Speaker 06: If there's no standing, what changes about the proceeding, the prudence hearing down the line? [00:38:44] Speaker 06: The consumers can't challenge it. [00:38:45] Speaker 06: That's all that's happened if there's no standing. [00:38:47] Speaker 01: Oh, there's nothing to change about the prudence. [00:38:49] Speaker 01: It's just the nexus test that we've litigated here would have to get litigated again if the customers want to renew their objection at that time. [00:38:56] Speaker 01: So we would have to cover the same ground of rehearing order, paragraphs 18 and 19. [00:39:00] Speaker 06: And why can't they do that if they have standing here? [00:39:03] Speaker 01: They wouldn't be precluded if they weren't able to get review of it. [00:39:06] Speaker 06: Yeah, I'm just trying to understand why you're taking the position you're taking in this court. [00:39:09] Speaker 06: And I don't see how it's in the commission's interests. [00:39:11] Speaker 06: Can you explain that? [00:39:13] Speaker 01: Sure, so if you take a step back to to the incentives rule itself, we identified that there are some incentives, you might be able to see through just a one step to a process that's discussed in San Diego as well. [00:39:26] Speaker 01: This one in San Diego also talks about the fact that this one might be the kind that is really only available through a two-step process because the incentives orders that we issue take effect on a certain date and only costs after that date are applicable to this incentive. [00:39:41] Speaker 01: So the date matters, the timing matters. [00:39:44] Speaker 01: And so what we've tried to do in this case is give ITC Midwest that incentive as of August 8, 2023. [00:39:51] Speaker 01: But if that is not a final order that has had a chance to be fully litigated, then the customers would not be precluded necessarily from relitigating those issues again later. [00:40:02] Speaker 01: And so we're not. [00:40:03] Speaker 06: I'm not understanding that. [00:40:06] Speaker 06: What do you mean they're not preclude? [00:40:08] Speaker 06: If they have standing to bring this appeal, they can't relitigate these issues later in the 205 hearing? [00:40:14] Speaker 01: We don't relitigate these issues later in a normal 205 process. [00:40:17] Speaker 06: I'm still not understanding your answer to my question then. [00:40:22] Speaker 06: Why is it in the commission's interest here to not take the position that the consumers have no standing? [00:40:31] Speaker 01: Because I think that we're not trying to evade review of the commission's order and the review would probably need to be had either here or in the 205 proceeding. [00:40:40] Speaker 01: We're saying it should be here. [00:40:41] Speaker 01: under the structure of how we've given things so that they're certain. [00:40:43] Speaker 06: But whatever happens here, can't it still happen in the 205 hearing? [00:40:46] Speaker 01: No, we don't look at these issues again in the nexus test issue. [00:40:50] Speaker 01: We look at the prudence issues there, because the facts are fully developed. [00:40:53] Speaker 06: And I don't understand your answer to say you'd rather have it decided here than the 205 hearing, because you say you're not going to decide it in the 205 hearing anyway. [00:41:02] Speaker 06: Isn't that what you just said to me? [00:41:03] Speaker 01: Am I not understanding? [00:41:06] Speaker 01: I'll try one more time. [00:41:08] Speaker 01: The first step of this process looks through to see whether or not there's a nexus between the investment to be made and the incentive received. [00:41:20] Speaker 01: And so if there is that nexus, we call it number two in the step of the three decisions to be made, if there is that nexus, that's an issue that needs to be litigated at the time of applying for the incentive. [00:41:30] Speaker 01: That's straight out of the... [00:41:31] Speaker 06: But it could be that they don't have a right to appeal that at all. [00:41:34] Speaker 06: That happens all the time. [00:41:35] Speaker 06: Anybody can comment on anything that you're doing, because you have a comment period. [00:41:39] Speaker 06: And that doesn't mean that every commenter has standing to appeal that to us. [00:41:43] Speaker 06: It happens all the time. [00:41:44] Speaker 06: It could just be that you don't get to appeal this. [00:41:47] Speaker 06: But you're saying that they should be allowed to appeal this? [00:41:52] Speaker 01: Well, the issue is, once we've made that determination, [00:41:56] Speaker 01: can affect the way that the utility has financing arrangements and other things, how they approach the decisions they're making. [00:42:04] Speaker 01: And so if that isn't a final order and it hasn't been fully litigated and customers can come in and challenge it later, then- But it would be a final order if they have no standing to appeal this. [00:42:15] Speaker 01: It would still be a final order. [00:42:17] Speaker 01: It's just that would a court then be able to review back to the previous issues that we decided? [00:42:22] Speaker 06: No. [00:42:22] Speaker 06: Who would have standing to bring that? [00:42:25] Speaker 01: then it's possible, like under that theory, then there wouldn't be standing, and it would also be certain at that point. [00:42:32] Speaker 01: I think that was just an uncertainty about whether or not the preclusion would attach if Article III review is not available the first time. [00:42:40] Speaker 01: Our institutional interest is satisfied if that is the case. [00:42:43] Speaker 06: So you think that FERC orders are not final until somebody can appeal them? [00:42:51] Speaker 01: No, it's just that if the if the customers argument later is that we never got review of why it's just unreasonable to have the extra 50%. [00:43:00] Speaker 01: It's hard to say why that shouldn't be part of the second proceeding where we don't want to look at those issues. [00:43:06] Speaker 01: So. [00:43:07] Speaker 05: All right, thank you. [00:43:10] Speaker 05: Thank you. [00:43:12] Speaker 05: Mr. [00:43:25] Speaker 00: It pleased the court Aaron Street for the interveners like to start with standing since we were the proponent of that argument. [00:43:32] Speaker 00: But I do want to be sure to answer any questions the court has about the status of the Iowa. [00:43:38] Speaker 04: The court has a suesponte obligation, to be sure. [00:43:41] Speaker 00: Indeed, indeed. [00:43:43] Speaker 00: And we felt as officers of the court, we needed to raise that. [00:43:46] Speaker 00: And I also want to be sure, if there are any questions on the merits for my side of the V, that we get a chance to address those. [00:43:52] Speaker 00: But beginning with standing, just starting with a very basic procedural point, I think Judge Pan alluded to, when a non-regulated party seeks a petition for review, [00:44:03] Speaker 00: their standing is generally not self-evident. [00:44:06] Speaker 00: They need to come forward with a concrete theory of standing that's backed up by some evidence in their opening brief. [00:44:11] Speaker 00: They haven't done that throughout this proceeding, including this morning. [00:44:15] Speaker 00: But more substantively, [00:44:18] Speaker 00: This court has four or five cases in which this court denied standing to review a FERC order that adjudicated some legal right or obligation of a utility or a pipeline because that legal obligation would not become encompassed in a rate that would have a concrete effect on the market until some later proceeding. [00:44:42] Speaker 00: Now the most recent of those cases is the Kansas Corporation Commission case. [00:44:47] Speaker 00: And I think it's really directly on point here and addresses many of the arguments that the petitioners have made this morning. [00:44:55] Speaker 00: And essentially that case says, I'll quote from page 926, a harm that will not occur unless a series of contingencies occurs at some unknown future time is not concrete [00:45:08] Speaker 00: particularized, actual, or imminent. [00:45:11] Speaker 00: And what we have here is not just a series of contingencies, but contingencies that depend on what the Iowa Supreme Court does, what MISO does, what potentially FERC does at some point in the future with respect to this project. [00:45:25] Speaker 00: What I've heard from the petitioners is a series, and as well from the commission, is a series of phrases like a new legal relationship. [00:45:35] Speaker 00: a preclusive effect or a risk transfer. [00:45:38] Speaker 00: Those are abstract concepts. [00:45:40] Speaker 00: Those are not concrete today or imminent harms. [00:45:44] Speaker 00: And in fact, they've all been rejected by this court's case law. [00:45:48] Speaker 00: I think the commission said their institutional interest was not having a preclusive effect. [00:45:52] Speaker 00: But in Kansas Corporation Commission, the court rejected precisely that argument at page 931. [00:45:58] Speaker 00: It's saying that this now or never argument cannot establish standing. [00:46:03] Speaker 00: In the Sealand case, which was not cited by the parties, but it's 137, Fed 3rd, 640, the court said, quote, mere presidential effect within the agency is not alone enough for Article 3 standing, no matter how foreseeable the future litigation. [00:46:21] Speaker 00: This litigation in the future is not even foreseeable because we have all [00:46:24] Speaker 00: these contingencies that would have to materialize. [00:46:27] Speaker 00: First of all, the Iowa Supreme Court would have to affirm the injunction. [00:46:31] Speaker 00: We've challenged that injunction and said it cannot apply retrospectively to take away things that have been assigned pursuant to a federal tariff to us. [00:46:41] Speaker 00: Sure, it can apply prospectively [00:46:43] Speaker 00: to future projects that MISO might assign, but both as a matter of Iowa law and federal preemption law, it cannot be assigned, it cannot be- Yeah, we understand the whole Stoke issue is still being litigated. [00:46:57] Speaker 04: I would like you to answer my hypothetical. [00:47:01] Speaker 04: If ITC incurs costs for studies, electrical studies, [00:47:14] Speaker 04: and those costs are being incurred today in anticipation of this project. [00:47:23] Speaker 04: When ITC files its 205 proceeding, regardless of whether the project goes forward or it is abandoned because of unforeseeable events, [00:47:46] Speaker 04: Is it your understanding that that cost can be included in the rate base? [00:47:53] Speaker 04: And if so, can the petitioners challenge the prudence of it? [00:48:04] Speaker 04: And can that challenge extend to the no nexus circumstance? [00:48:14] Speaker 04: Three parts. [00:48:16] Speaker 00: Understood, Your Honor. [00:48:17] Speaker 00: So yes, if the engineering costs were prudently incurred, they could be included in the rate base if FERC ruled for us at that second stage 205 proceeding. [00:48:31] Speaker 00: Second part of your question, as part of that 205 proceeding, FERC has made very clear here in paragraphs 36 through 41 of their rehearing order, which is a 246 to 248 in the JA, that the customers can challenge whether those costs were prudently incurred. [00:48:51] Speaker 00: And in fact, they can make their same broad scale challenge that they're making in this court [00:48:57] Speaker 00: that they are categorically not prudently incurred because we incurred them when there was this legal risk with respect to the Iowa litigation. [00:49:05] Speaker 00: So they can absolutely make that argument before FERC. [00:49:09] Speaker 00: FERC also reserved the question and said that petitioners could challenge at the 205 proceeding whether any abandonment [00:49:18] Speaker 00: was as a result of a cause outside of the control of ITC. [00:49:22] Speaker 00: And recall, that's another argument that they've made to this court, that somehow this litigation was within our control, and so we shouldn't be allowed to get the incentive. [00:49:31] Speaker 00: Third part of your question, Judge Rogers, the Nexus, it's our position that the Nexus test, which is the test for granting the incentive in the first instance, cannot be relitigated at stage two. [00:49:44] Speaker 00: Those prudence and abandonment issues which have a lot of factual overlap with the nexus test. [00:49:49] Speaker 00: Yes, those can be relegated, but that just gets back to what I was saying at the outset of my remarks that the preclusive effect of an earlier order. [00:49:57] Speaker 00: on some later agency proceeding is not enough for standing, particularly when that agency proceeding may never happen. [00:50:04] Speaker 00: We've got to have the Iowa Supreme Court rule a certain way. [00:50:07] Speaker 00: We've got to have MISO say, oh, all right, we'll rebid the project, even though we think federal law compels us to give this project ITC. [00:50:15] Speaker 00: We then have to [00:50:16] Speaker 00: you know pursue the 205 cost recovery proceeding and then we'd have to prevail in the proceeding and that would have to increase rates. [00:50:24] Speaker 00: So I think there's a lot of contingencies that are outside of the control of any of the parties here and that are analogous to those that were at issue in this court's cases. [00:50:36] Speaker 00: Now I think that sort of brings us back to San Diego which is the only case really cited by the commission and [00:50:43] Speaker 00: the customers that's relevant to the abandonment incentive. [00:50:47] Speaker 00: And I think there Judge Pan put her finger on the question, which is the denial of the incentive to the petitioner has an immediate, to a utility has an immediate effect on their ability to access capital. [00:51:00] Speaker 00: And that was proven up in that case. [00:51:02] Speaker 00: There's nothing like that here. [00:51:04] Speaker 00: The only dollars and cents costs comes if the incentive is granted and it gets incorporated [00:51:11] Speaker 00: into the rate base. [00:51:12] Speaker 00: So it's really just apples and oranges there. [00:51:18] Speaker 00: I did want to make sure I addressed, I think the court understands the retrospective scope of the injunction issue. [00:51:26] Speaker 00: I did want to mention one development that's happened since the briefs were filed here, apart from the appeal to the Iowa Supreme Court, which will go on, who knows, months or years, and I think shows why FERC needs to act and give parties [00:51:40] Speaker 00: certainty when they can. [00:51:42] Speaker 00: But another thing that's happened is that MISO has looked at the Iowa litigation and recall that the Iowa injunction itself, which is attached to one of the briefs, says that if this project is assigned for reasons independent of the [00:52:01] Speaker 00: the right of first refusal that the injunction doesn't even cover that. [00:52:05] Speaker 00: It doesn't prevent ITC from moving forward. [00:52:07] Speaker 00: MISO has looked at that injunction and has looked at its own tariff, which is binding as a matter of federal law, and says we continue to assign this project to ITC. [00:52:18] Speaker 00: ITC has the right and the obligation to construct this project, notwithstanding the result of the Iowa right of first refusal litigation. [00:52:26] Speaker 00: So I think [00:52:27] Speaker 00: A lot of the uncertainty that's tried to cast on this is unfounded, and I think it just shows how attenuated the chain of contingencies is. [00:52:36] Speaker 05: When did that happen? [00:52:38] Speaker 00: That was in August of this year. [00:52:40] Speaker 05: Okay, so my question to you was the status of the project. [00:52:44] Speaker 05: What is the status of the project? [00:52:46] Speaker 05: Can it now, the part of it anyway that's subject to the abandonment incentive, can it now go forward? [00:52:53] Speaker 00: That is ITC's position, Your Honor. [00:52:55] Speaker 00: Yes, we've been moving forward, consistent with our understanding of the injunction and the MISO variance analysis. [00:53:04] Speaker 05: Am I correct that part of this project has been awarded without regard to the abandonment incentive? [00:53:16] Speaker 00: Yes. [00:53:17] Speaker 00: Well, I want to make sure I understand the question. [00:53:21] Speaker 00: Tell me if I'm going down the wrong track. [00:53:23] Speaker 00: There were four projects that were assigned to ITC in Iowa pursuant to the right of first refusal. [00:53:31] Speaker 00: ITC only sought the abandonment incentive as to this one because it made an analysis that the risks here were higher. [00:53:38] Speaker 00: Not to do with the ropher, because the ropher applied to all four projects, but it looked at the regulatory, environmental, and permitting risks of this project and decided one out of the four, we're going to seek the abandonment incentive. [00:53:49] Speaker 05: But the other three are going forward, or what's the status of the other three? [00:53:54] Speaker 00: I believe they're similarly situated in terms of going forward, you know, under our understanding of the injunction and the misovariance analysis. [00:54:07] Speaker 06: So what you just said seems highly significant, though. [00:54:10] Speaker 06: You're saying that there's an adequate and independent ground for ITC to have these projects aside from the rofer, the right of first refusal, meaning all of these issues really don't affect ITC's ability to run this project. [00:54:27] Speaker 00: That's our position. [00:54:28] Speaker 00: So what I'm saying is significant and not significant at the same time, if I can explain that. [00:54:32] Speaker 07: It was disputed. [00:54:32] Speaker 00: Well, it's certainly disputed as a legal matter. [00:54:35] Speaker 00: But also, this court's reviewing the FERC order at the time it was issued. [00:54:40] Speaker 00: So it has to deal with FERC issuing this order at the time that it issued it, which was when a temporary prospective injunction was in place, but not anything that was arguably retrospective that affected this project. [00:54:53] Speaker 06: I guess you could all settle this. [00:54:57] Speaker 00: Well, if the other side agreed, we could go ahead and construct this project. [00:55:00] Speaker 00: Yes, in ITC, I mean, just for the record, we want to construct this project. [00:55:05] Speaker 00: We have no belief that we will abandon it. [00:55:07] Speaker 00: We want to move forward with it. [00:55:09] Speaker 00: We're just seeking the incentive that Congress and the Commission has put forward for things that have significant regulatory risk. [00:55:17] Speaker 06: So I do have a question about that, because this project is one piece of sort of a multi-state giant project. [00:55:26] Speaker 06: And if, for some reason, ITC were found to be not the proper person to do it, what would happen to all the work that you've done on the project so far? [00:55:35] Speaker 06: Would that get transferred to whoever the new, I guess, project developer would be? [00:55:41] Speaker 00: Yeah. [00:55:41] Speaker 00: So if I could answer a predicate question to that, which is, I think, [00:55:46] Speaker 00: We could have a very interesting situation if the Iowa Supreme Court says this thing is retroactive and applies to this project. [00:55:57] Speaker 00: That in and of itself doesn't reassign the project away from ITC. [00:56:01] Speaker 00: To do that, you would have to have MISO double back on what its understanding of its own tariff is. [00:56:07] Speaker 00: and decide to competitively bid it, and you'd have to have a competitor win that bid, which is yet another chain in the contingencies. [00:56:15] Speaker 00: But yes, I think to go back to your question, I think that that is correct. [00:56:24] Speaker 00: that we would be able to, to a certain extent, hand over the land, whatever building has been done. [00:56:32] Speaker 00: Now, that would be a negotiated transaction, obviously. [00:56:35] Speaker 00: But it wouldn't all go to waste. [00:56:36] Speaker 00: Another company wouldn't come along and have to redo everything. [00:56:40] Speaker 06: So they would pay you. [00:56:41] Speaker 06: And so the abandonment costs would be lessened by whatever. [00:56:45] Speaker 00: Yes, correct. [00:56:47] Speaker 06: Thank you. [00:56:55] Speaker 05: Why don't you take two minutes? [00:56:57] Speaker 02: Thank you. [00:56:58] Speaker 02: Thank you, Your Honors. [00:56:58] Speaker 02: I have a few points I'd like to hit here. [00:57:00] Speaker 02: First, with respect to the update in Iowa, October 22nd, 2024, the competitive developers filed a motion to enforce the permanent injunction. [00:57:12] Speaker 02: So this is very much in dispute in litigation, and ITC submitted a response recently on November 4th. [00:57:19] Speaker 02: And with respect to the MISO tariff, it's worth highlighting. [00:57:23] Speaker 02: MISO is not an expert. [00:57:25] Speaker 02: in Iowa law and its federal tariff merely references the applicability of state law. [00:57:31] Speaker 02: So this isn't some profound federal authority that it's relying on. [00:57:35] Speaker 02: It's being disputed in Iowa at this stage of the litigation where the utilities have elevated federal preemption rights. [00:57:43] Speaker 02: I wanted to touch on, uh, uh, intervener council, uh, mentioned the Kansas corporation commission, uh, decision. [00:57:51] Speaker 02: are standing. [00:57:52] Speaker 02: We don't have all these contingencies and speculation upon speculation. [00:57:57] Speaker 02: We're not arguing standing with respect to what happens in Iowa. [00:58:01] Speaker 02: It's the incentive itself. [00:58:03] Speaker 02: And in the San Diego case, this court mentioned that it's the abandonment may never occur, but there's a concrete dispute over the scope of the current beneficial assurance. [00:58:13] Speaker 02: And I know it was with respect to the utility, but we respectfully submitted conversely should apply to consumers. [00:58:19] Speaker 02: And with the Kansas Corporation case, [00:58:21] Speaker 02: It's important because there were contingencies there about a parent company submitting a bid, about the grid operator. [00:58:27] Speaker 02: This was SPP, the Southwest Power Pool, awarding that bid. [00:58:31] Speaker 02: And then the subsidiary may be choosing to use formula rates. [00:58:34] Speaker 02: And then the Corporation Commission filing a complaint. [00:58:37] Speaker 02: So there were several contingencies that aren't at play here. [00:58:40] Speaker 02: Here, the utility loses the project, files for abandonment and cost recovery under Section 205. [00:58:46] Speaker 02: It's also worth mentioning to distinguish the Kansas Corporation Commission case [00:58:51] Speaker 02: that on oral argument before this court, the Kansas Corporation Commission's attorney conceded, well, it may turn out there is no issue. [00:58:58] Speaker 02: We have no problem. [00:58:59] Speaker 02: The formula rates could be turned out to be just and reasonable. [00:59:03] Speaker 02: Here, that's not the case. [00:59:04] Speaker 02: We have a problem no matter how whatever happens in Iowa and however the abandonment cost recovery is sought. [00:59:11] Speaker 02: So that remains an issue. [00:59:14] Speaker 02: The last point to make, if I may and then I will close, [00:59:20] Speaker 02: with respect to prejudging the prudence. [00:59:23] Speaker 02: I just want to make sure this point is understood by the court and what we meant. [00:59:29] Speaker 02: So the purpose of the issuance of a transmission incentive is to encourage transmission of project development. [00:59:37] Speaker 02: And that is exactly what FERC did, knowing that the utility here was tied up in litigation. [00:59:43] Speaker 02: It's saying, proceed with doing what you can to develop the project. [00:59:47] Speaker 02: And so that is why consumers are going to be locked in in a very difficult situation because probably any other utility in the shoes of ITC Midwest would reasonably and deliberately attempt to litigate and fully claim those ownership rights because they've been encouraged by the regulator to proceed with project development. [01:00:07] Speaker 02: And if your honors have no further questions, we would respectfully ask that the orders, the final orders be reversed and vacated. [01:00:15] Speaker 05: Thank you.