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Case number 23-1236, Kimball wins LLC petitioner versus Federal Energy Regulatory Commission.

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Mr. Coyle for the petitioner, Ms.

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Chu for the respondents, Mr. Ross for the interveners.

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All right, Mr. Coyle, good morning.

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Good morning, Your Honor.

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I hope the podium's the right height.

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Can you hear me all right?

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Yes.

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Great, thank you.

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Good morning, Your Honor.

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May I please the court?

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My name is John Coyle of the firm Duncan and Allen, LLP, for Petitioner Kim Bawin.

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This case ultimately turns on a question of statutory construction and the correct meaning of Section 211A of the Federal Power Act.

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The Commission correctly held

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that the statute does not specify who may seek relief or who may obtain relief under section 211A.

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The statute simply says that the commission may order an unregulated transmitting utility.

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There is no dispute that the Western Area Power Administration is an unregulated transmitting utility.

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To provide transmission services, and I'm summarizing on rates, terms, and conditions comparable to those,

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on which the unregulated transmitting utility provides service to itself.

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There is no clearer example that I could imagine of disparate treatment than the one presented in this case, where the Western Area Power Administration funded one third of a

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network upgrade, a sectionalizing substation.

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I'll be happy to explain in as un-technical terms as I can what that means, but there isn't really a dispute that it's a network upgrade.

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You say no dispute that it's a network upgrade, but the statute refers to transmission services and how those need to be comparable with respect to the costs.

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That's correct, Your Honor.

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And so that's what my question would be, that you're speaking of recouping

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your outlay of costs with respect to a network upgrade, but the statute refers to transmission services.

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That's correct, Your Honor, and at rates that are comparable to those that the unregulated transmitting utility charges itself.

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In this case, there's no clearer example of disparate treatment.

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WAPA paid one-third of the cost to the substation

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No, but what I'm asking is that you're contending that upgrades flows into the definition of a transmission service?

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Well, there's an intervening step, Your Honor, which is cost recovery under rates and the treatment of those investments.

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And in this case, the investments in the facility were treated disparately.

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Western recovers its investment through its rates

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while Kimball Wind was directly assigned two-thirds of the cost, $5.93 million, and does not recover those costs through rates or any other arrangement.

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That is about as incomparable an illustration of transmission service being provided not to Kimball Wind, I'll concede, and that may be part of your honor's question, but to the purchasers of Kimball Wind's output.

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If your question is, where's the nexus to transmission services, then the, sorry to be slow on the uptake.

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Then the issue is, okay, the requirement that Kimball Wind absorb two thirds of the costs of the network upgrade was imposed by Western as a condition of providing transmission service to its customers.

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The municipal electric,

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Municipal Energy Association of Nebraska, or MEAN, and its member utilities were municipal utilities in the state of Nebraska.

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In plain English, in order to move the output of Kimbell Wind's generating facility over Western's transmission system, Western imposed this condition.

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The commission argues, well,

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But you're not eligible, Kim, for relief because you're not a transmission customer or an interconnection customer.

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And that's true.

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We never contended that we were.

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However, the statute, Section 211A of the Federal Power Act, is not so limited.

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In contrast to other provisions of the Federal Power Act, as the Commission correctly held, Section 211A does not specify who can seek relief or who can obtain relief.

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What Section 211A operates on is transmission services and transmission rates.

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And would you not consider what you were doing a construction service?

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A construction service.

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Construction service.

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No, I wouldn't.

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No, I wouldn't.

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I wouldn't because the only reason to do it was in order to enable the output of Kimberwind's generating facility to be delivered to its customers.

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But there are transmission service agreements, and you didn't enter into a transmission service agreement.

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That is correct, Your Honor.

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There is no dispute here that Kimball Wind is not itself a transmission customer of the Western Area Power Administration, nor is it an interconnection customer of Western.

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However, Kimball Wind's customers are transmission customers of Western and Kimball Wind

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was hit with two-thirds of the costs of this facility that benefits all transmission customers on Western's system.

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As part of its customers, who are also Western's customers, efforts to obtain network transmission service through which the output of Kimbell Wynn's facilities would be delivered to those customers.

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So we ultimately need to make a finding essentially that you would stand in the shoes of Western with respect to that transmission service.

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Not that we'd stand in the shoes of Western.

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Or have some type of affinity or agency.

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Well, I think what you mean to say, if I could, I don't mean to put words in your mouth.

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No, this is technical language, so help me out.

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It's not exactly that we stand in the shoes.

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It is that we have a sufficient relationship

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to Western's provision of transmission services at rates and terms and conditions.

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I meant the shoes of mean.

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Sorry?

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I meant the shoes of mean.

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But use your technical language.

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It's fine, Your Honor.

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We don't exactly stand in the shoes of mean, although we are aligned with mean because we serve mean.

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We can't serve mean without mean obtaining the transmission service they need to take delivery.

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Western's provision of that transmission service was conditioned on Kimball Wind funding two-thirds of the cost of a substation that benefits all users of the Western transmission system.

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I think that's about as plain as I can put it.

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What do you say about FERC's characterization of Kimball Wind as an off

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system network resource for mean?

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You know, honestly, Your Honor, I'm not sure what they mean by that.

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I think what I would suggest is the Commission throughout the case has drawn the distinction, and I'll outline it for you, that Kimball Wind is not directly interconnected to the Western transmission system.

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And that is also true, and it is undisputed.

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Kimbell Wind is directly interconnected with the 115, 115 kilovolt transmission system.

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Sorry, I try not to speak in acronyms here.

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Kimball Wind is directly interconnected to the 115 kilovolt transmission system of the city of Kimball, Nebraska and Kimball, Nebraska is interconnected with the 115 kV Archer Sydney line that is owned by Western.

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So yes, there's an intervening utility and we're not directly interconnected.

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I don't think that matters in the context of Section 211A.

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Section 211A does not say relief is only available to customers

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who seek interconnection service.

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It says the Commission may order an unregulated transmitting utility to provide transmission services under terms and conditions or at rates that are comparable to the rates that it charges itself.

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But it doesn't say to whom it is to provide for admission.

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That's correct.

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That's correct, Your Honor.

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And I think that the statutory phraseology, if I could, is one of the important textual clues that the commission neglected to consider in its construction of the statute.

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What the statute focuses on, first of all, I mean, we have three textual clues here that the court should pay attention to when construing 211A.

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One is the commission's own recognition.

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in its May 4th order, that the statute doesn't specify who may seek relief or who may obtain relief under Section 211A.

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So the statutory text doesn't limit relief, number one.

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Number two, the statute's use of the word comparable as a test of what the commission may order to happen had a well-understood meaning by 2005 when Section 211 was enacted.

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And this court in the Alabama Municipal Electric Authority case that we cite in our reply brief, in particular 662 Fed 3rd at page 574, speaks at some length about what comparability means.

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It was a change in the

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Commission's policy about what is undue discrimination, which is prohibited, as the Court is aware, under other provisions of the Federal Power Act.

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The Commission changed its focus on undue discrimination to say it is not so important that an actor, a utility, discriminate among classes of customers.

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So the focus on comparability goes from being horizontal, if you will, discrimination among different classes of customers to being vertical.

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Does the utility treat people the same way that it treats itself?

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Does it treat those who use its system the same way that it treats itself?

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And in this case, that is clearly not the case.

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You cannot imagine more disparate treatment.

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I'll recover my investment.

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You don't recover yours.

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And by the way, you're going to eat 2 thirds of the facility.

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Finally,

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Under Section 211, the focus is not on actors.

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It's on action.

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It's on transmission services.

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So the attempt to say, well, the statute is limited, or it's limited in this case, to the provision of relief to transmission customers or interconnection customers has no basis in the statute.

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The commission is engrafting that requirement, which we submit is contrary to the plain language of the statute.

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In order to justify, and this is my second point, in order to justify what it's done, the commission then dances the flamenco on generations of precedent that say you can't directly assign the cost of network upgrades, which is why, Judge Childs, I use the expression network upgrades.

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Network upgrades benefit every user of the system.

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There is a clear line of commission precedent cited in our brief.

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whole that sectionalizing ring buses because they improve the reliability and availability of a critical transmission line or network upgrades.

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Again, that isn't in dispute as far as I'm aware and the policy.

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But your ultimate relief you're seeking is the refund of your construction costs.

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Yes, Your Honor.

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Okay, so here

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The statute is indicating that the unregulated transmitting utility can't offer itself rates that are less than comparable to another.

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Yes.

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So how does refund fit into this statute?

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Right.

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So there are a couple of different ways to effect

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treatment of Kimbell Wynn's capital expenditures that do not discriminate against Kimbell Wynn.

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One is Western includes its investment in rate base and through its transmission rates receives a recovery of and on its investment.

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They could treat Kimbell Wynn's investment the same way

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and pay off Kimmel Wind's investment over time through transmission rate credits, which would be provided to MEAN or its members.

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And there would then be a third party agreement, which would flow those payments back to Kimmel Wind.

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Well, you could have entered into such an agreement, but you didn't.

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The question is, what possible instruction of the statute would authorize the commission to order everybody to enter into this agreement?

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It's well beyond the terms of an order to adjust rights or terms of service.

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With respect, Your Honor, I would disagree.

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As we pointed out at some length in our pleadings, the commission does this all the time in connection with generator interconnection.

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Well, not under this statute.

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It's dealing with an unregulated facility.

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Correct.

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It's got basically a limited waiver of sovereign immunity, which this is what this is, to order them to do things.

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Go ahead, finish how you can finally.

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It's true.

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Everything that you've said applies fine outside of this statute.

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Yep.

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And how you've described Burke's practice is accurate, I believe, too.

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It's just that you have a problem.

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You're operating under a very limited grant of authority and discretionary authority, am I right?

[00:14:45] Speaker 03:
Let me take the second point first, Your Honor.

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I've got about 30 seconds left.

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This case does not involve an exercise of commission discretion.

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follows the commission's interpretation of the statute, if that interpretation is incorrect, and it is for the reasons we've shown,

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then the commission's order is arbitrary and capricious.

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So discretion is reviewable in this case.

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And in this case, the erroneous construction of a statute makes the ruling arbitrary and capricious.

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To get back to whether Section 211A authorizes the commission to direct comparable treatment of Kimball Wynn's investment in this facility, it does.

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Clearly, it does.

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Under both rates and terms and conditions of service,

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All the commission would have to do is to say, which it has done in other contexts under Section 211, direct the Western Area Power Administration to enter into an arrangement.

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They don't have to specify the arrangement.

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Enter into an arrangement with Kimball Wind.

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And if necessary, with me, that does not treat Kimball Wind's investment in this facility on a disparate basis compared to what

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It could even be a lump sum, the way you described it.

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You could pay them $5 million.

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It could, but, excuse me, but the commission doesn't... Reimbursement or refunds from a statute that is all about very limited relief.

[00:16:17] Speaker 03:
Well, it's about rates being comparable, Your Honor, and the rates that are involved in this case and the terms and conditions of service in this case are not comparable.

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Initially, there was some discussion, at least so meeting notes revealed,

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doing a third party agreement with respect to the 2.2 million, I guess, between 2.9, but never with respect to this portion.

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Your honor, I don't.

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Why is that?

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Why do you object to such a?

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Your honor, I don't believe that that point was clarified.

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And the chronology is a little murky about when Western said,

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Our commitment to provide transmission rate credits is limited to money that we were prepared to spend to upgrade Kimball Tap, which is what the Kimball substation used to be.

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That, I believe, did not arise initially.

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And it was Kimball Wynn's understanding, at least, that it would be receiving transmission rate credits through its customer mean.

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What's the record show about that?

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Where is that?

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Pardon me, you're on.

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It's it is.

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Yeah, I think I think that's that's correct.

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That is the correct reference.

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That's it.

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Well, that's the one in which it's other say network credits will be applied against means transmission bill and mean will then pass the credits in times of Kimberl wins a three party agreement will be established.

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What didn't happen?

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And it was only with respect initially to the notes revealed to, it's not clear on that, yes, the estimated cost of 2.2 million.

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In any event, why didn't you do it?

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You didn't do it, that's the problem.

[00:18:07] Speaker 03:
Well, Your Honor, it is- Somebody pulled out, right?

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Your Honor, it is inevitably the case

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that a party seeking transmission service or seeking in this case to be designated as a network resource has a choice either to honor its contract with purchaser if it's off take or not.

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In this case, the transmission service was necessary in order for Kimball Wind to deliver its output to the customers under its power sales agreement.

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Now, and since it wasn't interconnecting directly, it should have sought some arrangements to secure its

[00:18:43] Speaker 03:
Well, Your Honor, it tried.

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And I think the record honestly reflects that they thought they had or that that would be an item for discussion later.

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But in fact, you're right.

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Kimball Wind was not offered a choice.

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They were told, if you don't pony up the money, Western says, we're not going to provide transmission service.

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The contract, the power sales agreement between Kimball Wind and Mean

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had a rather strict deadline in it as to when delivery was supposed to start that did not admit of Kimbell Wind going off and trying to build its own transmission network or find some other means of delivering the power.

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There was no other option for it.

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The same situation arises, for example, in Western Mass Electric, in this court's case, Western Mass Electric, 165 Fed 3rd, where there was a contract in place.

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under which an interconnecting generator had agreed to fund network upgrade costs.

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So we don't care what contract you signed.

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The fact of the matter is this isn't comparable service.

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It's therefore not permissible.

[00:19:51] Speaker 03:
In that case, under Section 205 of the Federal Power Act, in this case, we argue the same principle would apply under Section 211A because the statute says the commission may direct an unregulated public utility to provide transmission services on a basis comparable to those that the unregulated transmitting utility provides itself.

[00:20:14] Speaker 03:
It's not that complicated.

[00:20:18] Speaker 03:
And I'm way over time.

[00:20:20] Speaker 06:
We'll give you a couple of minutes and we'll talk.

[00:20:23] Speaker 06:
Thank you.

[00:20:27] Speaker ?:
Mr. Chu.

[00:20:32] Speaker 01:
Good morning.

[00:20:33] Speaker 01:
May it please the court, Susanna Chu for the Federal Energy Regulatory Commission.

[00:20:38] Speaker 01:
If I may, let me try to follow up on some of the factual questions that Judge Schoenberg, I believe, was asking.

[00:20:44] Speaker 01:
Relating to these approximately 2.2 to 2.9 million dollars,

[00:20:51] Speaker 01:
In that work upgrades that WAPA reimbursed to itself.

[00:20:58] Speaker 01:
At JA 183, you will see that the facilities agreement from 2017 specifies that $2.2 million, that was the current estimate at that time,

[00:21:11] Speaker 01:
qualify as network upgrades and are eligible for network credit.

[00:21:15] Speaker 01:
Then further down on that page, it provides a cost estimate as to the rest of the upgrade costs.

[00:21:22] Speaker 01:
And it makes clear that these are not the remainder of those costs, the costs that ultimately were footed by Kimball Wind were not considered

[00:21:30] Speaker 01:
Network upgrades that you know, these are a different category of costs.

[00:21:35] Speaker 01:
So despite knowing this Kimball wind in 2018 entered into a construction contract under which it agreed to pay for those upgrade costs.

[00:21:45] Speaker 01:
So it went into the contract discussion and signed a contract fully aware of how these costs would be allocated.

[00:21:55] Speaker 01:
Judge Childs, you were asking about how refunds fit into the statute, and the short answer is that they don't.

[00:22:02] Speaker 01:
Under 211A, as you were discussing earlier, the question is whether there is a unregulated transmitting utility that is providing transmission service on terms that are not comparable to the services it's providing to itself.

[00:22:20] Speaker 01:
So there's a real disconnect here between what Kimball Wind is asking for

[00:22:25] Speaker 01:
and what the commission has authority to order under section 211A.

[00:22:30] Speaker 01:
As the commission recognized in the complaint order at paragraph 47, JA 378, there is no provision of the Federal Power Act that grants the commission the authority to order refunds by governmental entities like WAPA that are exempt from the commission's jurisdiction under section 201F.

[00:22:47] Speaker 01:
That's the general exemption provision.

[00:22:49] Speaker 01:
It's 16 USC section 824F.

[00:22:56] Speaker 01:
So the commission here is acting as a creature of statute, and it's applying the provisions of Section 211A to this contractual situation.

[00:23:06] Speaker 01:
And it found that there are simply, there is no transmission service agreement, no interconnection agreement that it has the authority to reach.

[00:23:17] Speaker 01:
My friend Mr. Coyle referred to the Western Massachusetts precedent.

[00:23:21] Speaker 01:
That's a commission order in which the commission did order a jurisdictional transmission provider to provide credits for network upgrades.

[00:23:32] Speaker 01:
But a couple things here.

[00:23:33] Speaker 01:
First of all,

[00:23:34] Speaker 01:
That was a generation plant that was directly connecting to a transmission provider.

[00:23:40] Speaker 01:
Those parties were jurisdictional.

[00:23:42] Speaker 01:
There was a generator interconnection agreement that was within the jurisdiction of the commission to regulate.

[00:23:49] Speaker 01:
And moreover, in that case, the commission actually was assessing witness testimony about whether the enhancements actually benefited the entire system.

[00:23:59] Speaker 01:
rather than being enhancements that were solely for the purpose of interconnecting that particular generator.

[00:24:05] Speaker 05:
You do indicate that the statute does not specifically speak to who can obtain relief.

[00:24:13] Speaker 05:
And so therefore we allow Kimba Wynn to petition and also because they do have an order that affects them.

[00:24:21] Speaker 05:
So that's why they're here.

[00:24:22] Speaker 05:
But then you separate that from that they can't get relief under this statute.

[00:24:28] Speaker 05:
So what are the circumstances that Kimba Wynn would be under the statute?

[00:24:35] Speaker 05:
So that's the who that's right, your honor.

[00:24:38] Speaker 01:
Um, so of course, yes, the commission said that it was fine for Kimball when to come before and ask for relief, but it was not actually entitled to relief under 211 a and I think that goes to the commission's findings that there's no transmission service agreement and Kimball wind or interconnection agreement and Kimball wind isn't even asking for one of those agreements from WAPA.

[00:25:03] Speaker 01:
So there's a real

[00:25:04] Speaker 01:
contractual disconnection there.

[00:25:06] Speaker 01:
But moreover, the commission also found that Kimball Wind and WAPA are not similarly situated for purposes of this statutory provision.

[00:25:15] Speaker 01:
As Mr. Coyle was explaining, the concern under Section 211A is that the transmitting utility needs to be treating the interconnection customer, the transmission customer,

[00:25:30] Speaker 01:
You know, on comparable terms that it's treating itself.

[00:25:33] Speaker 01:
But here, the Commission explained in the rehearing order and in the complaint order that they're not similarly situated.

[00:25:42] Speaker 01:
This is at a rehearing order, paragraph 18, JA 390.

[00:25:48] Speaker 01:
The Commission said that the amount that WAPA paid for its upgrades were incurred in its capacity as a transmission provider.

[00:25:56] Speaker 01:
And these were part of previously planned reliability upgrades.

[00:25:59] Speaker 01:
WAPA was already going to do something at that substation to increase the reliability on its grid.

[00:26:05] Speaker 01:
And then the costs assigned to Kimball Wind, said the commission, were due to the designation of the off-system Kimball facility as a network resource for MEAN.

[00:26:14] Speaker 01:
So they're not in the same shoes, Kimball Wind and WAPA.

[00:26:20] Speaker 01:
WAPA is acting as a transmission provider.

[00:26:22] Speaker 01:
Kimball Wind is...

[00:26:24] Speaker 01:
not even a generator in this situation.

[00:26:26] Speaker 01:
It's an off-system resource.

[00:26:29] Speaker 04:
It's a peculiar term.

[00:26:33] Speaker 04:
I mean, that is generating power.

[00:26:38] Speaker 01:
Yes, Your Honor.

[00:26:39] Speaker 01:
And I understand.

[00:26:41] Speaker 01:
It's a bit of a complicated circumstance in terms of the actual connections.

[00:26:48] Speaker 01:
Generator, regenerate.

[00:26:49] Speaker 04:
Does that make a difference here?

[00:26:51] Speaker 01:
No, I don't think it would make a difference.

[00:26:53] Speaker 01:
I mean, it is a generator.

[00:26:55] Speaker 01:
It's just that it is not directly interconnected to WAPA.

[00:26:59] Speaker 01:
It's interconnected to a transmission line owned by a party that's not before the court, the city of Kimball.

[00:27:05] Speaker 01:
And it's the city of Kimball's transmission lines that are connected to WAPA.

[00:27:11] Speaker 04:
I think, and I don't, sorry.

[00:27:13] Speaker 04:
Instead of a third party agreement, well, pardon me, instead of credits going back from

[00:27:21] Speaker 04:
Western to first to the city and then to Kimball.

[00:27:32] Speaker 04:
Would Kimball have entered into an agreement to sell power to the city at a price that would have reimbursed it for this and then the city then selling the power to Kimball?

[00:27:46] Speaker 04:
to Western.

[00:27:48] Speaker 01:
Well, I'm not sure, Your Honor, because the city, I believe, is just a transmitting.

[00:27:52] Speaker 01:
Well, I'm not sure if the city wanted to purchase power, but the arrangement, I think what, sorry?

[00:27:58] Speaker 04:
Probably should not.

[00:27:59] Speaker 04:
I mean, that's a complication for them.

[00:28:01] Speaker 04:
But it does seem to me that with a little bit of foresight, this could have been worked out for Kimber.

[00:28:08] Speaker 01:
Well, Your Honor, actually, I think

[00:28:11] Speaker 01:
The the answer is here that Kimball has a long term power purchase agreement with being the municipal agency and mean is the actual transmission customer right mean actually contracts with generators and it contracts with WAPA and other transmitting utilities to bring power to its own.

[00:28:31] Speaker 01:
customers.

[00:28:32] Speaker 01:
So what happened here is there's a 20-year power purchase agreement between Kimball Wind and Mean, which is in the record.

[00:28:39] Speaker 01:
And that shows that Kimball Wind is receiving 20 years of compensation for all the output of its 30 megawatts of wind generation.

[00:28:47] Speaker 01:
So Mean, of course, is not here before the court.

[00:28:51] Speaker 01:
But it would seem to me that those contractual arrangements, those are the compensation that Kimball is receiving.

[00:28:59] Speaker 01:
and the amount that it has to pay for upgrades necessary to bring its power to its customer mean are basically the cost of doing business.

[00:29:07] Speaker 01:
I mean, this is all outside the record.

[00:29:10] Speaker 04:
I'm sorry.

[00:29:10] Speaker 04:
Apparently you found that acceptable, right?

[00:29:13] Speaker 01:
Yes, apparently they did.

[00:29:14] Speaker 04:
This is a facility study done by Western.

[00:29:22] Speaker 01:
Yes, Western, yes.

[00:29:24] Speaker 04:
So if the requester, the requester is Kimball, right?

[00:29:27] Speaker 01:
The requester was mean in this facility says because the mean was requesting the study.

[00:29:32] Speaker 01:
But after the study means it's a construct if they could use it.

[00:29:35] Speaker 04:
So ultimately they engaged able to construct is that that's right.

[00:29:40] Speaker 01:
My understanding is from the Kimball complaint after the facility study mean informed WAPA that any contractual arrangements would need to be negotiated with directly with Kimball and so being stepped back.

[00:29:54] Speaker 01:
And MEAN has not been, it's not before this court.

[00:29:58] Speaker 01:
It didn't participate actively in the agency proceeding either.

[00:30:01] Speaker 01:
So you're right, Your Honor.

[00:30:05] Speaker 01:
So JA 183, that's the notice from 2017 about all of the costs and how they would be allocated.

[00:30:12] Speaker 01:
And at JA 215, that's the contractual provision providing for the compensation.

[00:30:19] Speaker 01:
It specifically says that Kimball went upon execution

[00:30:24] Speaker 01:
of this contract will advance to WAPA the sum of $4.28 million.

[00:30:30] Speaker 01:
So Kimball went in with eyes wide open and entered into that contractual agreement.

[00:30:37] Speaker 01:
And what's happening now is the contract is what governs that relationship.

[00:30:42] Speaker 01:
And the commission simply doesn't have the authority to go in and rewrite those contracts for Kimball Wind.

[00:30:48] Speaker 01:
There's just no basis for it in the Federal Power Act.

[00:30:52] Speaker 05:
under 211 a. Do you read that to say that only a transmission customer can obtain relief?

[00:31:00] Speaker 01:
I think, uh, under 211 a, your honor, it's.

[00:31:04] Speaker 01:
It would be a transmission customer or someone who's asking for interconnection.

[00:31:09] Speaker 01:
So a customer or someone asking to become a customer.

[00:31:13] Speaker 01:
And you know, these relationships are governed by transmission service agreements or generator interconnection agreements, neither of which are present here.

[00:31:23] Speaker 05:
And in terms of how we would write our opinion, would your suggestion, if we were to rule for you, be that it be narrowly constructed to just say the relief is not there because the statute does not provide for the refund and then that be it, not go into who's a customer, is there a transmission agreement, services agreement,

[00:31:50] Speaker 01:
I think that would work just fine.

[00:31:55] Speaker 01:
You know, I don't know that it's necessary to go into all of that.

[00:31:58] Speaker 01:
I mean, that was one of the bases for the commission's decision.

[00:32:02] Speaker 01:
But I think that is, you know, that's certainly one of the bases for the commission's decision as well, that there's just no, you know, what Kimmel-Wynn is asking for is not covered by 211A.

[00:32:14] Speaker 01:
All right.

[00:32:19] Speaker 06:
Thank you.

[00:32:19] Speaker 06:
Thank you, your honor.

[00:32:21] Speaker 06:
Mr. Ross.

[00:32:42] Speaker 07:
Thank you, Your Honor.

[00:32:43] Speaker 07:
Kacen Ross for the Western Area Power Administration.

[00:32:46] Speaker 07:
I think I'll pick up on a theme that Ms.

[00:32:48] Speaker 07:
Chu concluded with, namely this dispute concerns terms of a contract that was duly agreed to by WAPA and Kimball Wind.

[00:32:58] Speaker 07:
And after Kimball Wind received the benefit of its bargain with WAPA, it's now asked FERC to unwind the terms of that duly agreed to contractual arrangement under Section 211A of the Federal Power Act.

[00:33:10] Speaker 07:
But that provision provides FERC only limited authority to oversee unregulated transmitting utilities like WAPA and provides the commission authority to direct WAPA to provide transmission services on terms that are not discriminatory or preferential.

[00:33:27] Speaker 07:
But as Petitioners' Council admitted this morning, WAPA is neither a transmission provider nor an interconnection provider for Kimball Wind itself, nor did Kimball Wind ask WAPA to provide those services.

[00:33:44] Speaker 07:
So FERC understandably rejected Kimball Wind's petition, concluding that it lacked the statutory authority to provide the kinds of relief that it requested.

[00:33:52] Speaker 07:
As Judge Childs recognized this morning,

[00:33:54] Speaker 07:
Essentially, what Kimball Wind has asked for is a reimbursement for the terms of its contract.

[00:33:59] Speaker 07:
And as Judge Ginsburg recognized, that could have been contemplated by a three-way crediting agreement with the Municipal Energy Agency of Nebraska.

[00:34:07] Speaker 07:
But those are not the kinds of relief that Section 211A contemplates, which is strictly the provision of transmission services.

[00:34:15] Speaker 07:
Neither of those terms, either a refund for a contract that was satisfied and that Kimball Wind has now benefited from, nor a crediting arrangement with another municipal agency that is not before this court and which did not participate in the underlying contracted issue, would be properly contemplated by Section 211A.

[00:34:38] Speaker 07:
As Judge Ginsburg recognized, some foresight might have avoided this entire dispute.

[00:34:44] Speaker 07:
But that foresight would have required the participation of another agency who simply opted not to participate in this arrangement, the Municipal Energy Agency of Nebraska.

[00:34:55] Speaker 07:
Ultimately, Kimball-Winds' dispute may be with them, but that is not the kind of relief that FERC can provide under Section 211A of the Federal Power Act.

[00:35:05] Speaker 06:
Can I ask you, I've got a chart that says Kimball-Winds has an interconnection and wheeling agreement with the City of Kimball.

[00:35:14] Speaker 06:
The city of Kimball then has an interconnection agreement with you all, with Western.

[00:35:21] Speaker 06:
What would it have taken, what type of agreement, if possible, would it have taken for Kimball Wind to be a customer direct or indirect of Western?

[00:35:36] Speaker 07:
I'm not sure, to be completely honest with you.

[00:35:40] Speaker 07:
They're the initial three party crediting crediting agreement that WAPA would have entered into with mean and Kimble wind would have been some semblance of the terms that you're describing, Judge Anderson, but

[00:35:52] Speaker 07:
It's not clear.

[00:35:54] Speaker 07:
And under the terms of that arrangement, so far as I understand, WAPA would have provided network credits to MEAN, and MEAN would have passed through the value of those credits to Kimball-Wind.

[00:36:04] Speaker 07:
Indeed, that's one of the forms of relief that Kimball-Wind has sought from this court, and which the commission reasonably determined it could not provide under Section 211A.

[00:36:14] Speaker 07:
But irrespective of that,

[00:36:17] Speaker 07:
characterization of the relationship between WAPA and Kimball Wind, it's clear that as petitioners council admitted this morning, Kimball Wind is not either type of customer, either an interconnection customer or a transmission service customer of WAPA.

[00:36:34] Speaker 07:
Now mean is, but that does not affect the analysis here as the commission reasonably determined.

[00:36:40] Speaker 06:
FERC called it an off system network resource.

[00:36:47] Speaker 06:
Is that a term of art?

[00:36:51] Speaker 07:
There again, I'm not sure.

[00:36:52] Speaker 07:
I think in FERC's presentation this morning, it suggested that that was simply a characterization of the fact that the Kimbell Wind facility does not directly connect to

[00:37:07] Speaker 07:
to WAPA's transmission network.

[00:37:08] Speaker 07:
As Ms.

[00:37:09] Speaker 07:
Chu explained, there is a portion of line that's owned by the city of Kimball, Nebraska, that's not owned by WAPA, and that line connects to WAPA's transmission network.

[00:37:21] Speaker 07:
And so I think that's why it would have been referred to as an off-network source, but I'm not entirely certain.

[00:37:30] Speaker 05:
And how did you determine the allocation of costs between you all and Kimball when?

[00:37:35] Speaker 07:
I think that was just the nature of the contractual agreement.

[00:37:38] Speaker 07:
The $2.2 million that WAPA agreed to pay was previously ascertained costs to upgrade its network.

[00:37:49] Speaker 07:
And then the initially, I believe,

[00:37:53] Speaker 07:
$4.2 million, which ended up being nearly $6 million that Campbell Wind would pay, were simply upgrades to WAPA's substation in Nebraska to be able to facilitate the provision of power from a larger wind farm.

[00:38:07] Speaker 07:
I believe initially it was a 15 kilovolt wind farm and

[00:38:11] Speaker 07:
Now it's a 30 kilovolt wind farm, but in order to provide twice the amount of electricity, WAPA needed to upgrade its substation to accommodate that larger flow.

[00:38:21] Speaker 07:
So I think that was just agreed to through the course of negotiations.

[00:38:25] Speaker 07:
And as Ms.

[00:38:25] Speaker 07:
Chu explained,

[00:38:27] Speaker 07:
That was a duly agreed to contract between Kimball Wind and WAPA.

[00:38:31] Speaker 07:
There's no argument here, so far as I understand, that there was any kind of malfeasance in the negotiations.

[00:38:38] Speaker 07:
And in fact, so far as I can tell, Kimball Wind is receiving the benefit of that bargain by providing energy to residents of Nebraska and other Western states.

[00:38:50] Speaker 04:
It's actually a fair inference that since they went ahead with the construction,

[00:38:55] Speaker 04:
even though that cost was allocated to them, that they regarded the revenues from the 20-year sale of the wind as sufficient to make it still a profitable investment.

[00:39:07] Speaker 04:
This would be a double recovery.

[00:39:10] Speaker 07:
That's certainly possible, but I think maybe a better question for Kimble Winds Council on rebuttal.

[00:39:18] Speaker 02:
All right.

[00:39:19] Speaker 07:
Thank you, Your Honors.

[00:39:20] Speaker 07:
We urge the court to deny the petition.

[00:39:36] Speaker 03:
Let me start with something that seems to be troubling the court, which is, assuming that you rule in Kimball Wynn's favor and remand the case to the commission, what does the commission do on remand?

[00:39:48] Speaker 03:
The commission has authority on remand under the statute, the plain language of the statute, to direct Western to provide transmission service for the delivery of Kimbell-Wynne's output on the same basis as it does other generation that's on that system.

[00:40:10] Speaker 03:
What that would then require, in our view, is for Western to reevaluate its disparate treatment of Kimbell Wind's contribution to the capital costs for Kimbell substation.

[00:40:23] Speaker 03:
The commission does not have to say refund.

[00:40:25] Speaker 03:
It doesn't have to say network credits, although those are two obvious ways to affect the relief.

[00:40:31] Speaker 03:
But what would happen in the ordinary course is the commission would direct Western to reconsider its treatment of Kimbell Wind.

[00:40:39] Speaker 03:
The idea that there is a contract in place doesn't differentiate, and I mean the Western Construction Contract 2913, does not differentiate this case in any material basis from any of the other cases in which interconnecting generators were compelled to execute interconnection agreements with transmitting utilities, which were subsequently found by the commission to be unjust and unreasonable because they did not provide comparable service.

[00:41:10] Speaker 03:
The direct assignment of network upgrades is flatly prohibited by other provisions of the Federal Power Act.

[00:41:17] Speaker 03:
It's not comparable service, and it can't be comparable service here.

[00:41:21] Speaker 03:
Period.

[00:41:21] Speaker 03:
Full stop.

[00:41:23] Speaker 03:
I wanted to respond briefly to Judge Ginsburg's question about double recovery.

[00:41:28] Speaker 03:
It's not double recovery, Your Honor.

[00:41:30] Speaker 03:
There was no budget anywhere, no indication of a budget anywhere for the $6 million that Kimberlain got stuck with on this deal.

[00:41:40] Speaker 03:
Kimberlain had a choice to do.

[00:41:42] Speaker 03:
was to comply with its contract with me or not.

[00:41:46] Speaker 03:
And what Kimball-Wynn did in this case was to honor the time-honored labor setting, work now, grieve later.

[00:41:55] Speaker 03:
Get the power flowing, get the facility built, figure out the cost allocation later on.

[00:42:00] Speaker 03:
That's why we're here.

[00:42:07] Speaker 03:
The other point I wanted to raise briefly, Ms.

[00:42:11] Speaker 03:
Chu made a couple of references to this being different, that because Kimball, because Western had planned on spending $2.2 million on upgrades, that Western's contribution to the Kimball substation costs is somehow in a different category than Kimball Wynn's contribution to those costs.

[00:42:36] Speaker 03:
And that's just nonsensical when you think about it.

[00:42:40] Speaker 03:
Allocating the cost for the same facility on a different basis, one where Western gets rate recovery and the other where Kimball Wind has to absorb its $6 million share directly, is not in any sense comparable.

[00:42:55] Speaker 03:
And again, this situation is no different.

[00:42:59] Speaker 03:
than the situation that the commission has confronted in connection with other interconnection cases where a transmitting utility argues, well, we would not have to have incurred this cost but for this utility's interconnection.

[00:43:14] Speaker 03:
That's exactly what this is.

[00:43:16] Speaker 03:
It's a but for argument.

[00:43:18] Speaker 03:
We Western would not have had to upgrade Kimball Tap to Kimball substation if Kimball Wind hadn't come along and wanted to put its energy on our transmission system.

[00:43:28] Speaker 03:
That's fine.

[00:43:29] Speaker 03:
But the point, the commission's analytical point in all of the case law that it disregards in this case is that really doesn't matter.

[00:43:37] Speaker 03:
Causation is not important.

[00:43:39] Speaker 03:
What is important is that every user of the system benefits from that sectionalizing substation.

[00:43:46] Speaker 03:
And that is a fact.

[00:43:48] Speaker 03:
That is an ineluctable fact, well-settled, under commission precedent, which everybody seems to want to ignore.

[00:43:55] Speaker 03:
I thank you.

[00:43:56] Speaker 03:
I have nothing further to add.

[00:43:57] Speaker 03:
I appreciate the time.