[00:00:00] Speaker 04:
The case number 23-1041 et al.

[00:00:03] Speaker 04:
Pacific Gas and Electric Company Petitioner versus Federal Energy Regulatory Commission.

[00:00:08] Speaker 04:
Ms.

[00:00:09] Speaker 04:
Goldenberg for the petitioner, Mr. Ediger for the respondent, Mr. Bain for the intervener.

[00:00:13] Speaker 07:
Good morning, Ms.

[00:00:18] Speaker 07:
Goldenberg.

[00:00:19] Speaker 01:
Good morning, Your Honor.

[00:00:20] Speaker 01:
May it please the Court?

[00:00:24] Speaker 01:
The class-based approach that FERC adopted violates the plain text of Section 824KH2, which is incorporated into the tariff.

[00:00:33] Speaker 01:
That approach would vastly expand the grandfathering exception to the ban on mandatory retail wheeling, allowing, as the Commission has previously said, grandfathering covering every consumer in San Francisco.

[00:00:45] Speaker 01:
based on some kind of unspecified resemblance to a consumer that San Francisco served in October 1992.

[00:00:51] Speaker 01:
There is no textual basis for looking to a category or class of ultimate consumers.

[00:00:57] Speaker 01:
The orders here don't supply one.

[00:00:59] Speaker 01:
My opponents have not identified one.

[00:01:00] Speaker 01:
And that's because the statute refers to a discrete, particularized consumer provided service on one particular date.

[00:01:09] Speaker 07:
Before we get into the merits, can you help me understand what injury you currently, your clients currently, are suffering because of the tariff?

[00:01:22] Speaker 07:
There's a tariff that's no longer in existence, meaning that's expired, right?

[00:01:28] Speaker 01:
The particular tariff at issue here, yes.

[00:01:30] Speaker 01:
There is another tariff, successor tariff, that's come into play.

[00:01:34] Speaker 01:
And so the reason that this is very much a live dispute

[00:01:37] Speaker 01:
is that as to that other tariff, there are still legal disputes outstanding that the parties are working through.

[00:01:43] Speaker 01:
And in particular, the parties stipulated in the FERC docket with respect to that other tariff in August 2022, they made a joint motion to stipulate that the commission granted saying that what was decided in this case would determine whether it was just and reasonable for PG&E to remove from that next generation tariff the language that's at issue here.

[00:02:04] Speaker 01:
about grandfathering, referring to the eligibility criteria of the statute.

[00:02:08] Speaker 01:
So that's one of the reasons that this case is very much alive.

[00:02:12] Speaker 01:
And then I would just add that the court rejected a mootness argument in its last decision in this case in 2022.

[00:02:16] Speaker 01:
One of the things it said is that FERC has equitable authority to afford relief for prior tariff violations.

[00:02:23] Speaker 01:
So that would be another reason why this is very much a live dispute here, even though this particular tariff isn't currently in effect.

[00:02:31] Speaker 05:
What is the redress?

[00:02:32] Speaker 05:
I mean, if you were to vacate,

[00:02:34] Speaker 05:
the orders that are before us today.

[00:02:36] Speaker 05:
How would that redress PG&E's injury?

[00:02:42] Speaker 01:
Well, the PG&E made a compliance filing before the commission that changed the way that it was treating various delivery points based on the commission's order in this case.

[00:02:51] Speaker 01:
And that compliance filing is something that the commission hasn't acted on yet.

[00:02:55] Speaker 01:
And so if this court were to rule for PG&E, that compliance filing would go away and PG&E could return to the way that it was treating delivery points before FERC's order in this case.

[00:03:04] Speaker 01:
And in addition, as I say, in the next level, the next generation tariff, the dispute would be different.

[00:03:12] Speaker 05:
And would PG&E be entitled to compensation for having provided service to applications where if this court were to agree with PG&E, it wasn't required to provide service?

[00:03:27] Speaker 01:
PG&E hasn't asked for compensation.

[00:03:28] Speaker 01:
But again, a change in the way that PG&E was treating these delivery points has occurred as a result of the commission's order.

[00:03:34] Speaker 01:
And when this court rejected the mootness argument in the last appeal, one of the things to look to was not only the effects with respect to this particular tariff, but also the fact that the next tariff is not yet fully in effect because there are legal disputes between the parties that haven't been resolved.

[00:03:49] Speaker 01:
And the same thing is true here.

[00:03:50] Speaker 01:
Those legal disputes remain.

[00:03:52] Speaker 01:
So in that sense, the next tariff isn't fully

[00:03:54] Speaker 01:
In place, it's not fully accepted by the commission because there are these legal disputes between the parties, one of which is the question of whether this particular language that's in dispute here is something that can or cannot be in the next tariff.

[00:04:07] Speaker 01:
Sorry.

[00:04:07] Speaker 05:
Can we have jurisdiction simply because FERC indicates that it's waiting for our decision?

[00:04:12] Speaker 05:
Does that make something a live case or controversy?

[00:04:17] Speaker 01:
I don't think that alone would make something a live case or controversy, but that's not at all the only thing that's going on here.

[00:04:23] Speaker 01:
There will be real effects in the world

[00:04:25] Speaker 01:
with respect to this tariff, which is still a tariff before the FERC fully accepts the next tariff, while there are still legal disputes ongoing with respect to the next tariff.

[00:04:35] Speaker 01:
And there would also be effects with respect to that next tariff because of the stipulation that I mentioned.

[00:04:40] Speaker 01:
And in addition to all of that, and this was something else that this court relied on in rejecting mootness in its last decision, FERC could order equitable relief of some kind for prior tariff violations.

[00:04:49] Speaker 01:
So there is an effect in the world

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for that reason as well.

[00:04:52] Speaker 01:
And San Francisco in its complaint here did ask for equitable monetary relief.

[00:04:58] Speaker 01:
So for all of those reasons, I think the same reasoning that the court gave when it rejected mootness last time around applies here as well.

[00:05:04] Speaker 01:
The situation with respect to the next sheriff really hasn't changed significantly since this court's prior decision in 2022.

[00:05:12] Speaker 01:
So I'd like to start with the text, if I could.

[00:05:15] Speaker 01:
And then I would like to spend a little bit of time talking about our arbitrariness and capriciousness argument, and then also spend a little bit of time talking about what's really at stake here in this case and what's not at stake in terms of what the effects would be in the world of this court's ruling.

[00:05:29] Speaker 01:
So with respect to the text, the word class and its equivalent doesn't appear anywhere in this provision.

[00:05:36] Speaker 07:
Let me interrupt you for a second.

[00:05:40] Speaker 07:
I'm assuming that everyone has triple-checked this, but there is no definition of consumer in the statute.

[00:05:47] Speaker ?:
Correct.

[00:05:52] Speaker 07:
What do you think consumer means?

[00:05:55] Speaker 07:
Rather than debate about what class means, tell me what you think consumer means.

[00:06:00] Speaker 01:
Consumer is the end user of the power.

[00:06:02] Speaker 01:
The ultimate consumer is the end user of the power.

[00:06:05] Speaker 01:
So not somebody who's going to transfer the power, sell the power,

[00:06:08] Speaker 01:
There's a person who's actually consuming or using the power.

[00:06:11] Speaker 01:
And I don't think there's any dispute in this case.

[00:06:13] Speaker 01:
There has never been any dispute between the parties.

[00:06:15] Speaker 01:
FERC has never said otherwise.

[00:06:17] Speaker 01:
That's everyone's understanding of what an ultimate consumer is, the consumer of the power.

[00:06:23] Speaker 01:
And you can see from the statutory provision that that's what Congress is getting at here because the provision requires for the grandfathering exception to apply, the ultimate consumer to have been provided power on a particular date, October 24th, 1992,

[00:06:37] Speaker 01:
and to be the consumer of that power, to be the ultimate consumer of the power.

[00:06:41] Speaker 06:
The statute has, it says an ultimate consumer.

[00:06:45] Speaker 06:
So read literally, that would be one person.

[00:06:48] Speaker 06:
And so once we all agree that we're not talking about one person, we're talking about classes of consumers, whether it's the class that you propose or the class that the other side proposes.

[00:06:59] Speaker 01:
I think there's a big difference between saying that

[00:07:02] Speaker 01:
term an ultimate consumer can apply to many different ultimate consumers and saying that we're talking about a class or category that's defined in some way by characteristics, which is what the agency has done here.

[00:07:12] Speaker 06:
But your definition is also a class of consumers, the ones who are being served at that time.

[00:07:17] Speaker 01:
Not as class as being used by the agency here.

[00:07:20] Speaker 01:
And I think this is a really important clarification.

[00:07:22] Speaker 01:
Class is sometimes used to mean a defined group of people

[00:07:26] Speaker 01:
who experienced something, who were provided power on October 24th, 1992.

[00:07:30] Speaker 01:
If you were doing a class action, you would use class that way.

[00:07:33] Speaker 01:
What the agency has said here is something extremely different, which is that class is a category, a broad category of consumers defined by some characteristic into which people may or may not fall.

[00:07:45] Speaker 01:
But the characteristic is not the statutory one.

[00:07:47] Speaker 06:
I understand what the dispute is about that.

[00:07:49] Speaker 06:
But your textual argument, it seems to me, is that you must win because

[00:07:56] Speaker 06:
the statute supports your view.

[00:07:58] Speaker 06:
But once we get away, once we acknowledge and understand that the statute has to be talking about some class, whether it's the class they say or the class you say, your textual argument is greatly weakened.

[00:08:09] Speaker 01:
I don't think so, Your Honor.

[00:08:10] Speaker 01:
What we're saying is that an ultimate consumer is singular, that Anne, the Supreme Court has told us this, refers to an unspecified particular or discrete countable thing.

[00:08:19] Speaker 01:
And yes, when you look at the Dictionary Act, you can see this as well.

[00:08:22] Speaker 01:
When a statute says singular noun,

[00:08:25] Speaker 01:
It can refer to a lot of different people or things.

[00:08:27] Speaker 01:
And you can also see this from the Supreme Court's decision in the Chavez, which we've cited in our brief, where it was a notice to appear.

[00:08:34] Speaker 01:
And what the court said is that is a singular thing.

[00:08:36] Speaker 01:
A notice to appear can go out to many different people.

[00:08:39] Speaker 06:
So if we think the statute just means ultimate consumers, because we're talking not about one person, how does that affect your argument?

[00:08:47] Speaker 01:
So I think, again, our view is that an ultimate consumer is any one ultimate consumer who meets the statutory criteria, who has provided power on October 24th, 1992.

[00:08:56] Speaker 06:
But my question is, if we read the statute as an ultimate consumer, it's just a way of saying ultimate consumers, which I think is a very logical way of looking at this.

[00:09:04] Speaker 06:
How does that affect your argument?

[00:09:05] Speaker 01:
I don't think it affects it very much in the sense that it's still very different than the class-based approach, because if you're talking about multiple ultimate consumers, you can look to see, was this ultimate consumer in front of me, somebody who was provided power by San Francisco on October 24th, 1992, and was this ultimate consumer someone who was provided power on October 24th, 1982?

[00:09:23] Speaker 01:
And everyone, you can think of that as a class if you like, but everyone has to qualify.

[00:09:27] Speaker 06:
I just don't see why we necessarily should.

[00:09:29] Speaker 06:
I just don't see what supports your argument.

[00:09:32] Speaker 01:
Well, again, I think the way that the statute is written is very clear that it says that the ultimate consumer and ultimate consumer as to whom the wheeling of power is going to go, right?

[00:09:43] Speaker 01:
The power is going to go to that ultimate consumer.

[00:09:46] Speaker 01:
As to that ultimate consumer, such ultimate consumer, there has to be a showing that such entity, which is here in San Francisco, was providing the service on that date.

[00:09:53] Speaker 01:
So you have to match them up.

[00:09:55] Speaker 06:
In your view, there's that sort of hypothetical from Suffolk County.

[00:09:58] Speaker 06:
where two neighbors are receiving service, but on the day in question, the power was out for one of them, they would not qualify for grandfathering, in your view.

[00:10:09] Speaker 01:
I think that particular hypothetical, there would be a question of what it means to provide service, actually.

[00:10:14] Speaker 01:
That's not an issue in this case.

[00:10:16] Speaker 01:
Nobody's briefed or argued that.

[00:10:17] Speaker 01:
You could argue, I suppose.

[00:10:18] Speaker 06:
But you would say that that person could get service as a matter of being an ultimate consumer, even if they weren't receiving service that day.

[00:10:26] Speaker 01:
I think if that person was a customer of San Francisco and they were supposed to be being provided service and it's just that a tree came down on the line and interfered with the flow of electrons that day.

[00:10:37] Speaker 01:
you could construct an argument, and I'm not endorsing it or not.

[00:10:40] Speaker 06:
You're saying yes, they would be entitled to pair that day.

[00:10:42] Speaker 01:
I think there would be an argument that they could, but that is so far away from what the agency has done here in saying that you can have these broad, amorphous categories of consumers, and that you have to look at the people who are being provided service in 1992, and they agree, you have to look at the specific people being provided service in 1992, and try to construct from that the characteristics that would define this broad, amorphous cost.

[00:11:06] Speaker 06:
You think that there needs to be an analysis of every person who is being served in 1992 and then analysis of every person who's being served now and a matching to see if they match and then those people be provided service.

[00:11:19] Speaker 06:
Do you think that's what's required here?

[00:11:21] Speaker 01:
I think that you need to ascertain whether the ultimate consumer in question was provided service and that is not hard to do.

[00:11:27] Speaker 01:
In the record in this case is a list of.

[00:11:29] Speaker 01:
Is that a yes to

[00:11:29] Speaker 06:
I'm asking you, how would this work?

[00:11:32] Speaker 06:
Is that what they're supposed to do?

[00:11:33] Speaker 01:
Yes.

[00:11:34] Speaker 01:
But in the record, in this case, there is a list of customers from San Francisco from October 1992.

[00:11:40] Speaker 01:
It's not particularly long.

[00:11:42] Speaker 06:
And I just want to understand, what are you relying on to argue that that's what was intended or what Congress wanted to have happen here?

[00:11:51] Speaker 01:
Well, we're relying on a number of things, number of aspects of the text that I've talked about already.

[00:11:56] Speaker 01:
We're relying on the fact that this is a grandfathering provision that is supposed to winnow over time and not vastly expand over time, which is what the agency did.

[00:12:03] Speaker 06:
We're relying on the underlying- I'm interested in your winnowing argument too.

[00:12:07] Speaker 06:
Why do you think this is supposed to winnow?

[00:12:08] Speaker 06:
Because we have this Raker Act that says that San Francisco is supposed to compete with PG&E and it's supposed to provide

[00:12:18] Speaker 01:
electricity cheaply to San Francisco residents.

[00:12:22] Speaker 01:
So the Raycroft is absolutely irrelevant here.

[00:12:24] Speaker 01:
It does not say that San Francisco is supposed to compete with PG&E.

[00:12:27] Speaker 01:
It gives San Francisco rights of way to construct certain kinds of facilities, but it doesn't say anything about wheeling of power.

[00:12:34] Speaker 01:
It doesn't contradict Section 824.

[00:12:35] Speaker 06:
I know, but just with respect to your winnowing argument, it seems to contradict your winnowing argument.

[00:12:41] Speaker 01:
I don't think so, Your Honor.

[00:12:42] Speaker 06:
There's a separate statute that seems to contemplate that San Francisco would have the ability to serve consumers.

[00:12:47] Speaker 06:
And it seems that the end game of what you're arguing is that San Francisco would have to stop doing that at some point.

[00:12:53] Speaker 01:
Not at all.

[00:12:53] Speaker 06:
Jeannie would take over their customers.

[00:12:54] Speaker 01:
Not at all.

[00:12:55] Speaker 01:
That is not at all what's at stake in this case.

[00:12:57] Speaker 01:
And I'd really like to explain this because I think it's critically important.

[00:13:00] Speaker 01:
Without this broad-based class-based approach to grandfathering, San Francisco will have ample opportunity

[00:13:06] Speaker 01:
to serve consumers in lots of different ways.

[00:13:09] Speaker 01:
It will continue to generate power in the Hetch Hetchy Valley, hydroelectric power, just as it does now.

[00:13:13] Speaker 01:
And it will get that power to San Francisco consumers.

[00:13:16] Speaker 01:
And there are several different ways that that can happen, all of which would mean that the power would flow essentially as it does now.

[00:13:21] Speaker 01:
So it's not like new facilities or anything like that would necessarily need to be constructed.

[00:13:25] Speaker 01:
It's certainly not by PG&E.

[00:13:28] Speaker 01:
So one of them is the community choice aggregation program under California law.

[00:13:33] Speaker 01:
which gets power from municipalities to consumers using the utilities facility.

[00:13:38] Speaker 01:
So the power flow as it does now, San Francisco would generate the power and the customer would pay San Francisco for the generation and pay PG&E.

[00:13:46] Speaker 01:
for the services it's providing and getting that power to the consumer.

[00:13:49] Speaker 01:
It's used all over California by many, many municipalities and San Francisco uses it as well.

[00:13:55] Speaker 01:
It is intended to get power generated or purchased by municipalities to consumers.

[00:14:00] Speaker 01:
Another thing that San Francisco could do would be to put in intervening facilities between PG&E's distribution facilities and the end user.

[00:14:08] Speaker 01:
I think San Francisco has

[00:14:10] Speaker 01:
argued in the past that that would somehow require duplication of PG&E systems.

[00:14:15] Speaker 01:
It would not.

[00:14:16] Speaker 01:
It doesn't require them to duplicate every line or wire that PG&E has.

[00:14:20] Speaker 01:
All it requires them to do is put some equipment in between PG&E's distribution system and the ultimate consumer, like a protective device or a disconnect switch.

[00:14:29] Speaker 01:
And again, many municipalities have done this.

[00:14:31] Speaker 01:
There are four cases about it.

[00:14:33] Speaker 01:
And it is not this massive, difficult undertaking.

[00:14:36] Speaker 01:
Another thing is that PG&E has made a concession in this case previously, and it's talked about a little bit in this court's prior decision, that grandfathering under certain circumstances would extend here to mid-2015, way past the 1992 date in the statute.

[00:14:50] Speaker 01:
And that's PG&E trying to make sure that this is all working well.

[00:14:54] Speaker 01:
And of course- So can I ask you, why is it that PG&E doesn't want to wield this power?

[00:14:59] Speaker 01:
Well, what San Francisco is trying to do here is create an unfair playing field.

[00:15:05] Speaker 01:
It wants to expand the grandfathering exception so that it can cover every customer in San Francisco and then so that San Francisco can use the wholesale distribution tariff to get the power, that's PG&E's own facilities, to get the power to the consumers.

[00:15:17] Speaker 01:
And then San Francisco engages in rate arbitrage because it pays the wholesale rate to PG&E and then it sets the retail rate for customers slightly under PG&E's retail rate.

[00:15:28] Speaker 01:
And the difference between the wholesale rate and the retail rate is free money to San Francisco.

[00:15:32] Speaker 01:
So the effect, the combination of those two things, the vast expansion of grandfathering under a class-based approach, and this rate arbitrage that San Francisco can engage in, means that every single customer in San Francisco could become a San Francisco customer, even though it is PG&E's own facilities that are being used.

[00:15:50] Speaker 01:
So that's synthetic competition.

[00:15:51] Speaker 01:
It's not real competition.

[00:15:54] Speaker 01:
San Francisco making things more efficient, more cost effective, building anything, adding anything, transforming anything.

[00:16:01] Speaker 01:
And that is what PG&E feels is a very unfair playing field that would be created by this decision.

[00:16:05] Speaker 01:
And that, I think, is the practical effect of the decision.

[00:16:08] Speaker 01:
But I don't want to get too far away from the text.

[00:16:12] Speaker 05:
I'm interested in understanding how you think our previous decision in City and County of San Francisco constrains.

[00:16:19] Speaker 05:
our decision here because of course the previous panel didn't say what the statute means and it asked for to do that statutory analysis but.

[00:16:29] Speaker 05:
But there is in that opinion, you know language about the importance of fairness and.

[00:16:37] Speaker 05:
you know, competition in this context.

[00:16:40] Speaker 05:
And, you know, the panel admonished FERC to think about its Suffolk County precedents and arguably FERC kind of picked up on both the holding and maybe some of the dicta of that panel opinion in issuing the order that it did.

[00:16:55] Speaker 01:
I think it's right that the panel certainly asked FERC to take a look at the Suffolk County orders and take a look at the statute in the first instance because the agency had not done that.

[00:17:05] Speaker 01:
at that point.

[00:17:06] Speaker 01:
So that is certainly true.

[00:17:07] Speaker 01:
That's what the panel instructed.

[00:17:08] Speaker 01:
But I think that's as far as the panel's instruction went.

[00:17:11] Speaker 01:
There is that discussion at the end about fairness.

[00:17:14] Speaker 01:
And I think I've just explained why we feel like it is actually quite anti-competitive, what has happened here, and that the Raker Act doesn't really speak to this and doesn't suggest that there should be some kind of mandatory wheeling of power in any way, shape, or form.

[00:17:28] Speaker 01:
And I think there's also a lot of language in this court's prior decision that we think shows that when

[00:17:34] Speaker 01:
panel, which was not interpreting the statute.

[00:17:36] Speaker 01:
And I understand that last time.

[00:17:37] Speaker 01:
But when the panel just looked at the face of the statute and looked at its plain text, the panel was reading it the way that we read it.

[00:17:44] Speaker 01:
And in fact, that's actually doing some work in the decision.

[00:17:46] Speaker 01:
So the place that I would point to most notably is page 664.

[00:17:51] Speaker 01:
of the 2022 opinion where the court said any end use customers, San Francisco did not serve in 1992 could not qualify.

[00:18:00] Speaker 01:
And the work that that's doing was the court was using that to reject the argument that San Francisco's approach was too broad.

[00:18:06] Speaker 01:
And we've identified in our brief a couple of other instances of language like that, that I think just helps emphasize that when you just read the statute, it's plain language shows that there's nothing about a class in there.

[00:18:17] Speaker 01:
There's nothing about a category type approach in there.

[00:18:19] Speaker 01:
It's just not.

[00:18:20] Speaker 01:
discussed at all.

[00:18:23] Speaker 07:
And in addition, someone who was receiving service as of the October date in 1992, but they have moved and they're still in San Francisco, but they've moved across town.

[00:18:40] Speaker 07:
Are they grandfathered in their year interpretation of the statute?

[00:18:46] Speaker 01:
So that's something that the agency did not address in the orders here, and I think is not really presented here yet.

[00:18:51] Speaker 01:
I think there would be an issue on remand for the agency.

[00:18:54] Speaker 07:
We're trying to come up with a construction and one that is sensible and reasonable.

[00:19:01] Speaker 01:
Understood, Your Honor.

[00:19:02] Speaker 01:
I just wanted to flag that that's not something that the agency has decided, and they didn't decide it because they thought the class-based approach precluded any kind of location limitation.

[00:19:10] Speaker 01:
But our position about that, I'm happy to tell you, is first of all, you have to look at the point of delivery language in the tariff in conjunction with the tariff's reference to the statute here.

[00:19:20] Speaker 01:
So the tariff talks about points of delivery qualifying for grandfathering under the statutory criteria, and a point of delivery is a place, it's a physical location in the world.

[00:19:30] Speaker 01:
And so we think that when you look at that tariff language and you look at it in conjunction with the statutory language,

[00:19:37] Speaker 01:
Yes, there's there's the identity limitation right, it has to be the same ultimate consumer that was getting the power in October 1992 that this case is about we do also think that there is a locational limitation, so it has to be at the same place the same point of delivery.

[00:19:51] Speaker 07:
But again, I think that's something that the parties would... But your point is that the locational limitation comes from the tariff, not from the statute.

[00:19:59] Speaker 01:
No, I think you can find it in ultimate consumer as well, actually.

[00:20:02] Speaker 01:
So it's not necessarily just from the tariff, but I think the tariff puts a very... How do you find it from ultimate consumer?

[00:20:09] Speaker 01:
Well, the statute talks about somebody consuming power and someone who consumes power is consuming it at a particular location where meter is running and recording what's happening.

[00:20:19] Speaker 01:
And the Commission acknowledged, this is at J56, that the utility industry commonly links customers to their delivery points.

[00:20:26] Speaker 01:
And then I think if you look at the other exception in the statute, not the grandfather exception, but the intervening facilities exception, which talks about San Francisco putting in the disconnect switch and the protective device in between,

[00:20:37] Speaker 01:
The ultimate consumer and PG and ease facilities, but that is plainly location specific actually we're talking about technology, physical things in the world that you can't just pick up and move around.

[00:20:47] Speaker 01:
So all of that I would argue suggests that ultimate consumer has this location aspect, but I do think that the tariff language puts the point on it.

[00:20:53] Speaker 01:
that it's points of delivery that have to qualify.

[00:20:55] Speaker 01:
But again, for purposes of this case, we're not talking about that.

[00:20:59] Speaker 01:
We're talking about the identity issues.

[00:21:01] Speaker 01:
And one thing that hasn't come up yet.

[00:21:02] Speaker 07:
So can a successor to the consumer as of October of 1992 be an ultimate consumer?

[00:21:12] Speaker 01:
So somebody who moves into a place where somebody who is being provided service in October of 1992 used to live?

[00:21:17] Speaker 01:
That kind of?

[00:21:18] Speaker 07:
A successor as far as, you know,

[00:21:22] Speaker 07:
I guess in the contract sense, the successor or assign, you know, someone who takes over the contract, so to speak.

[00:21:31] Speaker 01:
No, I don't think so.

[00:21:32] Speaker 01:
I think it has to be the same person or entity that was consuming the power in October 1992.

[00:21:38] Speaker 01:
But I think these questions about what exactly is an ultimate consumer and how do you decide exactly what an ultimate consumer is, there are some questions along these lines that are going to be questions for the agency sort of around the edges.

[00:21:50] Speaker 01:
The bottom line sort of administrative ability question that we were talking about earlier, I think is pretty straightforward because there is this list of customers.

[00:21:57] Speaker 01:
It's not the list itself is not in the record, but it is discussed in the record.

[00:22:01] Speaker 01:
I'm sorry, it's not in the appendix.

[00:22:03] Speaker 01:
It is in the record, but it's discussed in the appendix at J.A.

[00:22:06] Speaker 01:
519.

[00:22:07] Speaker 01:
And so that's going to go a very long way to telling you who the ultimate consumers were on October 24th, 1992.

[00:22:14] Speaker 01:
I also think that the other side's administrability problems are far greater.

[00:22:19] Speaker 01:
They too will have to identify ultimate consumers to some degree to figure out whether they slot into these classes that the agency has said should happen.

[00:22:27] Speaker 01:
But beyond that, trying to figure out what the class is, is basically an impossible task.

[00:22:32] Speaker 01:
And that's because the word class does not appear in the statute.

[00:22:35] Speaker 01:
Congress has provided no guidance.

[00:22:37] Speaker 01:
for how broadly or narrowly a class should be defined.

[00:22:40] Speaker 01:
And there's just no way to tell.

[00:22:41] Speaker 01:
And to sort of amplify on an example in our brief, if I may, on this point, imagine that the only consumer that San Francisco was serving on October 24, 1992, was a seafood restaurant in San Francisco.

[00:22:53] Speaker 01:
And now you have to construct the class of people and entities that are like that seafood restaurant from that single consumer.

[00:23:00] Speaker 06:
But why is it that you think that they want to expand?

[00:23:03] Speaker 06:
It seems to me that they just want the status quo.

[00:23:05] Speaker 06:
They've been serving these consumers.

[00:23:08] Speaker 06:
for all this time, for decades, and they just want to continue doing so the same way they were before.

[00:23:13] Speaker 06:
Why do you think this is an expansion?

[00:23:15] Speaker 01:
So if we're looking all the way back to October 24, 1992, the group of consumers they were serving was much, much, much smaller.

[00:23:21] Speaker 01:
And so I don't think it's true that it's just a sort of freezing in time as of the date that the statute specifies.

[00:23:28] Speaker 06:
Well, it's a freezing time of the classes.

[00:23:30] Speaker 06:
I'm sorry, I didn't quite catch that.

[00:23:31] Speaker 06:
It seems they want to maintain the status quo of the classes that they've been serving.

[00:23:36] Speaker 06:
And I don't see, and I'd like you to address this, because we didn't get to it before, why you think this is supposed to winnow, because that doesn't seem to be supported by anything that I've seen.

[00:23:46] Speaker 01:
Right.

[00:23:46] Speaker 01:
So if I may just start with the expansion, if you have a class that's something like every entity that has operated in coordination with San Francisco, which is one of the things that San Francisco has said that the class definitions the agency chose,

[00:23:59] Speaker 01:
would describe, then they can keep adding and adding and adding and adding people and saying, well, now this person is operating coordination with us, this person is, and so that the group of consumers that's being served by them.

[00:24:13] Speaker 06:
Connection to the municipal load or whatever, then it's not necessary to San Francisco.

[00:24:18] Speaker 01:
Well, not necessarily.

[00:24:19] Speaker 01:
Actually, I think it's actually quite unclear.

[00:24:21] Speaker 01:
So, what the agency said in terms of what the classes are here was to look to the categories in this 1987 agreement, which was obviously entered into before the statute was enacted.

[00:24:30] Speaker 01:
And one of the classes is this municipal class, which they have defined very, very broadly.

[00:24:35] Speaker 01:
But there's also something called non-firm, hedge-hedgey resources, which has categories in it like airport and riverbank.

[00:24:42] Speaker 01:
And so it's not just that it's purely this municipal category.

[00:24:46] Speaker 01:
And this is part of the problem with the class-based approach.

[00:24:48] Speaker 01:
It's really, really impossible to tell.

[00:24:51] Speaker 01:
What are the classes?

[00:24:52] Speaker 01:
What are their boundaries?

[00:24:53] Speaker 01:
What are the categories?

[00:24:54] Speaker 01:
And how should they be defined?

[00:24:56] Speaker 01:
So to get to your question about the winnowing, if I could, because I feel like that's really important here,

[00:25:00] Speaker 01:
grandfathering provision by its nature and we cited cases to this effect it has a temporal limitation in it and then people who are doing something or or whatever the the criteria in the statute is after that date aren't included and so by its nature

[00:25:16] Speaker 01:
The group of people who are grandfathered gets smaller over time.

[00:25:19] Speaker 01:
People die, entities close down.

[00:25:22] Speaker 01:
There's entropy in the world.

[00:25:23] Speaker 06:
The basis of your argument is that all grandfathering exceptions are intended to win out.

[00:25:27] Speaker 01:
All of them are.

[00:25:28] Speaker 01:
I think that is the basic nature of a grandfathering provision.

[00:25:31] Speaker 01:
Could someone write a grandfathering provision in a different way, I suppose?

[00:25:33] Speaker 06:
That's the question, whether they did that here.

[00:25:35] Speaker 06:
And it seems that when they wrote this provision, they were trying to maintain the status quo.

[00:25:41] Speaker 06:
I don't see anything about

[00:25:43] Speaker 06:
winnowing, they're trying to just keep things the way they were.

[00:25:46] Speaker 01:
I think they were trying to keep things the way they were with respect to particular ultimate consumers who are being provided service in 1992.

[00:25:51] Speaker 01:
That begs the question, doesn't it?

[00:25:54] Speaker 01:
Well, I mean, I think we've discussed in other ways the reasons why we think that's correct.

[00:25:57] Speaker 01:
But with respect to your winnowing question, if you understand the statute that way, then yes, the people are going to die, they're going to move away, and the group's going to get smaller.

[00:26:04] Speaker 01:
And that's going to put the policy, the new policy that Congress enacted in this provision, more firmly into place.

[00:26:10] Speaker 05:
Is winnowing

[00:26:11] Speaker 05:
essential to your statutory argument?

[00:26:15] Speaker 05:
I mean, winnowing may occur or it may not occur, but is the fact that winnowing may occur or in your view maybe should occur, I mean, is that necessary to rejecting a class-based interpretation?

[00:26:27] Speaker 01:
No, it's not necessary.

[00:26:28] Speaker 01:
I do think it is another reason to reject the class-based interpretation besides the plain text of the statute, which again,

[00:26:34] Speaker 01:
does not say class or anything like class.

[00:26:36] Speaker 01:
And one thing that we haven't talked about yet that, to me, is very dispositive, actually, of the statutory issue, so I do want to make sure to discuss it, is the fact that there are other provisions, including another provision from the same 1992 Act that put this provision into place where Congress did talk about classes of ultimate consumers.

[00:26:53] Speaker 01:
So the main example we gave in our brief is Section 111E of the 1992 Act, which says,

[00:26:58] Speaker 01:
ultimate consumers or groups or classes of such consumers.

[00:27:05] Speaker 01:
And I think that tells you two different things.

[00:27:06] Speaker 01:
One is that in 1992, when Congress enacted the provision that's at issue in this case, Congress knew how to talk about classes of ultimate consumers.

[00:27:13] Speaker 01:
It didn't do it in this statute.

[00:27:15] Speaker 01:
And the other thing I think it tells you is that ultimate consumer and class of ultimate consumer can't be the same thing, because if they had been, then Congress wouldn't have said ultimate consumers or classes of ultimate consumers

[00:27:27] Speaker 01:
because that latter phrase would have been superfluous.

[00:27:29] Speaker 01:
So classes of ultimate consumers is something different.

[00:27:31] Speaker 01:
And the other thing that's really actually interesting about that other statutory provision is for that part of the statute, there is a definition of class, actually.

[00:27:39] Speaker 01:
It's in 16 USC 2602.

[00:27:41] Speaker 01:
Class is defined to mean groups of ultimate consumers with similar energy usage characteristics.

[00:27:48] Speaker 01:
Of course, that definition doesn't apply here because the word class is in our provision, doesn't appear anywhere in our provision.

[00:27:54] Speaker 01:
And in addition, that's not the way that the agency has defined class here.

[00:27:58] Speaker 01:
The agency has defined class in this vague, amorphous way to say, well, we're going to look at the people who are provided power and we're going to pick out some characteristics having to do with them.

[00:28:07] Speaker 01:
And now we're going to somehow know what the class is.

[00:28:10] Speaker 01:
There is a massive level of generality problem with respect to that.

[00:28:13] Speaker 01:
There's no way to know how broadly or how narrowly classes should be defined.

[00:28:17] Speaker 06:
Can I ask you about that though?

[00:28:19] Speaker 06:
What's been happening since 1992 until now when they decided to

[00:28:23] Speaker 06:
to go with the tariff instead of whatever agreements?

[00:28:26] Speaker 06:
Like, how are you defining what would be covered up until this dispute arose?

[00:28:31] Speaker 01:
Well, so the class-based approach has never been in effect until the agency's decision.

[00:28:35] Speaker 06:
No, I'm talking about what has practically been happening between San Francisco and PG&E because there has been wheeling.

[00:28:42] Speaker 06:
They weren't relying on the tariff.

[00:28:43] Speaker 06:
But how are they defining who could get wheeling?

[00:28:46] Speaker 01:
Right.

[00:28:46] Speaker 01:
So this dispute has been going on since 2013, I will say, the dispute in this case.

[00:28:52] Speaker 01:
I think I described before the accommodation that PG&E offered in this case, which was to extend the grandfathering exception in certain circumstances to mid 2015, right?

[00:29:03] Speaker 01:
Way past 1992, the date in the statute as an effort to resolve the dispute between the parties.

[00:29:08] Speaker 01:
And so the wheeling has happened under that concession for the vast bulk of the time that we've been talking about.

[00:29:16] Speaker 01:
I understand how you're defining the classes.

[00:29:17] Speaker 01:
Who's getting the wheeling?

[00:29:19] Speaker 01:
Right.

[00:29:19] Speaker 01:
And so the people who are getting wheeling are, again, in our view, it is the people who are provided service in October 1992.

[00:29:27] Speaker 01:
San Francisco has disputed that.

[00:29:29] Speaker 01:
And now, under this confines filing, San Francisco has prevailed.

[00:29:33] Speaker 01:
But this has been a dispute between the parties back and forth for this entire period of time.

[00:29:38] Speaker 07:
So if you had a home in October of 1992 that was getting service,

[00:29:46] Speaker 07:
And it was owned by, let's say, husband and wife.

[00:29:52] Speaker 07:
And they both passed on and left the home to their kids, and their kids now occupy it today.

[00:30:01] Speaker 07:
Are the kids grandfathered, or are they different ultimate consumers?

[00:30:09] Speaker 01:
So again, I think the agency can resolve some of these questions about exactly how ultimate consumers apply, but I can give you my answer as I stand here today and maybe the agency will think something different, which is no, they're not ultimate consumers who are provided power by San Francisco on October 24th, 1992.

[00:30:24] Speaker 01:
They weren't provided power at that location.

[00:30:26] Speaker 01:
They weren't consuming the power.

[00:30:28] Speaker 01:
They may not have even been in.

[00:30:29] Speaker 07:
But if they lived at the house in October of 1992, they've never left the house.

[00:30:34] Speaker 01:
Oh, I see, your honor.

[00:30:35] Speaker 01:
I'm sorry.

[00:30:35] Speaker 01:
I didn't understand the question.

[00:30:37] Speaker 01:
Right.

[00:30:37] Speaker 01:
So in that, that circumstance, too, I think the agency will have to address this.

[00:30:41] Speaker 01:
But in our view, if somebody was in the residence, say, on October 24th, 1922, and was consuming the power, but their name just isn't on the bill, that could be as simple as having someone just check a box saying, I live there, then I consume the power, even though my name isn't on the bill.

[00:30:55] Speaker 01:
So I'm not on your list of customers.

[00:30:57] Speaker 01:
I'd also point out that, with respect to San Francisco in particular, there were very, very vanishingly few, I think, residential customers that they were serving on October 24, 1992.

[00:31:07] Speaker 01:
So this issue is not going to come up in this particular case in any meaningful way.

[00:31:12] Speaker 01:
But I point out again here that the administrability problems that the other side has

[00:31:17] Speaker 01:
any administrative ability issues around the edges here that the agency can deal with, with respect to understanding ultimate consumer to mean a specific particularized ultimate consumer and that's.

[00:31:29] Speaker 05:
Take your statutory argument to have a necessary answer to some of these hypotheticals.

[00:31:35] Speaker 05:
Is that correct?

[00:31:37] Speaker 01:
Yes, I think that's right, because there are some ways that are not an issue with respect to whether the class-based approach is correct that the agency could address.

[00:31:44] Speaker 01:
Well, what is an ultimate consumer exactly in some of these circumstances?

[00:31:47] Speaker 01:
And I think that is the kind of job that's perfect for the agency, right?

[00:31:51] Speaker 01:
That's what agencies are supposed to do.

[00:31:53] Speaker 01:
But none of that suggests that you can take the statute

[00:31:56] Speaker 01:
It says an ultimate consumer such ultimate consumer ultimate consumer provided with power on a particular date, which is a noble thing in the world and transform that into a statute that means anybody who's kind of like that ultimate consumer, even if the person you're including in that class.

[00:32:12] Speaker 01:
did not exist on October 24, 1982, was not alive on that date, was not an entity that anyone had created on that date, was living in New York or London on that date.

[00:32:23] Speaker 01:
There's no way to read this provision to encompass those folks.

[00:32:27] Speaker 01:
And yet, that's exactly what the class-based approach does.

[00:32:29] Speaker 01:
It encompasses them.

[00:32:31] Speaker 01:
And that just cannot be correct.

[00:32:33] Speaker 01:
And so what we're asking the court to do here is to vacate these orders.

[00:32:37] Speaker 01:
to reject to the class-based approach as an impermissible construction of the statute and to send it back to the agency for further proceedings, which may include some discussion along the lines of what we've been talking about here today.

[00:32:49] Speaker 07:
Let's hear from the other side.

[00:32:52] Speaker 07:
Thank you very much.

[00:33:06] Speaker 03:
Good morning, and may it place the court.

[00:33:07] Speaker 03:
I'm Scott Edgar for the Federal Energy Regulatory Commission.

[00:33:10] Speaker 03:
Thank you for hearing this case this morning.

[00:33:13] Speaker 03:
If I may jump in directly, Judge Pan, your questions about the naturally winnow over time, I believe that was in reply brief, page 12.

[00:33:22] Speaker 03:
I, too, was struck by that language.

[00:33:24] Speaker 03:
And I think this court will have a difficult time

[00:33:29] Speaker 03:
and reconciling that statement in the reply brief with some of the legislative history in this case.

[00:33:35] Speaker 03:
And at footnote 124 of the rehearing order, the commission discussed the legislative history, including statements by Senator Wallop.

[00:33:53] Speaker 03:
And if you look at that page,

[00:33:56] Speaker 03:
the discussion of Senator Wallop in the congressional record.

[00:34:01] Speaker 03:
He specifically refers to the idea that the purpose of this legislation, it's the next to last sentence of this discussion on this section.

[00:34:12] Speaker 03:
And he says, by the same token, legitimate existing municipal wholesale sellers may apply and obtain wheeling orders that lowers the rates for their retail customers.

[00:34:24] Speaker 03:
That is something that there's evidence in this record that Congress wanted to preserve.

[00:34:30] Speaker 03:
If you look at page 12 of the reply brief, this naturally went over time, I think is a problem.

[00:34:35] Speaker 07:
Let's let's deal with the text.

[00:34:37] Speaker 07:
Yes, not what one senator said.

[00:34:40] Speaker 07:
The text says.

[00:34:44] Speaker 07:
Over and over again, directly to an ultimate consumer and then even.

[00:34:49] Speaker 07:
Narrows it more specified date.

[00:34:55] Speaker 07:
and it says providing service to such ultimate consumer on October 24th, 1992.

[00:35:04] Speaker 07:
So how on earth do we get from that providing service on a specific date in 1992 to class that includes entities that didn't even exist or that are successors to

[00:35:26] Speaker 07:
or alike were akin to, somehow, ultimate consumers that were getting service on that date.

[00:35:36] Speaker 03:
Thank you, Your Honor.

[00:35:37] Speaker 03:
I think the only, the way the Commission resolved this, and this comes from paragraph 53 of the Rehearing Order at JA50, is to, the Commission acknowledges the singular use of consumer in the section

[00:35:53] Speaker 07:
However, the commission found that that cannot refer to individual and I think there's support for that finding and if we look at the date, we look at the it's not just that it's singular, but it's saying provided to such ultimate consumer on a specific date.

[00:36:12] Speaker 03:
I'd assert, Your Honor, that the date doesn't preclude a collective use of the word consumer.

[00:36:17] Speaker 03:
And I think there's support for that.

[00:36:18] Speaker 03:
If we look at Black's Law Dictionary Sixth Edition, which was the one in existence 1990, the latest version previous to the passage of the 1992 Act.

[00:36:28] Speaker 03:
If we look at the second and third definitions of the word consumer singular,

[00:36:37] Speaker 03:
The second and third both use a plural word to define consumer.

[00:36:44] Speaker 03:
What the commission was doing here was using consumer in a collective sense.

[00:36:49] Speaker 03:
And I don't, and to get to your specific question about the date, I don't think that precludes that understanding of the statute.

[00:36:58] Speaker 03:
And we can talk about some of the legislative history and what Congress was really after.

[00:37:05] Speaker 03:
They were here, and in the title to the section is the idea that Congress was trying to prevent a sham wholesale transaction.

[00:37:13] Speaker 03:
And if we look at the statements of Senators Johnston and Wallop,

[00:37:19] Speaker 03:
The sham transaction comes up when it's a retail consumer that seeks to circumvent the ban on retail wheeling.

[00:37:29] Speaker 03:
Here is the very opposite of that.

[00:37:31] Speaker 03:
We have San Francisco, which has been a wholesale player in this market going way back to the Raker Act of 1913.

[00:37:39] Speaker 05:
It seems like FERC's primary arguments are about some sort of purpose or policy or stepping back away

[00:37:48] Speaker 05:
of the statute.

[00:37:50] Speaker 05:
So what is your best argument from the text of the statute, that class of consumer, that an ultimate consumer can include a generalized class of consumers?

[00:38:01] Speaker 03:
I would refer back to what I said about consumer, that it can be used in a collective sense, and we find that from Black Slot issue.

[00:38:06] Speaker 05:
It can be, but was it in this statute?

[00:38:10] Speaker 03:
I think so, in this context, and getting back to... But how do we know that from the text?

[00:38:17] Speaker 03:
There's nothing that precludes that.

[00:38:19] Speaker 03:
And I would assert that this isn't precisely answered in the text.

[00:38:24] Speaker 05:
So you're seeking some kind of deference.

[00:38:25] Speaker 03:
We are seeking deference.

[00:38:28] Speaker 05:
What if deference vanishes in a few months?

[00:38:31] Speaker 03:
That is out of my control, and that's up to the court.

[00:38:38] Speaker 06:
Before we get to deference, don't we have to exhaust the tools of statutory construction?

[00:38:43] Speaker 06:
The words themselves are not clear.

[00:38:44] Speaker 06:
We still have to look at

[00:38:46] Speaker 06:
context and purpose and all the other tools of statutory construction.

[00:38:50] Speaker 03:
I would agree with that.

[00:38:52] Speaker 03:
I would agree with that.

[00:38:52] Speaker 03:
And I think I can make a case that the text doesn't answer the question, but there is support in the legislative history and there is support in the notion of grandfathering that the commission discussed in these rehearing orders.

[00:39:10] Speaker 03:
So I do agree that you have to exhaust those tools.

[00:39:13] Speaker 05:
And when you exhaust them, then your claim is for deference.

[00:39:18] Speaker 03:
I don't concede that after exhausting them that PG&E would win this interpretation.

[00:39:27] Speaker 03:
But if you do exhaust them and you find that there's a mixed bag, I think the current state of the law under Chevron is that the commission would get deference.

[00:39:37] Speaker 03:
But I'm willing to make that case that the plain text, as I said, does not preclude the interpretation that the commission gave.

[00:39:47] Speaker 03:
And I'll go back to what I was talking about, Lex.

[00:39:50] Speaker 05:
But that argument that it doesn't preclude is an argument that the text is ambiguous.

[00:39:56] Speaker 05:
It's not that it's the best reading of the text.

[00:40:00] Speaker 05:
You're saying it's a permissible reading.

[00:40:01] Speaker 03:
It is a permissible reading and I think it's also the best reading that the commission gave after looking at, and we can look at previous orders, the Palm Springs order, for example, that discussed Senator Wolop's discussion of what really the commission should do here is to look at substance over form.

[00:40:26] Speaker 03:
And I think all these things together, the commission has given the best reading to the statute.

[00:40:33] Speaker 05:
The fact that elsewhere in the statute, it talked about ultimate consumers and classes of consumers.

[00:40:40] Speaker 03:
Right.

[00:40:40] Speaker 05:
I know that's not about this particular provision, but there is some indication.

[00:40:44] Speaker 05:
And then there's a specialized, as my colleague said, a definition of what class means in that context.

[00:40:51] Speaker 03:
Right you're referring to section impact 1992 that is a comprehensive bill that has I believe 30 titles to it it affects virtually all aspects of other American energy economy section 111 that has the contrasting languages and title one.

[00:41:12] Speaker 03:
And that is a completely different context than Section 722, which is the section that amends the Federal Power Act, something completely different.

[00:41:25] Speaker 03:
Getting back to 111, that's directing the Secretary of Energy to do something, i.e., write a report about integrated resource planning and how the states are affecting that.

[00:41:37] Speaker 03:
And I would assert that's a completely different

[00:41:40] Speaker 03:
And I would cite also this court's discussion in Clinchfield Cole at 895 F.

[00:41:50] Speaker 03:
2nd, 773 at page 779.

[00:41:55] Speaker 03:
And there the court deals with this expressio unaeus, the expression of one implies the exclusion of the other, and suggests that that has a weak

[00:42:08] Speaker 03:
that has a, well, it ignores other plausible explanations.

[00:42:12] Speaker 03:
Congress just might not have been thinking about this precise issue.

[00:42:15] Speaker 05:
It's not ironclad.

[00:42:16] Speaker 05:
It's just some evidence of context, maybe.

[00:42:21] Speaker 03:
And to add also, it is evidence.

[00:42:26] Speaker 03:
But I think it's weak evidence here.

[00:42:28] Speaker 03:
And I think this commission, this court's precedent bears that out.

[00:42:33] Speaker 03:
And in particular, Clinchfield Cole also

[00:42:36] Speaker 03:
particularly calls out the Chevron context and that the statutory interpretation tool is particularly inapplicable in this context.

[00:42:52] Speaker 06:
Can you address?

[00:42:53] Speaker 06:
I'm still trying to understand in a sense why we're here.

[00:42:57] Speaker 06:
Why, from your perspective, what's the end game here?

[00:43:01] Speaker 06:
Why does PG not want to do this wheeling?

[00:43:05] Speaker 06:
is the end game to winnow this down until they can take over all the end distributors?

[00:43:11] Speaker 06:
Or I just don't understand why this is such a, do you have a sense of what the?

[00:43:17] Speaker 03:
I believe they're right, Your Honor.

[00:43:18] Speaker 03:
And I take the words at page 12 of the reply brief face value.

[00:43:22] Speaker 03:
I think that's exactly what- I'm sorry, what were those words?

[00:43:26] Speaker 03:
Naturally winnow over time.

[00:43:27] Speaker 03:
That's exactly what PG&E would like to accomplish here.

[00:43:31] Speaker 06:
And I don't- That would drive, would that drive San Francisco out of the market?

[00:43:36] Speaker 03:
It would, presumably, PG&E would prefer to serve these customers through their retail tariff, which would have rates presumably set by the CPUC.

[00:43:49] Speaker 06:
Because San Francisco, in order to continue serving their customers, if they can't get willing, they would have to build distribution networks, which they're not going to do.

[00:43:58] Speaker 03:
That's right.

[00:43:59] Speaker 03:
My sense is that would be very expensive and unnecessary.

[00:44:03] Speaker 03:
And if I want to make one observation that the question here isn't the idea that San Francisco is getting free service, it's just service under the tariff.

[00:44:12] Speaker 03:
There's a rate they're paying.

[00:44:14] Speaker 03:
If PG&E has an assertion that this rate is not recovering the costs for the service, that's a Section 205 question that they can bring to the commission.

[00:44:24] Speaker 03:
And I don't know how the commission would address that, but the commission will address it and we'll take up those issues.

[00:44:30] Speaker 03:
So this isn't a question of- Are there any rate proceedings

[00:44:32] Speaker 05:
ongoing right now about this?

[00:44:35] Speaker 03:
Yes, there are.

[00:44:36] Speaker 03:
This is a continually ongoing dispute.

[00:44:39] Speaker 03:
And I did want to refer to this came up earlier.

[00:44:45] Speaker 03:
The commission did point out in the remand order, paragraph 31, note 66 to A17, that this case only

[00:45:00] Speaker 03:
applies up until July 1st, 2000, up until the filing of the second of the rate case afterwards.

[00:45:09] Speaker 03:
And that's at JA 17 footnote.

[00:45:12] Speaker 07:
So the power at issue that is being generated by San Francisco, is it being generated in California?

[00:45:22] Speaker 03:
Hetch Hetchy.

[00:45:23] Speaker 03:
This is Hetch Hetchy power that was authorized by the Raker Act in 1913.

[00:45:31] Speaker 03:
And San Francisco not only operates that project but has... The answer to the question is yes.

[00:45:38] Speaker 07:
It is generated in California.

[00:45:40] Speaker 07:
Yes.

[00:45:42] Speaker 07:
So we have power that's generated in California.

[00:45:45] Speaker 07:
And then this is a dispute about the fact that, well, San Francisco has transmission lines.

[00:45:52] Speaker 07:
It doesn't have a distribution system to get it to each of these end users in San Francisco.

[00:46:00] Speaker 07:
That's right.

[00:46:01] Speaker 07:
And that's an intrastate issue, right, that normally FERC wouldn't have any role, right?

[00:46:12] Speaker 03:
That is a, well, jurisdiction hasn't been questioned here.

[00:46:16] Speaker 07:
I understand that, but shouldn't that be something that should kind of impact the way that we think about this statute in this grandfather?

[00:46:28] Speaker 07:
I mean, what does FERC even have to do with this under the way that kind of the cooperative federalism model of FERC

[00:46:37] Speaker 07:
Well, as imagined, shouldn't that have some role in how we look at what the statute means?

[00:46:50] Speaker 03:
I'm not sure.

[00:46:52] Speaker 03:
This is a wholesale transaction that the commission has jurisdiction over.

[00:46:59] Speaker 03:
And I was trying to find a case that discusses that.

[00:47:04] Speaker 03:
It's Detroit Edison.

[00:47:07] Speaker 07:
So even though it's all intrastate because it's a wholesale transaction, FERC would traditionally have jurisdiction.

[00:47:16] Speaker 07:
That's what you're saying.

[00:47:18] Speaker 03:
Yeah, it's a wholesale transaction for distribution service.

[00:47:23] Speaker 03:
And as this court explained at 334, F3, 48, and Detroit Edison, that the commission has jurisdiction over this kind of transaction.

[00:47:37] Speaker 07:
So, okay, so we shouldn't be concerned about that.

[00:47:40] Speaker 07:
But I guess what I'm still, I guess, having trouble with and would like to make sure that I give you ample opportunity to respond is how text

[00:47:58] Speaker 07:
that says directly to such an ultimate consumer, or to an ultimate consumer, and it says this in this particular subsection, I think it repeats that phrase three or four times, including in that last sentence.

[00:48:17] Speaker 07:
How do we get, how is the best natural reading of that text

[00:48:30] Speaker 07:
a class and not just a consumer who was provided energy on a particular day.

[00:48:44] Speaker 03:
Again, I would go back, I would harken back to the statements about the definition of consumer and whether they can be in a collective sense.

[00:48:55] Speaker 03:
And I think, um,

[00:48:57] Speaker 03:
And in that sense, I would also invoke the statements of Senator Wolop and what the purpose of this provision is to allow a legitimate, not sham, wholesale purchaser of distribution to serve its retail customers.

[00:49:17] Speaker 03:
There's no question

[00:49:18] Speaker 03:
San Francisco doesn't fall into that sort of category of let's say a high volume user that's upset with its electricity provider and wants to go out and to use the words of Senator Johnston, he talked about the XYZ Procurement Corporation.

[00:49:36] Speaker 03:
And so they create this procurement corporation that goes out and then creates a sham.

[00:49:41] Speaker 03:
That's the opposite of what San Francisco is.

[00:49:43] Speaker 03:
There's a long history

[00:49:45] Speaker 06:
Is there room in the text for a sort of intermediate position, which is the ultimate consumers were the actual, I guess, people or and the points of delivery that were in effect on this particular date and the consumer also being defined as if it's the police department, the police department can move.

[00:50:08] Speaker 06:
It's still the police department.

[00:50:09] Speaker 06:
I just think there is there some intermediate way that's more textually, I guess, supportable.

[00:50:15] Speaker 06:
That's not what PG&E is asking for and not what San Francisco is asking for.

[00:50:21] Speaker 03:
I'm not sure, Your Honor.

[00:50:22] Speaker 03:
The way you've described that, that sounds like a class.

[00:50:24] Speaker 03:
If the police department is a class.

[00:50:27] Speaker 06:
Where you can define police department as a consumer.

[00:50:31] Speaker 03:
Yes, I think so.

[00:50:33] Speaker 03:
And I do want to mention that every time in the brief, there's a reference to poorly defined class or something of this sort.

[00:50:41] Speaker 03:
This is their agreement.

[00:50:43] Speaker 03:
This is PG&E's agreement, the 1987

[00:50:46] Speaker 03:
Interconnection agreement and all the commission has done was to preserve that relationship so.

[00:50:53] Speaker 03:
I would suggest that their drafted agreement is sufficient to define.

[00:51:01] Speaker 03:
And so there's no question about it that that was the agreement that defined the relationship on October 24, 1992.

[00:51:09] Speaker 03:
And again, they had a hand in drafting it.

[00:51:12] Speaker 03:
So it's not exactly sensible for them to say that it's a poorly defined class when it's based on their agreement.

[00:51:23] Speaker 06:
So if there is sort of an intermediate possibility that is more tied to the text, which would include consumers broadly defined and points of delivery that were being served at that time, if that were the best reading of the statute, are you saying that that is a class-based approach?

[00:51:46] Speaker 03:
It sounds like a class-based approach.

[00:51:48] Speaker 03:
And that's what the commission did.

[00:51:49] Speaker 03:
It said, OK.

[00:51:50] Speaker 03:
Let's look at the date in the statute who was being served by the entity on that date.

[00:51:59] Speaker 03:
And there's a couple ways to approach that.

[00:52:02] Speaker 03:
We can take the sort of particular individualized approach, or we can take what the commission found was a class-based approach.

[00:52:10] Speaker 03:
And the commission went through the steps of analyzing that and talked about how it would be unfair to retail

[00:52:17] Speaker 03:
consumers, I've talked about how some of the legislative history is going back to this.

[00:52:23] Speaker 06:
Are you saying, I'm sorry, are you saying that regardless of what you call this, all they did was take the consumers that were being served at that time based on the 1987 contract?

[00:52:34] Speaker 06:
And that's what we're looking at here, whether, whatever you call it.

[00:52:38] Speaker 03:
The commission was called on by the statute to look at ultimate consumer in October 24th, 1992.

[00:52:44] Speaker 03:
The commission believes that the best interpretation of that would be to look at the class that was served on that date.

[00:52:54] Speaker 06:
Defined by the 1987 contract.

[00:52:55] Speaker 03:
And in this case, absolutely.

[00:52:57] Speaker 03:
And in this case, that question is answered best by looking at the agreement PG&E signed

[00:53:04] Speaker 03:
and agreed to in 1987.

[00:53:07] Speaker 06:
Because that represents who is being served.

[00:53:09] Speaker 03:
Yes.

[00:53:10] Speaker 06:
I understand.

[00:53:10] Speaker 06:
Thank you.

[00:53:11] Speaker 06:
Sorry.

[00:53:11] Speaker 07:
So suppose we agree with you about the way that the statute should be interpreted.

[00:53:24] Speaker 07:
Your friend on the other side says that they're still in the tariff

[00:53:32] Speaker 07:
that we are or that the commission was construing, there's still a locational restriction separate and apart.

[00:53:47] Speaker 07:
They argue that it's also in the statute, but let's oppose for the sake of this question.

[00:53:53] Speaker 07:
We disagree with that.

[00:53:57] Speaker 07:
What's your response to their argument that the tariff that we're construing has a location?

[00:54:04] Speaker 03:
I think Judge Wilkins that the Commission resolved that in the very same way the previous panel did.

[00:54:11] Speaker 03:
The Commission took the position that the

[00:54:15] Speaker 03:
That this delivery point approach to the tariff that you're invoking here precludes the the application of the class based and and the previous panel had no no problem with that they said instead that the that the all that language in the tariff means is that San Francisco will have to.

[00:54:34] Speaker 03:
identify for each delivery point.

[00:54:36] Speaker 03:
Yes, there is a reference to delivery point, but that doesn't preclude the ability of San Francisco to demonstrate that entitlement under the tariff by demonstrating that the customer was of the class served on October 24th, 1992.

[00:54:53] Speaker 03:
So in that sense, there is no conflict there.

[00:54:57] Speaker 03:
It is possible to resolve this.

[00:55:00] Speaker 03:
that delivery point concept with the class-based approach.

[00:55:04] Speaker 03:
And I would just point out that my friend might say, well, this just means it explodes.

[00:55:09] Speaker 03:
But again, I'll go back to the 87 interconnection agreement.

[00:55:13] Speaker 03:
And so there were limits.

[00:55:14] Speaker 03:
It's not like the commission just said.

[00:55:17] Speaker 03:
Anyone in some free-willing sense of a class was very much tied to their agreement.

[00:55:24] Speaker 03:
So it's not an unlimited class.

[00:55:29] Speaker 07:
So in your view, unless PG&E has a reason to argument that the commission's construction of the 1987 agreement is arbitrary and capricious, PG&E loses.

[00:55:48] Speaker 07:
is my oversimplifying thing.

[00:55:50] Speaker 03:
I think that's right, your honor.

[00:55:52] Speaker 03:
I think the commission was was approach here was very reasonable in defining the class.

[00:55:57] Speaker 03:
Once we get to that point and say, well, okay, what was the class on that date?

[00:56:01] Speaker 03:
Commission look at the contractual agreement in place between the parties.

[00:56:07] Speaker 03:
And I think that's eminently reasonable approach to take.

[00:56:11] Speaker 06:
If I can just come back to this, and I'm sorry to belabor it.

[00:56:14] Speaker 06:
Are you saying, because this would address the textual argument, that the consumers that were served on this date in October 1992 are defined by the 1987 contract?

[00:56:26] Speaker 00:
Here.

[00:56:26] Speaker 06:
In this case.

[00:56:28] Speaker 06:
Yes.

[00:56:28] Speaker 06:
And in the 1987 contract, they define the users by class?

[00:56:37] Speaker 03:
They.

[00:56:38] Speaker 03:
There's various definitions.

[00:56:39] Speaker 03:
There's municipal load.

[00:56:40] Speaker 03:
There's obligations to the districts.

[00:56:42] Speaker 03:
And there's a series of other things.

[00:56:44] Speaker 03:
But in a sense, that's class.

[00:56:49] Speaker 05:
In a sense, what do you mean by in a sense?

[00:56:52] Speaker 03:
Well, it is a those are classes, I suppose.

[00:56:55] Speaker 03:
I'm not sure I follow the.

[00:56:58] Speaker 06:
I guess maybe that wouldn't solve like the larger statutory interpretation question necessarily, but it just seems to me that

[00:57:06] Speaker 06:
the text seems to talk about ultimate consumers on a particular date.

[00:57:09] Speaker 06:
And there's a debate as to whether that should be the actual consumers or the class of consumers served on that date.

[00:57:15] Speaker 06:
But in this particular case, it seems that the consumers served on that date, the specific ones, are defined by an agreement, which is the 1987 contract.

[00:57:26] Speaker 06:
And that 1987 contract defines them by class.

[00:57:30] Speaker 03:
I would say this, the statutory provision, the commission was

[00:57:36] Speaker 03:
a reasonable interpretation by determining that a class was contemplated there, a class of consumers.

[00:57:43] Speaker 03:
Then the next question comes under the tariff, well, how do we implement that?

[00:57:49] Speaker 03:
What does that mean?

[00:57:51] Speaker 06:
Yeah, no, I understand that.

[00:57:52] Speaker 06:
I'm just saying, is this a different route to analyze this case, which would leave open the question of whether, in all cases, classes can be determined?

[00:58:00] Speaker 06:
Because in this particular case, the actual consumers were defined by class by the contract.

[00:58:07] Speaker 03:
I think that's a fair reading of the agreement, that they are in municipal load and the service to the districts.

[00:58:14] Speaker 03:
I think it's fair to look at those by class as a class.

[00:58:21] Speaker 07:
Thank you.

[00:58:21] Speaker 07:
All right, thank you.

[00:58:23] Speaker 07:
Thank you.

[00:58:23] Speaker 07:
We'll hear from Councilor Greener.

[00:58:49] Speaker 02:
May I please the court.

[00:58:51] Speaker 02:
Yeah, my name is Jeff Bain arguing on behalf of the city and county of San Francisco intervener and supporter for I like to start with the text in the term ultimate consumer, but then circle back to some of your questions about the impact on the city and what's going on here.

[00:59:05] Speaker 02:
So I think there's some clarification I can provide on that.

[00:59:09] Speaker 02:
So I think a lot of the questions have correctly focused on what is the meaning of this term ultimate consumer.

[00:59:16] Speaker 02:
I take PG&E's position to be that the exclusive meaning, or at least the best meaning, is it has to be a specific, individually identified retail customer, and that it has to be at the same exact location that was served on this date.

[00:59:30] Speaker 02:
And I think on its face, and our friends at FERC explained, that's not

[00:59:34] Speaker 02:
That's not the plain reading of the term ultimate consumer.

[00:59:37] Speaker 02:
But I think the other references to ultimate consumer in the statute confirmed that.

[00:59:42] Speaker 02:
I think even if you look at Section 111E from the Energy Policy Act, which we fully agree that's a totally irrelevant provision here,

[00:59:52] Speaker 02:
But even if you look at what that term is doing, it is not referring to specific individual retail customers.

[00:59:58] Speaker 02:
It's asking the Secretary of Energy to produce a study on how certain state policies affect the rates paid by ultimate consumers.

[01:00:07] Speaker 02:
And then it also recognizes there might be different effects on smaller, more narrow classes in that context.

[01:00:13] Speaker 02:
But ultimate consumers is a much broader term.

[01:00:16] Speaker 02:
And same as the saving clause at the end of subsection H that we're talking about here,

[01:00:21] Speaker 02:
where it says nothing under this subsection affects state law concerning transmission of energy directly to an ultimate consumer.

[01:00:29] Speaker 02:
The plain reading of that is not directly to Mr. Smith at 123 Main Street.

[01:00:35] Speaker 02:
It's to ultimate consumers distinguished from wholesale entities, but as a broad category of ultimate consumers.

[01:00:43] Speaker 02:
And the date, October 24, 1992, is doing work in this particular grandfathering provision, because that's telling FERC what type of consumer are you looking at for purpose of grandfathering.

[01:00:56] Speaker 02:
And that grandfathering provision functions to preserve or maintain legitimate wholesale wheeling arrangements as they existed on that date.

[01:01:04] Speaker 02:
And you might have different arrangements.

[01:01:06] Speaker 02:
And FERC applies this statute on a case-by-case basis.

[01:01:11] Speaker 05:
How do we understand the tariff language that talks about point of deliveries, right?

[01:01:18] Speaker 05:
Points of delivery for which the grandfathering criteria are met.

[01:01:22] Speaker 05:
I mean, are we here interpreting that whole tariff term or just the meaning of the grandfathering term?

[01:01:31] Speaker 02:
I think the inquiry here is just on the meaning of the grandfathering term.

[01:01:34] Speaker 02:
I mean, the tariff when

[01:01:37] Speaker 02:
When we talk about point of delivery framework, that applies throughout the tariff.

[01:01:41] Speaker 02:
That simply means when someone's putting an application, they have to tell PG&E, this is the point where I'm requesting service.

[01:01:49] Speaker 02:
You have to meet various technical requirements, provide certain information for that point.

[01:01:55] Speaker 02:
And one of them is this eligibility requirement.

[01:01:58] Speaker 02:
But whatever eligibility requirement you apply at that particular point, that's independent from the fact that the tariff, like,

[01:02:07] Speaker 02:
Right, it has to identify points of delivery.

[01:02:10] Speaker 02:
I mean, you can imagine an eligibility requirement that says you're eligible only if it's an even-numbered street address, putting aside whether that's just and reasonable at FERC.

[01:02:19] Speaker 02:
You could have whatever eligibility test.

[01:02:22] Speaker 02:
It just applies for whatever the particular point is in question.

[01:02:26] Speaker 02:
So there's no inherent tension between the tariff's point of delivery framework and a class, and even PG&E's

[01:02:34] Speaker 02:
what they call voluntary accommodation to provide non-tariff service to certainly these points it seems aren't tariff qualified, that's a class-based approach that it applies under the tariff with the same point of delivery framework.

[01:02:47] Speaker 05:
So you have to explain why you think PG&E's interpretation is not the best one.

[01:02:52] Speaker 05:
Can you say affirmatively why you think the class-based approach is the best one without any sort of Chevron deference?

[01:03:00] Speaker 02:
Yeah, absolutely.

[01:03:02] Speaker 02:
So it comes back to that term ultimate consumer, which I think the various questions have pointed out there.

[01:03:08] Speaker 02:
There is some question on how to define that requires for to draw a line and Going back to the function of the statute to preserve wheeling that existed on that particular date.

[01:03:21] Speaker 05:
It asked for who was the ultimate consumer statute was in part to limit

[01:03:26] Speaker 05:
you know, mandatory wheeling and then it provides an exception.

[01:03:30] Speaker 05:
So those are, those two things have to be understood together.

[01:03:33] Speaker 05:
It's not just the exception that we interpret.

[01:03:36] Speaker 02:
Right.

[01:03:37] Speaker 02:
Right.

[01:03:37] Speaker 02:
So the question is who, who was the ultimate consumer in 1992?

[01:03:41] Speaker 02:
And in the case of San Francisco purchasing for jurisdictional service from PG&E, it was under this 1987 agreement that didn't limit San Francisco service to particular locations.

[01:03:54] Speaker 02:
It didn't limit San Francisco's service to specifically individually identified retail customers.

[01:04:00] Speaker 02:
That agreement allowed the city to serve its historical customer base, which is a small fraction of load in the city, and that didn't expand in this relevant period from 92.

[01:04:09] Speaker 05:
So you're saying that ultimate consumer means whatever the 1987 agreement meant?

[01:04:17] Speaker 02:
I think what I'm saying is you have to look at the arrangement in place at the time.

[01:04:22] Speaker 02:
So you're going to have a different class in Suffolk County, where the county was serving all residential customers in a particular service territory.

[01:04:30] Speaker 02:
That's going to be much broader than here in San Francisco, where the city has and continues it's about 15% of the load in the city, but served by the city instead of PG&E.

[01:04:41] Speaker 02:
So what I read FERC's orders as saying, is you look at the actual customers that were served on that date in 1992, under that 1987 agreement, and as long as it's the same type of customer, there hasn't been a change in the ultimate consumer.

[01:04:58] Speaker 05:
Now in your view, does the 1987 agreement refer to classes, the same classes that FERC is relying on?

[01:05:07] Speaker 02:
So I, so,

[01:05:10] Speaker 02:
The way I read FERC's order is FERC didn't address each individual point.

[01:05:16] Speaker 02:
So FERC didn't rule that everything served under the 87 agreement up until 2015 is necessarily grandfathered.

[01:05:24] Speaker 02:
It asked PG&E in a compliance filing to go back, apply FERC's instructions, and classify those points.

[01:05:31] Speaker 02:
And that leaves open the possibility that PG&E could have said, there are some points, these dozen points interconnected in the 2000s that are different than what was served on that date in 1992 under the 87 agreement.

[01:05:45] Speaker 02:
We think that's outside the class.

[01:05:47] Speaker 02:
Now, PG&E didn't do that in its compliance filing.

[01:05:50] Speaker 02:
And I think the reason was is there's just been no dramatic expansion of the type of customers the cities have been serving.

[01:05:59] Speaker 02:
But I think the test FERC laid out in its decision is look at the customers that were served on that date in 1992 under the 87 agreement.

[01:06:08] Speaker 02:
And as long as you stay within that class of customers, that type of customers, there's no change in the ultimate consumer and grandfathering still applies under the statute.

[01:06:20] Speaker 02:
So turning to the impacts, there are several points I'd like to hit.

[01:06:25] Speaker 02:
One is there was some brief mention of alternatives to how the city could.

[01:06:29] Speaker 02:
fulfill its role under the Raker Act through community choice aggregation, which is a fundamentally different program that involves PG&E being the retail service provider.

[01:06:40] Speaker 02:
So that's fundamentally different than San Francisco being the retail service provider.

[01:06:44] Speaker 02:
But I think all that matters here is there's nothing in the record about this alternative of community choice aggregation.

[01:06:51] Speaker 02:
That wasn't an issue here.

[01:06:53] Speaker 02:
There's no record on why that's fundamentally different service, which it is, and I'm happy to get into.

[01:06:59] Speaker 02:
And in any event, that's not a basis for how the statute should be interpreted.

[01:07:03] Speaker 02:
I think another thing that came up was, what is the burden on the city?

[01:07:11] Speaker 02:
What would it involve if PG&E's view was to prevail?

[01:07:15] Speaker 02:
And so again, PG&E's view, exact same individual retail customer at the exact same location.

[01:07:21] Speaker 02:
And for everything else, everything PG&E deemed non-tariff qualified, it's subject to these additional restrictions

[01:07:29] Speaker 02:
don't just apply under the tariff, but that PG&E's never sought to apply to its other wholesale customers, even those without intervening facilities.

[01:07:37] Speaker 02:
And once one of those restrictions is triggered, the city's forced into one of two options.

[01:07:42] Speaker 02:
It either turns that customer over to PG&E retail service, or it has to install facilities to meet the other option,

[01:07:49] Speaker 02:
ownership or control of intervening facilities.

[01:07:52] Speaker 02:
And what we're talking about in this case, these are all points that were actually served under the 1987 agreement, you know, when it transitioned to tariff service in 2015.

[01:08:02] Speaker 02:
They're already receiving power today.

[01:08:05] Speaker 02:
They're receiving it safely.

[01:08:06] Speaker 02:
There's absolutely no technical engineering reason for there to be new facilities installed.

[01:08:12] Speaker 02:
But what that does do, it imposes costs on the city to install those facilities.

[01:08:17] Speaker 02:
And the cost of these unnecessary duplicative facilities raise exactly the kind of concerns this court previously identified with PG&E's anti-competitive administration of its tariff.

[01:08:28] Speaker 02:
And that's particularly a problem given the RACOR Act, given Congress's intent not just to provide a source of clean power, but also to ensure competition in the power market in the city.

[01:08:42] Speaker 07:
And then, so there isn't the equivalent of something like an open access here at San Francisco for the access so that it would not have to.

[01:08:57] Speaker 07:
So outside of this wholesale distribution tariff, there's not another kind of similar tariff that might have different terms, conditions, rates, but that San Francisco could access to service these customers using PG&E's distribution net.

[01:09:17] Speaker 02:
Right.

[01:09:17] Speaker 02:
So the options would be this is the PG&E's wholesale open access tariff for access to its distribution system.

[01:09:24] Speaker 02:
Uh, PG's mentioned the CCA state law option.

[01:09:28] Speaker 02:
It's not for jurisdictional service.

[01:09:30] Speaker 02:
It involves PG&E being the retail provider.

[01:09:33] Speaker 02:
That's not a path for the city being the retail provider.

[01:09:36] Speaker 02:
The other option is for the city to put in individual requests through section 210 to 11 of the federal power act under the same statutory criteria, just on an individual basis.

[01:09:47] Speaker 02:
So instead of having this one case

[01:09:50] Speaker 02:
about the tariff, it would be individual point by point cases.

[01:09:55] Speaker 02:
And that's really, I think, why this statutory criteria is pulled into the tariff is because there's this option outside the tariff, but it would be through one off individual applications, which obviously has efficiency, you know, concerns on both sides, I think, on how that would be administered.

[01:10:14] Speaker 02:
But the tariff is the option for the city to be the retail service provider using PG&E's distribution facilities to reach its customers.

[01:10:24] Speaker 02:
And again, this grandfathering provision is only used for some of the city's points.

[01:10:28] Speaker 02:
The city does own, it has some transmission interconnections with PG&E that don't rely on this tariff at all.

[01:10:35] Speaker 02:
It has others that the city has intervening facilities at, often higher voltage ones that have more city facilities.

[01:10:43] Speaker 02:
And I'd also add, there hasn't been this expansion with the class of customers.

[01:10:51] Speaker 02:
From 1992 to 2015, the period we're talking about,

[01:10:56] Speaker 02:
The city's load that's relied on PG&E's distribution system had something like 2% annual growth.

[01:11:03] Speaker 02:
And that includes individual locations that grew, just general growth within the city, growth in electric usage.

[01:11:11] Speaker 02:
So there hasn't been some explosion of city service in that time.

[01:11:14] Speaker 02:
There's no reason to think when limited to that same class of customers, grandfathering would somehow expand.

[01:11:21] Speaker 02:
And PG&E hasn't pointed to any actual examples in the record.

[01:11:25] Speaker 02:
where the city has somehow stretched the meaning of grandfathering, sought to use grandfathering to serve customers that are different than what it served in 1992.

[01:11:33] Speaker 02:
And there also hasn't been any expansion in use of this statutory grandfathering criteria since the commission first articulated its approach in the Suffolk County cases, which were in the early 2000s.

[01:11:47] Speaker 02:
So I think this concern about an expansion is contrary to the facts on the ground.

[01:11:53] Speaker 02:
And it just ignores first limit that it has to be within the same type of customers.

[01:11:58] Speaker 06:
And in terms of the customers that are being served by San Francisco, can you explain that a bit?

[01:12:03] Speaker 06:
Because there was some talk about it being very unclear, like who we're talking about here.

[01:12:09] Speaker 02:
Right so the the city's description that we've used is it's it's city agencies related entities because there are long time customers like the San San Francisco Unified School District technically a separate.

[01:12:25] Speaker 02:
legal entity outside the city.

[01:12:27] Speaker 02:
Tenants on city property and some private entities providing services in coordination with the city.

[01:12:36] Speaker 02:
So it'd be like a health clinic on city property.

[01:12:38] Speaker 02:
Now that doesn't mean the city can somehow use grandfathering to expand to any customer in the city.

[01:12:46] Speaker 02:
I think Burke clarified that in its rehearing order where it talks about there was some reference in the complaint

[01:12:53] Speaker 02:
to classes of customers used for different California retail purposes, commercial buildings, industrial customers.

[01:13:01] Speaker 02:
And for clarified, we're not saying just because San Francisco served one commercial building in 1992, it can somehow

[01:13:09] Speaker 02:
rely on the grandfathering provision to serve all commercial buildings in the city under this clause because that's not that's not within the same type of customers.

[01:13:19] Speaker 02:
The city served under the 87 agreement on that date that was limited to a much narrower

[01:13:26] Speaker 02:
that we've been able to do.

[01:13:29] Speaker 02:
We've been able to do.

[01:13:33] Speaker 02:
We've been able to do.

[01:13:35] Speaker 02:
We've been able to do.

[01:13:36] Speaker 02:
We've been able to do.

[01:13:37] Speaker 02:
We've been able to do.

[01:13:39] Speaker 02:
We've been able to do.

[01:13:41] Speaker 02:
We've been able to do.

[01:13:43] Speaker 02:
We've been able to do.

[01:13:45] Speaker 02:
We've been able to do.

[01:13:58] Speaker 07:
Miss Goldenberg, you were out of time, but we'll give you three minutes for rebuttal.

[01:14:03] Speaker 01:
I appreciate it, your honor.

[01:14:04] Speaker 01:
Just a couple of points.

[01:14:05] Speaker 01:
You can't provide service to an ultimate consumer on October 24th, 1992, if that ultimate consumer didn't exist on that date or wasn't in San Francisco on that date.

[01:14:14] Speaker 01:
But that is what the class-based approach does.

[01:14:17] Speaker 01:
It is contrary to the language of the statute.

[01:14:19] Speaker 01:
There's no broad category of consumers.

[01:14:21] Speaker 01:
in the statute, it's an ultimate consumer.

[01:14:24] Speaker 01:
And so I think that's especially true because grandfathering provisions are strictly construed against the party trying to invoke them.

[01:14:31] Speaker 01:
That here is San Francisco.

[01:14:32] Speaker 01:
But it's true even without that strict construction principle.

[01:14:35] Speaker 01:
And I point the court in terms of grandfathering to its decision in the BP case that we cited in our brief where the court said, when you have a grandfathering provision that has a temporal limitation, you can't say, well, somebody who didn't meet that temporal limitation maybe could have met that temporal limitation.

[01:14:50] Speaker 01:
if they had been around at that point.

[01:14:52] Speaker 01:
And so we're going to put them in along with the other people who are grandfathered.

[01:14:55] Speaker 01:
That is what this court called imagining a world that never was.

[01:14:59] Speaker 01:
And that is not something that's permissible with a provision like this.

[01:15:02] Speaker 01:
And that's exactly what the class-based approach does.

[01:15:05] Speaker 01:
It imagines a world that never was.

[01:15:07] Speaker 01:
And that's particularly true about the 1987 agreement.

[01:15:10] Speaker 01:
That agreement entered into several years before the statute is not intended to define classes under the statute.

[01:15:16] Speaker 01:
It's hard to know how to define classes under the statute.

[01:15:18] Speaker 06:
What do you think about my question about

[01:15:21] Speaker 06:
to sort of have a better textual link between the theory that San Francisco and FERC have provided, that textually we're talking about the ultimate consumers on this date, on that date the consumers were defined by the 1987 agreement, and the 1987 agreement defines them by class.

[01:15:43] Speaker 01:
So I don't think that's correct, Your Honor.

[01:15:45] Speaker 01:
The 1987 agreement, again, not constructed for this purpose, has broad categories that are also sort of vague, that could be served, could have been served on that date, not that were provided service by San Francisco on that date, which is the language of the statute.

[01:16:01] Speaker 01:
And that is exactly the world that never was that the BP case is talking about because

[01:16:05] Speaker 01:
The 1987 agreement says Riverbank.

[01:16:08] Speaker 01:
There may not even have been a customer served by San Francisco in the Riverbank category.

[01:16:12] Speaker 01:
And that's especially true given that the 1987 agreement was amended several times over its life.

[01:16:16] Speaker 01:
It was constantly shifting.

[01:16:18] Speaker 01:
So I just think it's impossible to say that somehow this particular 1987 agreement

[01:16:22] Speaker 01:
solves the statutory problem in this case.

[01:16:24] Speaker 01:
There's going to be a lot of other cases where there is no 1987 agreement.

[01:16:27] Speaker 01:
This is going to apply in lots of other circumstances.

[01:16:30] Speaker 01:
And so I just think that what happens here under the categories in the 1987 agreement is, and the commission said this itself, this is a J123.

[01:16:38] Speaker 01:
It's from the commission's original order that this court vacated on other grounds in 2022.

[01:16:43] Speaker 01:
This will allow San Francisco to cover every single consumer in the city with grandfathering.

[01:16:48] Speaker 01:
The agency recognized that, and that's what this would do.

[01:16:51] Speaker 07:
The agency recognized that if followed the 1987 agreement that that's what it would allow.

[01:16:57] Speaker 01:
They recognize it with respect to the class based approach in general.

[01:17:00] Speaker 01:
And again, the 1987 agreement categories are very broad.

[01:17:04] Speaker 01:
So individuals operating in coordination with the city is anything that San Francisco wants.

[01:17:09] Speaker 01:
And San Francisco has actually argued in the past that that means customers to whom they're providing power because those people are paying San Francisco and therefore operating in coordination with them.

[01:17:18] Speaker 06:
You're saying theoretically they could do that but what I heard your friend on the other side say is that that hasn't happened and if that were to come up it would be part of your compliance filing where you would say these shouldn't count and then there would be a decision on those.

[01:17:33] Speaker 01:
Well again though I think the class-based approach is what is the problem here.

[01:17:36] Speaker 01:
The class-based approach does allow this to happen and so we could make all the arguments we want afterwards if this court approves the class-based approach but

[01:17:43] Speaker 01:
the class-based approach would allow them to slot these people in to these categories in the future.

[01:17:48] Speaker 01:
And the fact that they haven't done it yet, I think, is not indicative.

[01:17:51] Speaker 01:
Everyone's waiting for this court to decide whether the class-based approach is correct or not.

[01:17:56] Speaker 01:
They have made very, very broad arguments.

[01:17:57] Speaker 01:
They are also trying to push PG&E out in San Francisco in various other ways that are not implicated in this case.

[01:18:04] Speaker 06:
So I don't think we can just- So PG&E has 85% of the electricity market in San Francisco, correct?

[01:18:10] Speaker 06:
It's approximately that, I think, yes.

[01:18:11] Speaker 06:
And what I'm hearing from the other side is that if you were to prevail in this case, all the options that you told us that were available would make PG&E the provider, or it would force San Francisco's cost to go up so much that they would have to give you their retail customers.

[01:18:30] Speaker 01:
And I really disagree with that.

[01:18:31] Speaker 01:
And I love a chance to address it.

[01:18:33] Speaker 01:
So both with respect to the community choice aggregation program and the intervening facilities.

[01:18:38] Speaker 01:
So the community choice aggregation program, as I said, is used all over California by lots of municipalities.

[01:18:43] Speaker 01:
It makes the customer a San Francisco customer with respect to the power generation that San Francisco does in the Hetchhatchee Valley.

[01:18:51] Speaker 01:
Served by who?

[01:18:51] Speaker 01:
I'm sorry.

[01:18:52] Speaker 01:
And they would be served by PG?

[01:18:54] Speaker 01:
Well, they would be served by PG in the same way that they're served by PG&E under grandfathering.

[01:18:57] Speaker 01:
PG&E's distribution facilities would be used to get the power to the customer, and PG&E would get paid for what it does.

[01:19:03] Speaker 01:
But San Francisco would also get paid for what it does.

[01:19:05] Speaker 01:
So they would be a customer of both, actually.

[01:19:07] Speaker 01:
And so that's not any kind of problematic thing.

[01:19:09] Speaker 01:
It is used by San Francisco now, and it's used all over the state.

[01:19:13] Speaker 06:
I'm going to go back to why is PG&E fighting this so hard?

[01:19:15] Speaker 06:
Because what you told me before, I don't see how that harms PG&E if they're making a profit on wholesale versus retail, whatever.

[01:19:23] Speaker 06:
Why are you fighting this?

[01:19:24] Speaker 01:
As I said, it is the rate arbitrage that is the problem.

[01:19:27] Speaker 01:
It's taking over all PG&E customers, essentially, because it's the combination of the broad grandfathering so that everybody's covered by the wholesale distribution tariff.

[01:19:36] Speaker 06:
If it's interpreted to allow broad grandfathering, then you're OK.

[01:19:40] Speaker 01:
Which I think is exactly what the agency has done by pointing to these categories in the 1987 agreement and by the way it's described to the class-based approach in general.

[01:19:47] Speaker 01:
Yes.

[01:19:48] Speaker 07:
Do you believe that the

[01:19:51] Speaker 07:
that FERC misconstrued the 1987 agreement and if so how?

[01:20:00] Speaker 01:
I think FERC correctly referred to the categories that are listed in the 1987 agreement but those categories again are not for this purpose and there's no way to know whether they match up with what class means under the statute because the agency has never explained how one would go about determining what a class is

[01:20:19] Speaker 01:
under the statute, and that's that level of generality problem we were talking about before.

[01:20:22] Speaker 01:
Not surprising, because the word class doesn't appear in the statute, and Congress hasn't given any guidance on.

[01:20:28] Speaker 01:
And I would also point out that the agency really struggled here.

[01:20:30] Speaker 01:
But PG&E agreed to those classes in the 1987 agreement.

[01:20:32] Speaker 01:
Well, PG&E used those categories in the 1987 agreement to generally refer to customers.

[01:20:37] Speaker 01:
You agreed to serve those classes?

[01:20:39] Speaker 01:
Well, again, I think it's not as simple as that because it is a general reference.

[01:20:43] Speaker 01:
Those categories pop up in the agreement, but those people were not necessarily being provided power.

[01:20:49] Speaker 01:
I understand that, but those are categories that PG&E agreed to and agreed to serve.

[01:20:53] Speaker 01:
PG&E would never have agreed to them as classes for purposes of the grandfathering exception because they're vague.

[01:20:59] Speaker 01:
They're amorphous.

[01:20:59] Speaker 01:
PG&E would have defined things differently.

[01:21:01] Speaker 01:
They would have put a lot more care into these categories.

[01:21:03] Speaker 01:
This was a simple agreement between PG&E and San Francisco, which again,

[01:21:06] Speaker 01:
Changed a lot over time, in fact, and so I just think it's extremely unfair to say that this agreement that PG&E entered into before the statute even existed is somehow now going to bind it under this grandfathering exception when it was never intended for that purpose and wasn't written with that in mind in any way, shape or form.

[01:21:24] Speaker 01:
And again, as I said before, the 1987 agreement won't exist in lots and lots and lots of other cases.

[01:21:28] Speaker 05:
Is that the reason that FERC gave in its order?

[01:21:31] Speaker 05:
I'm now not recollect.

[01:21:33] Speaker 05:
I mean, I think the 1987 agreement was pointed to as a reasonable way for figuring out what these classes were.

[01:21:42] Speaker 05:
But I'm not sure that did FERC rely on the 1987 agreement in terms of defining the meaning of ultimate consumer?

[01:21:50] Speaker 01:
Certainly not in terms of defining the meaning of ultimate consumer, no.

[01:21:53] Speaker 01:
FERC

[01:21:53] Speaker 01:
didn't say much at all about what ultimate consumer means.

[01:21:56] Speaker 01:
There's actually almost no statutory interpretation at all.

[01:21:59] Speaker 05:
Maybe there's a chenry problem with them relying on that here at oral argument.

[01:22:03] Speaker 01:
I completely agree.

[01:22:03] Speaker 01:
There is a chenry issue here because I think the agency is not engaged in statutory interpretation in any meaningful sense here.

[01:22:09] Speaker 01:
They just look to the Suffolk County orders, which themselves engage in no statutory interpretation.

[01:22:13] Speaker 01:
The reference to the 1987 agreement came when the agency said, okay, there's a class-based approach.

[01:22:18] Speaker 01:
We've told you that now because that's what Suffolk County says, even though other fur quarters from that area say the opposite, but that's what Suffolk County says.

[01:22:24] Speaker 01:
Now let's talk about what the classes are.

[01:22:26] Speaker 01:
And that's when they looked to the 1987 agreement, although they struggled mightily.

[01:22:30] Speaker 01:
They looked to a lot of other things too.

[01:22:32] Speaker 01:
And only on rehearing did they say, well, we looked to this exhibit to San Francisco's complaint, but maybe that's not quite right, even though those are categories that San Francisco came up with.

[01:22:40] Speaker 01:
So maybe we'll look at this 1987 agreement instead.

[01:22:43] Speaker 01:
And there was yet a third category.

[01:22:44] Speaker 01:
We're going to jettison that.

[01:22:46] Speaker 01:
They're struggling.

[01:22:47] Speaker 01:
They're struggling because there is nothing about classes here.

[01:22:51] Speaker 01:
Congress hasn't said anything about classes.

[01:22:53] Speaker 01:
Congress hasn't explained how classes should be defined.

[01:22:55] Speaker 01:
And that's the issue that they're having here is that they're making it up because it doesn't come from anywhere in the statute.

[01:23:01] Speaker 01:
And it's directly inconsistent with the plain language of the statute.

[01:23:04] Speaker 07:
Thank you.

[01:23:05] Speaker 07:
Thank you, Your Honor.

[01:23:06] Speaker 07:
No matter under advisement.