[00:00:00] Speaker 00:
Case number 24-1270 et al.

[00:00:04] Speaker 00:
City utilities of Springfield, Missouri et al.

[00:00:06] Speaker 00:
Petitioners versus Federal Energy Regulatory Commission.

[00:00:10] Speaker 00:
Ms.

[00:00:10] Speaker 00:
Taylor for the petitioners, Ms.

[00:00:12] Speaker 00:
Banta for the respondent, Ms.

[00:00:14] Speaker 00:
Murphy for the interveners.

[00:00:16] Speaker 05:
Good morning, Council.

[00:00:17] Speaker 00:
Good morning.

[00:00:19] Speaker 05:
Ms.

[00:00:19] Speaker 05:
Taylor, please proceed when you're ready.

[00:00:22] Speaker 01:
Good morning, Your Honors.

[00:00:23] Speaker 01:
Charlotte Taylor from Jones Day for Petitioners.

[00:00:27] Speaker 01:
Southwest Power Pole's Highway Byway methodology was adopted to respond to significant challenges in the previous regional transmission planning process, where facility by facility allocation had led to conflict and stymied efficiency.

[00:00:40] Speaker 01:
Highway Byway establishes a bright line system for allocating costs ex ante.

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The system does not claim to achieve perfect matching of costs and benefits with respect to every single facility, but it is empirically supported and aims to achieve rough justice over time.

[00:00:56] Speaker 07:
Miss Taylor, could you get a little closer to the microphone?

[00:00:59] Speaker 07:
I apologize.

[00:01:01] Speaker 01:
Certainly.

[00:01:01] Speaker 07:
Okay.

[00:01:01] Speaker 07:
Let me, should I raise it as well?

[00:01:03] Speaker 07:
Why don't you?

[00:01:04] Speaker 07:
I'm having a hard time hearing you.

[00:01:07] Speaker 01:
Okay.

[00:01:08] Speaker 01:
Please let me know if it's okay.

[00:01:09] Speaker 07:
Thank you.

[00:01:11] Speaker 01:
Crucially, highway byway contains a safety valve, the RCAR process, to guard against cost benefit imbalances and unfairness.

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FERC has now opted to depart from that carefully crafted methodology on a one-off basis for a handful of facilities.

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FERC admits that this type of midstream reallocation of costs for pre-existing facilities is essentially unprecedented.

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One would therefore expect FERC to carefully explain why it is appropriate to do an about face

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and reallocate the costs for just these four facilities.

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But its explanation for discarding highway byway falls woefully short in at least two respects.

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First, FERC failed to address in any meaningful way the repeated finding in the RCAR process that the sunflower zone is a net beneficiary under the highway-byway methodology.

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That is at least relevant to the question whether costs need to be reallocated for four facilities because of a supposed cost-benefit problem.

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Yet FERC dismissed the RCAR process as procedurally irrelevant, which is inadequate reasoning.

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Second, FERC failed to adequately explain its departure from Order 1000's strong policy favoring ex-ante decision-making and cost allocation.

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All it had to say was that Order 1000 does not prohibit other approaches, but that is unresponsive to the question whether it is appropriate here to change the allocation of costs midstream.

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In any case, even if you accept FERC's decision to toss its highway-byway methodology out the window for these individual facilities, at that point it had to at least attempt to confirm.

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that those who will pay for the facilities actually benefit from them.

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That is a settled requirement of the cost causation principle.

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But as commissioners Christie and C both stated, and as neither FERC nor interveners contest, none of the three capacity, flow, and benefit criteria shed any light on the distribution of benefits from these facilities to different parts of the region.

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FERC's decision to nevertheless allocate the facility's cost region-wide runs headlong into the holding of Illinois Commerce Commission and was arbitrary and capricious.

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FERC attempts to hide behind deference to its expert judgment on technical issues, focusing on the capacity, flow, and benefit criteria.

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But even on FERC's account, all these criteria show is that some electricity flowing over these four facilities has been leaving the sunflower zone.

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Of course, some electricity flowing over these four facilities leaves the zone.

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That is why costs for these facilities are already allocated one third on a regional basis.

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But the question is whether that flow of electricity is so far out of balance that a departure from highway byway is justified and no such showing has been made.

[00:04:03] Speaker 05:
So on the first issue you started with, which I think is the RCAR issue, it's at least conceptually the case that that measurement covers a broader range than a particular facility.

[00:04:18] Speaker 01:
Correct.

[00:04:19] Speaker 01:
The RCAR methodology is by design not attempting to measure facility by facility because when it's the safety valve for a system that was adopted in order to move away from the burdens of facility by facility allocations.

[00:04:35] Speaker 05:
Right.

[00:04:35] Speaker 05:
So it could be the case that even if our car points in one direction, you could have a different result with respect to individual facilities.

[00:04:42] Speaker 01:
It could be.

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But again, I think the commission would have to engage with the our car evidence and explain in a reasoned fashion why where our car is indicating that the sunflower zone is a net beneficiary under the highway by way methodology as a whole.

[00:05:00] Speaker 01:
It's still appropriate to allocate these four facilities regionally.

[00:05:06] Speaker 04:
So can you explain what exactly the RCAR methodology is measuring?

[00:05:11] Speaker 01:
I can give it a try.

[00:05:13] Speaker 01:
So the RCAR methodology, and to go back to 2010, everybody understood when highway byway was adopted that it was sort of going to be, because it was bright line rules, it was going to be sort of a rough justice system.

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It was adopted right on the heels, in fact, of the Illinois Commerce Commission decision.

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And everybody was also aware that there needed to be an effort to make sure that this regional allocation of costs was going to be fair.

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And so our car was the solution to that.

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Our car, it's a safety valve.

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I mean, there was another solution.

[00:05:50] Speaker 04:
But here's the, I'll be more precise, I guess.

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This, when you look at RCAR 3, it labels everybody a net beneficiary.

[00:05:59] Speaker 04:
Correct.

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And in fact, it labels Sunflower a lower than average net beneficiary.

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And this argument would make a lot more sense to me if it were somehow a sort of mathematically precise quantification of costs and benefits where Sunflower is a winner and other zones are already losers.

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And you're now reaching in to shift more costs into the loser zones.

[00:06:22] Speaker 04:
That would seem very unfair, would require more explanation.

[00:06:25] Speaker 04:
But although I don't fully understand what our car is measuring, it's certainly not doing that, right?

[00:06:31] Speaker 04:
You can't have a system where everyone is a net beneficiary if it's measuring sort of who's winning under the highway-byway system.

[00:06:41] Speaker 01:
So everybody is in that beneficiary.

[00:06:44] Speaker 01:
I have a few responses to that.

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One,

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It hasn't always been the case that every zone is an beneficiary.

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So in our CAR 1, which is on SPP's website, there were five zones that were indicated as below the 0.8 threshold.

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But the idea that what the sort of recommendations at that point were, well, let's develop more facilities on an expedited basis in the zones that are not benefiting.

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Because the point is to make sure that every zone

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is getting benefits from the regional transmission system in a way that is at least roughly commensurate with what it's paying.

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So it is possible that everybody can be a net beneficiary because the regional transmission facilities could be benefiting everyone.

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And the costs could be allocated fairly such that they are each paying in proportion to their benefits.

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Now, some are coming out ahead in our CAR 3

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And some are coming out a little bit less ahead, I would say, not behind.

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I would note that two of the petitioners have lower ARCAR3 values than Sunflower, OG&E, and AEP, and are not protesting overall.

[00:08:05] Speaker 01:
And I think to the extent that your question is getting at, I think the

[00:08:12] Speaker 01:
you know, is this just an apples and oranges comparison to look at the our car results that seem to be measuring something quite different than this facility by facility allocation allocation.

[00:08:25] Speaker 01:
I think that's that's partly the point because

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If you go back to before order 890 and then before order 1000, there wasn't this efficient regional transmission planning process where ex ante costs were allocated.

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And in the SPP in particular,

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There was much more, the previous methodology was trying to assign, you know, zonal, one third went regional, went to the region and then two thirds went to different zones on the basis of this flow, a flow measurement called the megawatt mile.

[00:09:04] Speaker 01:
metric that really was trying to measure how much electricity is flowing over a particular facility and where is it going and so therefore who should pay and there was a deliberate decision to move away from that.

[00:09:22] Speaker 01:
Now nobody contests that

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that highway byway is going to be a rough yardstick.

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And I think in every zone, there are going to be some facilities where you could do a measurement such as the one that Sunflower and SPP have advanced here looking at these three criteria.

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and show, well, these facilities actually appear to be exporting more electricity than is going to the zone.

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But there might be other facilities where there is a greater local benefit than the allocation would reflect under highway byway.

[00:10:02] Speaker 01:
And the assumption is that in the aggregate, everybody will win some and lose some, but that the safety valve of the RCAR will make sure that if there's real imbalance and things get out of whack,

[00:10:14] Speaker 01:
then there is a way to try to correct that imbalance.

[00:10:21] Speaker 01:
And so what Sunflower has effectively said is these four facilities are our least favorite facilities in our zone because we feel like we're losing on these four.

[00:10:31] Speaker 01:
We want to reallocate those.

[00:10:32] Speaker 01:
But if everybody did that,

[00:10:34] Speaker 01:
then the highway-byway system would come apart, right?

[00:10:36] Speaker 01:
If you buy an index fund at the end of the year, it's giving you a nice return on investment.

[00:10:43] Speaker 01:
You don't go back to the company that sold it to you and say, well, that's all well and good.

[00:10:48] Speaker 01:
I mean, I'd like to take the four least well-performing stocks out of the index fund so that I can do even better.

[00:10:55] Speaker 01:
And again, Order 1000

[00:10:58] Speaker 01:
indicates that the right path or not just it expresses firm policy that cost should be allocated ex ante in order to foster a transparent and cooperative

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regional planning process.

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That's been working.

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But if everybody can just then come back and say, OK, that's all well and good, but we would really like to take, again, our least favorite facilities and just have a little exception here, then that's going to undo the consensus and the predictability and transparency that Highway Byway has instituted consistent with Order 1000.

[00:11:43] Speaker 01:
I would also just, well, I can reserve the remainder of my time for rebuttal, I guess.

[00:11:50] Speaker 05:
Do my colleagues have any additional questions?

[00:11:54] Speaker ?:
Sure.

[00:12:16] Speaker 03:
Good morning.

[00:12:19] Speaker 03:
Carol Banta for the commission.

[00:12:20] Speaker 03:
I'd like to begin by just refocusing on who filed what because it's important.

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This is not a case where sunflower.

[00:12:29] Speaker 03:
came to the commission asking to reallocate its facilities.

[00:12:33] Speaker 03:
The regional transmission organization, Southwest Power Pool, its tariff, it came to the commission, it went through whatever internal processes it has to decide to make that filing.

[00:12:45] Speaker 03:
And it did have an internal process that it described, going through its cost allocation working group and its regional states committee, which, as a couple of the commissioners noted, had voted by a super majority to bring this filing.

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It comes to the commission.

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with a federal power act section 205 filing to change its own rate.

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And this court's very familiar with section 205 and what that means that the commission did not reach out on its own or on a third party complaint to change a rate because it was unjust and unreasonable.

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It was brought a section 203 or 205 filing.

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which Southwest Power Pool proposed its own rate change and supported its filing with three detailed reports containing engineering analyses, and the commission had a statutory obligation to accept that proposal if it found it was just and reasonable and sufficiently supported.

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And it did.

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And it's just careful.

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It's important to focus on the fact that the regional transmission organization, for its own reasons and through its own internal process, chose to make a filing to change its own rate and put the commission in what this court has several times described as an essentially passive and reactive role to assess the filing that's brought to it.

[00:13:59] Speaker 05:
I think that was pretty critical to the comparing commissioner.

[00:14:05] Speaker 05:
both iterations because they sent a pretty strong signal that, but for the dynamic that you lay out, they might well have reached a different conclusion about it.

[00:14:13] Speaker 03:
That's right.

[00:14:14] Speaker 03:
And again, that was a commissioner concurring in the result.

[00:14:18] Speaker 03:
Of course, the commission by majority had voted on the merits that are laid out in the orders.

[00:14:23] Speaker 03:
But in the first order, one commissioner concurred in the result, heavily influenced by the fact that eight of the 12 states that are in or in some part in the Southwest Power Pool, each of their retail regulatory commissions is represented

[00:14:43] Speaker 03:
on the regional states committee and it voted eight to four to bring this and so in first order one of the commissioners found that very persuasive and in the second in the rehearing order two commissioners found that very persuasive so it is a fact but for our purposes because the commission as a majority did not rely on that fact it's just a background fact to explain

[00:15:07] Speaker 03:
that Southwest Power Pool doesn't just take something that Sunflower handed to it, rubber stamp it, and ship it off to the commission.

[00:15:14] Speaker 03:
It went through an extensive process.

[00:15:16] Speaker 03:
The reason there are three analyses here is because the commission, let me get the order right.

[00:15:25] Speaker 03:
In the brief window of time when the commission had allowed Southwest Power Pool potentially to make this decision itself internally, Sunflower submitted an application with its supporting evidence.

[00:15:37] Speaker 03:
And Southwest Power Pool began its process where its internal staff looked at that, ran their own analysis, and found essentially the same results.

[00:15:46] Speaker 03:
And then in 2024, after the commission had decided that Southwest Power Pool can't make these decisions by itself.

[00:15:54] Speaker 03:
That's why we were all here last year.

[00:15:57] Speaker 03:
Southwest Power Pool updated the analysis.

[00:16:00] Speaker 03:
So there's a third analysis.

[00:16:01] Speaker 03:
So all of these are in the 2024 filing.

[00:16:04] Speaker 03:
It has their updated analysis and the original sunflower analysis.

[00:16:10] Speaker 03:
So it has analyses from 2022, 2023, and 2024.

[00:16:15] Speaker 03:
that it submitted to the commission in support of its section 205 filing.

[00:16:19] Speaker 04:
Do you know, I agree this is a background fact, but do you know why, is there an explanation somewhere of why the state committee supported this?

[00:16:30] Speaker 04:
We could find the long explanation from the four who dissented, but not the, do you know why they supported it?

[00:16:37] Speaker 03:
Um all I have seen and and I believe if it's not a record, we may have given a site for it in our brief is just notes from the meeting that say they held the vote and here's how they voted and at least which eight did and which four didn't but as far as the reason, I think one thing we could say is that once Sunflower initiated its process within SPP, SPP staff did the report which is, you know, attached to this

[00:17:04] Speaker 03:
136.

[00:17:06] Speaker 03:
And the internal staff recommended it.

[00:17:08] Speaker 03:
So presumably the state's committee was to some extent persuaded either by the staff recommendation or by the analysis that the staff put forward in support of its recommendation, but it was recommended internally.

[00:17:21] Speaker 04:
So Miss Taylor and at least one of the commissioners also emphasize this concern about if you start doing this for individual facilities, eventually you'll sort of unravel or undermine the predictability of highway by way.

[00:17:35] Speaker 04:
And what is the commission's response to that concern?

[00:17:39] Speaker 03:
Well, I think it goes back to I mean, Southwest has no interest in undoing its own process.

[00:17:45] Speaker 03:
So what does the what does Southwest choose to bring to the commission in the first place?

[00:17:50] Speaker 03:
And Southwest went through what appears to be a rigorous process internally before it made that determination.

[00:17:56] Speaker 03:
It had these criteria, which it did initially develop for its own internal use.

[00:18:00] Speaker 03:
And then it made its case to the commission using those criteria.

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And those criteria had a logic to them that Southwest Power Pool explained.

[00:18:09] Speaker 03:
The capacity criterion, I think, as Southwest Power Pool designed it, was intended to be a narrowing.

[00:18:17] Speaker 03:
You don't even meet the capacity.

[00:18:19] Speaker 03:
I believe they said, and I'm sorry, I don't know if I have the page, but the only three of the 18 zones could even meet that criterion.

[00:18:28] Speaker 03:
And that's before you get to the flow and then the benefit.

[00:18:31] Speaker 03:
So it had some internal limiting principles for what it was going to choose to bring to the commission.

[00:18:38] Speaker 03:
Again, that's internal.

[00:18:41] Speaker 03:
And the commission hasn't spoken to whether SPP is doing it correctly internally.

[00:18:47] Speaker 03:
The time it weighed in on the internal process was when Southwest was going to make this decision itself through the board, and the commission rejected that.

[00:18:54] Speaker 03:
But as far as what steps it went through or what any transmission organization goes through before they ultimately bring a Section 205 filing to the commission, that's more an internal matter and conflicts between the various stakeholders and the members within that organization.

[00:19:09] Speaker 03:
But when Southwest PowerPool brings its Section 205 filing to the commission, the commission treats it like any utility

[00:19:15] Speaker 03:
you know, tariff utility that brings it's a rate filing to change its rates.

[00:19:20] Speaker 03:
The commission doesn't really look into how you decided, you know, if it's an individual utility, you know, whether they went through their board of directors or how they made that decision.

[00:19:31] Speaker 04:
Okay.

[00:19:31] Speaker 04:
And on the argument, what's your, do you have a specific response to that?

[00:19:36] Speaker 03:
Well, it's it's the same.

[00:19:37] Speaker 03:
It's the same argument in addition to it.

[00:19:39] Speaker 03:
Um

[00:19:43] Speaker 03:
but both of your honors, I think we're going to about what the RCAR does and doesn't prove, but from the commission's perspective, that's internal.

[00:19:50] Speaker 03:
The commission, the RCAR process neither requires Southwest Power Pool to make some particular filing at the end of or as a result of that process, nor does it limit

[00:20:05] Speaker 03:
Southwest Power Pool's right to make a 205 filing.

[00:20:09] Speaker 03:
So it's an internal process that's useful for Southwest's own reasons, but it doesn't really speak to whether Southwest had the right or the reason to bring this filing to the commission.

[00:20:22] Speaker 03:
And once it brings a section 205 filing to the commission, again, the commission

[00:20:27] Speaker 03:
treats that the way it has to treat a section 205 filing.

[00:20:30] Speaker 03:
And because the RCAR is a more general zonal thing, it doesn't really speak to the issue of these four facilities that Southwest brought to the commission.

[00:20:41] Speaker 03:
So it just doesn't have much to say to this case, even if it means a great deal to the parties within Southwest Power Pool who are tussling over these issues.

[00:20:55] Speaker 03:
So I did address that it couldn't theoretically be a rezone because the criteria Southwest has imposed on itself for when it would do this.

[00:21:03] Speaker 03:
But I want to talk a little bit about the specific four facilities.

[00:21:07] Speaker 03:
And as we noted in our brief, I think we even noted it in the case last year, Southwest represented to the commission that it doesn't anticipate any more of these filings.

[00:21:18] Speaker 03:
it didn't necessarily explain the reason that it probably has to do with the criteria.

[00:21:23] Speaker 03:
That's at J 38 and it's filing to the commission.

[00:21:25] Speaker 03:
It said we don't expect any more of these.

[00:21:28] Speaker 03:
So there's something about the southwest has found about the sunflowers and about these four facilities in particular.

[00:21:36] Speaker 03:
Um so I'm going to talk about for a second about the flow criterion and what they proved under the flow criterion because I do think it's important to note that it's not just that these facilities are incidentally

[00:21:48] Speaker 03:
incidentally, I think the petitioners at some point use the word incident incidentally um touched by this flow and so I want to point to a couple.

[00:21:58] Speaker 03:
First of all, um

[00:22:01] Speaker 03:
If we look at J824, which is in the filing, and I would also give you citations to J31 and J8144.

[00:22:10] Speaker 03:
There are several places this appeared because there are redundancies among these three analyses.

[00:22:15] Speaker 03:
The facilities at issue, first of all, the way the flow test works, it's something that Southwest is familiar with.

[00:22:22] Speaker 03:
The commission is familiar with it.

[00:22:23] Speaker 03:
It's a form of, I think, computer modeling.

[00:22:26] Speaker 03:
where you take any given facility and you model how the whole system interacts with that facility, and you add another megawatt to some generation resource somewhere, and you see where it flows through the system.

[00:22:39] Speaker 03:
There are experts in the commission who understand this.

[00:22:42] Speaker 03:
They try to explain it to me.

[00:22:44] Speaker 03:
That's about as far as I can get with it.

[00:22:45] Speaker 03:
I think it's computer modeling, but it is meaningful.

[00:22:48] Speaker 03:
It does tell you what a facility is doing when the system is running, for lack of a better word.

[00:22:53] Speaker 03:
But if we look at JA24 and the four facilities, or it looks like just kind of a set of facilities that are grouped together here, the percentages, the results of the test,

[00:23:04] Speaker 03:
The criteria in Southwest itself was just being above 70%, but the numbers we're getting are 73%, 83%.

[00:23:12] Speaker 03:
One of the facilities, which is a transformer that moves between the extra high voltage, 345 kilovolt, and the lower high voltage, 115, 95.8% of its use.

[00:23:26] Speaker 03:
is for the unaffiliated generation that is flowing out of this zone to other zones.

[00:23:33] Speaker 03:
So basically this is telling you that these by way facilities are operating more like on ramps.

[00:23:39] Speaker 03:
to the highway facilities.

[00:23:42] Speaker 03:
Because these numbers above 70% are basically what the highway-byway split, although it was decided on voltage.

[00:23:48] Speaker 03:
The proof Southwest put in for that was that the highway facilities were running at 65% to 85%, generally averaging out to about 70% or 78% was the number.

[00:24:00] Speaker 03:
And the zonal, the byway facilities were, on average, operating about 28%.

[00:24:08] Speaker 03:
So what this flow criterion is showing with these facilities, they're doing 73, 83, 95.

[00:24:12] Speaker 03:
They're acting like highway facilities because they're working with the highway facilities to move this excess generation elsewhere in the zone.

[00:24:23] Speaker 03:
I don't know that I had anything else from the judges, from your honor's earlier questions, but.

[00:24:34] Speaker 05:
Okay, thank you, Ms.

[00:24:36] Speaker ?:
Banta.

[00:24:45] Speaker 02:
Good morning, your honors and may I please the court Erin Murphy on behalf of the interveners in support of the commission.

[00:24:58] Speaker 02:
I just want to go over kind of three quick points.

[00:25:00] Speaker 02:
The first is the basic premise of the petitioners argument here is that we're trying to jettison the

[00:25:06] Speaker 02:
highway-byway system for purposes of these facilities, and that's really not what's going on at all.

[00:25:11] Speaker 02:
I mean, all of this is premised on using the same basic framework of the highway-byway system, which is premised on the idea that if you're operating more like a highway, your costs should be allocated to the whole region.

[00:25:24] Speaker 02:
If you're operating more like the byway, it should be $67.33.

[00:25:28] Speaker 02:
That full framework is kept in place.

[00:25:30] Speaker 02:
All that's changed here is looking at a different criteria for establishing who's a highway.

[00:25:37] Speaker 02:
Normally the default rule is you can figure that out by looking at voltage, but here the sunflower brought to SPP and SPP brought to the commission evidence that these criteria showed that for these particular facilities, they actually are operating more like highways.

[00:25:52] Speaker 02:
And at that point, all that happened here is the commission said, OK, you can treat them like highways.

[00:25:57] Speaker 02:
Allocate their costs the same way the highway byway system always has for a highway instead of a byway.

[00:26:04] Speaker 02:
So this really isn't at all undoing the way that framework works.

[00:26:09] Speaker 02:
It's just saying, while voltage is usually the right proxy, sometimes a different proxy is going to get you to a different result.

[00:26:16] Speaker 02:
And that goes to my second point, which is FERC didn't just say and SPP didn't just demonstrate that these facilities are providing some benefits to the region.

[00:26:27] Speaker 02:
What FERC concluded after looking at the evidence is that they are primarily, that's at

[00:26:31] Speaker 02:
449 of the record, mainly 459 of the record, supporting the region, not just the zone.

[00:26:38] Speaker 02:
And that's based on some of the criteria you just heard the commission talk about, that evidence, you've got a region that is itself producing way more energy than that region needs.

[00:26:49] Speaker 02:
The generation, that's the capacity criteria.

[00:26:52] Speaker 02:
Then you have these facilities operating three times, the flow on them is three times as high.

[00:26:57] Speaker 02:
as on the average byway facility for that unaffiliated load that's not being used in the zone.

[00:27:04] Speaker 02:
And then you have that benefit criteria where the threshold idea under the criteria SPP had set up was that it should be at least a 50% greater benefit to the region than the zone.

[00:27:15] Speaker 02:
And for these facilities, it's 300, 400%.

[00:27:19] Speaker 02:
greater for the region than for the zone itself.

[00:27:22] Speaker 02:
So we've got facilities here that aren't just doing a little bit more work for the zone.

[00:27:28] Speaker 02:
They are primarily, mainly serving the zone in exactly the way that the highway byway system is designed to be looking for.

[00:27:36] Speaker 02:
Do you have a system that's operating more as a highway?

[00:27:40] Speaker 02:
And so you're not jettisoning the framework.

[00:27:43] Speaker 02:
You've got the evidence to show that these facilities are different.

[00:27:46] Speaker 02:
And then the last thing I just want to say is a few words about the RCAR.

[00:27:50] Speaker 02:
So what that is designed to do is measure the costs that the particular zone is paying in as compared to the benefits that it's getting from the entire system.

[00:28:01] Speaker 02:
And what it does is it looks at that every six years for each zone.

[00:28:06] Speaker 02:
But it looks at it at the zone level.

[00:28:08] Speaker 02:
And there are many facilities within a zone.

[00:28:10] Speaker 02:
And so what it tells you is, sure, the sunflower zone, as your honor pointed out, like basically all the zones, is a net beneficiary.

[00:28:18] Speaker 02:
But that doesn't tell you.

[00:28:19] Speaker 02:
There's dozens of facilities within the zone.

[00:28:23] Speaker 02:
And that doesn't mean you might not have some facilities where you're really having a cost causation problem.

[00:28:28] Speaker 02:
And as the commission explained in his orders, the RCAR process just isn't designed to look to that at all.

[00:28:34] Speaker 02:
It's not looking at the facility level.

[00:28:36] Speaker 02:
So it doesn't provide data about the facility level.

[00:28:39] Speaker 02:
It's at the zone level.

[00:28:40] Speaker 02:
It's every six years.

[00:28:42] Speaker 02:
It's a safety valve.

[00:28:43] Speaker 02:
a safety valve never said and never said in its that it's the only way that you could ever go about looking to see if there might be some issues with how highway is working and I don't think it could have consistent with this court's precedent because this court said in the case that can't

[00:29:01] Speaker 02:
essentially kind of confine the SVP or RTOs and ISOs generally in a way that means they can't come with a 205 petition and say, we've got a cost causation problem here that needs to be addressed as to particular facilities, not withstanding our ex ante, you know, cost allocation principles.

[00:29:21] Speaker 02:
Unless your honors have any questions, I'm happy to.

[00:29:24] Speaker 04:
Do you understand what goes into the benefits bucket of our car?

[00:29:28] Speaker 04:
Because here's one version of it that would have made sense to me, is the benefit is we're going to try to quantify, and I know this would be very hard, how much energy your zone is getting.

[00:29:39] Speaker 04:
And the cost is how much you're paying.

[00:29:41] Speaker 04:
But that doesn't seem like what they are measuring.

[00:29:44] Speaker 04:
So do you know what's going in the benefit?

[00:29:46] Speaker 02:
I think it's a little bit more focused on are your costs going down by virtue of the benefits you're getting from being connected to the rest of the system.

[00:29:56] Speaker 02:
So if you think about it, if you're not connected, you've got to do it all yourself.

[00:30:01] Speaker 02:
If you are connected, then you want to ask, are these facilities helping you?

[00:30:05] Speaker 02:
Are you getting some savings out of being connected to the broader region?

[00:30:11] Speaker 02:
And that's why when if you think about this particular question, it's kind of the converse of,

[00:30:16] Speaker 02:
Well, our facilities are really, you know, there's a lot of transmission happening in this zone that you wouldn't need if you weren't part of the broader interconnected SVP region where, you know, sunflowers generating a lot of energy, this wind energy that's being generated is not

[00:30:33] Speaker 02:
being used principally or even you know kind of close to predominantly in the sunflower region the bulk of it is going elsewhere so that's a benefit that's going out and then you look at you know is the transmission cost kind of coming out fairly in terms of sunflower being stuck paying all the transmission costs to get that energy out that it's you know it's it's you kind of look at both pieces the benefits in terms of the energy you're generating and the benefits in terms of

[00:31:00] Speaker 02:
the system and who's doing the bulk of the transmission work.

[00:31:04] Speaker 05:
Thank you.

[00:31:06] Speaker 05:
Thank you, Council.

[00:31:07] Speaker 05:
Thank you.

[00:31:11] Speaker 05:
Ms.

[00:31:11] Speaker 05:
Taylor will give you the time that you had left.

[00:31:14] Speaker 01:
Thank you very much.

[00:31:31] Speaker 01:
Just to pick up where Ms.

[00:31:34] Speaker 01:
Murphy left off with Judge Garcia's question, I do actually have some sample criteria that are the benefits that are measured in the RCAR process.

[00:31:43] Speaker 01:
That includes things like avoiding having to build further reliability projects, mitigation of transmission, outage costs.

[00:31:53] Speaker 01:
benefits from meeting public policy goals, reduce costs from extreme events like winter storms and things like that.

[00:32:01] Speaker 01:
So they focus on overall regional benefits from the regional transmission system.

[00:32:08] Speaker 01:
And again, to speak more broadly to the RCAR, there's

[00:32:16] Speaker 01:
We don't dispute that it is measuring something different than the particular extrazonal flows over these four facilities.

[00:32:28] Speaker 01:
But our point is that if FERC is going to depart from the highway-by-way methodology, it needs to explain why the RCAR methodology, which shows a net benefit, is overcome by this

[00:32:46] Speaker 01:
you know, the particular cost imbalance that is asserted with respect to these four facilities.

[00:32:55] Speaker 01:
To put that in a larger, I think that fits into the section 205 arguments that have been made, which is that because this is a section 205 filing, all this court should do is ask narrowly whether these four facilities, whether this allocation would be just and reasonable.

[00:33:14] Speaker 01:
But that doesn't address the background administrative law requirement that if you're changing your position, you demonstrate awareness that you're changing your position.

[00:33:23] Speaker 01:
and sufficiently explain the reasons why.

[00:33:28] Speaker 01:
Just to give you a citation, there's an Advanced Energy United from a couple of years ago, 82F41095 at 1116 to 1117.

[00:33:40] Speaker 01:
That was a section 205 proceeding where this court rejected a filing because the commission was changing position without adequately accounting for what it had done before.

[00:33:50] Speaker 04:
I feel like one of the things FERC would say is we're not changing our position.

[00:33:54] Speaker 04:
Our position before was that we let them implement highway by way and now we're letting them make an exception.

[00:34:01] Speaker 04:
But it's sort of, it's not our position, it's SPP's position.

[00:34:05] Speaker 01:
Well, so it is changing its position certainly from the Order 1000 principle that ex ante cost allocation is beneficial.

[00:34:15] Speaker 01:
Nobody has come up with a single example in all the briefing of certainly of a Section 205 proceeding being used to allocate costs midstream.

[00:34:26] Speaker 01:
And we would say really for any, whether Section 205 or Section 206,

[00:34:31] Speaker 01:
But I do think that if Sunflower had come in and under section 206 and carried the burden to say that this is unjust and unreasonable as applied to them with respect to these four facilities, then that might frame the issues in such a way that it would be appropriate.

[00:34:52] Speaker 01:
I mean, I don't want to commit that we would agree with that.

[00:34:56] Speaker 01:
But then I think

[00:34:57] Speaker 01:
That's the type of potential reallocation that was, for example, contemplated in the coalition of meso-transmission customers, that under section 206, if you really believe that there is an unjust and unreasonable result being reached, that you can then bring an as-applied challenge.

[00:35:17] Speaker 01:
But SPP is sort of arguing, just ignore the context.

[00:35:23] Speaker 01:
We're the RTO.

[00:35:27] Speaker 01:
We're telling you, we think this is just unreasonable.

[00:35:29] Speaker 01:
Don't look at what we've done in the past.

[00:35:31] Speaker 01:
And then FERC is saying, don't look at what we've said in the past.

[00:35:34] Speaker 01:
Don't look at our approval of the highway-byway methodology.

[00:35:38] Speaker 01:
We're just focused very narrowly.

[00:35:39] Speaker 01:
And there's no precedent that we are aware of for doing that under Section 205.

[00:35:44] Speaker 01:
But even if there were, they would have to adequately explain their change in position.

[00:35:48] Speaker 01:
If I could, I would like to also just touch on this idea that because of the stakeholder process and the role of the regional state committee, there's somehow deference that is appropriate.

[00:36:03] Speaker 01:
Section 205 requires the commission as a statutory matter to determine that the filed tariff is just and reasonable.

[00:36:11] Speaker 01:
We're not aware of any case that under which this court has approved the commission giving deference without independently exercising its judgment as to whether a particular cost or tariff is just and reasonable.

[00:36:25] Speaker 01:
So

[00:36:25] Speaker 01:
We do think it's highly significant that two commissioners believe that this cost reallocation was problematic in large part because the three criteria do not identify the distribution of benefits.

[00:36:40] Speaker 01:
There's no showing that

[00:36:42] Speaker 01:
You know, North Dakota is benefiting equally as Oklahoma from this particular, you know, transformer that's located in Kansas.

[00:36:51] Speaker 01:
And yet they, you know, the part of their reasoning that I would disagree with is that they went along with it anyway because of the regional state committee's vote.

[00:36:58] Speaker 01:
Because again, stakeholder process is all well and good, but there's a statutory non-delegable obligation that the commission has.

[00:37:05] Speaker 01:
Um, and you know, it could lead to real process problems.

[00:37:09] Speaker 01:
If all the state committee has to do is to vote 11 one to put all of the costs on, you know, uh, Oklahoma, then, uh, you know, there's no way that that could be a precedent that that FERC would defer to the court has no further questions.

[00:37:23] Speaker 01:
Thank you very much.

[00:37:24] Speaker 05:
Thank you, counsel.

[00:37:25] Speaker 05:
Thank you to all counsel.

[00:37:26] Speaker 05:
We'll take this case under submission.