USCA4 Appeal: 23-1192 Doc: 67 Filed: 03/04/2025 Pg: 1 of 15
UNPUBLISHED
UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT
No. 23-1192
APPALACHIAN POWER COMPANY
Petitioner
BLUE RIDGE POWER AGENCY
Intervenor
v.
FEDERAL ENERGY REGULATORY COMMISSION,
Respondent.
On Petition for Review of an Order of the Federal Energy Regulatory Commission. (21- 97-000)
Argued: September 26, 2024 Decided: March 4, 2025
Before NIEMEYER, Circuit Judge, FLOYD, Senior Circuit Judge, and Kenneth D. BELL, United States District Judge for the Western District of North Carolina, sitting by designation.
Petition for review denied by unpublished per curiam opinion.
ARGUED: William Keyser, III, STEPTOE LLP, Washington, D.C., for Petitioner. Carol J. Banta, FEDERAL ENERGY REGULATORY COMMISSION, Washington, D.C., for Respondent. ON BRIEF: Karen Bruni, Megan McDowell, STEPTOE & JOHNSON USCA4 Appeal: 23-1192 Doc: 67 Filed: 03/04/2025 Pg: 2 of 15
LLP, Washington, D.C.; Jessica A. Cano, Assistant General Counsel, AMERICAN ELECTRIC POWER SERVICE CORPORATION, Columbus, Ohio, for Petitioner. Matthew R. Christiansen, General Counsel, Robert H. Solomon, Solicitor, FEDERAL ENERGY REGULATORY COMMISSION, Washington, D.C., for Respondent.
Unpublished opinions are not binding precedent in this circuit.
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PER CURIAM:
This case concerns the interpretation of contracts between member utilities of the
Blue Ridge Power Agency and Petitioner Appalachian Power Company (APCO). The
Federal Energy Regulatory Commission (FERC) issued an order declaring that Blue Ridge
members may install battery storage, energize the batteries with electricity purchased from
APCO, and discharge that electricity during periods of peak demand without violating
those agreements. APCO filed a petition for review challenging the Commission’s
decision. For the reasons we explain below, we deny the petition.
I.
Blue Ridge, appearing as intervenor aligned with FERC, is a non-profit entity that
negotiates wholesale power purchase contracts on behalf of its members and monitors
performance of those contracts. In 2017, APCO and three Blue Ridge members—Craig-
Botetourt Electric Cooperative and the cities of Radford and Salem, Virginia (collectively,
the “Members”)—executed three respective agreements for “Full Requirements Electric
Service.” J.A. 352. Under these agreements, APCO sells to the Members all electricity
required to meet their end-use customers’ needs. In return, the Members purchase all the
electricity they require from APCO and no one else. These three agreements contained
substantially identical language and did not expressly authorize or forbid installation of
battery storage technology (BST). This technology is aptly named: it consists of large-
scale batteries capable of storing energy and discharging it to the electrical grid on demand.
A fourth agreement for APCO to supply wholesale electricity to Virginia Polytechnic
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Institute and State University (Virginia Tech) in Blacksburg, Virginia, contained
provisions limiting BST installation. The Virginia Tech Agreement was executed in 2019.
Relevant to the present appeal, each of these contracts also contained a choice of law clause
providing for its interpretation under Virginia law.
In 2021, Blue Ridge informed APCO that its members intended to install BST to
manage electrical loads at times of peak demand. These batteries would be energized using
power purchased from APCO during off-peak times, when electricity costs less. The
Members intended to then discharge electricity to meet customer demand during peak
times, reducing the amount they must purchase from APCO at higher rates. APCO sent a
response to Blue Ridge indicating it did not believe the agreements permitted the
implementation of BST as contemplated by the Members.
Blue Ridge filed a petition seeking a declaratory judgment with the Commission
shortly thereafter. See 18 C.F.R. § 385.207(a)(2) (permitting party to file petition for
declaratory order); see also 5 U.S.C. § 554(e) (permitting FERC to issue “declaratory order
to terminate a controversy or remove uncertainty”). Blue Ridge asked the Commission to
declare that the agreements were not a barrier to installing BST and using it to manage
electricity demand. APCO filed a response arguing the agreements foreclosed BST
installation and its use in the manner the Members intended, and it asked the Commission
to issue a judgment declaring accordingly.
On October 21, 2022, FERC issued an order finding the Members’ agreements with
APCO permitted installation of BST. Specifically, the Commission concluded that “[t]he
use of battery storage does not affect the parties’ obligations under the Agreements”
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because the Members would have all their electricity needs met by APCO—including the
power to energize the batteries—and the agreements contemplated that the quantity of
electricity the Members purchased would vary from day to day. Blue Ridge Power Agency,
181 FERC ¶ 61,048 at PP 29–36 (2022). Further, the Commission noted that the
agreements prohibited the installation of “generation resources,” but reasoned that “battery
storage cannot be defined as a generation resource” under the agreements “because a
battery can only store Energy for later use, but cannot produce energy.” Id. P 29 (citing N.
Carolina E. Mun. Power Agency (NCEMPA), 172 FERC ¶ 61,249 at P 37 (2020)
(concluding battery storage is not “inherently a form of generation” when charged with
electricity from wholesale seller)). The Commission also found that installation and use of
battery storage would not violate prohibitions on “newly constructed or purchased
generation resources” or entering “new power purchase agreements.” Id. P 36.
The Commission reached a different conclusion with respect to APCO’s contract
with Virginia Tech. It pointed to that agreement’s limitation on construction of “New
Generation” and the fact that the agreement expressly listed “battery storage” as a form of
New Generation. Id. PP 37–38. Further, the Virginia Tech agreement precluded the use
of BST for the purpose of demand reduction, and Blue Ridge intended to use it for that
purpose. The Commission disagreed with Blue Ridge’s arguments that the Virginia Tech
agreements permitted installation of greater BST capacity than its express terms.
Therefore, it concluded that Virginia Tech lacked “broad and uncapped” authority to install
BST, and any installation of that technology would be subject to the capacity limitations
and educational-purpose requirements contained in the contract. Id. P 44.
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APCO timely appeals. It primarily focuses its arguments on the Commission’s
interpretation of the agreements with the Members. It argues that the agency decision
should be vacated because the Commission failed to cite to Virginia law, would have
reached a different result if it had, and substituted a policy judgment for a legal one.
Finally, it contends the Commission erred in failing to ensure rates would be “just and
reasonable” if the Members installed the proposed BST. No party appeals the
Commission’s order with respect to the Virginia Tech agreement.
II.
An agency action, like the Commission’s order, is reviewed under the familiar
“arbitrary and capricious” standard. Sierra Club v. State Water Control Bd., 64 F.4th 187,
194 (4th Cir. 2023). “Agency action is arbitrary and capricious if the agency relies on
factors that Congress did not intend for it to consider, entirely ignores important aspects of
the problem, explains its decision in a manner contrary to the evidence before it, or reaches
a decision that is so implausible that it cannot be ascribed to a difference in view.” Friends
of Buckingham v. State Air Pollution Control Bd., 947 F.3d 68, 80 (4th Cir. 2020) (quoting
Appalachian Voices v. State Water Control Bd., 912 F.3d 746, 753 (4th Cir. 2019)). In
other words, we “must ensure that the agency has examined the relevant data and
articulated a satisfactory explanation for its action.” Mountain Valley Pipeline, LLC v. N.
Carolina Dep’t of Envtl. Quality, 990 F.3d 818, 826 (4th Cir. 2021) (quoting Defs. of
Wildlife v. Dep’t of the Interior, 931 F.3d 339, 345 (4th Cir. 2019)).
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This case also concerns the Commission’s interpretation of a contract.
“[I]nterpretation of [a] contract’s language” is “a question of law clearly within the
competence of courts,” so our review is de novo. Burgin v. Off. Personnel Mgmt., 120
F.3d 494, 497–98 (4th Cir. 1997) (citing 5 U.S.C. § 706).
A.
We start with the interpretation of the agreements. The Commission determined the
Members were not constrained from installing BST and discharging the batteries at times
of peak customer demand. It began by emphasizing the agreements’ exclusive focus on
“generation” and its requirements that APCO serve as the exclusive electricity wholesaler
for the Members to meet demand. Blue Ridge, 181 FERC ¶ 61,048 at P 28. The agreements
expressly prohibited the Members from using “newly constructed or purchased generation
resources”—in other words, the Members could not build their own power plants or
purchase electricity from any entity besides APCO. Id. P 29.
The Commission determined that battery storage would not affect the parties’
obligations under the agreements because batteries “can only store Energy for later use,
but cannot produce Energy.” Id. (citing NCEMPA, 172 FERC ¶ 61,249 at P 37). To further
support its decision, FERC reasoned the agreements acknowledged electricity demand (and
how much Members must purchase from APCO) would fluctuate from day to day. The
agreements also did not fix minimum purchase or usage requirements. Therefore, the
Commission found that while the agreements might change the timing of the Members’
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use of electricity purchased from APCO, it would not change the fact the members were
purchasing electricity exclusively from APCO as the contracts require. Id. PP 30–31.
The Commission also rejected APCO’s argument that the Members were precluded
from installing BST because the agreements did not expressly allow them to do so. Again,
the Commission pointed out the agreements’ language only requires the Members “to take
their full requirements service from APCO and to pay a charge based on those
requirements.” Id. P 31. APCO also argued that the use of the batteries to reduce peak
demand (also referred to in the industry as “peak shaving”) was not expressly permitted in
the agreements, and therefore prohibited. Id. P 32. But the Commission rejected that
argument too, noting that the agreements did not proscribe that use of batteries, and the
terms in fact contemplated fluctuating demand without limitation as to how the Members
might effectuate that fluctuation. Id. P 33. Accordingly, the Commission determined BST
installation would not violate the agreements.
The Commission cited cases in the federal courts discussing fundamental contract
principles and constructive canons to support its order. See id. PP 31–33 & nn. 53, 57 ((“a
company is not ‘entitled to be relieved of its improvident bargain’”) (quoting Fed. Power
Comm’n v. Sierra Pac. Power Co., 350 U.S. 348, 355 (1956)) and (“the canon expressio
unius est exclusio alterius [the expression of one thing is the exclusion of the other]”
applies only where items are of an associated group or series) (quoting Barnhart v. Peabody
Coal Co., 537 U.S. 149, 168 (2003))). APCO argues this was error because the agreements
called for interpretation under Virginia law.
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As we explain below, APCO does not demonstrate that Virginia law warrants a
result different than the Commission’s. Its order declaring BST installation would not
violate the agreements was therefore not “arbitrary, capricious, an abuse of discretion, or
otherwise not in accordance with law.” 5 U.S.C. § 706(2)(A). With that said, the
Commission has authority to issue a declaratory order interpreting a contract between
private parties (no party argues it lacks that authority here) and it is good practice, at a
minimum, to honor choice of law clauses incorporated in an agreement. We now address
APCO’s arguments.
APCO contends that the agreements’ plain terms foreclose BST installation. It cites
the language stating APCO “shall sell and deliver” and the Members “shall exclusively
receive and purchase Full Requirements Electric Service sufficient to serve Customer’s
Retail Load.” Pet. Br. at 22. APCO then refers to provisions requiring it be “solely
responsible for satisfying all requirements and paying all costs incurred or to be incurred
to provide Full Requirements Service” and the Members “pay for such Full Requirements
Electric Service[.]” Id. at 23. With this language in the background, APCO then asserts
the compensation structure of the agreements—measuring peak monthly use and allocating
costs accordingly—does not allow BST because using it to reduce the Members’ peak
electrical loads would “allow [the Members] to avoid paying for the full cost of the
generation needed to serve them.” Id. at 23–24.
It does not follow that the exclusive buyer-seller relationship and compensation
terms proscribe the installation of battery technology here. APCO argues we cannot ignore
that compensation is calculated by reference to peak demand and BST’s intended use to
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reduce peak demand because “a court should read the contract as a single document and
give meaning to every clause where possible.” Id. at 24 (citing Berry v. Klinger, 300 S.E.2d
792, 796 (Va. 1983)). In other words, APCO asserts that BST installation is inconsistent
with the agreements’ express intent for an exclusive supply-demand agreement. But the
problem with that argument is that nothing about BST installation changes the fact that the
Members will buy all the power needed to meet demand from APCO. Whether current
flows directly to end-use customers or first makes a figurative “stop” in battery storage, it
remains true that the Members purchase that electricity from APCO. Even if the Members
strategically discharge the batteries to reduce load at the time load is measured for purposes
of compensation, APCO is the original source of the electricity as the agreements require.
APCO also looks to the expressio unius canon to support its preferred readings of
the agreements. Under Virginia law, that maxim “provides that the mention of a specific
item . . . implies that other omitted items were not intended to be included[.]” Blake Constr.
Co./Poole & Kent v. Upper Occoquan Sewage Auth., 587 S.E.2d 711, 718 (Va. 2003)
(quoting Smith Mountain Lake Yacht Club, Inc. v. Ramaker, 542 S.E.2d 392, 395 (Va.
2001)). The contracts require APCO to provide electric service “regardless of changes in
Retail Load arising from daily fluctuations, increased or decreased usage, extreme weather
and/or similar events.” Pet. Br. at 28. APCO argues “systematic use of storage” to reduce
electricity load is “not analogous” to any of the named items in this list and so it is
prohibited. Pet. Br. at 28.
The expressio unius canon—which is nonbinding under Virginia law, see Turner v.
Commonwealth, 758 S.E.2d 81, 86 (Va. Ct. App. 2014)—does not require or even point
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towards a different result than the one the Commission reached. Nothing in the agreement
suggests that this list comprehensively sets out the only permissible types of “fluctuations”
in peak demand—indeed, the items listed are mostly expressed in already broad terms:
“daily fluctuations, increased or decreased usage,” and “similar events.” Pet. Br. at 28. We
therefore decline to vacate the Commission’s decision based upon this nonbinding
interpretive canon.
APCO also argues that the Commission improperly looked beyond the four corners
of the agreements by referencing its NCEMPA decision, 172 FERC ¶ 61,249 (2020) (BST
installation permitted in part because it is not “inherently” generation), and the fact that
several Members’ end-use customers participated in a demand response program, which
has the effect of reducing electricity load at peak times, in its order. APCO contends the
Court was “not at liberty to search for its meaning beyond the instrument itself.” Pet. Br.
at 32 (quoting Hitachi Credit Am. Corp. v. Signet Bank, 166 F.3d 614, 624 (4th Cir. 1999)
(recognizing principle under Virginia law)).
We disagree that this requires us to vacate the Commission’s order. APCO seems
to suggest the Commission relied on its NCEMPA decision as controlling in this case, but
that is not quite correct. For starters, the Commission focused extensively on the language
in the agreements and the agreements’ failure to define generation to include battery
storage or forbid Member-induced changes in electricity demand by use of battery storage.
Blue Ridge, 181 FERC ¶ 61,048 at PP 27–33. The Commission then zeroed in on its
NCEMPA decision, acknowledged that that order did not “dictate” the outcome in this case,
but concluded that it was “highly relevant” to its interpretation of the Members’ agreements
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with APCO. Id. PP 34–36. The Commission supported its order by pointing out the
conclusion it reached aligned with a prior agency decision under similar facts, which was
not error.
Nor was it erroneous to point out in a single sentence that some end-use customers
participated in a demand response program without objection from APCO. After noting
the agreements acknowledged electricity demand would fluctuate and placed no limitation
on how the Members “can effectuate such variation,” id. P33, the Commission cited these
customers’ participation as examples of similar conduct APCO had ostensibly permitted
until this dispute arose. This “course of performance” justification makes up only a small
part of the Commission’s reasoning and does not require us to vacate its order.
APCO last argues that the Virginia Tech agreement—which expressly places limits
upon BST installation and use—makes clear that the agreements with the Members
prohibit BST installation and use, too. It now asks us, under the assumption the agreements
are ambiguous as to whether BST installation is allowed, to find the Virginia Tech
agreement shows the parties also intended the agreements at issue to prohibit BST.
The agreements between the Members and APCO were executed in 2017, and the
Virginia Tech agreement was executed in 2019. Virginia law recognizes that a contract
may be modified by a subsequent agreement or course of conduct. See Smith Dev., Inc. v.
Conway, 896 S.E.2d 88, 97 (Va. Ct. App. 2024). But the party asserting modification must
show the parties had a “mutual intention” to modify the agreement, and that intention must
be shown by “clear, unequivocal and convincing evidence, direct or implied.” Id. (quoting
Gov’t Emps. Ins. Co. v. Hall, 533 S.E.2d 615, 618 (Va. 2000)).
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The Virginia Tech agreement’s terms do not suggest any mutual intent to modify
the Salem, Radford, and Craig-Botetourt agreements to forbid BST, let alone suggest the
parties intended that meaning from the start. First, even though Blue Ridge negotiates on
behalf of the Members, the agreements only bind APCO and each respective Member.
Second, the terms of the agreements with the Members could have been different than the
Virginia Tech agreement for any number of reasons; it makes sense that the provisions of
a wholesale electricity purchase contract for a college campus might be different than one
for a municipality. For example, the parties may seek to accommodate a significant drop
in power demand during school breaks. It is also possible that APCO decided to make sure
BST was expressly limited or prohibited in agreements after 2017 and sought to include
the term’s presence in the Virginia Tech agreement. At bottom, we are not persuaded that
the Salem, Radford, or Craig-Botetourt agreements prohibit those entities from installing
and using BST, whether looking within the four corners of their agreements with APCO or
by reference to APCO’s agreement to sell electricity to Virginia Tech.
We conclude by reiterating that honoring choice of law clauses in private contracts,
when appropriate, is good agency practice so that parties may be afforded the benefit of
their negotiated agreement. Our sister circuits have, for example, vacated FERC orders
where the Commission did not adhere to the parties’ selected outcome-determinative law.
See, e.g., Louisville Gas & Elec. Co. v. FERC, 988 F.3d 841 (6th Cir. 2021) (Commission’s
failure to honor choice of law clause left important issues unresolved following agency
proceedings); S. Cal. Edison Co. v. FERC, 502 F.3d 176 (D.C. Cir. 2007) (Commission’s
failure to apply California law left unclear whether condition precedent was satisfied). In
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this case, APCO has not persuaded us that the Commission’s decision would have, or even
could have, been different if it had looked to Virginia law instead. Nor has it shown that
the Commission ignored relevant contract principles. We therefore decline to vacate the
agency decision on the grounds it was contrary to law.
B.
We now address APCO’s argument that the Commission’s decision must be vacated
because it will result in unjust and unreasonable electricity rates, in violation of the Federal
Power Act. See 16 U.S.C. § 824d(a) (“All rates . . . shall be just and reasonable”). APCO
contends the Commission’s decision contravenes a duty to prevent cost-shifting among
customers, because the Members could discharge the batteries when APCO was otherwise
providing the needed electricity from facilities it had already invested in.
We reject this argument. First, because the Commission was not addressing a newly
filed contract, rate tariff, or claim that an existing contract or rate tariff had become unjust
or unreasonable. Instead, the Commission was tasked with answering the question of
whether the agreements permitted BST installation and use. We cannot say the
Commission erred by deciding the rates issue was irrelevant to the matter before it. See
Mobil Oil Expl. & Producing Se. Inc. v. United Distrib. Cos., 498 U.S. 211, 230–31 (1991)
(agencies “enjoy[] broad discretion” in determining how to handle “related, yet discrete,
issues” and an agency “need not solve every problem before it in the same proceeding”).
Further, the agreements say what they say. As we have explained, these contracts
that the cities of Salem and Radford, Virginia and the Craig-Botetourt Electric Cooperative
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executed with APCO do not prevent those entities from installing BST. These are contracts
between private parties governing the terms of wholesale power purchases. The
Commission did not err when it focused on the terms of the agreements before it and
concluded BST installation as the Members intended would not violate those agreements
and did not engage in speculation as to whether BST would result in unjust or unreasonable
rates at some time in the future.
III.
For the foregoing reasons, we deny APCO’s petition for review.
PETITION FOR REVIEW DENIED