Braintree Electric Light Department v. Federal Energy Regulatory Commission

550 F.3d 6, 384 U.S. App. D.C. 6, 2008 U.S. App. LEXIS 25580, 2008 WL 5214614
CourtCourt of Appeals for the D.C. Circuit
DecidedDecember 16, 2008
Docket04-1335, 05-1210, 05-1212, 06-1144
StatusPublished
Cited by25 cases

This text of 550 F.3d 6 (Braintree Electric Light Department v. Federal Energy Regulatory Commission) is published on Counsel Stack Legal Research, covering Court of Appeals for the D.C. Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Braintree Electric Light Department v. Federal Energy Regulatory Commission, 550 F.3d 6, 384 U.S. App. D.C. 6, 2008 U.S. App. LEXIS 25580, 2008 WL 5214614 (D.C. Cir. 2008).

Opinion

Opinion for the Court filed by Senior Circuit Judge WILLIAMS.

WILLIAMS, Senior Circuit Judge:

This appeal presents the issue of wheth- • er the Federal Energy Regulatory Commission may approve rates filed by a Regional Transmission Organization (“RTO”) to cover the cost of activity that for some purposes may be classified as lobbying. Rejecting petitioners’ contentions that approval of the rates was arbitrary and capricious and violated their First Amendment rights, we affirm FERC’s orders.

Since 1996, in an effort to facilitate the development of competitive wholesale power markets, FERC has required power utilities to provide non-discriminatory open access transmission services. To this end it has encouraged creation of RTOs — entities consolidating control of all transmission services in a particular region. Promoting Wholesale Competition Through Open Access Non-Discriminatory Transmission Services by Public Utilities, 61 Fed.Reg. 21,540, 21,667 (1996) (“Order No. 888”) (“We continue to support the development of [RTOs]”). But the Commission found that the requirement of non-discriminatory access did not fully accomplish its efficiency goals. See Regional Transmission Organizations, 65 Fed.Reg. 810, 817 (2000) (“Order No. 2000”) (detailing inefficiencies that remained after Order No. 888). Hence, in Order No. 2000, the Commission stepped up the pressure, requiring transmission-owning utilities either to participate in an RTO or to explain their failure to do so. See 18 C.F.R. § 35.34(a), (c), (g), (h); Regional Transmission Organizations, 65 Fed.Reg. at 812.

Order No.2000 required all RTOs to meet a minimum independence requirement, but allowed RTOs to assume “different organizational forms” in order to satisfy the independence characteristic. Regional Transmission Organizations, 65 Fed.Reg. at 811 (“the Commission is not proposing a ‘cookie cutter’ organizational format”). Among the forms explicitly approved in Order No. 2000, see id. at 836, was one that FERC had noted in Order No. 888, an independent system operator or “ISO.” This would “separate operation of the transmission grid and access to it from economic interests in generation” *9 and provide what the Commission called “operational unbundling.” Order No. 888, 61 Fed.Reg. at 21,551-52 n. 115 & 21,594 n. 41 (internal quotations omitted).

The RTO involved in the present case is operated under just such an arrangement. It originated in 1971 with the formation of the New England Power Pool (“NE-POOL”), which in 1997 obtained FERC approval for the creation of ISO New England Inc. (“ISO-NE”), a “private, nonprofit entity to administer New England energy markets and operate the region’s bulk power transmission system.” NSTAR Electric & Gas Corp. v. FERC, 481 F.3d 794, 796 (D.C.Cir.2007). Ultimately ISO-NE requested approval to establish itself as an RTO under Order No.2000. FERC gave its approval in 2004, relying, in part, on the fact that as a “not-for-profit entity governed by an independent, non-stakeholder board,” ISO-NE met Order No.2000’s independence requirement. ISO New England v. New England Power Pool, 106 FERC ¶ 61,280 at P 51 (March 24, 2004), order on reh’g, 109 FERC ¶ 61,147 (2004), aff'd sub nom. Maine Pub. Utilities Comm’n v. FERC, 454 F.3d 278 (D.C.Cir.2006).

As a FERC-authorized RTO, ISO-NE is required to submit its tariff to FERC for approval under § 205 of the Federal Power Act, 16 U.S.C. § 824(d). The tariff is meant to establish rates that will provide customers with “open access to the regional transmission system to all electricity generators ... in a non-discriminatory manner.” Midwest ISO Transmission Owners v. FERC, 373 F.3d 1361, 1364 (D.C.Cir.2004). Section 205 requires that the rates be “just and reasonable.”

At issue in the current proceeding are the tariff sheets ISO-NE submitted for FERC approval covering its 2005 and 2006 revenue requirements. In each tariff ISO-NE sought over two million dollars in funding for accounts associated with “Government Affairs,” “Public Information,” and “Regulatory Affairs” (collectively, “external affairs”). See ISO-NE, 109 FERC ¶ 61,383 at P 18 (2004); ISO-NE, 113 FERC ¶ 61,341 at P 10 (2005). These accounts were elements of total administrative budgets exceeding $100,000,000 a year. See ISO-NE, 109 FERC ¶ 61,383 at P 3; ISO-NE, 113 FERC ¶ 61,341 at P 2.

In response to both tariffs, petitioners Braintree Electric Light Department, Reading Municipal Light Department, and Taunton Municipal Lighting Plant (collectively, “BRT”) — all ISO-NE customers— intervened and argued that further information was required to determine if the costs ISO-NE sought to recover for external affairs were just and reasonable within the meaning of § 205. In particular, it pointed to reports that lobbyists engaged by ISO-NE had filed with the U.S. Congress under § 5 of the Lobbying Disclosure Act of 1995 (2 U.S.C. §§ 1601-1612 at § 1604), as well as comparable reports filed under state law. BRT argued that these filings showed that ISO-NE’s proposed charges included lobbying costs, which BRT said were not permitted under FERC’s own precedent and regulations, and that FERC approval in effect compelled subsidization of speech in contravention of the First Amendment.

In response to BRT’s complaints, FERC sua sponte ordered a “paper hearing” in which it directed ISO-NE to “clarify the nature of each activity listed in the ‘lobbying reports’ filed by protestors and explain how each of the activities cited by protestors is an educational, informational, or monitoring activity on the one hand, or a lobbying activity on the other.” ISO-NE, 115 FERC ¶ 61,332 at P 11 n. 8 (2006). ISO-NE submitted an almost 800-page filing, comprised of a brief, nine affidavits, and numerous exhibits, arguing that all of *10 its communications with government officials were “designed to address matters of direct operating concern,” ie., “to ensure a reliable bulk-power system and competitive energy markets.” Brief of ISO-NE on Issues Set for Paper Hearing 5, Joint Appendix (“J.A.”) 993.

The Commission rejected BRT’s substantive objections, but in a move to enhance transparency ordered ISO-NE to “prepare and post on its website a monthly report concerning ‘external affairs’ and ‘corporate communications.’ ” ISO-NE, 117 FERC ¶ 61,070 at P 52 (2006).

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550 F.3d 6, 384 U.S. App. D.C. 6, 2008 U.S. App. LEXIS 25580, 2008 WL 5214614, Counsel Stack Legal Research, https://law.counselstack.com/opinion/braintree-electric-light-department-v-federal-energy-regulatory-commission-cadc-2008.