TNA Merchant Projects, Inc. v. Federal Energy Regulatory Commission

857 F.3d 354, 2017 WL 2192927, 2017 U.S. App. LEXIS 8789
CourtCourt of Appeals for the D.C. Circuit
DecidedMay 19, 2017
Docket13-1008 Consolidated with 15-1320, 16-1009
StatusPublished
Cited by5 cases

This text of 857 F.3d 354 (TNA Merchant Projects, Inc. 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
TNA Merchant Projects, Inc. v. Federal Energy Regulatory Commission, 857 F.3d 354, 2017 WL 2192927, 2017 U.S. App. LEXIS 8789 (D.C. Cir. 2017).

Opinion

EDWARDS, Senior Circuit Judge:

In 2008 the Federal Energy Regulatory 'Commission (“FERC” or “Commission”) invoked Section 205 of the Federal Power Act (the “Act” or “FPA”) to order Chehal-is Power Generating, L.P., (“Chehalis”) to refund a portion of the. rates it had charged a customer because they were not just and reasonable. Several years later, FERC had second thoughts. It determined that Chehalis should not, after all, have been required to pay these funds and held that Chehalis ought to recover funds with interest. But Bonneville Power Administration (“Intervenor”), the customer to whom Chehalis had paid the refund, had no interest in voluntarily returning the money. Chehalis sought relief from FERC by filing a Motion for an Order Requiring Recoupment of Payments. FERC, however, in a perplexing decision, held that it could not order recoupment because the Commission’s refund authority does not extend to exempt public utilities such as the Intervenor Bonneville. We hold that FERC erred when it held that it lacked the authority to grant the Order Requiring Recoupment.

Section 309 of the FPA, which permits FERC to “perform any and all acts ... [as may be] necessary or appropriate to carry out [the Act’s] provisions,” 16 U.S.C. § 825h, clearly affords FERC the authority necessary to make Chehalis whole. In concluding otherwise, FERC looked to §§ 201(f) and 205 which prohibit it from ordering governmental entities, such as Bonneville, to refund “rates or charges” that FERC determines are “not justified.” 16 U.S.C. § 824d(e); see 16 U.S.C. § 824(f). FERC determined that because it could not require Bonneville' to grant “refunds” under § 205, it was also barred from granting “recoupment” of a refund in favor of Chehalis. This reasoning does not hold up. The strictures of §§ 201(f) and 205 place no limits on FERC’s ability to grant this form of relief.

FERC clearly had jurisdiction over the subject of this dispute—ie., the funds that it ordered Chehalis to pay to Bonneville in refunds pursuant to § 205 of the FPA. Therefore, FERC retained the authority to order Bonneville to return the funds when the agency acknowledged that its initial order was mistaken. Section 309 vests the Commission with broad remedial authority, including the authority to grant recoupment when it is justified. And § 201(f) does not limit the authority of FERC to grant relief under § 309 with respect to matters that are beyond the strictures of § 201(f) and § 205. An order of recoupment, as distinguished from an order to refund under § 205, is beyond the strictures of § 201(f) and § 205.

We uphold FERC’s determination that, on the record of this ease, recoupment of funds by Chehalis is appropriate. We reverse the Commission’s determination that the Act does not grant the agency authority to order Bonneville to repay the funds that it should not have received. However, wé remand the case to allow the Commission to determine whether it should apportion its recoupment order. FERC amply explained why recoupment is justified in this case, but in assessing the equities the Commission did not consider whether something less than full recoupment might be warranted.

I. BACKGROUND

Chehalis operates an electric generating plant that is interconnected with the elec- *357 trie transmission system of Intervenor, a federal agency within the Department of Energy. See TNA Merchant Projects, Inc. v. FERC, 616 F.3d 588, 589-90 (D.C. Cir. 2010); Br. for FERC at 4. Since the commencement of this litigation, Chehalis’s corporate parent, TNA Merchant Projects, Inc., the Petitioner in this case, has sold its equity ownership interests in Chehalis but retained the right to litigate this matter. Br. for Petitioner at 8. For convenience’s sake we, like the parties, will refer to Petitioner as Chehalis.

Prior to 2005, Chehalis supplied reactive power to Intervenor pursuant to an Interconnection Agreement that did not provide for Chehalis to be compensated for this service. TNA Merchant Projects, Inc., 616 F.3d at 590. In May 2005, Chehalis filed a proposed rate schedule with FERC, which set forth “Chehalis’ rates for the provision of Reactive Power Service,” that would allow it to charge Intervenor for its services for the first time. See id. (quoting Chehalis Rate Schedule, Joint Appendix (“JA”) 10). The accompanying letter informed FERC that these rates were “initial rates” because Chehalis had “never sought to charge for this service before.” JA 6.

This initial rate designation was significant. FERC “regulates rates for wholesale interstate sales of electricity pursuant to sections 205 and 206 of the Federal Power Act.” Middle S. Energy, Inc. v. FERC, 747 F.2d 763, 765 (D.C. Cir. 1984). As relevant here, § 205(a)-(c) require that “all rates for jurisdictional sales of electricity ... be reasonable and just,” that there be no “undue preferences and discrimination among customers,” and that sellers file “all rate schedules” with FERC. Id. To ensure that these requirements are met, § 205(e) permits FERC to suspend a rate schedule for up to five months after it is filed so that it can hold a hearing regarding the proposed rates. See id. If FERC deems the rates to be “unjust and unreasonable” it “may require refunds of any rates collected” during this time period. Id. This refund authority, however, applies only to “changed,” as opposed to “initial” rates. See TNA Merchant Projects, Inc., 616 F.3d at 590.

In spite of Chehalis’s protestations to the contrary, in July of 2005 FERC found that its proposed rate schedule was a “changed rate[].” Order, JA 101. The Commission reasoned that “[a]n initial rate schedule must involve a new customer and a new service” and Chehalis was not offering either, simply continuing to “provid[e] reactive power to [Intervenor].” Id. FERC then exercised its authority under § 205(e) to suspend these rates “for a nominal period, to become effective August 1, 2005 ... subject to refund.” Id.; TNA Merchant Projects, Inc., 616 F.3d at 590. FERC denied Chehalis’s request for rehearing and, on April 17, 2008, concluded that Che-halis’s proposed rates were excessive and ordered it to refund Intervenor “a portion of the revenues it had collected for supplying reactive power service to [Intervenor] from August 1, 2005 through September 30, 2006,” an amount totaling approximately $2 million. Order on Rehearing, JA 330.

Chehalis appealed FERC’s initial order and denial of rehearing, arguing that its May 2005 proposed rate schedule was not a “changed rate” subject to suspension and refund. See TNA Merchant Projects, Inc., 616 F.3d at 590-91. This court vacated and remanded FERC’s orders because we found that FERC had failed to explain why Chehalis was required to file an initial rate schedule when it was providing Inter-venor with power gratis,

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857 F.3d 354, 2017 WL 2192927, 2017 U.S. App. LEXIS 8789, Counsel Stack Legal Research, https://law.counselstack.com/opinion/tna-merchant-projects-inc-v-federal-energy-regulatory-commission-cadc-2017.