Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-05-01147/USCOURTS-caDC-05-01147-0/pdf.json

Parties Involved:
Federal Energy Regulatory Commission
Respondent
PJM Interconnection, L.L.C.
Intervenor
Virginia Electric and Power Company
Intervenor
Virginia State Corporation Commission
Petitioner

Document Text:

United States Court of Appeals 

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Filed November 21, 2006 

No. 05-1147 

VIRGINIA STATE CORPORATION COMMISSION, 

PETITIONER

V. 

FEDERAL ENERGY REGULATORY COMMISSION, 

RESPONDENT

PJM INTERCONNECTION, L.L.C. AND

VIRGINIA ELECTRIC AND POWER COMPANY, 

INTERVENORS

Consolidated with 

05-1149 

On Petition for Review of an Order of the 

Federal Energy Regulatory Commission 

John M. Adragna, Phyllis G. Kimmel, and William H. 

Chambliss, were on the brief for petitioner Virginia State 

Corporation Commission. 

USCA Case #05-1147 Document #1005572 Filed: 11/21/2006 Page 1 of 7
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Robert F. McDonnell, Attorney General, Attorney 

General’s Office for the Commonwealth of Virginia, Maureen 

Riley Matsen, Deputy Attorney General, C. Meade Browder, 

Jr., Senior Assistant Attorney General, and D. Mathias 

Roussy, Jr., Assistant Attorney General, were on the brief for 

petitioner Robert F. McDonnell, ex rel. Virginia Division of 

Consumer Counsel. 

John S. Moot, General Counsel, Federal Energy 

Regulatory Commission, Robert H. Solomon, Solicitor, and 

Samuel Sooper, Attorney, were on the brief for respondent. 

Beth G. Pacella, Attorney, entered an appearance. 

Kevin M. Downey was on the brief for intervenor Virginia 

Electric and Power Company. 

Before: SENTELLE, Circuit Judge, EDWARDS and

WILLIAMS, Senior Circuit Judges. 

Opinion for the Court filed by Senior Circuit Judge

WILLIAMS. 

WILLIAMS, Senior Circuit Judge: Petitioners challenge 

two orders of the Federal Energy Regulatory Commission 

declining to consider whether Virginia Electric and Power 

Company d/b/a Dominion Virginia Power (“Dominion”) can 

treat as “regulatory assets” certain wholesale and retail costs 

associated with developing a Regional Transmission 

Organization (“RTO”). In a lengthy first order, FERC 

recognized that the start-up costs associated with an RTO are 

usually treated as regulatory assets for FERC accounting 

purposes, but noted that certain parties, including the 

petitioners before us, had raised questions as to whether 

Dominion could properly recover these costs now or in the 

future. FERC then went on to conclude that: 

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At this time, we cannot determine with certainty that all 

of the costs at issue are, in fact, unrecoverable in 

Dominion’s current retail and wholesale rates or whether 

all such costs, if deferred, will ultimately be found, in a 

. . . proceeding [under § 205 of the Federal Power Act, 

16 U.S.C. § 824], to be recoverable in future rates. 

Therefore, Dominion must assess all available evidence 

bearing on the likelihood of rate recovery of these costs in 

periods other than the period they would otherwise be 

charged to expense under the general accounting 

requirements for costs . . . . If based on such assessment, 

Dominion determines that it is probable that these costs 

will be recovered in rates in future periods, it should 

record a regulatory asset for such amounts. 

PJM Interconnection, L.L.C., 109 F.E.R.C. ¶ 61,012 at P54 

(2004). In denying petitions for rehearing and clarification, 

FERC observed that because no rate proposal had been 

pending, it had made no finding regarding “the recoverability 

of a regulatory asset.” 110 F.E.R.C. ¶ 61,234 at P41 (2005). 

In their briefs here petitioners have made their concern 

clear. Dominion operates under a 2001 stipulation that limits 

its rate increases until July 1, 2007. See Application of 

Virginia Electric and Power Company for Approval of a 

Functional Separation Plan Under the Virginia Electric 

Utility Restructuring Act, 214 P.U.R.4th 17 (2001); Virginia 

State Corporation Commission Reply Br. at 8. Petitioners 

would prefer that as many as possible of the costs in question 

be “charged” to ratepayers during the rate-limited period, 

thereby shifting some or all of the burden to Dominion’s 

current investors. They contend that the Commission’s ruling 

here, declining to decide which costs are recoverable and at 

what time, will diminish consumers’ benefit from the 

stipulation. 

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On the merits—which we do not reach—petitioners argue 

that FERC’s failure to reject Dominion’s request for 

regulatory asset treatment was arbitrary and capricious both 

because it failed to explain why it considered itself unable to 

determine the proper accounting treatment for Dominion’s 

costs and because permitting Dominion to decide the 

accounting issue itself, in the first instance, is inconsistent 

with FERC’s statutes and regulations. But petitioners’ lack of 

standing bars us from reaching these issues. Specifically, we 

find that petitioners cannot point to the requisite injury-in-fact, 

see Lujan v. Defenders of Wildlife, 504 U.S. 555 (1992), and 

have not been aggrieved by the orders. 

“To show aggrievement, a plaintiff must allege facts 

sufficient to prove the existence of a ‘concrete, perceptible 

harm of a real, non-speculative nature.’” N.C. Util. Comm’n 

v. FERC, 653 F.2d 655, 662 (D.C. Cir. 1981) (quoting Public 

Citizen v. Lockheed Aircraft Corp., 565 F.2d 708, 716 (D.C. 

Cir. 1977)). Petitioners allege two types of harm. The first is 

that the contested orders have “an immediate rate impact on 

Dominion’s retail customers.” Virginia State Corporation 

Commission Br. at 48. The second is that the orders deny 

investors (and regulators) FERC’s appraisal of Dominion’s 

asset base, thereby increasing the likelihood that those parties 

will incorrectly “evaluat[e] Dominion’s financial health and 

activities.” Id. We reject both theories of injury. 

Petitioners’ claim of a rate effect is belied by the 

proposition that “[a]ccounting practices are not controlling for 

ratemaking purposes.” Consol. Gas Supply Corp., 14 

F.E.R.C. ¶ 61,029 at 61,054 (1981); Williston Basin Interstate 

Pipeline Co., 56 F.E.R.C. ¶ 61,104 at 61,370-71 (1991). 

Moreover, guidance as to accounting treatment “do[es] not 

effect [sic] the burden of proof in any presently pending or 

future rate proceeding.” Am. Elec. Power Serv. Corp., 104 

FERC ¶ 61,013 at 61,035 (2003). Petitioners do not contest 

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these propositions, which the Commission asserted 

prominently in its brief here. 

Instead petitioners claim that FERC has somehow 

“delegated to Dominion the discretion whether to treat the 

costs as a regulatory asset.” But this is no response at all. 

Given that the accounting issue is independent of the ultimate 

cost-recovery issue, and that the latter will be settled in a rate 

proceeding when and if Dominion files rates seeking 

recovery, petitioners haven’t explained how the Commission’s 

failure to decide the issue will affect the ultimate rate 

treatment. 

Petitioners’ alternative theory is that FERC’s accounting 

guidance, or its failure to guide, will injure investors by 

withholding from them some additional light on the utility’s 

financial condition that a FERC ruling would add. They cite 

our decision in CNG Transmission Corp. v. FERC, 40 F.3d 

1289, 1292–93 (D.C. Cir. 1994), where we found that a 

company had standing to challenge an accounting decision 

that stuck the company with an (apparent) $7 million loss, 

with effects, we thought, on the value of the company’s stock. 

CNG is analogous, petitioners argue, because FERC’s order 

here permits Dominion to book $275 million of unauthorized 

regulatory assets over the next six years, to the confusion of 

state and federal regulators and to the detriment of investors 

who will be unable to accurately “evaluat[e] Dominion’s 

financial health and activities.” Virginia State Corporation 

Commission Br. at 48. 

We have some uncertainty about petitioners’ dramatic 

switch from being a champion of ratepayers, against 

Dominion’s current investors, to being a champion of 

investors as a class, against uncertainty. But we put that 

aside. Reliance on standing in the form of probabilistic 

injury—here, an increase in the probability the investors will 

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inaccurately evaluate Dominion’s financial position—requires 

a showing of a “substantial probability” of the alleged injury. 

See Sierra Club v. EPA, 292 F.3d 895, 898 (D.C. Cir. 2002); 

see also 520 S. Mich. Ave. Assocs. Ltd. v. Devine, 433 F.3d 

961, 962 (7th Cir. 2006) (“Standing depends on the 

probability of harm, not its temporal proximity.”). The word 

“substantial” of course poses questions of degree, questions 

far from fully resolved. We have left open, for instance, the 

question whether, in the realm of environmental risk, “any 

‘scientifically demonstrable increase in the threat of death or 

serious illness’ . . . is sufficient for standing,” Natural Res. 

Def. Council v. EPA, 464 F.3d 1, 2006 WL 2472144 at 4 

(D.C. Cir. 2006), and have noted a conflict among the circuits 

on the point. Compare Baur v. Veneman, 352 F.3d 625, 634 

(2d Cir. 2003); Cent. Delta Water Agency v. United States, 

306 F.3d 938, 947-48 (9th Cir. 2002); Friends of the Earth, 

Inc. v. Gaston Copper Recycling Corp., 204 F.3d 149, 160 

(4th Cir. 2000) (en banc), with Shain v. Veneman, 376 F.3d 

815, 818 (8th Cir. 2004); Baur, 352 F.3d at 651 & n.3 (Pooler, 

J., dissenting). Outside the realm of environmental disputes, 

moreover, we have suggested that a claim of increased risk or 

probability cannot suffice. Compare Ctr. for Law & Educ. v. 

Dep’t of Educ., 396 F.3d 1152, 1161 (D.C. Cir. 2005), with id. 

at 1166-68 (Edwards, J., concurring). 

We need not face those issues here, however, as 

petitioners have made no showing that FERC’s order could 

generate a non-trivial increase in the likelihood that investors 

will inaccurately evaluate Dominion’s financial position. 

Indeed, petitioners have made no showing at all beyond their 

citation of CNG. They certainly haven’t explained how any 

investor savvy enough to monitor FERC decisions of this sort 

wouldn’t also be savvy enough to recognize their 

extraordinarily limited import. FERC’s order calls upon 

Dominion to assess whether its start-up costs meet the 

requirements of a regulatory asset. And Dominion’s 

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resolution of that issue will, as we’ve already said, be only a 

threshold event before resolution of the matter of most interest 

to investors (and petitioners)—the extent to which the costs 

can be recovered in collectible rates. 

As to the pure accounting issue (as opposed to 

ratemaking), petitioners’ best claim may be that resolution by 

FERC now, instead of first waiting for a perhaps more biased 

determination by Dominion, will afford investors more clarity 

as to the true condition of Dominion’s business by 

accelerating the enlightenment provided by an agency 

determination. But petitioners in no way frame their 

contention as a matter of agency delay, so we need not reach 

that issue. See Telecommunications Research & Action 

Center v. FCC, 790 F.2d 70 (D.C. Cir. 1984). Any 

incremental uncertainty resulting from the order therefore falls 

far short of substantially increasing the risk that investors will 

inaccurately appraise Dominion’s overall financial standing. 

Compare Mountain States Legal Found. v. Glickman, 92 F.3d 

1228, 1234-35 (D.C. Cir. 1996) (finding standing for “nontrivial” increment in risk), with Sierra Club v. EPA, 292 F.3d 

at 898 (requiring “substantial probability” of injury). 

Petitioners have failed to show how FERC’s decision (or 

non-decision) could cause them or those they represent injuryin-fact, by materially affecting either customers’ rates or the 

clarity of investors’ understanding of Dominion’s financial 

position. The petitions for review are therefore 

 Dismissed.

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