Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-14-01282/USCOURTS-caDC-14-01282-0/pdf.json

Parties Involved:
Federal Energy Regulatory Commission
Respondent
Occidental Permian Ltd.
Intervenor for Petitioner
Southwest Power Pool, Inc.
Intervenor for Respondent
Tri-County Electric Cooperative, Inc.
Intervenor for Respondent
Xcel Energy Services Inc.
Petitioner

Document Text:

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued January 15, 2016 Decided March 8, 2016

No. 14-1282

XCEL ENERGY SERVICES INC.,

PETITIONER

v.

FEDERAL ENERGY REGULATORY COMMISSION,

RESPONDENT

OCCIDENTAL PERMIAN LTD., ET AL.,

INTERVENORS

On Petition for Review of Orders of the 

Federal Energy Regulatory Commission

Stephen M. Spina argued the cause and filed the briefs for

petitioner.

Jennifer L. Mersing and Earle H. O'Donnell were on the

brief for intervenor Occidental Permian Ltd. in support of

petitioner.

Lisa B. Luftig, Attorney, Federal Energy Regulatory

Commission, argued the cause for respondent. With her on the

brief were David L. Morenoff, General Counsel at the time the

brief was filed, and Robert H. Solomon, Solicitor.

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Carrie L. Bumgarner, Matthew J. Binette, Andrew T.

Swers, and Marvin T. Griff were on the brief for intervenors

Southwest Power Pool Inc. and Tri-County Electric Cooperative,

Inc.

Before: ROGERS and WILKINS, Circuit Judges, and

WILLIAMS, Senior Circuit Judge.

Opinion for the Court filed by Circuit Judge ROGERS.

ROGERS, Circuit Judge: Xcel Energy petitions for review

of three orders of the Federal Energy Regulatory Commission

denying a retroactive refund for unlawful rates. Southwest

Power Pool, Inc., a regional transmission organization, filed a

tariff revision pursuant to section 205 of the Federal Power Act

to implement the formula rate of a non-jurisdictional

participating transmission owner, Tri-County Electric

Cooperative, Inc. To carry out the statutory mandate that rates

be just and reasonable, the Commission subjects the revenue

requirements of non-jurisdictional participating owners to

review under section 205 standards. Unless there is no material

issue, the Commission will either suspend the proposed rates

while it conducts a section 205 review or allow the rates to take

effect where the non-jurisdictional entity voluntarily agrees to

make refunds if the Commission determines the rates are unfair

and unjust. In this instance, contrary to section 205’s mandate

and Commission precedent, and over formal protests by

intervenors, the Commission, despite concluding that the

proposed rates may be unjust and unreasonable, allowed them 

to go into effect without suspension or a voluntary refund

commitment by Tri-County. 

On rehearing, the Commission admitted its error of law but

concluded that the only available remedy was prospective under

section 206 of the Federal Power Act. The Commission stated

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that retroactive suspension of the rates would be inconsistent

with section 2.4(a) of its regulations barring suspension of a rate

schedule after it took effect. We grant the petition in part and

remand the case to the Commission.

I.

Section 205 of the Federal Power Act (“FPA”) mandates

that “[a]ll rates and charges . . . demanded, or received by any

public utility for . . . the transmission or sale of electric energy

subject to the jurisdiction of the Commission . . . shall be just

and reasonable, and any such rate or charge that is not just and

reasonable is hereby declared to be unlawful.” 16 U.S.C.

§ 824d(a). Section 205(d) provides that unless the Commission

otherwise orders, “ no change shall be made by any public utility

in any such rate, charge, classification, or service, or in any rule,

regulation, or contract relating thereto, except after sixty days’

notice to the Commission and to the public.” Id. § 824d(d). 

Section 205(e) empowers the Commission, on its own initiative

or upon complaint, to investigate the lawfulness of a rate in a

newly filed schedule, and to suspend the effectiveness of the

changed schedule for up to five months. Id. § 824d(e). The

Commission may also order that increased rates and charges be

collected subject to refund so that when the rate schedule goes

into effect after suspension, the “interested public utility or

public utilities” must refund the amount of the increased rates or

charges “found not justified” by the Commission. Id.

Under section 206(a) of the FPA, the Commission may

institute, on its own motion or upon complaint, an investigation

into the rates of public utilities to determine whether the rates

are just and reasonable. 16 U.S.C. § 824e(a). Section 206(b)

requires the Commission to establish a refund effective date that

is no earlier than the date of the publication of its order

instituting the investigation on its own motion or the date of the

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complaint, as applicable. Id. § 824e(b). If the Commission

determines upon investigation that a public utility’s rates are

unjust and unreasonable, the Commission may prospectively fix

the just and reasonable rate and order refunds of the difference

between the rate charged and the just and reasonable rate for a

fifteen-month period that commences on the refund effective

date.

In response to the development of regional transmission

organizations (“RTOs”) and independent system operators

(“ISOs”), see generally Pub. Util. Dist. No. 1 of Snohomish Cty.

v. FERC, 272 F.3d 607, 610 (D.C. Cir. 2001), the Commission

determined, in order to carry out section 205’s mandate, that the

transmission revenue requirements of a non-jurisdictional entity

are subject to full review under section 205. The court endorsed

this decision to the extent that the Commission “may analyze

and consider the rates of non-jurisdictional utilities to the extent

that those rates affect jurisdictional transactions,” Pac. Gas &

Elec. v. FERC (“PG&E”), 306 F.3d 1112, 1114 (D.C. Cir.

2002), explaining that when reviewing a non-jurisdictional

entity’s rates as a component of an RTO’s rates, the

Commission is exercising jurisdiction over the RTO, not over

the non-jurisdictional entity, see id. The court has also held that

the Commission has no authority under section 205 to order a

non-jurisdictional entity to make refunds. See Transmission

Agency of N. Cal. v. FERC (“TANC”), 495 F.3d 663, 672 (D.C.

Cir. 2007). The Commission thus will accept the RTO’s filing

of a tariff revision where the non-jurisdictional entity voluntarily

agrees to make refunds in the event the Commission determines

the rate as filed is not just and reasonable, or the Commission

will delay the effective date of the proposed rate while it

conducts a section 205 review, unless there is no material issue. 

See, e.g., Lively Grove Energy Partners, LLC, 140 FERC

¶ 61,252, at P 47 & n.59 (2012); City of Banning, 136 FERC

¶ 61,134 (2011); City of Riverside, 128 FERC ¶ 61,207, at P 26

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(2009); cf. Great River Energy, 130 FERC ¶ 61,001 (2011). The

petition before the court arises from the Commission’s failure to

adhere to this established procedure.

Southwest Power Pool, Inc. (“SPP”) is an RTO and a

“public utility” as defined in the FPA. See Sw. Power Pool, Inc.,

119 FERC ¶ 61,307, at P 11 (2007) (“SPP 2007”); 16 U.S.C.

§ 824(e). As an RTO, SPP “administers the provision of open

access transmission service on a regional basis across the

facilities of” its transmission owning members. Southwest

Power Pool Submission of Tariff Revisions to Incorporate TriCounty Electric Cooperative, Inc. as Transmission Owner (Jan.

31, 2012) (“Tariff Filing”). Its transmission services are divided

into regional zones, including the Southwestern Public Service

Company Zone (“SPS Zone”). The SPS Zone includes

Southwestern Public Service Company (“SPS”), a whollyowned subsidiary of Xcel Energy Services, Inc. (“Xcel”). Xcel

and intervenor Occidental Permian Ltd. are also purchasers of

transmission services from the SPS Zone.

On February 1, 2012, SPP filed revisions to its Open Access

Transmission Tariff (“OATT”) pursuant to section 205 to

implement Tri-County’s formula rate for transmission service. 

According to SPP’s submission, Tri-County had become a

transmission owner in the SPS Zone and its formula rate would

be used to calculate the annual transmission revenue

requirement (“ATRR”). Xcel filed a protest, requesting the

Commission allow SPP’s tariff filing only if Tri-County agreed

voluntarily to make refunds or suspend the proposed rates while

the Commission conducted a section 205 review. See Motion to

Intervene and Protest at 4, 19 (Feb. 22, 2012). The Commission

did neither. On March 30, 2012, the Commission — despite

concluding that there was insufficient evidence to determine

whether Tri-County qualified as a “transmission provider” under

SPP’s OATT, and that the proposed rates may not be just and

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reasonable — accepted the tariff revisions for filing, to become

effective April 1, 2012 as requested, and established hearing and

settlement judge procedures. Sw. Power Pool, Order Accepting

Formula Rate Proposal and Establishing Hearing and

Settlement Judge Procedures (“Order I”), 138 FERC ¶ 61,231,

at PP 1, 14, 15. The Commission offered no explanation of its

departure from its precedent.

Xcel sought rehearing and a stay, and requested expeditious

action by the Commission. Xcel Request for Rehearing, Motion

for Stay, and Request for Clarification (Apr. 25, 2012) (“2012

Reh’g Request”). It argued that the Commission had clearly

erred, contrary to the mandate in section 205 to protect

consumers from excessive rates, by never fully reviewing TriCounty’s ATRR before allowing SPP’s rates to take effect after

concluding the proposed rates may be unjust and unreasonable. 

Except where proposed rates were not contested or there were

no issues of material fact, Xcel pointed out that “[a]fter TANC,

in every case where the Commission has reviewed the costs of

a non-jurisdictional utility included in an RTO’s or ISO’s rate,

the Commission has only set those rates for hearing where the

non-jurisdictional utility made a commitment to provide

refunds.” Id. at 7 & n.24.1

 Xcel therefore requested that the

Commission “reverse its determination to accept the SPP Filing 

and, instead, . . . suspend it, subject to refund and hearing

procedures.” Id. at 8. Because the Commission erred as a

1

 Xcel cited as examples: City of Azusa, 138 FERC

¶ 61,049 (2012); City of Pasadena, 137 FERC ¶ 61,045 (2011);

City of Riverside, 136 FERC ¶ 61,137 (2011); City of Banning,

136 FERC ¶ 61,134 (2011); City of Anaheim, 136 FERC

¶ 61,034 (2011); Midwest Indep. Transmission Sys. Operator,

Inc. (“MISO”), 135 FERC ¶ 61,131 (2011); City of Pasadena,

128 FERC ¶ 61,290 (2009); City of Riverside, 128 FERC

¶ 61,207 (2009).

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matter of law in allowing SPP’s rates to take effect without

conducting a full section 205 review or otherwise ensuring

consumer protection through refunds, Xcel argued that

Commission precedent barring retroactive rate suspension on

rehearing was not dispositive. Id. at 9 n.29. Xcel also sought

a stay of Order I, stating the SPP tariff filing increased revenue

requirements by $1.98 million annually, of which over 97%

would be borne by loads taking service under the SPP tariff 

other than Tri-County, of which about 60% will be borne by

SPS and its native load customers. See id. at 11; FPA § 313(c),

16 U.S.C. § 825l(c); 5 U.S.C. § 705. Xcel noted that “SPP has

not yet issued transmission service bills reflecting the TriCounty ATRR.” 2012 Reh’g Request at 9 n.29.

On rehearing, the Commission acknowledged that it “erred

in allowing SPP’s rate proposal for Tri-County’s ATRR to go

into effect April 1, 2012, without a commitment from TriCounty to refund the difference between the as-filed rate and the

rate ultimately found to be just and reasonable by the

Commission.” Sw. Power Pool, Order on Rehearing (“Order

II”), 142 FERC ¶ 61,135, at P 13 (2013). Further, the

Commission acknowledged, “[c]onsistent with Commission

policy in other instances involving non-public utilities, without

such a refund commitment, the effective date for Tri-County’s

ATRR should be the date the Commission makes the ATRR

effective in its order approving the ATRR following hearing and

settlement judge procedures.” Id. It stated, however, that it

lacked jurisdiction to make Tri-County’s collected rates subject

to refund. See id. PP 14–15 (citing Riverside, 128 FERC

¶ 61,207, at P 24 (citing TANC, 495 F.3d at 673–74); Midwest

Indep. Transmission Sys. Operator, Inc. (“MISO”), 135 FERC

¶ 61,131, at P 72 (2011)). But concluding that it would not be

just and reasonable to allow SPP to continue to pass through

“Tri-County’s proposed rate” before the Commission

determined it just and reasonable, the Commission ordered SPP,

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pursuant to section 206, to file a compliance filing either

removing the tariff sheets allowing it to charge Tri-County’s

proposed rate or providing Tri-County’s voluntary commitment

to make refunds beginning February 22, 2013. Id. at P 16. The

Commission denied the request for a stay as moot. Id. at P 18.

Xcel sought rehearing and clarification, observing in part

that the Commission had not addressed its position that the rates

at issue were SPP’s rates, not Tri-County’s, and thus its request

that SPP’s rates be suspended and made effective subject to

refund was within the Commission’s jurisdiction. See Request

for Rehearing and Request for Clarification at 4 (Mar. 25, 2013)

(“2013 Reh’g Request”).

The Commission denied rehearing and accepted SPP’s

compliance filing in which Tri-County agreed to pay forward

looking refunds. Sw. Power Pool, Order Denying Rehearing

and Accepting Compliance Filing Subject to Further

Compliance Filing (“Order III”), 149 FERC ¶ 61,050 (2014). 

Rejecting Xcel’s request for suspension of SPP’s rates, the

Commission stated that section 206 provided “the only remedy”

at the time of Xcel’s 2012 rehearing request. Id. at P 25. It

stated it lacked authority to suspend rates retroactively and order

refunds because of its “longstanding policy” that rate schedules

cannot be suspended after they take effect, 18 C.F.R. § 2.4(a). 

Id. at P 28. It rejected Xcel’s argument that there is an equitable

presumption in favor of ordering refunds where the Commission

erred as a matter of law because its “legal error” precedent was

not on point as the Commission was not acting pursuant to a

court remand. Id. at P 27. 

In the meantime, an administrative law judge determined

that Tri-County “ha[d] failed to carry its burden to prove that its

facilities [included in exhibits to SPP’s tariff filing] are

Transmission Facilities eligible to be rolled into SPP’s Zone 11

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ATRR.” Sw. Power Pool, Initial Decision, 143 FERC ¶ 63,003,

at P 250 (2013). The Commission affirmed the Initial Decision

on the same day it denied rehearing. Sw. Power Pool, Opinion

and Order on Initial Decision, ORDER NO. 535, 149 FERC

¶ 61,051 (2014).

II.

Xcel petitions for review of the Commission’s three orders

denying a refund of the unlawful rates it paid for eleven months,

from April 1, 2012, to February 22, 2013. See FPA § 313(b), 16

U.S.C. § 825l(b). The court reviews the Commission’s orders

under the Administrative Procedure Act to determine whether the

Commission’s action is arbitrary and capricious or contrary to

law. See, e.g., Sithe/Independence Power Partners v. FERC, 165

F.3d 944, 948 (D.C. Cir. 1999). This is a deferential standard, see

Transmission Access Policy Study Grp. v. FERC, 225 F.3d 667,

714 (D.C. Cir. 2000), but requires that the court at least assure

itself that the Commission’s reason for its decision is both

rational and consistent with the authority delegated to it by

Congress. See 5 U.S.C. § 706(2)(A) & (C); see also Motor

Vehicle Mfrs. Ass’n v. State Farm Mut. Auto. Ins. Co., 463 U.S.

29, 42 (1983).

It is long-established that the “primary aim [of the FPA] is

the protection of consumers from excessive rates and charges.” 

Mun. Light Bds. of Reading & Wakefield v. FPC, 450 F.2d 1341,

1348 (D.C. Cir. 1971), cert. denied, 405 U.S. 989 (1972). 

Consistent with this purpose, the Commission has a general

policy of providing refunds in the exercise of its remedial

discretion. Cf. Towns of Concord, Norwood, & Wellesley v.

FERC, 955 F.2d 67, 76 (D.C. Cir. 1992). In the context of

section 205, the Commission implements these policies during

its initial review of rate filings. Typically, where initial review

has not shown the proposed rates are just and reasonable, the

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Commission will suspend the rates and make them subject to

refund while it conducts a section 205 review through hearing

and settlement proceedings. W. Tex. Utils. Co., 18 FERC

¶ 61,189, at 61,374 (1982); Boston Edison Co., 12 FERC

¶ 61,211, at 61,516 (1980); see Conn. Light & Power Co. v.

FERC, 627 F.2d 467, 471 (D.C. Cir. 1980). When a regional

organization, such as an RTO, includes a non-jurisdictional

entity and seeks a tariff revision based on that entity’s ATRR, the

Commission has followed the same procedure where a voluntary

refund commitment is submitted with the RTO’s proposed tariff

revision. See supra note 1 and accompanying text. Here, the

Commission has acknowledged that it erred as a matter of law in

allowing SPP’s proposed rates to take effect, contrary to section

205, without voluntary refund protection despite the

acknowledged need for further section 205 review. The

Commission nonetheless concluded that it was powerless to do

more than order SPP, pursuant to section 206, to ensure

prospective refunds because section 2.4(a) of its regulations

barred suspension once SPP’s rates took effect. See Order III at

P 28. The Commission appears, from the record before the

court, to have misapprehended its remedial powers and thus

arbitrarily declined to weigh the equities underlying Xcel’s

request for retroactive relief.

First, as a threshold matter, to the extent the Commission

denied Xcel relief because it lacks authority to order refunds

from Tri-County, a non-jurisdictional entity, this was not

responsive to Xcel’s request. See Order II at PP 14–15; Order

III at P 28 & n.43. (The same is true of such arguments as

appear in the Commission’s brief. See, e.g., Resp’t’s Br. 35.) 

Xcel did not argue that the Commission has authority under the

FPA to order refunds from Tri-County. Rather, Xcel argued that

the Commission may exercise its remedial authority with respect

to SPP, whose OATT was unlawfully inflated by Tri-County’s 

ATRR, resulting in Xcel’s subsidiary SPS paying unlawful rates

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for eleven months. See, e.g., 2012 & 2013 Reh’g Requests at 6

and 16, respectively. SPP’s filing pursuant to section 205

submitted revisions to its tariff, albeit to implement Tri-County’s

ATRR. As Xcel has noted without contradiction by the

Commission, SPP’s proposed rates were filed by SPP, charged

to SPP’s customers by SPP, and were associated with service

purported to be provided by SPP. SPS did not and does not take

transmission service from Tri-County nor had any arrangement

or other obligation to pay for Tri-County’s non-jurisdictional

tariffs. See Pet’r’s Br. 27–28. The Commission acknowledged

that:

[A]s a regional transmission organization, SPP controls

the transmission facilities that provide the services and

has the OATT pursuant to which the services are

provided, and thus SPP is the entity providing services,

even if the relevant charges are ultimately traceable to

[a non-jurisdictional entity] and even if they appear on

SPP’s invoices as line items and with no “mark up.”

SPP 2007, 119 FERC ¶ 61,307, at P 14; see also TANC, 495 F.3d

at 672; MISO, 135 FERC ¶ 61,131, at P 72. 

Second, the Commission’s reliance on section 2.4(a) of its

regulations and related cases to deny Xcel retroactive relief is

misplaced. See Order III at P 28. Xcel does not dispute that

section 2.4(a) is a general prohibition against suspending a rate

schedule in effect under a final order that was not the product of

the Commission’s legal error. See generally United Gas

Improvement Co. v. Callery Props., Inc, 382 U.S. 223, 229

(1965). Rather, Xcel maintains that the applicability of section

2.4(a) is far from evident where no full section 205 review has

occurred. The Commission relied on Cooperative Power Ass’n

v. FERC, 733 F.2d 577, 580 (8th Cir. 1994), reh’g denied, 739

F.2d 390 (8th Cir. 1984), which upheld reliance on section 2.4(a)

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to deny a retroactive rate suspension. See Order III at P 28 n.44. 

Xcel points out that the Eighth Circuit is the only court to have

reviewed the Commission’s application of section 2.4(a) and that

on rehearing the court expressed doubt that the Commission

lacked power on rehearing of an initial rate order to suspend the

rate, but concluded, assuming the Commission had such power,

that its denial in the circumstances was not an abuse of

discretion. See Coop. Power, 739 F.2d at 392. Here, by contrast,

the Commission has admitted its error of law in not adhering to

section 205’s mandate, and Xcel maintains it was tantamount to

an abuse of discretion not to suspend SPP’s rates despite

concluding they may be unjust and unreasonable.

More telling still, the orders cited by the Commission that

have applied section 2.4(a) to deny rehearing to suspend a rate

are inapposite. See Order III at PP 25 n.36, 28 n.44 (citing

Dynegy Midwest Generation, Inc., 110 FERC ¶ 61,358, at P 5

(2005); FirstEnergy Operating Cos., 86 FERC ¶ 61,152, at

61,543 n.12 (1999); Consumers Energy Co., 80 FERC ¶ 61,316,

at 62,077 (1997); Illinois Power Co., 73 FERC ¶ 61,348, at

62,058 (1995); Kentucky Power Co., 64 FERC ¶ 61,112, at

61,922 (1993)). In none of these cases did the Commission find

that the proposed rates appeared to be unjust and unreasonable

yet placed them in effect without refund protection. Each order

involved a party intervening out of time to raise issues that could

have been raised before the Commission issued its initial order

placing the rate into effect. See Dynegy, 110 FERC ¶ 61,358, at

PP 2–5; Consumers Energy Co., 80 FERC at 62,077; Illinois

Power Co., 73 FERC at 62,057–58; Kentucky Power Co., 64

FERC at 61,923. Xcel’s protest was filed prior to the

Commission’s acceptance of SPP’s OATT revisions in Order I

and raised material factual issues, with supporting analysis,

regarding whether Tri-County’s facilities were qualified

transmission facilities and whether its ATRR was overstated, and

requested that the Commission delay the effectiveness of SPP’s

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proposed rates to conduct a section 205 review. Moreover, the

Commission’s legal error in accepting SPP’s rates without

suspension or refund protection is undisputed.

In seeking rehearing of Order II, Xcel argued as well that

the Commission had authority under section 309 of the FPA to

remedy its legal error and provide Xcel relief. See 2013 Reh’g

Request at 16. Xcel referenced the Supreme Court’s statement

in analogous circumstances that “[a]n agency, like a court, can

undo what is wrongfully done by virtue of its order,” which was

not final as it was still subject to judicial review. United Gas

Improvement Co., 382 U.S. at 229. Section 309 authorizes the

Commission “to perform any and all acts, and to prescribe, issue,

make, amend, and rescind such orders . . . as it may find

necessary or appropriate to carry out the provisions of [the

FPA].” 16 U.S.C. § 825h. It vests the Commission with broad

remedial authority. See Towns of Concord, 955 F.2d at 73. 

Indeed, in examining the parallel provision in the Natural Gas

Act, the court concluded that provision “unquestionably gives

[the Commission] the authority, in fashioning remedies, to

consider equitable principles, one of which is to regard as being

done that which should have been done,” and held the

Commission could order abandonment authorizations of natural

gas certificates to take effect retroactively, notwithstanding the 

Commission’s objection that the statute did not permit

retroactive authorizations. N. Natural Gas Co. v. FERC, 785

F.2d 338, 341 (D.C. Cir. 1986). 

Still, the Commission dug in its heels, disclaiming any

power or principle of equity to grant Xcel further relief, stating

it could not act in a manner that was inconsistent with the statute

where rates were accepted and have taken effect even to achieve

what some parties have claimed is a more equitable result. 

Order III at P 27 (citing Pub. Utils. Comm’n of Cal. v. FERC,

988 F.2d 154, 168 n.12 (D.C. Cir. 1993)). For instance, the

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Commission cited City of Anaheim v. FERC, 558 F.3d 521, 525

(D.C. Cir. 2009), which held that the Commission lacked

authority to establish a retroactive effective date and refunds

under section 206 because that provision only allowed the date

to be “fix[ed]” prospectively. Xcel does not maintain the

Commission erred in failing to apply section 206 retroactively

but that it erred in failing to correct its legal error under section

205. The Commission has acknowledged that in allowing SPP’s

rates to take effect immediately without refund protection its

action was contrary to section 205, see Order III at P 13. When

the Commission acts contrary to the statute its action is ultra

vires. Cf. Ind. & Mich. Elec. Co., 502 F.2d 336, 343 (D.C. Cir.

1974). Further, neither City of Anaheim nor Public Utilities

Commission speaks to the Commission’s power under

section 309 or its equivalent.

 

On appeal, the Commission, and intervenors SPP and TriCounty, rely on Indiana & Michigan, 502 F.2d at 343, where the

court vacated an order suspending a rate, holding that the

Commission had exceeded its statutory authority by delaying the

effective date of rate filings beyond the period set in section 205. 

On rehearing, the court retroactively suspended the rates to allow

the Commission to complete its section 205 review while

protecting consumers. See id. at 343–44. To the extent

intervenors SPP and Tri-County suggest that case is

distinguishable because the court sought to avoid imposing

surcharges on consumers, no precedent is cited, and we are

aware of none, for the proposition that the Commission’s

equitable authority does not encompass refunds as well as

surcharges. See Nat. Gas Clearing House v. FERC, 965 F.2d

1066, 1073 (D.C. Cir. 1992). Indeed, Xcel points to the example

of Cities of Batavia v. FERC, 672 F.2d 64 (D.C. Cir. 1982), in

which the court, concluding the Commission was mistaken about

its authority to review part of an amended rate schedule,

remanded for the Commission to determine “whether this [was]

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an appropriate case in which to exercise its section 205

suspension and refund jurisdiction,” id. at 77, even though the

contested rate had already gone into effect. The Commission’s

response that in Sea Robin Pipeline Co. v. FERC, 795 F.2d 182,

187 (D.C. Cir.1996), the court clarified review was limited to the

Natural Gas Act’s parallel provision to section 206, avoids the

central issue. Sea Robin simply held that the Commission lacks

authority “to reject, post hoc, a previously accepted provision or

to specify what should replace it.” Id. Under the Commission’s

interpretation that it lacks any power to correct its legal error

even where no section 205 review has occurred despite

recognition it is needed, consumers are denied the protection that

Congress mandated in section 205 without full recourse. Cf. Nat.

Gas Clearinghouse, 965 F.2d at 1074. It is no answer to suggest

that in enacting section 206 to provide only prospective relief

Congress anticipated that there would be situations in which

customers would not be made whole. See Resp’t’s Br. 27–28. 

At this point, it is unclear why the Commission has concluded

Congress intended there would be no administrative remedy for

the Commission’s legal error in its initial rate order, an area

where the Commission’s consumer protection responsibilities are

at their most fundamental, particularly when Congress provided

remedial authority in section 309.

The Commission ignores what distinguishes the instant case,

where it has conceded an error of law by failing, contrary to

section 205’s mandate, to ensure SPP’s rates were just and

reasonable before they took effect or provide refund protection. 

In a typical case, where the Commission exercises its section 205

authority to ensure consumer protection against unjust and

unreasonable rates, Xcel is not contesting the applicability of

section 2.4(a) of the Commission’s regulations in denying

retroactive relief where a rate schedule has been approved and

taken effect in a final order. But where the Commission

acknowledges that it acted contrary to section 205’s mandate to

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protect consumers against unjust and unreasonable rates, its

initial rate order is ultra vires and the Commission cannot

rationally ignore the different contexts in which it has refused to

suspend existing rate schedules or its remedial authority in

section 309.

Xcel observes that this court could exercise its equity power,

see Pet’r’s Br. 50, to respond to the “exigencies of the case” in

order to eliminate “compelling” hardship from non-recoverable

excessive rates, Ind. & Mich., 502 F.2d at 345–46. 

Consideration of that option is premature. The Commission has

yet to evaluate the equities of providing refund protection to

recover unlawful rates resulting from its failure to adhere to

section 205’s mandate. On appeal, the Commission has

expressed concern about under-recovery, which it states “there

could be in this case,” Resp’t’s Br. 33, but this was not the

Commission’s rationale in denying relief in Orders II or III. See

SEC v. Chenery Corp., 318 U.S. 80, 87 (1943); see also State

Farm, 463 U.S. at 50. 

Because the Commission’s reliance on section 2.4(a) of its

regulations as applied in its precedent is inapposite, and its

position that its section 205 error of law is irremediable beyond

prospective relief under section 206 appears irreconcilable with

the authority Congress granted it in section 309 to remedy its

errors, we grant the petition in part and remand the case to the

Commission for appropriate action. See Cities of Batavia, 672

F.2d at 77. Xcel suggests that the remedy it seeks would not

involve a change to the originally granted effective date for the

SPP rates of April 1, 2012, and that there is no reason to presume

the necessary correction to Order I would contravene the FPA,

inasmuch as parties were on notice the SPP rate is tentative and

may be adjusted with retroactive effect. See Pet’r’s Br. 40–41

(citing NSTAR Elec. & Gas Corp. v. FERC, 481 F.3d 794, 801

(D.C. Cir. 2007)). We leave these issues for the Commission to

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address as may be appropriate on remand. See Tenn. Valley

Mun. Gas Ass’n v. FPC, 470 F.2d 446, 452–53 (D.C. Cir. 1972);

see also Exxon Co., USA v. FERC, 182 F.3d 30, 49–50 (D.C. Cir.

1999).

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