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Parties Involved:
Alabama Municipal Electric Authority
Petitioner
American Public Power Association
Amicus Curiae for Petitioner
City of Dalton, Georgia
Intervenor for Respondent
Federal Energy Regulatory Commission
Respondent
Southern Company Services, Inc.
Intervenor for Respondent

Document Text:

United States Court of Appeals 

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued November 2, 2011 Decided December 13, 2011 

No. 10-1141 

ALABAMA MUNICIPAL ELECTRIC AUTHORITY, 

PETITIONER

v. 

FEDERAL ENERGY REGULATORY COMMISSION, 

RESPONDENT

CITY OF DALTON, GEORGIA, DOING BUSINESS AS DALTON 

UTILITIES AND SOUTHERN COMPANY SERVICES, INC.,

INTERVENORS

On Petition for Review of Orders of 

the Federal Energy Regulatory Commission 

Randolph Lee Elliott argued the cause and filed the briefs 

for petitioner. 

Cynthia S. Bogorad, Peter J. Hopkins, Sharon Coleman, 

and Susan N. Kelly were on the briefs for amicus curiae

American Public Power Association in support of petitioner. 

USCA Case #10-1141 Document #1347253 Filed: 12/13/2011 Page 1 of 10
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Beth G. Pacella, Senior Attorney, Federal Energy 

Regulatory Commission, argued the cause for respondent. On 

the briefs were Robert H. Solomon, Solicitor, and Lona T. 

Perry, Senior Attorney. 

Andrew W. Tunnell argued the cause for intervenors 

Southern Company Services, Inc., et al. With him on the brief 

were S. Chris Still, Kevin A. McNamee, Tom Blackburn, and 

James H. McGrew. 

Before: ROGERS and KAVANAUGH, Circuit Judges, and 

WILLIAMS, Senior Circuit Judge. 

Opinion for the Court filed by Senior Circuit Judge

WILLIAMS. 

WILLIAMS, Senior Circuit Judge: Petitioner, Alabama 

Municipal Electric Authority (“AMEA”), purchases power 

wholesale from various sources, including Southern 

Company, and sells it to 11 municipally owned utilities in 

Alabama. To get the power to its customers, AMEA uses 

“unbundled” transmission service provided by one of 

Southern’s subsidiaries, Alabama Power Company. 

(Southern’s other public utility subsidiaries are Georgia Power 

Company, Gulf Power Company, and Mississippi Power 

Company; as referred to here, Southern always includes such 

subsidiaries.) When AMEA uses Southern’s transmission 

system for such unbundled transmission, it pays the “Open 

Access Transmission Tariff” paid by any party receiving such 

service from Southern (including Southern itself). That tariff 

embodies the average cost of transmission service across 

Southern’s operations. 

Southern, AMEA’s transmission provider, also sells 

power directly to retail consumers in Alabama. For 

transmission of these “bundled” retail sales, it uses the 

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Alabama component of its transmission system, which has 

lower unit costs than its transmission system as a whole. 

According to AMEA the relatively high cost of transmission 

service in Georgia drives Southern’s systemwide average 

above its Alabama unit costs. In short, AMEA pays Southern 

a transmission rate that is higher than the implied transmission 

rate encompassed in the rates for Southern’s own bundled 

retail sales in Alabama. 

In a complaint filed with the Federal Energy Regulatory 

Commission, AMEA challenged the rate differential. It 

invoked FERC’s “comparability standard,” a policy adopted 

in fulfillment of provisions of the Federal Power Act requiring 

that all rates subject to FERC’s jurisdiction be “just and 

reasonable” and forbidding “undue prejudice or disadvantage” 

in ratemaking. See 16 U.S.C. § 824d; see also 16 U.S.C. 

§ 824e(a) (barring any “unduly discriminatory or preferential” 

rate). FERC has distilled its comparability standard into “a 

‘golden rule of pricing’—a transmission owner should charge 

itself on the same or comparable basis that it charges others 

for the same service.” Inquiry Concerning the Commission's 

Pricing Policy for Transmission Services Provided by Public 

Utilities Under the Federal Power Act; Policy Statement, 59 

Fed. Reg. 55,031, 55,035 (Nov. 3, 1994) (“Transmission 

Policy Pricing Statement” or “Statement”); see also American 

Electric Power Service Corporation (“AEP”), 67 FERC 

¶ 61,168 (1994); Order No. 888, Promoting Wholesale 

Competition Through Open–Access Non–Discriminatory 

Transmission Services by Public Utilities, 61 Fed. Reg. 

21,540 (May 10, 1996) (“Order No. 888”), on reh’g, Order 

No. 888–A, 62 Fed. Reg. 12,274 (Mar. 14, 1997) (“Order No. 

888-A”).

The comparability issue raised in AMEA’s complaint had 

been reserved under the settlement agreement under which 

FERC approved Southern’s transmission rates. AMEA 

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stresses that the settlement explicitly assigned Southern the 

burden of proof on the issue. In fact, the issue appears to turn 

entirely on the meaning of various prior FERC orders 

expounding the comparability concept, and we owe deference 

to reasonable FERC interpretations of such orders. Natural 

Gas Clearinghouse v. FERC, 108 F.3d 397, 399 (D.C. Cir. 

1997). 

FERC denied the relief, Alabama Municipal Elec. Auth. 

v. Alabama Power Co., 119 FERC ¶ 61,286 (2007), and 

denied AMEA’s request for rehearing, 131 FERC ¶ 61,101 

(2010). Despite the seeming breadth of the “golden rule,” we 

find FERC’s ruling consistent with its comparability policy 

and deny AMEA’s petition for review. 

* * * 

AMEA treats FERC’s AEP order and its 1994 

Transmission Pricing Policy Statement as the two 

foundational documents of the comparability policy, and 

FERC appears to accept that view. AMEA argues that the 

two documents “required comparability between a 

transmission provider’s open-access transmission service and 

the transmission provider’s own use of its system to serve 

bundled retail and wholesale customers.” Petitioner’s Br. 37. 

According to AMEA the best way for Southern Company to 

achieve this comparability would be for it “to adopt zonal, 

license-plate rates for their [transmission tariff].” Petitioner’s 

Br. 17; AMEA Complaint, Joint Appendix (“J.A.”) 2-3. 

Under such a system, transmission service would be priced 

according to the power’s destination: Transmission for all 

power delivered in Alabama, whether retail or wholesale, 

whether unbundled or part of bundled sale and transmission, 

would be charged the same rate. Under the “postage stamp” 

system currently employed for unbundled transmission, in 

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contrast, the price of unbundled transmission service is the 

same across Southern’s transmission network; yet the rates for 

the transmission element of bundled retail transactions vary 

by location. 

FERC’s AEP decision set out to address “changing 

conditions in the electric utility industry, e.g., the emergence 

of non-traditional suppliers and greater competition in bulk 

power markets.” 67 FERC ¶ 61,168 at 61,490. When power 

utilities had operated simply as vertically integrated 

monopolies, FERC’s duty to prevent “undue discrimination” 

had focused on “discrimination in the treatment of different 

customers,” id., presumably primarily to assure that the 

utilities did not improperly shift costs from favored to 

disfavored customers. With the development of “competition 

in bulk power markets,” FERC believed its focus properly 

shifted to “discrimination in the rates and services the utility 

offers third parties when compared to its own use of the 

transmission system.” Id. FERC decided “to refocus [its] 

traditional analysis of undue discrimination” and announced 

the rule that a transmission system “should offer third parties 

access on the same or comparable basis, and under the same 

or comparable terms and conditions, as the transmission 

provider’s uses of its system.” Id. In articulating its “golden 

rule” of pricing in its Transmission Pricing Policy Statement, 

quoted above, FERC naturally relied on the articulation in 

AEP. 59 Fed. Reg. at 55,034-35. 

FERC’s next logical step in responding to the 

development of competitive bulk power markets was its Order 

No. 888, requiring utilities to “unbundle” wholesale 

generation and transmission services, charging separate rates 

for each. Order No. 888, 61 Fed. Reg. at 21,558. Holding 

company operating subsidiaries were to “take transmission 

service under the same tariff rates, terms, and conditions as 

third-party customers that seek transmission service over the 

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holding company system.” Order No. 888-A, 62 Fed. Reg. at 

12,314. 

In addressing the Commission’s application of these 

principles to AMEA’s complaint, we start with a background 

proposition—the line between rates subject and not subject to 

FERC’s jurisdiction. With relatively minor qualifications (see 

below), FERC has not exercised authority over the 

transmission of bundled retail sales, whereas it does exercise 

jurisdiction over unbundled wholesale transmission service 

such as that of Southern. Order No. 888, 61 Fed. Reg. at 

21,625. As a solution to the price differential from which it 

suffers, AMEA suggested a fallback proposal (i.e., a substitute 

for the license plate rate solution mentioned above) under 

which FERC would order Southern to unbundle its retail sales 

and use its transmission tariff rate for the transmission 

component of its (hitherto) bundled retail sales. This would in 

effect render jurisdictional an economic activity that has until 

now been non-jurisdictional. 

But when the Supreme Court reviewed Order No. 888, it 

emphatically rejected a contention (made by Enron) that the 

Commission should subject the transmission used for bundled 

retail sales to the same sort of “open access” measures that the 

order imposed on wholesale transmission. New York v. 

FERC, 535 U.S. 1, 25-28 (2002). As FERC had found 

discrimination in the wholesale electricity market—not the 

retail electricity market—it was reasonable, said the Court, for 

FERC to limit its regulatory response to the wholesale market. 

Id. at 26-27. “Were FERC to investigate . . . and make 

findings concerning undue discrimination in the retail 

electricity market, § 206 of the FPA would require FERC to 

provide a remedy for that discrimination.” Id. at 27. Justice 

Thomas, writing for himself and Justices Scalia and Kennedy, 

dissented on this point, arguing that because of the inherently 

interstate character of electricity transmission (except in 

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Alaska and Hawaii), the statute clearly gave FERC a mandate 

to address undue discrimination in transmission regardless of 

the type of transaction with which it was associated. The 

dissenters would have required FERC to determine whether 

regulating transmission in connection with bundled retail sales 

was necessary to eliminate undue discrimination. Id. at 28-42. 

Thus all justices took it as given that FERC was not engaged 

in regulating the transmission involved in bundled retail sales. 

In this context, AMEA’s fallback proposal that Southern 

be ordered to unbundle its retail sales and use its transmission 

tariff rate for transmission of the relevant power would as a 

practical matter mean an exercise of FERC jurisdiction over 

what FERC has decided, as all nine justices viewed the 

matter, not to exercise jurisdiction. And although AMEA 

characterizes the rate differential affecting it as undue 

discrimination, it does not purport to have built the sort of 

record FERC used to justify Order No. 888’s intervention in 

the wholesale market, or otherwise to argue that we might be 

entitled to command a drastic revision of prevailing 

jurisdictional boundaries. 

We therefore return to AMEA’s proposal of “license 

plate” rates for Southern’s jurisdictional wholesale 

transmission service. In fact AMEA’s argument misreads 

FERC precedent, especially the 1994 Transmission Pricing 

Policy Statement. The express goal of the Statement was “to 

allow much greater transmission pricing flexibility.” 59 Fed. 

Reg. at 55,031. The Statement noted that FERC’s “traditional 

transmission pricing policy has permitted a public utility 

providing firm transmission service to charge rates . . . on a 

postage stamp basis (i.e., not distance sensitive).” Id. at 

55,032. In response to comments asking for flexibility to 

pursue other pricing options, FERC decided to allow new 

methods “such as zones, or line-by-line methods.” Id. at 

55,036; see id. at 55,039. AMEA argues that comparability 

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compels Southern (and perhaps any utility spanning multiple 

states and selling unbundled and bundled transmission 

service) to use a zonal pricing system. It thus takes a 

document opening the door to flexibility and turns it, in many 

circumstances, perhaps most, into one slamming the door on 

all but the “license plate” scheme. 

AMEA also points to language from the “pro forma” 

transmission tariff provided in Orders No. 888 and No. 890, 

see Order No. 890, Preventing Undue Discrimination and 

Preference in Transmission Service, 72 Fed. Reg. 12,266, 

12,361 (Mar. 15, 2007), which it believes supports its reading. 

Petitioner’s Br. 38-42. For example, Section 28.2 of the pro 

forma transmission tariff in Order No. 888 provides that “the 

Transmission Provider shall include the Network Customer’s 

[e.g., AMEA’s] Network Load in its Transmission System 

planning and shall . . . endeavor to construct and place into 

service sufficient transmission capacity to deliver the Network 

Customer’s Network Resources to serve its Network Load on 

a basis comparable to the Transmission Provider’s delivery of 

its own generating and purchased resources to its Native Load 

Customers [e.g., Alabama Power’s retail customers].” 61 Fed. 

Reg. at 21,718. 

FERC counters that these passages concern only 

comparability in non-rate terms and conditions of service. 

Indeed, while the passage (and similar ones) mention a variety 

of terms of service, rate provisions are not among them. We 

have held that these exercises of power over non-rate 

conditions are not inconsistent with the Commission’s 

position in Order No. 888 (i.e., its general non-exercise of 

jurisdiction over bundled retail service). Entergy Services v. 

FERC, 375 F.3d 1204, 1210 (D.C. Cir. 2004). At oral 

argument we inquired of FERC counsel just why the 

Commission intervened as to non-rate matters (but not rates), 

and she explained that FERC intervenes to maintain 

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“transmission availability.” For instance, in the order 

reviewed in Entergy, the Commission restricted a 

transmission provider’s reservation of capacity for its own 

bundled retail uses because that reservation “would have a 

direct impact on the capacity available to other customers 

taking firm transmission service.” Oral Argument Tr. 17. We 

need not evaluate the strength of the distinction, as AMEA 

rests its case on what the Statement and Order No. 888 say, 

not on a challenge to the logic of what they say.

But what of the “‘golden rule of pricing’—a transmission 

owner should charge itself on the same or comparable basis 

that it charges others for the same service”? Statement, 59 

Fed. Reg. at 55,035. Under FERC’s view, the “golden rule,” 

as articulated in FERC orders, does not require comparable 

pricing as between unbundled and bundled transmission 

service. Order on Rehearing, 131 FERC ¶ 61,101 at PP 9-10. 

In light of the jurisdictional versus non-jurisdictional divide, 

that understanding seems reasonable, if not altogether 

inevitable. AMEA points to nothing in the AEP order, the 

Statement, or elsewhere, contradicting the view that 

jurisdictional unbundled transmission service is not “the same 

service” as the transmission component of non-jurisdictional 

bundled retail service. 

AMEA several times cites the Supreme Court’s decision 

in FPC v. Conway, 426 U.S. 271 (1976), in which the Court 

held that FERC could consider rates not subject to FERC 

jurisdiction in order to determine whether jurisdictional rates 

were unduly discriminatory. Later cases by this court 

elaborated the “price squeeze” doctrine: a utility’s behavior 

may be unduly discriminatory if it sells both retail and 

wholesale power and attempts to “squeeze” its retail 

competitors out of the market by selling wholesale power at a 

high price. See Ellwood City v. FERC, 731 F.2d 959, 968 

(D.C. Cir. 1984). But AMEA did not raise a price squeeze 

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claim in its complaint to the Commission. AMEA Complaint, 

J.A. 1-35; see also 18 C.F.R. § 2.17 (listing the “elements of 

the prima facie” price squeeze case that a complainant must 

make out). We therefore do not address the possibility that 

Southern Company’s transmission pricing constitutes a “price 

squeeze.” Our inquiry is limited to the issue reserved in the 

settlement—whether Southern’s pricing violates FERC’s 

comparability policy—and, giving FERC the appropriate level 

of deference on its interpretation of its own orders, we 

conclude that it does not. 

* * * 

The petition for review is therefore 

Denied. 

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