Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-06-01331/USCOURTS-caDC-06-01331-0/pdf.json

Parties Involved:
CED Rock Springs, LLC
Petitioner
Federal Energy Regulatory Commission
Respondent

Document Text:

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued December 13, 2007 Decided February 29, 2008

No. 06-1326

OLD DOMINION ELECTRIC COOPERATIVE, INC.,

PETITIONER

v.

FEDERAL ENERGY REGULATORY COMMISSION,

RESPONDENT

PJM INTERCONNECTION, L.L.C., ET AL.,

INTERVENORS

Consolidated with

06-1331

On Petitions for Review of Orders of the

Federal Energy Regulatory Commission

William D. DeGrandis argued the cause for petitioners.

With him on the briefs were Bruce D. Ryan, Dennis Lane, and

Glen L. Ortman.

Carol J. Banta, Attorney, Federal Energy Regulatory

Commission, argued the cause for respondent. On the brief was

John S. Moot, General Counsel.

USCA Case #06-1331 Document #1101963 Filed: 02/29/2008 Page 1 of 18
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A. Karen Hill, Donald A. Kaplan, and John Longstreth were

on the brief for intervenors PPL Electric Utilities Corporation

and Exelon Corporation in support of respondent.

Before: SENTELLE, Chief Judge, and GINSBURG and

GARLAND, Circuit Judges.

Opinion for the Court filed by Chief Judge SENTELLE.

SENTELLE, Chief Judge: CED Rock Springs, LLC (“Rock

Springs”) and Old Dominion Electric Cooperative (“Old

Dominion”) (together, “Petitioners”) petition for review of a

Federal Energy Regulatory Commission (“FERC” or “the

Commission”) order rejecting their rate filings under section 205

of the Federal Power Act (“FPA”), 16 U.S.C. § 824d. They also

petition for review of FERC’s order denying their request for

rehearing. Because we conclude that the Commission

adequately explained its decision to deny Petitioners’ rate filings

and its decision was not unduly discriminatory, we deny their

petition for review.

I. Background

In 1998, Petitioner Old Dominion began planning the

construction and development of a natural gas-fired combustion

turbine generating facility to be located in Rising Sun,

Maryland. The facility is now complete and consists of four

generation units—two owned by Old Dominion and two by

Petitioner Rock Springs—and transmission facilities consisting

of a 500 kV substation and two 900-foot 500 kV transmission

lines jointly owned by Petitioners. Petitioners connected their

generators to the electrical grid first by running radial lines from

their generators to the substation. They then looped their two

900-foot transmission lines from the substation to a 500 kV

transmission line owned by PECO Energy Company (“PECO”).

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Electricity flows freely from other generation facilities through

PECO’s transmission lines, and subsequently, through

Petitioners’ substation and two 900-foot lines. Electricity

produced by Petitioners’ generators only flows out from the

generators onto the transmission grid via the radial lines that

connect their generators to the substation. In other words,

Petitioners’ substation and two looped 900-foot 500 kV lines are

fully integrated in the electrical grid; Petitioners’ generators are

not.

PJM Transmission System (“PJM”) is a regional,

interconnected transmission grid composed of transmission and

generation facilities owned by Petitioners, PECO, and others.

All owners of generation and transmission facilities in the PJM

Transmission System are parties to the PJM Interconnection

L.L.C. Open Access Transmission Tariff (“Tariff”). The Tariff

establishes the rates, terms, and conditions of service for

transmission services over the PJM Transmission System. The

Tariff also requires an Interconnection Customer, a generator

that needs to connect to the PJM Transmission System,

to pay for 100 percent of the costs of the minimum

amount of . . . Network Upgrades necessary to

accommodate its Interconnection Request and that

would not have been incurred . . . but for such

Interconnection Request, net of benefits resulting from

the construction of the upgrades, such cost not to be less

than zero.

Tariff § 37.2.

During construction of the Rock Springs and Old Dominion

generating facilities, Petitioners submitted an Interconnection

Request as set forth in the Tariff for PECO to connect their

generators to the PJM Transmission System. PECO indicated

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to Petitioners that it would be unable to build the interconnection

facilities on the schedule that they preferred, so instead of

waiting for PECO to build the facilities, they opted to build them

themselves. Petitioners then began construction on the 500 kV

substation and two 900-foot 500 kV lines that now connect their

generators to the PJM Transmission System. If PECO had built

the interconnection facilities, the Tariff would have allocated the

cost to Petitioners minus any benefit to the PJM Transmission

System, and PECO would have owned the interconnection

facilities. Tariff § 37.2; id. § 40.1 (“Except to the extent

otherwise provided in a Construction Service Agreement entered

into pursuant to Subpart F below, the Transmission Owners shall

own all Attachment Facilities, Local Upgrades, and Network

Upgrades constructed to accommodate Interconnection

Requests.”). However, Petitioners built the interconnection

facilities themselves, so they each own a one-half share in the

substation and 1,800 feet of transmission line, making them

Transmission Owners (“TOs”). Because Petitioners are TOs and

not simply owners of generation facilities, in addition to being

parties to the Tariff, they are also parties to the Transmission

Owners’ Agreement (“TOA”). 

Prior to signing the TOA, the relationship between PJM and

Petitioners was governed by a Facilities Operation Agreement

(“FOA”), a contract written to address Petitioners’ unique

position as both generation owners and TOs. Because

Petitioners wanted to preserve their status as Exempt Wholesale

Generators (“EWGs”) under the Public Utility Holding

Company Act of 1935 (“PUHCA”), 15 U.S.C. §§ 79a et seq.,

repealed by the Energy Policy Act of 2005, Pub. L. No. 109-58,

119 Stat. 594, the FOA included a provision that waived their

right to receive any revenue that “PJM may collect for

transmission services for which PJM may use the Facility . . . .”

FOA § 5.1.5. But other TOs were not satisfied with the FOA, so

the parties modified the TOA to allow Rock Springs and Old

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Dominion to opt out of cost recovery. The modified TOA gives

each party “the right at any time unilaterally to file pursuant to

Section 205 of the Federal Power Act to change the revenue

requirements underlying its rates for providing services under

the PJM Tariff.” TOA § 2.2.1. The next sentence addresses

Petitioners’ EWG concerns and gives each party “the unilateral

right to adopt a revenue requirement of zero and to forgo any

right or claim to compensation for providing transmission

services under the PJM Tariff or any other document.” Id.

(emphasis added). Section 2.2 of the TOA states that

“[n]otwithstanding any other provision of this Agreement, or

any other agreement or amendment made in connection with the

restructuring of PJM, each individual Party shall retain all of the

rights set forth in this Section 2.2 . . . .” 

Later FERC orders and the repeal of the Public Utility

Holding Company Act of 1935 assuaged Petitioners’ concerns

about their EWG status. As a result, Rock Springs and Old

Dominion filed petitions with FERC to recover operating and

management expenses, depreciation expenses, property taxes,

and return on equity for their substation and 1,800 feet of

transmission line. Old Dominion Elec. Coop., Filing of

Transmission Revenue Requirement Rate Application and Tariff

Revisions, at 6, Docket No. ER06-497-000 (Jan. 17, 2006).

These figures represent “the portion of plant costs attributable to

the two 900-foot transmission lines and related 500 kV

substation,” along with operating expenses for these facilities.

CED Rock Springs, LLC, Filing of Transmission Revenue

Requirement Rate Application and Tariff Revisions, at 8,

Docket No. ER06-497-000 (Jan. 17, 2006).

 FERC rejected Petitioners’ rate filings in full. CED Rock

Springs, LLC, et al., 114 FERC ¶ 61,285 (Mar. 17, 2006)

(“Order Rejecting Rate Filings”). The Commission concluded

that Section 37.2 of the Tariff, which assigns to Generation

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Interconnection Customers the cost of Network Upgrades that

“would not have been necessary but for the generation project

and that do not provide benefits to the transmission grid,”

precluded Petitioners from recovering the cost of building their

interconnection facilities. Id. at 61,961; see id. at 61,961–62.

Because Petitioners demonstrated no “but for” benefits to the

PJM Transmission System, FERC determined that the Tariff

foreclosed Petitioners from recovering their interconnection

costs from transmission revenue. Id. at 61,962. FERC also

found that Section 2.2 of the TOA and Section 9.1(a) of the

Tariff, which reserve a TO’s right to file for transmission service

revenue under section 205 of the FPA, do not override “the

express allocation of costs under section 37.” Id. at 61,962; see

id. at 61,962–64. In addition, FERC noted that in an earlier

filing, Petitioners expressly disclaimed any right to receive

transmission revenue from their facilities. Id. at 61,964; see Old

Dominion’s and Rock Springs’s Request for Expedited Order

Confirming Compliance with Order Nos. 888 and 889, at 3, 11

& 12, Docket No. OA02-9-000 (Aug. 30, 2002). FERC noted

that it had even issued an order in response to that filing stating

that “‘[w]hen Applicants’ transmission facilities provide

transmission service to PJM’s customers, Applicants will

receive no transmission revenue,’” for which Petitioners never

requested rehearing. Order Rejecting Rate Filings, 114 FERC

at 61,964 (quoting CED Rock Springs, Inc., et al., 101 FERC

¶ 61,325, 62,353 (Dec. 20, 2002)). 

Petitioners were not satisfied with FERC’s initial order so

they sought rehearing, which FERC denied. CED Rock Springs,

LLC, et al., 116 FERC ¶ 61,163 (Aug. 22, 2006) (“Order

Denying Rehearing”). As in the first order, FERC determined

that because Petitioners put forth no evidence that their

interconnection facilities were necessary “but for” their

interconnection request, Section 37.2 bars Petitioners from

recovering the costs of those facilities through transmission

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revenue. Id. at 61,705. FERC noted that, despite Petitioners’

assertions to the contrary, they cited no case in which “similarly

situated projects . . . have been treated differently.” Id. at

61,706. 

Rock Springs and Old Dominion now petition this court for

review of FERC’s initial order and its order denying rehearing.

II. Analysis

We grant substantial deference to FERC’s orders, setting

them aside only if they are “arbitrary, capricious, an abuse of

discretion, or otherwise not in accordance with law.” 5 U.S.C.

§ 706(2)(A); see also FPL Energy Marcus Hook, L.P. v. FERC,

430 F.3d 441, 446 (D.C. Cir. 2005). Under this deferential

standard of review we uphold orders in which we can “discern

a reasoned path” to the decision. FPL Energy Marcus Hook,

430 F.3d at 449 (internal citations and quotations omitted).

 

This Court also “generally gives substantial deference to

[FERC’s] interpretation of filed tariffs, even where the issue

simply involves the proper construction of language.” S. Cal.

Edison Co. v. FERC, 415 F.3d 17, 21 (D.C. Cir. 2005) (internal

citation and quotations omitted). However, we do not defer to

FERC’s interpretation when the tariff language is unambiguous.

FPL Energy Marcus Hook, 430 F.3d at 446. This level of

review is “Chevron-like” in nature. Consol. Edison Co. of N.Y.

v. FERC, 347 F.3d 964, 972 (D.C. Cir. 2003); see Chevron

U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837,

842-43 (1984). 

Petitioners ask this Court to review de novo FERC’s

interpretation of the Tariff and the TOA based on their

conclusion that FERC found the language in the relevant

documents to be unambiguous. It is true that “[a]n agency is

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given no deference at all on the question whether a statute is

ambiguous, and if an agency erroneously contends that

Congress’ intent has been clearly expressed and has rested on

that ground, we remand to require the agency to consider the

question afresh in light of the ambiguity we see.” Cajun Elec.

Power Coop., Inc. v. FERC, 924 F.2d 1132, 1136 (D.C. Cir.

1991). In this case, however, FERC considered policy concerns

and extrinsic evidence proffered by Petitioners, demonstrating

it recognized the Tariff and the TOA were ambiguous and

exercised its discretion to resolve the ambiguities. See Order

Rejecting Rate Filings, 114 FERC at 61,962-64; Order Denying

Rehearing, 116 FERC at 61,704. Therefore, we afford

substantial deference to the Commission’s interpretation of the

relevant contract language. See Chevron, 467 U.S. at 842-43;

Koch Gateway Pipeline Co. v. FERC, 136 F.3d 810, 814-15

(D.C. Cir. 1998).

A. Network Upgrades

Petitioners first argue that Section 37.2 of the Tariff does

not apply to their rate filing because their substation and 1,800

feet of transmission line are not Network Upgrades. Petitioners

contest FERC’s classification of their transmission facilities as

Network Upgrades for two reasons: one, transmission facilities

cannot also be classified as Network Upgrades; and two, no

document refers to their transmission facilities as Network

Upgrades, while other facilities were expressly defined as

“Network Upgrades.” 

In order for Section 37.2 to apply to Petitioners’ rate filings,

their interconnection facilities must be either Local Upgrades or

Network Upgrades. Tariff § 37.2 (referring only to payment

responsibility for Network and Local Upgrades). Network

Upgrades are defined as “[m]odifications or additions to

transmission-related facilities that are integrated with and

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support the Transmission Provider’s overall Transmission

System for the general benefit of all users of such Transmission

System.” Tariff § 1.26. Petitioners do not object to FERC’s

acknowledgment that even Petitioners “recognize[] the facilities

they own are modifications and additions to the existing”

transmission system, an admission that plainly places them in

the category of Network Upgrades. Order Denying Rehearing,

116 FERC at 61,702. Petitioners contend only that because their

facilities are transmission facilities, they cannot also be Network

Upgrades. 

FERC sensibly rejected this either/or contention,

determining that Network Upgrades can also serve as

transmission facilities and noting that the Tariff makes “no

distinction . . . between network upgrades and transmission

facilities.” Id. FERC also reasonably found that the lack of

designation of these facilities as Network Upgrades in the TOA

or Tariff or any other part of the record is irrelevant. Id. at

61,703. The only reason for designating the facilities in such a

way would be to ensure that Petitioners “repay” another entity

for the cost of constructing the facilities. Id. There was no

reason to designate Petitioners’ facilities as Network Upgrades

when Petitioners were already paying for the construction costs

themselves. 

B. Generation Interconnection Customers

Petitioners also claim that Section 37.2 does not apply to

them because they are not “ordinary” Generation

Interconnection Customers (“GICs”). Request for Rehearing of

CED Rock Springs, LLC, at 13–14, Docket No. ER06-491-001

(Apr. 14, 2006); see also Request for Rehearing of Old

Dominion Elec. Coop., at 12–13, Docket No. ER06-497-000

(Apr. 17, 2006). A GIC is defined as “[a]n entity that submits

an Interconnection Request to interconnect a new generation

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facility . . . with the Transmission System in the PJM Region.”

Tariff § 1.13B. Petitioners do not contest that they submitted an

Interconnection Request as required under the Tariff. PJM

Filing of Interconnection Service Agreement with Rock Springs,

Old Dominion and Rock Springs Generation and the FOA, at 3,

Docket No. ER02-1726 (May 6, 2002). Nor do they contest that

instead of waiting for PJM to construct the interconnection

facilities, Petitioners and PJM entered into an Interconnection

Agreement and a FOA that referred to Petitioners’ substation as

an “Interconnection Substation” and their 1,800 feet of 500 kV

transmission line as “interconnection facilities.” Id. at 5–6;

FOA § 1.1. Instead, Petitioners argue that they cannot be GICs

because they are TOs, and, according to Petitioners, TOs cannot

also be GICs. For support, they present an excerpt from a

transmittal letter PECO sent to FERC upon filing its

Interconnection Agreement: 

The subject Interconnection Agreement establishes the

requirements, terms, and conditions for the

interconnection of Rock Springs/CED’s Transmission

Facilities with PECO’s Transmission Facilities, and

defines the continuing responsibilities and obligations of

the parties as transmission owners of interconnected

transmission facilities. . . .

The Interconnection Agreement differs from other

interconnection agreements recently filed by PECO

because it is between two transmission owners, as

opposed to between a transmission owner and a

generator. . . . PJM’s standardized tariff for generation

interconnection is also designed to address the

interconnection of new generation stations to

transmission facilities, and does not address the unique

situation presented here.

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PECO Energy Co., Filing of Interconnection Agreement with

PECO, Old Dominion and Rock Springs, at 3, Docket No.

ER02-1779 (May 9, 2002). 

FERC adequately responded to Petitioners’ attempt to

dichotomize TOs and GICs by relying on the definition of a GIC

and examining it in light of the policy underlying Section 37.2.

The Commission found that GIC “is defined without limitation”

and “applies regardless of whether the interconnection customer

is also a transmission owner.” Order Rejecting Rate Filings,

114 FERC at 61,962. FERC noted that the policy underlying

Section 37.2, which is “to promote efficient interconnection and

enhance overall economic efficiency . . . would be undermined

by requiring generators initially to pay their interconnection

costs and allowing generators then to allocate those costs to

transmission service customers.” Id.; see also Order Denying

Rehearing, 116 FERC at 61,702 (“Allocation of cost

responsibility under section 37.2 does not depend on which

party chose to build facilities, but rather on whether the facilities

would have been built ‘but for’ the generation interconnection

project.”). In response to the excerpted letter, FERC reasonably

noted that creating an Interconnection Agreement when parties

rearrange ownership and operational arrangements “is both

expected, and under the [Tariff], irrelevant.” Order Denying

Rehearing, 116 FERC at 61,701 n.10. We find that FERC’s

reasoning adequately explains why Petitioners are classified as

GICs. 

C. “But For” Facilities

Because FERC reasonably determined that Petitioners’

interconnection facilities are Network Upgrades and that

Petitioners are GICs, it was reasonable for the Commission to

apply the cost responsibility provisions in Section 37.2 of the

Tariff. Section 37.2 of the Tariff assigns to the Interconnection

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Customer “100 percent of the costs of the minimum amount of

. . . Network Upgrades necessary to accommodate [an

Interconnection Customer’s] Interconnection Request and that

would not have been incurred under the Regional Transmission

Expansion Plan but for such Interconnection Request, net of

benefits resulting from the construction of the upgrades . . . .”

 

Interpreting Section 37.2 in light of the provision’s

language and the relevant policy considerations, FERC found

that it “determines cost responsibility based not on electrical

integration (whether the facilities operate as transmission

facilities) or ownership, but rather on whether the connection

facilities would have been built for another purpose or enable

the system to avoid certain expenditures.” Order Denying

Rehearing, 116 FERC at 61,701. To read the provision to allow

GICs to recoup interconnection costs through transmission

revenue would undermine the Commission’s policy “to promote

efficient interconnection and enhance overall economic

efficiency” and “defeat the purpose of Order No. 2003 to treat

generation interconnections built by transmission owners

differently from other generation interconnections.” Order

Rejecting Rate Filings, 114 FERC at 61,962. FERC found no

evidence that Petitioners’ interconnection facilities would have

been built but for their need to connect to the transmission grid.

Order Denying Rehearing, 116 FERC at 61,705. Because

Section 37.2 assigns to the GIC 100 percent of the costs of

interconnection when facilities would not have been built but for

the interconnection request, FERC denied Petitioners’ request to

recoup these expenditures through transmission revenue. Id.

On appeal, Petitioners make several allusions to services

their transmission facilities now provide to the grid, but they still

point to no evidence in the record that the PJM Transmission

System would have built facilities to provide these services in

the absence of Petitioners’ need to connect to the grid. While

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Petitioners contend that FERC refused “to acknowledge the

benefits of increased reliability and flexibility” to the grid their

facilities provide, Petitioners’ Br. at 26, the presence or absence

of these purported benefits is not controlling. The allocation of

costs under Section 37.2 depends on the grid’s demonstrated

need for interconnection facilities, not the incidental services or

benefits any given interconnection facility may provide once it

is built. The same reasoning applies to explain why the future

cost of a $200,000 wave trap replacement and other unquantified

costs associated with complying with TOA regulations, Request

for Rehearing of Old Dominion Elec. Coop., at 26, Docket No.

ER06-497-000 (Apr. 17, 2006), are not evidence that the

facilities would have been built but for their interconnection

request. FERC adequately responded to this argument, asserting

that “these costs resulted from [Petitioners’] choice to build and

own these facilities[,]” not from any demonstrated need by the

system. Order Denying Rehearing, 116 FERC at 61,702. And

while the 500 kV capacity of their substation and transmission

lines more than doubles the maximum output of their generation

units, this additional capacity is not evidence that the PJM

Transmission System would have added facilities such as these

absent Petitioners’ need to interconnect. FERC reasonably

attributed this extra capacity to the need for the interconnection

facilities to match the transmission capacity of the grid so as not

to adversely affect the reliability of the grid. Order Denying

Rehearing, 116 FERC at 61,705. Because Section 37.2 requires

evidence that facilities would have been built “but for” a GIC’s

need to interconnect for the GIC to receive any credit towards

interconnection construction costs, FERC reasonably assigned

to Petitioners 100 percent of interconnection costs and denied

their rate filing for reimbursement of these costs. 

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D. TOA § 2.2 and Tariff § 9.1(a)

Despite the language in Section 37.2 of the Tariff that

precludes cost recovery for Petitioners’ interconnection

facilities, Petitioners contend that Section 2.2 of the TOA and

Section 9.1(a) of the Tariff override Section 37.2’s applicability.

Section 2.2 of the TOA states that “[n]otwithstanding any other

provision of this Agreement . . . each individual Party shall

retain all of the rights set forth in this Section 2.2.” The rights

set forth in Section 2.2 include “the right at any time unilaterally

to file pursuant to Section 205 of the Federal Power Act to

change the revenue requirements underlying its rates for

providing services under the PJM Tariff” and “the unilateral

right to adopt a revenue requirement of zero and to forgo any

right or claim to compensation for providing transmission

services under the PJM Tariff . . . .” TOA § 2.2.1. Section

9.1(a) of the Tariff states:

[t]he Transmission Owners shall have the exclusive and

unilateral rights to file pursuant to Section 205 of the

Federal Power Act . . . for any changes in or relating to

the establishment and recovery of the Transmission

Owners’ transmission revenue requirements or the

transmission rate design under the PJM Tariff, and such

filing rights shall also encompass any provisions of the

PJM Tariff governing the recovery of transmissionrelated costs incurred by the Transmission Owners.

Petitioners claim that the language in these provisions

unambiguously gives Petitioners the right to recover revenue for

their interconnection facilities through their rate filings despite

contrary language in Section 37.2 of the Tariff. Petitioners

contend that any contrary conclusion would make Section 2.2.1

of the TOA meaningless. They also claim that Section 2.2.1,

language not present in the parties’ prior agreement, served as

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their quid pro quo for taking on the additional responsibilities

that TOA signatories incur. Such responsibilities include, inter

alia, complying with FERC Standards of Conduct and curtailing

transmission facility operation when instructed by PJM. 

In response to Petitioners’ argument about the significance

of Section 2.2 of the TOA and Section 9.1(a) of the Tariff,

FERC found that the provisions are simply reservations of rights

that “permit[] the utility only to submit a filing to recover costs.”

Order Denying Rehearing, 116 FERC at 61,703. “Whether such

costs can be recovered, and from whom, depends upon an

analysis of the [Tariff] and the benefits, if any, that such costs

provide to other parties.” Id. FERC further stated that Section

2.2.1 of the TOA, which allows a party to “adopt a revenue

requirement of zero,” does not grant the converse affirmative

right to receive the revenue that Petitioners seek. Id. at 61,704.

A party to the TOA may apply for revenue, as the provision

allows, but it does not require FERC to accept an application for

revenue that other parts of the TOA and Tariff prohibit. Id. We

find no problem with the Commission’s reasoning. 

Petitioners claim that FERC’s interpretation of Section 2.2.1

of the TOA to provide a unilateral right to file for revenue but

not to include an affirmative right to receive revenue renders the

provision meaningless. In Petitioners’ view, if they can file for

revenue and FERC can reject their filing, then Section 2.2.1

provides no right at all. But Petitioners ignore the fact that they

can file, and if the filing is not prohibited by another section of

the TOA or the Tariff, then they can receive the revenue to

which they are entitled. The provision operates in the same way

for every signatory to the TOA, giving each party an equal right

to file. Furthermore, Section 2.2.1’s right to forego

compensation, the language that Petitioners urged the parties to

the TOA to adopt, also had a tangible meaning to Petitioners.

As FERC aptly stated, “section 2.2.1 merely ensures that each

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owner may decide unilaterally to forgo any compensation to

which the owner might be entitled, notwithstanding the joint

filings contemplated under the PJM agreements.” Order

Denying Rehearing, 116 FERC at 61,704. This provision

allowed Petitioners to comply with the now-repealed PUHCA.

Contrary to Petitioners’ assertion, Section 2.2.1 has meaning and

provides Petitioners with the right to recover revenue if they can

show their transmission facilities provide net benefits to the

system. 

The extrinsic evidence that Petitioners present to support

their quid pro quo theory is inapposite in light of the fact that the

TOA only confers a “right at any time unilaterally to file” for

revenue, not to receive it. TOA § 2.1.1. There is no reason for

FERC to accord determinative weight to extrinsic evidence of

one party’s expectations, particularly when the contract

language provides for no such right. See Order Denying

Rehearing, 116 FERC at 61,704 (“[E]xtrinsic evidence cannot

overcome the provisions of the [Tariff] that do not permit such

recovery.”]. As FERC noted, “the affidavit never states that the

other parties were ever aware of, or agreed to, Rock Springs’ or

Old Dominion’s right to recover these costs from other

transmission customers.” Id. It is reasonable for the

Commission to discount extrinsic evidence of one party’s

“personal understanding of the contractual terms rather than its

objective meaning.” Amerada Hess Pipeline Corp. v. FERC,

117 F.3d 596, 606 (D.C. Cir. 1997). We further note that just as

the parties to the TOA derived no benefit from Old Dominion’s

new transmission lines, those parties derived no benefit from the

additional expenses Old Dominion incurred as a result of

signing the TOA. Therefore, there is no reason they would have

agreed to permit Old Dominion to recover revenue in exchange

for Old Dominion shouldering those regulatory burdens.

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E. Undue Discrimination

Last, Petitioners assert that FERC’s interpretation of

Section 37.2 of the Tariff to preclude them from recovering the

cost of building their interconnection facilities through

transmission revenue is unduly discriminatory. Referring to a

spreadsheet they created and titled, “PECO Comparable

Facilities Included in PJM OATT Rates,” they claim that PECO,

another owner of transmission facilities and a party to the Tariff,

has recovered costs for substations and transmission lines

associated with other generation facilities through transmission

revenue. The spreadsheet contains no revenue figures and does

not indicate whether any of the “PECO Comparable Facilities”

are also interconnection facilities governed by Section 37.2 of

the Tariff. In fact, Petitioner Rock Springs admitted these

facilities were not built to connect a generating facility to the

PJM Transmission System. Rock Springs stated to the

Commission that “[s]ince PJM was restructured as an

independent system operator (“ISO”) in 1997, no PJM East

Transmission Owner has constructed generation and sought to

include the transmission facilities associated with such new

generation in its rate base.” Request for Rehearing of CED

Rock Springs, LLC, at 27, Docket No. ER06-491-001 (Apr. 14,

2006). FERC examined this evidence of undue discrimination

presented by Petitioners and quite reasonably did not regard it

as persuasive. Order Rejecting Rate Filings, 114 FERC at

61,964; Order Denying Rehearing, 116 FERC at 61,706. 

Petitioners also cited PJM Interconnection, LLC, 94 FERC

¶ 61,295 (Mar. 15, 2001), rehearing denied, 95 FERC ¶ 61,217

(May 16, 2001), to support its claim of undue discrimination. 

In PJM Interconnection, a TO recovered its investment in 42

miles of transmission line through a rate filing for transmission

revenue. 94 FERC at 62,074, 62,078. FERC adequately

distinguished PJM Interconnection, finding no evidence that the

USCA Case #06-1331 Document #1101963 Filed: 02/29/2008 Page 17 of 18
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transmission line in that case was constructed to connect a

generator to the grid, making Section 37.2 of the Tariff

inapplicable to that TO. Order Denying Rehearing, 116 FERC

at 61,705. Because Section 37.2 was not at issue in PJM

Interconnection, it did not provide evidence of any

discriminatory treatment toward Petitioners. Id. 

There is insufficient evidence in the record to show that

FERC discriminated against Petitioners. Contrary to Petitioners’

contention, FERC’s statement in its brief that Petitioners failed

to sustain their burden of proof on the issue of undue

discrimination, is not a post-hoc rationalization. See id. at

61,706 (referring to Petitioners’ contention that other TOs are

recovering costs for similar facilities and stating that Petitioners

“offer no citations to show that there are any similarly situated

projects that have been treated differently”).

III. Conclusion

Because we conclude that FERC adequately explained its

decision to deny Petitioners’ rate filings and Petitioners

presented no evidence that FERC acted with any undue

discrimination, we deny their petition for review.

USCA Case #06-1331 Document #1101963 Filed: 02/29/2008 Page 18 of 18