Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-12-01340/USCOURTS-caDC-12-01340-0/pdf.json

Parties Involved:
FPL Energy Marcus Hook, L.P.
Intervenor for Respondent
Federal Energy Regulatory Commission
Respondent
PJM Interconnection, L.L.C.
Intervenor for Respondent
West Deptford Energy, LLC
Petitioner

Document Text:

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued March 6, 2014 Decided August 26, 2014

No. 12-1340

WEST DEPTFORD ENERGY, LLC,

PETITIONER

v.

FEDERAL ENERGY REGULATORY COMMISSION,

RESPONDENT

FPL ENERGY MARCUS HOOK, L.P. AND PJM

INTERCONNECTION, L.L.C.,

INTERVENORS

On Petition for Review of Orders of the 

Federal Energy Regulatory Commission

Ashley C. Parrish argued the cause for petitioner. With 

him on the briefs were Karen F. Grohman, Neil L. Levy, and 

Stephanie S. Lim.

Holly E. Cafer, Attorney, Federal Energy Regulatory 

Commission, argued the cause for respondent. On the brief 

were David L. Morenoff, Acting General Counsel, Robert H. 

Solomon, Solicitor, and Beth G. Pacella, Senior Attorney.

USCA Case #12-1340 Document #1509252 Filed: 08/26/2014 Page 1 of 28
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Paul M. Flynn argued the cause for intervenors. With 

him on the brief were Barry S. Spector, Jennifer H. Tribulski, 

and Stephen L. Huntoon.

Before: GARLAND, Chief Judge, and SRINIVASAN and 

MILLETT, Circuit Judges.

Opinion for the Court filed by Circuit Judge MILLETT.

MILLETT, Circuit Judge: The Federal Power Act requires 

regulated utilities to file with the Federal Energy Regulatory 

Commission, as a matter of open and accessible public record, 

any rates and charges they intend to impose for sales of

electrical energy that are subject to the Commission’s 

jurisdiction. See 16 U.S.C. § 824d(c). As a consequence, 

utilities are forbidden to charge any rate other than the one on 

file with the Commission, a prohibition that has become 

known as the “filed rate doctrine.” See NSTAR Elec. & Gas 

Corp. v. FERC, 481 F.3d 794, 800 (D.C. Cir. 2007); see also 

Arkansas La. Gas Co. v. Hall, 453 U.S. 571, 577 (1981)

(describing filed rate doctrine under the Natural Gas Act). 

That requirement of transparent, public filing of rates ensures 

evenhandedness, fairness, stability, and predictability in the 

prices charged for electrical energy. 

The question in this case is, when a utility filed more than 

one rate with the Commission during the time it was 

negotiating an agreement with a prospective customer, which 

of the two filed rates governs: the rate at the time 

negotiations commenced or the rate at the time the agreement 

was completed? West Deptford argues that, as a matter of 

practice, the Commission has used the rate on file at the time 

the agreement was finalized. The Commission is of the view 

that it can pick and choose which rate applies on a case-bycase basis. See PJM Interconnection, L.L.C., 136 FERC 

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¶ 61,195 (2011) (“Order”); PJM Interconnection, L.L.C., 139 

FERC ¶ 61,184 (2012) (“Rehearing Order”). We vacate the 

Commission’s orders in part and remand because the 

Commission has provided no reasoned explanation for how its

decision comports with statutory direction, prior agency 

practice, or the purposes of the filed rate doctrine.

I

STATUTORY AND REGULATORY FRAMEWORK

The Federal Power Act, 16 U.S.C. §§ 791a et seq.,

charges the Commission with regulating “the transmission of 

electric energy” and “the sale of electric energy at wholesale”

in interstate commerce, id. § 824(b)(1). In exercising that

authority, the Commission must ensure that “[a]ll rates and 

charges” for the “transmission or sale of electric energy 

subject to” its jurisdiction are “just and reasonable,” and that 

no public utility’s rates are unduly discriminatory or 

preferential. Id. § 824d(a) & (b); see NRG Power Marketing, 

LLC v. Maine Public Utils. Comm’n, 558 U.S. 165, 167 

(2010). 

To that end, the Act requires every public utility to “file 

with the Commission” and “keep open in convenient form 

and place for public inspection schedules showing all rates 

and charges for any transmission or sale subject to the

jurisdiction of the Commission.” 16 U.S.C. § 824d(c). That 

obligation applies whether the rates and charges are set 

“unilaterally by tariff” or agreed upon in individual contracts 

between sellers and buyers. NRG Power Marketing, 558 U.S. 

at 171. When a public utility seeks to change its filed rate, it

must “fil[e] with the Commission * * * new schedules stating 

plainly the change or changes * * * and the time when the 

change or changes will go into effect.” 16 U.S.C. § 824d(d).

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The Federal Power Act’s express mandate of openness, 

transparency, and consistency in rates prevents 

discrimination, promotes fair and equal access to the utilities’ 

services, ensures the stability and predictability of rates, and 

reinforces the Commission’s jurisdictional authority. See 

Maislin Industries, U.S., Inc. v. Primary Steel, Inc., 497 U.S. 

116, 130–131 (1990); Consolidated Edison Co. of New York 

v. FERC, 347 F.3d 964, 969 (D.C. Cir. 2003); Consolidated 

Edison Co. of New York v. FERC, 958 F.2d 429, 432 (D.C. 

Cir. 1992) (R.B. Ginsburg, J.).

To foster competition in the wholesale energy market, the 

Commission drastically overhauled the regulatory scheme for 

public utilities in 1996. As part of that effort, the 

Commission ordered regulated utilities to separate financially 

their wholesale power-generation and power-transmission 

services. See Order No. 888, FERC Stats. & Regs. ¶ 31,036

(1996); see also New York v. FERC, 535 U.S. 1, 11 (2002) 

(describing Order No. 888). Accordingly, public utilities 

must now file tariffs with the Commission establishing 

separate rates for wholesale power generation service, 

transmission service, and any ancillary service. New York, 

535 U.S. at 11. In addition, they must “take transmission of 

[their] own wholesale sales and purchases under a single 

general tariff applicable equally to [themselves] and to 

others.” Id.

Problems soon arose, however, because every time a new 

generator of electricity asked to use a transmission network 

owned by another—to interconnect the two entities—disputes 

between the generator and the owner of the transmission grid 

would arise, delaying completion of the interconnection

process. See Order No. 2003, FERC Stats. & Regs. ¶ 31,146

P 11 (2003). The Commission waded into those disputes case 

by case, delaying entry into the market by new generators and 

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providing an unfair competitive advantage to utilities owning

both transmission and generation facilities. Id. at PP 10–11.

To address those issues, the Commission, in 2003, issued 

Order No. 2003, FERC Stats. & Regs. ¶ 31,146 at PP 11–12. 

That order replaced the Commission’s case-by-case approach 

with a standardized process. The Order requires all regulated 

utilities that “own, control, or operate” transmission facilities 

to include standardized interconnection procedures and a form 

interconnection agreement in their filed tariffs. Id. at P 2. By 

mandating that “standard set of procedures,” the Commission 

“minimize[d] opportunities for undue discrimination and 

expedit[ed] the development of new generation, while 

protecting reliability and ensuring that rates are just and 

reasonable.” Id. at P 11.

FACTUAL BACKGROUND

1. PJM Interconnection, L.L.C., is a regional 

transmission organization, an independent entity that operates

transmission facilities in thirteen states and the District of 

Columbia. See FPL Energy Marcus Hook, L.P. v. FERC, 430 

F.3d 441, 442–443 (D.C. Cir. 2005). Under PJM’s Open 

Access Transmission Tariff, the interconnection process 

begins when a generator of electricity submits an 

interconnection request to PJM. PJM Tariff § 36.1.01, J.A.

747–748. Each request is placed into a “first-come, firstserved queue.” Marcus Hook, 430 F.3d at 443; see PJM 

Tariff § 201, J.A. 752. 

The submission of an interconnection request triggers an 

often lengthy review by the utility and holds the requestor’s 

place in the interconnection queue until it concludes. During 

this process, PJM conducts “a series of studies to determine 

the impact of a generator interconnection request on the PJM 

transmission system,” including “the need for upgrades or 

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additions to those transmission facilities,” PJM Br. 6, and an 

estimate of the requestor’s cost responsibility for any needed 

upgrades, see Marcus Hook, 430 F.3d at 443. Those studies 

do “not set a rate for interconnection service,” however; they 

merely provide “a non-binding estimate of costs.” Dominion 

Res. Servs., Inc. v. PJM Interconnection, L.L.C, 123 FERC 

¶ 61,025 P 52 (2008). Customers are thus free to “terminate 

or withdraw their interconnection requests” at any time. 

Marcus Hook, 430 F.3d at 443. Once PJM finishes the 

studies, it provides the requestor with a proposed

interconnection service agreement that “specifies the 

customer’s actual cost responsibility,” including the cost of 

any upgrades needed to PJM’s transmission network to 

sustain the increased demand. Id. 

While a new service request might be what prompts a 

network upgrade, the “integrated transmission grid is a 

cohesive network,” Entergy Servs., Inc., 96 FERC ¶ 61,311, 

62,202 (2001), and thus completed upgrades, whether they 

increase network capacity or simply improve stability,

generally “benefit all transmission customers.” Order No. 

2003, FERC Stats. & Regs. ¶ 31,146 at P 21. For that reason, 

those generators who have to pay for upgrades under the PJM 

Tariff receive “incremental auction revenue rights” that give 

the generator the right to revenue from future sales of 

transmission services associated with the new or upgraded 

facility. See PJM Tariff § 231.1, J.A. 764; see also PJM 

Interconnection, L.L.C., 126 FERC ¶ 61,280 P 3 (2009) 

(describing the function of auction revenue rights). That 

auction revenue, in turn, partially compensates the generator 

for the financial burden it bore in improving the transmission 

network for all users. See Order No. 2003, FERC Stats. & 

Regs. ¶ 31,146 at P 694.

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2. In 1998, three generators submitted interconnection 

requests to PJM for the following projects: the Mantua Creek 

Project, the Liberty Electric Project, and the Marcus Hook 

Project. Rehearing Order at P 3; Marcus Hook, 430 F.3d at 

444. PJM determined that the projects’ combined load would 

“push [its] system beyond the breaking point,” and thus 

advised a $13 million upgrade (“Upgrade”) to a transmission 

circuit. Marcus Hook, 430 F.3d at 444. Because that

Upgrade was unnecessary at the time the first project, Mantua 

Creek, entered the queue, Mantua Creek was not assigned any 

cost responsibility for the Upgrade. Marcus Hook, 430 F.3d 

at 444. Marcus Hook and Liberty Electric bore it all, with 

90% of the Upgrade’s cost assigned to Marcus Hook. See id.; 

see also Rehearing Order at P 3. Both generators moved 

forward with the project, with Marcus Hook agreeing to pay 

“over $10 million of the upgrade’s total cost.” Marcus Hook, 

430 F.3d at 444.

As the Upgrade neared completion, Mantua Creek 

unexpectedly cancelled its project and withdrew from the 

queue. See Rehearing Order at P 3. That decrease in the 

demand for power made the Upgrade unnecessary to support 

Marcus Hook’s and Liberty Electric’s projects. But PJM 

determined that completion of the almost-final Upgrade was 

the “least costly alternative,” and thus “trudged forward and 

completed the upgrade.” Marcus Hook, 430 F.3d at 444. The 

Upgrade was placed into service in June 2003.

Marcus Hook felt differently about being required to 

continue financing the Upgrade. Having paid over $9 million 

to PJM for improvements that were no longer necessary, 

Marcus Hook filed a complaint with the Commission seeking 

a refund. Marcus Hook, 430 F.3d at 444–445. The 

Commission rejected Marcus Hook’s complaint. See FPL 

Energy Marcus Hook, L.P. v. PJM Interconnection, L.L.C., 

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107 FERC ¶ 61,069 (2004) (Marcus Hook I), reh’g denied, 

108 FERC ¶ 61,171 (2004) (Marcus Hook II). In 2005, this 

court upheld the Commission’s decision in relevant part. 

Marcus Hook, 430 F.3d at 447–449.

3. The next year, petitioner West Deptford submitted an 

interconnection request to PJM. Rehearing Order at P 4. 

Under Section 37.7 of the PJM Tariff that was in effect on the 

date that West Deptford submitted its request (July 31, 2006), 

PJM could seek reimbursement for a previously constructed 

network upgrade from a new applicant for interconnection

like West Deptford if the new proposed project (i) used the 

added capacity created by the upgrade or would have required 

the upgrade itself, (ii) the cost of the upgrade was at least $10 

million, and (iii) the upgrade was “placed in service no more 

than five years prior to the affected Interconnection 

Customer’s Interconnection Queue Closing Date.” PJM 

Superseded Tariff § 37.7, J.A. 745.

Based on Section 37.7, PJM’s first study of West 

Deptford’s project proposed imposing financial responsibility 

for the Upgrade on West Deptford. See Rehearing Order at 

PP 5, 9; PJM Feasibility Study 8 (Nov. 2006), J.A. 580. West 

Deptford does not dispute that, if the 2006 Tariff controls its 

interconnection agreement, it must reimburse Marcus Hook 

and Liberty Electric for the costs of the Upgrade. Order at 

P 28.

Eighteen months later, while West Deptford’s 

interconnection request was still pending, PJM filed several 

proposed amendments to its tariff. Rehearing Order at P 11; 

see also Dominion, 123 FERC ¶ 61,025 at PP 1–3 (settlement 

of administrative challenge to PJM Tariff resulted in proposed 

amendments). One proposed amendment significantly 

changed Section 37.7’s assignment of financial responsibility 

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for prior upgrades. As relevant here, under Section 219 of the 

new 2008 tariff, PJM could seek reimbursement for 

previously constructed network upgrades only for a period of 

five years “from the execution date of the Interconnection 

Service Agreement for the project that initially necessitated 

the requirement for the Local Upgrade or Network Upgrade.” 

PJM Tariff § 219(a), J.A. 762. While the tariff was silent 

about the effective date of that change, a transmittal letter 

from PJM noted that the next interconnection queue would 

begin on August 1, 2008, and then “request[ed] an August 1, 

2008 effective date for these Tariff revisions.” PJM 

Transmittal Letter 17, J.A. 711. Because Liberty Electric 

executed its interconnection agreement on May 14, 2001 and 

Marcus Hook executed its agreement on January 22, 2002, 

Rehearing Order at P 10, the Commission and PJM agree that, 

if the 2008 tariff controls, then that tariff’s five-year time 

limit insulates West Deptford from having to pay for the 

Upgrade, Order at P 34.

Proceedings commenced before the Commission 

challenging aspects of the 2008 tariff, but West Deptford was 

not a party. In that proceeding, PJM received an inquiry 

asking whether the new cost-allocation provisions would 

“apply only to projects that enter the interconnection queue on 

or after the proposed effective date of August 1, 2008 or 

whether they will apply also to projects that have entered the 

queue before that date.” Request for Clarification of 

American Municipal Power – Ohio, Inc. at 1, Dominion Res. 

Servs., Inc. v. PJM Interconnection, L.L.C., Docket No. 

EL08-36-001 (FERC June 20, 2008). PJM responded that 

one revised provision of the tariff (known as Section 217.3a, 

J.A. 761, which governs upgrades costing less than $5 million 

and is not at issue here) “will become effective on August 1, 

2008, and will be initially applied to the U2-Queue (this 

queue will close on July 31, 2008).” Answer of PJM 

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Interconnection, L.L.C. to Request for Clarification of 

American Municipal Power – Ohio, Inc. at 4, Dominion Res. 

Servs., Inc. v. PJM Interconnection, L.L.C., Docket No. 

EL08-36-001 (FERC July 7, 2008), J.A. 555. With respect to 

Section 219(a), J.A. 762, the provision at issue here, PJM 

separately stated that “[t]hese modifications are intended to be 

effective as of August 1, 2008, and will be initially applied to 

the U2-Queue.” Id. 

On August 19, 2008, the Commission accepted PJM’s 

revised tariff, but referenced only PJM’s clarification of the 

effective date for the provision not relevant here, stating that 

Section 217.3a “will be applied to the U2-Queue effective 

August 1, 2008.” FERC Letter Order at 1, Dominion Res. 

Servs., Inc. v. PJM Interconnection, L.L.C., Docket No. 

EL08-36-001 (August 19, 2008), J.A. 742. The Commission 

did not mention PJM’s clarification of the effective date for 

the provision at issue in this case, Section 219(a). See id.

Over the next three years, PJM conducted two more 

studies of West Deptford’s interconnection request. In both 

of them, PJM expressed its intention to charge West Deptford 

the full $10 million for the Upgrade, as had been permitted by 

the superseded tariff. PJM System Impact Study Report 4–5

(September 2010), J.A. 594–595; PJM Facilities Study Report

4, 10 (April 2011), J.A. 612, 618. West Deptford claims, 

Reply Br. 25, and no one disputes, that it repeatedly objected

to this attempted cost allocation. 

PROCEDURAL HISTORY

In 2011, PJM provided West Deptford a draft 

interconnection service agreement that imposed the full cost 

of the Upgrade on West Deptford. West Deptford Protest at 

9, J.A. 434. West Deptford objected, id., and PJM filed the 

unexecuted agreement with the Commission, seeking its 

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resolution of the dispute. Rehearing Order at P 6. West 

Deptford argued that imposing the superseded tariff’s terms 

for cost allocation violated both the filed rate doctrine and 

past Commission precedent enforcing the terms of tariffs that 

were in effect when an interconnection agreement was 

executed or filed, rather than when a prospective customer 

entered the queue. West Deptford Protest at 15, J.A. 440. 

West Deptford also argued, as relevant here, that even if it 

were required to reimburse Marcus Hook and Liberty Electric 

for the Upgrade, its cost should be offset by the value of the 

auction revenue rights that Marcus Hook and Liberty Electric 

had already received and exercised as a result of having 

previously paid for the Upgrade’s construction. Id. at 26–27, 

J.A. 451–452. 

The Commission rejected West Deptford’s protest. 

Acknowledging that West Deptford could not be liable for the 

Upgrade under the on-file tariff, the Commission nonetheless 

concluded that the cost-allocation provisions of the 

superseded tariff should govern “since, at the time when West 

Deptford entered the PJM interconnection queue, that 

provision was the one that established its financial 

responsibility.” Order at P 35. According to the 

Commission, that fact put West Deptford “on notice of the 

costs to which it potentially would be liable.” Id. at P 38. 

With respect to West Deptford’s separate claim for 

auction revenue rights, the Commission ruled that the issue 

was not ripe. Order at P 43. In so ruling, the Commission 

relied this time on the on-file 2008 Tariff, and noted that it 

provided that the surrender of auction revenue rights applies 

only once the “New Service Customer * * * executes * * * an 

Interconnection Service Agreement,” which West Deptford 

has not yet done. Id. at P 43 (quoting PJM Tariff 

§ 231.4(1)(b), J.A. 767; omissions in original).

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West Deptford requested rehearing, which the 

Commission denied. The Commission said that PJM could 

enforce the superseded tariff’s cost-allocation rule because, 

during the tariff-revision proceedings to which West Deptford 

was not a party, PJM had clarified that the new tariff’s costallocation provision (Section 219) would only apply starting 

with projects in the “U2 Queue,” which closed in the Summer 

of 2008. Rehearing Order at P 31. The Commission also 

reasoned that each of PJM’s interconnection studies had 

provided West Deptford notice of PJM’s intent to enforce the 

superseded tariff’s cost-allocation provision. Id. at P 28. 

With respect to past Commission precedent, the Commission 

stated that its decisions did not bind it to “a single policy to 

address all of the myriad issues that may arise from a change 

to cost allocation in the interconnection process.” Id. at P 38. 

Finally, the Commission restated, without additional 

explanation, its conclusion that West Deptford’s auctionrevenue-rights claim would be unripe until after it executed 

the interconnection agreement. Id. at P 59.

West Deptford timely petitioned for review, and PJM and 

Marcus Hook intervened. 

II

STANDARD OF REVIEW

We have jurisdiction under 16 U.S.C. § 825l(b). We 

review Commission orders under the arbitrary and capricious 

standard, and will uphold the Commission’s factual findings 

if they are supported by substantial evidence. See 5 U.S.C. 

§ 706(2); see also, e.g., Sacramento Municipal Util. Dist. v. 

FERC, 616 F.3d 520, 528 (D.C. Cir. 2010). Under that

familiar standard, we must determine whether the 

Commission’s orders “examined the relevant data and 

articulated a rational connection between the facts found and 

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the choice made.” Alcoa Inc. v. FERC, 564 F.3d 1342, 1347 

(D.C. Cir. 2009) (internal punctuation and citation omitted). 

While we defer to the Commission’s interpretation of its own 

precedent, see NSTAR, 481 F.3d at 799, the Commission 

cannot depart from those rulings without “‘provid[ing] a 

reasoned analysis indicating that prior policies and standards 

are being deliberately changed, not casually ignored.’” Alcoa, 

564 F.3d at 1347 (quoting Entergy Servs., Inc. v. FERC, 319 

F.3d 536, 541 (D.C. Cir. 2003)). Those same principles also 

govern our review of the Commission’s application of the 

filed rate doctrine. See NSTAR, 481 F.3d at 800. Our review 

of the Commission’s interpretation of filed tariffs is 

“Chevron-like in nature,” which means that we give 

“substantial deference” to the Commission’s interpretation 

unless “the tariff language is unambiguous.” Old Dominion 

Elec. Co-Op., Inc. v. FERC, 518 F.3d 43, 48 (D.C. Cir. 2008)

(internal quotation marks omitted).

III

ANALYSIS

As in many Federal Energy Regulatory Commission 

cases, aspects of this case seem complex. But the legal 

principles that dictate our decision are relatively 

straightforward. The Commission held that the amount of 

money West Deptford would have to pay to obtain 

transmission services would be dictated by a tariff provision

that had been superseded more than three years before PJM

even proposed a contract. To sustain that determination, the 

Commission was obligated to provide a reasoned explanation 

of how applying that charge comported with the text of the 

Federal Power Act and prior Commission precedent. The 

Commission’s decision did neither. Nor did the 

Commission’s ripeness analysis adequately address West 

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Deptford’s claims concerning already-exercised auction 

revenue rights. We accordingly vacate the orders in part and

remand the case to the Commission for further proceedings 

consistent with this decision.

A. THE COMMISSION’S APPLICATION OF THE 

SUPERSEDED TARIFF WAS NOT ADEQUATELY 

REASONED

1. The Commission’s decision, first and foremost, must 

conform to statutory direction. And the Federal Power Act is 

quite clear: “All rates and charges made, demanded, or 

received by any public utility for or in connection with the 

transmission or sale of electric energy” subject to the 

Commission’s jurisdiction must be “file[d] with the 

Commission,” “open in convenient form,” and available for 

“public inspection.” 16 U.S.C. § 824d(a) & (c) (emphasis 

added). Furthermore, if a utility makes any changes to a filed 

“rate, charge, classification, or service,” its public filing with 

the Commission must “stat[e] plainly” both the changes made 

to the tariff “then in force,” and “the time when the change or 

changes will go into effect.” Id. § 824d(d) (emphasis added). 

PJM’s 2008 tariff did not identify any effective date for 

its changed cost-allocation provision, let alone do so 

“plainly.” In particular, nothing in the tariff explained when 

the cost-allocation rules would transition from those 

previously in force (which would have obligated West 

Deptford to pay for the Upgrade) to those in the 2008 tariff 

(which would not charge West Deptford for the Upgrade). 

Right out of the box, then, the Commission’s application of 

the superseded tariff, rather than the new one, ran into 

statutory headwinds that the Commission needed to address. 

2. As the Commission noted, Order at P 37, a

transmittal letter accompanying the new tariff did request an 

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“August 1, 2008 effective date for these Tariff revisions,” J.A.

711. The Commission’s decision seems to assume, and West 

Deptford does not disagree, that the transmittal letter satisfied 

the Act’s legal requirements that the notice of the change’s 

effective date be “fil[ed] with the Commission” and be “open 

for public inspection,” 16 U.S.C. § 824d(d), and so we 

assume for purposes of decision that it does (although it 

would have been far better for the Commission to explain its 

thinking). 

The dispute in this case centers, instead, on whether the 

Commission’s application of the transmittal letter’s request 

for an August 1, 2008 effective date in this case “plainly”

stated that the effective date would be August 1, 2008 only for 

those generators in the U2 queue, and not for those generators 

in earlier queues who signed interconnection agreements after 

the August 1st effective date. The Commission failed to 

adequately explain how it found the statutory requirements 

satisfied in this case. 

To start with, the letter, by its plain terms, does not 

contain the limitation on who gets the August 1, 2008 

effective date that the Commission enforced. At best, the 

request for “an August 1, 2008 effective date for these Tariff 

revisions,” J.A. 711, is silent about whether the date of the 

interconnection agreement or of entry into the queue had to 

fall on or after August 1st. And, at worst, given the Federal 

Power Act’s textual application of filed rates to “any 

transmission or sale,” 16 U.S.C. § 824d(c), the letter implies 

that, beginning August 1st, all charges for transmission and 

sales contracts, including interconnection service, would hew 

to the new tariff’s terms. 

PJM’s letter transmitting the new tariff to the 

Commission did introduce its proposed effective date by 

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noting that it requested August 1, 2008, “[b]ecause the next 

interconnection queue will begin on August 1, 2008.” J.A.

711. But that introductory clause, which is crafted in 

explanatory rather than operative language, simply adds to the 

confusion about what must be in place by August 1st. 

Furthermore, the Commission never endorsed that 

prefatory language as part of the effective date when it 

accepted PJM’s tariff revisions, see J.A. 742, and it has failed 

to provide any explanation of whether and how the bare 

mention of the next queue date, without endorsement by the 

Commission at the time of acceptance, could have legally 

operative force for purposes of the filed rate doctrine. Indeed, 

the Commission has yet to explain, in this ruling or any other 

of which we are aware, what the legal status of information in 

a transmittal letter is—and what the impact of Commission 

endorsement is—for purposes of compliance with the Federal 

Power Act’s filed rate requirements. 

3. A further barrier to affirming the Commission’s 

decision is that it appears to contradict Commission precedent 

applying the tariff in effect on the date of execution of an 

interconnection agreement or the agreement’s filing with the 

Commission, and not the date a generator entered the queue. 

For example, in Midwest Independent Transmission System

Operator, Inc. (MISO III), 125 FERC ¶ 61,277 P 10 (2008),

Midwest filed an amended tariff that took effect in August 

2008. When Midwest filed two interconnection agreements

the next month, however, it sought—just as PJM does here—

to apply the superseded tariff that was in effect when its 

customers entered the queue, rather than the updated tariff. 

Id. at P 5. The Commission flatly rejected that effort. Id. at 

P 10. In sharp contrast to its decision in this case, the 

Commission ruled that Midwest could not apply the old tariff 

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to agreements executed after the amended tariff took effect. 

Id. 

The Commission reaffirmed that position two years later 

in another Midwest case. Describing its previous holding in 

MISO III, the Commission explained that, “because two 

generator interconnection agreements had been executed after 

the effective date of newly revised interconnection queue 

rules, the interconnection agreements [had to] be revised to 

conform with the new rules,” rather than the rules in place at 

the time the generators entered the queue. Midwest Indep. 

Transmission Sys. Operator, Inc. (MISO IV), 129 FERC 

¶ 61,060 P 62 n.120 (2009). The Commission then held that, 

as in MISO III, it had to apply the tariff “effective and on file 

on the date that the interconnection agreement is executed or 

filed unexecuted.” MISO IV, 129 FERC ¶ 61,060 at P 62; see 

also Midwest Indep. Transmission Sys. Operator, Inc. (MISO 

I), 114 FERC ¶ 61,106 P 70 (2006) (interconnection 

agreement would be governed by the presently effective tariff, 

rather than the tariff in effect when the agreement was being 

negotiated); Midwest Indep. Transmission Sys. Operator, Inc.

(MISO V), 131 FERC ¶ 61,165 P 32 (2010) (although costallocation methodology in tariff changed while 

interconnection agreement was being negotiated, “the cost 

allocation methodology that was effective and on file” on the 

date the agreement was executed or filed with the 

Commission controlled); Midwest Indep. Transmission Sys. 

Operator, Inc. (MISO VI), 138 FERC ¶ 61,199 P 42 (2012)

(declining to apply deadlines in an amended tariff because the 

interconnection agreement was governed by “the tariff 

effective and on file at the time the [agreement] was filed with 

the Commission and proposed to take effect”); MidAmerican 

Energy Co., 116 FERC ¶ 61,018 P 13 (2006) (following 

practice of “review[ing] interconnection agreements based on 

USCA Case #12-1340 Document #1509252 Filed: 08/26/2014 Page 17 of 28
18

the terms and conditions in effect on the date when they are 

filed”).

Indeed, until now, there appeared to be an unbroken 

Commission practice of holding that interconnection 

agreements filed after the designated effective date of an 

amended tariff are governed by the amended tariff, unless the 

amended tariff has a grandfathering provision. See Edison 

Mission Energy v. Midwest Indep. Transmission Sys. 

Operator, Inc., 136 FERC ¶ 61,035 PP 38–40 (2011) 

(applying grandfathering provision in tariff that divided 

interconnection requests into four categories based on their 

status when tariff revisions took effect); Arizona Public Serv. 

Co., 137 FERC ¶ 61,099 P 25 (2011) (accepting proposed 

tariff revision “grandfather[ing] existing interconnection 

requests for” customers that had reached a certain milestone 

in the interconnection process). 

It is textbook administrative law that an agency must 

“provide[] a reasoned explanation for departing from 

precedent or treating similar situations differently,” ANR 

Pipeline Co v. FERC, 71 F.3d 897, 901 (D.C. Cir. 1995), and 

Commission cases are no exception, see Colorado Interstate 

Gas Co. v. FERC, 146 F.3d 889, 893 (D.C. Cir. 1998) 

(“Because it has not adequately explained its decision to treat 

[entities] differently in a context where they appear similarly 

situated, we remand the case to the Commission for a fuller 

explanation.”). The Commission, however, failed to provide 

a reasoned explanation for why West Deptford’s 

interconnection agreement should be treated any differently

than those in predecessor decisions. Accordingly, the 

Commission’s deviation from that precedent is not “justified 

either as consistent with precedent or as a considered 

departure therefrom.” Williams Gas Processing-Gulf Coast 

Co. v. FERC, 475 F.3d 319, 327 (D.C. Cir. 2006).

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4. With a paean to administrative flexibility, the 

Commission argues that it can employ a case-by-case 

approach to deciding whether entry into the queue or, instead,

the execution or filing of an interconnection agreement is the 

relevant trigger for an effective date. Perhaps. But the 

Commission must first provide a reasoned decision 

explicating how such case-by-case variation, absent explicit 

tariff provisions publicly identifying different effective dates 

for customers, jibes with the Federal Power Act’s unqualified

directive that “the time when the change or changes” in an 

amended tariff will displace the schedules “then in force” and 

“go into effect” must be “plainly” stated in an open, 

accessible, and convenient manner, 16 U.S.C. § 824d(d). In 

addition, the Commission would have to explain how such a 

case-by-case approach would protect against the 

discrimination and unpredictability in rates and charges that

Section 824d proscribes. See NSTAR, 481 F.3d at 800.

That is just the beginning. The Commission would also 

need to elucidate how such case-by-case variation would fit 

with the Federal Power Act’s purposes given that it has 

previously decided that those aims are best served by 

imposing increased uniformity in tariff terms in lieu of 

conducting case-by-case adjudications. See Order No. 2003, 

FERC Stats. & Regs. ¶ 31,146 at P 11. Generally, such 

standardization “ensures that interconnection customers * * * 

receive non-discriminatory service and that all 

interconnection customers are treated on a consistent and fair 

basis.” MidAmerican Energy, 116 FERC ¶ 61,018 at P 7. 

And finally, the Commission would have to provide a 

reasoned analysis, resting on articulated objective, nondiscriminatory, and evenhanded criteria, that would justify 

treating West Deptford differently than the generators in all 

those other cases in which the Commission enforced the tariff 

USCA Case #12-1340 Document #1509252 Filed: 08/26/2014 Page 19 of 28
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in effect at the time an agreement was filed or executed. See 

Muwekma Ohlone Tribe v. Salazar, 708 F.3d 209, 216 (D.C. 

Cir. 2013) (“Agency action is arbitrary and capricious if ‘the 

agency offers insufficient reasons for treating similar 

situations differently.’”) (quoting County of Los Angeles v. 

Shalala, 192 F.3d 1005, 1022 (D.C. Cir. 1999)). That is 

because identifying the relevant factors that would govern a 

case-by-case analysis is critical to ensuring that the Federal 

Power Act’s requirements of openness, equal treatment, and 

predictability in rates are enforced. 

The Commission’s decision in this case did none of those 

things. The Commission instead pointed to yet another

Midwest decision as purportedly evidencing its case-by-case 

approach. See Rehearing Order at P 40 (citing Midwest 

Indep. Transmission Sys. Operator, Inc. (MISO II), 124 FERC 

¶ 61,183 P 90 (2008), order on reh’g, 127 FERC ¶ 61,294). 

But MISO II makes things worse not better for the 

Commission’s position. In that case, the Commission 

permitted Midwest to apply interconnection procedures from 

its old tariff to certain customers already waiting in the queue. 

MISO II, 124 FERC ¶ 61,183 at PP 1, 84–90. But the 

Commission did so because the text of the revised tariff itself 

provided for that differential treatment. See Proposed 

Revisions to Open Access Transmission and Energy Markets 

Tariff part 2, § 5.1.2, Midwest Indep. Sys. Operator, Inc., 

Docket No. ER08-1169 (FERC June 26, 2008). In other 

words, all that MISO II establishes is that the Commission 

may approve a tariff the express terms of which differentiate 

when its terms will take effect and when they will not. That 

does nothing to justify what appears to be the Commission’s 

one-off decision in this case to deviate both from the filed 

tariff and from precedent consistently enforcing the tariff on 

file on the date an agreement is filed or executed, even though

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the on-file tariff contained no grandfather clause or any other 

indication of its variable application. 

Compounding the problem for the Commission is its 

reliance on FPL Energy Marcus Hook, L.P. v. PJM 

Interconnection, L.L.C. (Marcus Hook III), 118 FERC 

¶ 61,169 (2008). Critically, that case involved not just the 

PJM system, but the very network upgrade for which cost 

allocation is at issue in this case. Id. at P 2. The Commission 

in this case read Marcus Hook III as establishing that the time 

a generator enters the queue could be the relevant point at 

which costs are determined, given how long the 

interconnection process can take and the need to account for 

business risks at the outset. Order at P 36 & n.29; Rehearing 

Order at P 36. But in so stating, the Commission coyly cited

a footnote in Marcus Hook III, and described it as applying 

the “tariff on file ‘when the interconnection was being 

considered.’” Order at P 36 n.29 (quoting Marcus Hook III, 

118 FERC ¶ 61,169 at P 11 n.9) (emphasis added); Rehearing 

Order at P 36 (quoting same footnote). So fortified, the 

Commission then assured that “[s]imilarly, the tariff we apply 

here is the one on file when West Deptford’s interconnection 

request was being considered.” Rehearing Order at P 36 

(emphasis added).

The Commission would have done better to look above 

the footnote to what it actually ruled in Marcus Hook III, 

because there is nothing at all “similar[]” about the two 

outcomes. Quite the opposite, as counsel for the Commission 

conceded at oral argument, Oral Arg. Tr. 44:18-20, Marcus 

Hook III applied not the tariff in effect at the time the 

interconnection customer entered the queue, but “the PJM 

tariff in effect at the time the Interconnection Service 

Agreement was executed[.]” 118 FERC ¶ 61,169 at P 10

(emphasis added); see also FPL Energy Marcus Hook, L.P. v. 

USCA Case #12-1340 Document #1509252 Filed: 08/26/2014 Page 21 of 28
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PJM Interconnection, L.L.C. (Marcus Hook IV), 123 FERC 

¶ 61,289 P 6 n.6 (2008) (reconfirming, on denial of rehearing,

that PJM’s 2001 tariff, which was “in force at the time of 

execution of the [interconnection service agreement],”

controlled); see also id. at P 80 (tariff provision in effect “at 

the time that the [interconnection service agreement] was 

executed” “properly governs the relationship between the 

parties”). 

In other words, the last time the Commission addressed

for this very same tariff the question of which event the

effective date turned on—the queue entry date or the 

interconnection agreement date—the Commission gave the 

exact opposite answer. That is the very essence of 

unreasoned and arbitrary decisionmaking: “[G]loss[ing] over 

or swerv[ing] from prior precedents without discussion * * * 

cross[es] the line from the tolerably terse to the intolerably 

mute.” Bush-Quayle ’92 Primary Committee, Inc. v. FEC, 

104 F.3d 448, 453 (D.C. Cir. 1997) (internal quotation marks 

omitted). 

5. The Commission also invoked the so-called notice 

exception to the filed rate doctrine. We have said that the 

“filed rate doctrine simply does not extend to cases in which 

buyers are on adequate notice that resolution of some specific 

issue may cause a later adjustment to the rate being collected 

at the time of service.” Natural Gas Clearinghouse v. FERC, 

965 F.2d 1066, 1075 (D.C. Cir. 1992). Unfortunately, “[o]ur 

decisions on the necessary notice have not been altogether 

clear.” Transwestern Pipeline Co. v. FERC, 897 F.2d 570, 

577 (D.C. Cir. 1990). For the most part, however, the notice 

exception has been confined to two scenarios. 

First, it permits the filing of tariffs that provide a formula 

for calculating rates, rather than a specific rate number. This 

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court had held that such a “formula itself is the filed rate that

provides sufficient notice to ratepayers” to comport with the 

Federal Power Act’s open-filing requirements, and that the 

objectivity of formulae ensures evenhandedness, 

predictability and stability in rates. Public Utils. Comm’n v. 

FERC, 254 F.3d 250, 254 n.3 (D.C. Cir. 2001); see also

Transwestern Pipeline, 897 F.2d at 578 (“The Commission 

need not confine rates to specific, absolute numbers but may 

approve a tariff containing a rate ‘formula’ or a rate ‘rule’

* * *; it may not, however, simply announce some formula 

and later reveal that the formula was to govern from the date 

of announcement[.]”); see also id. (“[W]e think that where the 

Commission explicitly adopts a formula and indicates when it 

will take effect, courts may not * * * say that such a formula 

may never qualify as a ‘rate[.]’”) (emphasis added); NSTAR, 

481 F.3d at 801 (confirming the “acceptability of tariffs with 

a rate formula” under the filed rate doctrine).

Second, the notice exception has been applied when 

judicial invalidation of Commission decisions has resulted in 

retroactive changes in rates. Canadian Ass’n of Petroleum 

Producers v. FERC, 254 F.3d 289, 299–300 (D.C. Cir. 2001); 

Western Resources, Inc. v. FERC, 72 F.3d 147, 151 (D.C. Cir. 

1995); Public Utils. Comm’n v. FERC, 988 F.2d 154, 163–

166 (D.C. Cir. 1993); Natural Gas Clearinghouse, 965 F.2d

at 1075–1077. The Commission has reasoned, and this court 

has agreed, that generators in those cases were aware in 

advance of the risk of litigation-induced change and, more 

importantly, “[w]ere the Commission not able to take 

remedial action to correct its errors, ‘[ratepayers] would be 

substantially and irreparably injured by Commission errors, 

and judicial review would be powerless to protect them from 

many of the losses so incurred.’” See Western Resources, 72

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F.3d at 151 (quoting Natural Gas Clearinghouse, 965 F.2d at 

1074–1075) (internal brackets omitted).

1

 

This case presented neither of those well-established 

situations. Instead, the Commission pointed (Order at P 26) 

to PJM’s statement in a pleading during the tariff-revision 

process that the revisions to the cost-allocation provision “are 

intended to be effective as of August 1, 2008, and will be 

initially applied to the U2-queue.” J.A. 555. The 

Commission’s decision, however, failed to provide any 

reasoned explanation of how such language in a non-binding 

pleading in litigation to which West Deptford was not even a 

party could provide the type of fair notice the Federal Power 

Act and precedent require. 

To begin with, as the Commission’s counsel 

acknowledged at oral argument, PJM’s supposedly clarifying 

statement was actually “confusing” as to the effective date. 

Oral Arg. Tr. 49:8. While the pleading said that amended 

Section 219(a) would “be effective as of August 1, 2008, and 

will be initially applied to the U2-Queue,” just a few 

sentences earlier PJM said that the “U2-Queue * * * will 

close on July 31, 2008.” Answer of PJM Interconnection, 

L.L.C. to Request for Clarification of American Municipal 

Power – Ohio, Inc. at 4, Dominion Res. Servs., Inc. v. PJM 

Interconnection, L.L.C., Docket No. EL08-36-001 (FERC 

July 7, 2008), J.A. 555. The first statement suggests 

prospectivity; the latter applies Section 219 backward to some 

unidentified date (apparently, sometime in May 2008) at 

which the U2 queue started.2

 Applying the new provision to 

 1 Parties may also mutually agree to give a new rate retroactive 

effect. See Consolidated Edison, 347 F.3d at 969.

2 See PJM INTERCONNECTION, L.L.C., Generation Queues: Active, 

http://www.pjm.com/planning/generation-interconnection/

generation-queue-active.aspx (follow “U2” hyperlink) (last visited 

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customers who started the process in May ill fits the concept 

of an August effective date. More to the point, that 

contradiction undermines the Commission’s insistence that it 

accepted PJM’s tariff with only “prospective” effect, 

Rehearing Order at P 29, and “appl[ied] the tariff change at 

issue only to future queue participants,” id. at P 42.

Beyond that, charging customers with notice of every 

statement in every pleading submitted in proceedings to 

which they are not even parties is a far logical leap from the 

discrete categories to which the notice exception has generally 

been limited. The Commission cited no prior application of 

the notice exception that stretched this far. The Commission 

also failed to explain how that material expansion of the 

notice exception remains consistent with the express 

commands of the Federal Power Act and the filed rate 

doctrine, or how an exception so broadly construed could 

avoid consuming the rule that rates are supposed to identify 

new changes “plainly,” and do so in filed tariffs that are “open 

in convenient form and place for public inspection.” 16 

U.S.C. § 824d(c) & (d). Perhaps it can do that, but the 

decision on review provides no trace of a reasoned decision in 

that regard. 

Finally, the Commission indicated that the studies PJM 

undertook while West Deptford was in the queue provided 

ample notice because each assigned West Deptford financial 

responsibility for the Upgrade. The problem with that 

argument is threefold. First, it overlooks that West Deptford 

repeatedly objected throughout that time period to any such 

imposition of cost responsibility as impermissible. 

 

August 3, 2008) (listing projects entering the U2 queue from May 

16, 2008 through July 31, 2008).

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Second, as with the pleading, the Commission provides 

no reasoned explanation for expanding the notice exception to 

encompass such one-way assertions, especially since 

generators have no apparent way to challenge any costs such 

studies purport to assign at that stage in the interconnection 

process. 

Third, the Commission’s position paid no heed to prior 

Commission precedent that treated such studies as just a

“non-binding estimate of costs.” Dominion, 123 FERC 

¶ 61,025 at P 52.

In sum, because the Commission failed, at multiple steps,

to provide any reasoned explanation of how its decision 

conformed to the Federal Power Act and prior precedent, we 

must remand for the Commission “to explain why its decision 

in this case is not inconsistent with [past precedent] or, 

alternatively, to justify its apparent departures.” Brusco Tug 

& Barge Co. v. NLRB, 247 F.3d 273, 278 (D.C. Cir. 2001); 

see also Northeast Energy Associates v. FERC, 158 F.3d 150, 

156 (D.C. Cir. 1998).

B. The Commission Failed to Address the Impact of 

Already Exercised Auction Revenue Rights on West 

Deptford’s Cost

Before the Commission, West Deptford made two 

distinct arguments regarding auction revenue rights should the 

2006 Tariff apply. First, West Deptford argued that PJM 

could not force West Deptford to pay for the Upgrade until 

Marcus Hook and Liberty Electric surrendered any 

unexercised auction revenue rights they still had. Second, 

West Deptford contended that its $10 million charge should 

be offset by the amount of compensation for building the 

Upgrade that Marcus Hook and Liberty Electric had already 

received from auction revenue rights they had previously 

USCA Case #12-1340 Document #1509252 Filed: 08/26/2014 Page 26 of 28
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exercised. West Deptford Protest at 25–27, J.A. 450–452; 

West Deptford Request for Rehearing at 24–26, J.A. 665–667. 

Addressing only the first argument, the Commission 

construed the 2008 PJM Tariff to require transfer of

unexercised auction rights only after West Deptford executed 

“‘an Interconnection Service Agreement.’” Order at P 43 

(quoting PJM Tariff § 231.4(1)). Because West Deptford 

“ha[d] not yet executed its” agreement, the Commission ruled 

that West Deptford’s claim was “not yet ripe.” Id. In 

denying rehearing, the Commission reiterated that, once West 

Deptford executes the interconnection service agreement, its 

claim to auction revenue rights “will be perfected and PJM 

will be required to assign those [rights] as provided in its 

tariff.” Rehearing Order at P 59.

While the Commission’s decision about the transfer of 

auction rights yet to be exercised was reasonable as far as it 

went, it did not go far enough. The ripeness rationale does 

not work for West Deptford’s separate argument that the $10 

million price tag should have been offset by the amount of the 

cost that Marcus Hook and Liberty Electric had already 

recovered through exercising auction revenue rights. Put 

differently, West Deptford asked the Commission for a price 

check on the Upgrade. There was nothing unripe about that. 

To the extent that Marcus Hook and Liberty Electric already 

recouped their payments from those auction revenue rights, 

they would have been paid a second time when West 

Deptford handed over its $10 million. Oral Arg. Tr. 38:19-20. 

West Deptford thus is presently out of pocket any such 

overpayment. 

The Commission’s counsel posited at oral argument that

the issue remained unripe because, under the PJM Tariff, 

Marcus Hook or Liberty Electric could choose not to 

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relinquish any auction rights. Oral Arg. Tr. 68:13-21. But if 

that happened, it would appear to reduce West Deptford’s 

financial responsibility to zero, and disentitle Marcus Hook 

and Liberty Electric to their respective shares of the $10 

million already paid over by West Deptford. See PJM Tariff 

§ 231.4(d)(2), J.A. 767. Why Marcus Hook and Liberty 

Electric are allowed to keep both the funds already received 

from exercised auction rights and the $10 million is left 

entirely unexplained by the Commission. 

In any event, we need not—and indeed cannot—consider 

“appellate counsel’s post hoc rationalizations” for 

Commission action. Maine Public Utils. Comm’n v. FERC, 

625 F.3d 754, 759 (D.C. Cir. 2010) (internal quotation marks 

omitted). The Commission’s failure to explain why the 

retrospective offsets could not be calculated, and our inability 

to “discern a reasoned path” to that conclusion, Marcus Hook, 

430 F.3d at 449, require us to remand for further explanation. 

IV

CONCLUSION

Because the Commission failed to provide an adequate 

explanation either for its decision to apply the superseded 

tariff to an interconnection agreement filed after the new 

tariff’s effective date, or for its refusal to address the auction 

revenue rights offset, we grant West Deptford’s petition for 

review, vacate the Commission’s orders in relevant part, and 

remand to the Commission for additional explanation

consistent with the decision of this court. 

So ordered.

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