# United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued May 13, 2021 Decided March 4, 2022

No. 20

- 1033

L ONG I SLAND P OWER A UTHORITY AND L ONG I SLAND

L IGHTING C OMPANY

, D / B / A LIPA,

P ETITIONERS

v.

F EDERAL E NERGY R EGULATORY C OMMISSION

, R ESPONDENT

A MERICAN E LECTRIC P OWER S ERVICE C ORPORATION

, ET AL

., I NTERVENORS

Consolidated with 20

- 1035, 20

- 1273

On Petitions for Review of Orders

of the Federal Energy Regulatory Commission

Michael F. McBride argued the cause for petitioners Long

Island Power Authority, et al. Eric J. Konopka argued the

cause for petitioner Linden VFT, LLC. On the briefs were

Richard P. Bress

, David L. Schwartz , and Joseph B. Nelson

.

Anand R. Viswanathan , Attorney, Federal Energy

Regulatory Commission, argued the cause for respondent.2

With him on the brief were Matthew R. Christiansen , General

Counsel, and Robert H. Solomon , Solicitor.

John Longstreth argued the cause for respondent

intervenors. With him on the brief wer e Gary E. Guy, Donald

A. Kaplan, Cara J. Lewis, Richard P. Sparling, Bradley R.

Miliauskas, Morgan E. Parke, Evan K. Dean, Pauline Foley,

Paul M. Flynn, Miles H. Mitchell, Stacey Burbure, Robert

Adkins, David Yost , Attorney General, Office of the Attorney

General for the State of Ohio, Werner L. Margard , Assistant

Attorney General, Steven D. Hughey and Spencer A. Sattler,

Assistant Attorneys General, Office of the Attorney General

for the State of Michigan, Daniel E. Frank, Allison E. Speaker,

Kriss E. Brown, Aspassia V. Staevska, Christian A. McDewell,

Gurbir S. Grew a l , Attorney General, Office of the Attorney

General for the State of New Jersey, Paul Youchak , Deputy

Attorney General, Christopher R. Jones, Molly Suda, and

Christopher J. Barr. William M. Keyser III, Steven M. Nadel,

and Alex Moreau , Deputy Attorney General, Office of the

Attorney General for the State of New Jersey, entered

appearances.

Before: H ENDERSON

, K ATSAS

, and W ALKER

, Circuit

Judges

.

Opinion of the Court filed by Circuit Judge K ATSAS

.

K

ATSAS

, Circuit Judge : This case arises from a long

running dispute over how to allocate the costs of high

- voltage

facilities to transmit electricity within the mid

- Atlantic

planning region. The question is difficult because high

- voltage

projects afford two different kinds of benefits

— local benefits

that accrue primarily to utilities close to the project at issue,

and region al benefits tha t accrue throughout the grid. The

Seventh Circuit has twice set aside cost allocations that ignored3

the local benefits, Illinois Commerce Comm’n v. FERC , 576

F.3d 470 (7th Cir. 2009) ( Illinois Commerce I ); Illinois

Commerce Comm’n v. FERC , 756 F.3d 556 (7 th Cir. 2014)

( Illinois Commerce II ), and we have set aside cost allocations

that ignored the regional benefits, Old Dominion Elec

. Coop.

v. FERC , 898 F.3d 1254 (D.C. Cir. 2018).

This case involves a contested settlement covering high

voltage projects appr oved between 2007 and 2013. The

settlement allocates the ir costs through hybrid formula s that

account for both local and regional benefits. In that respect

, it

track s the allocation formula for high

- voltage projects

approved after 2013, which is not chal lenged here

.

The Federal Energy Regulatory Commission approved the

settlement over the objection of two utilities that transmit

electricity from the mid

- Atlantic region to New York. The se

utilities argue that the approval was inconsistent with the

Seventh Circuit ’s decisions , with FERC’s own precedent, and

with an underlying cost

- causation principle . One of the utilities

also argues that FERC erroneously assigned it costs based on a

flawed interpretation of the settlement. We agree with the

s econd contention but not the first

.

I

A

T he Federal Power Act requires utilities to charge “ just

and reasonable ” rates for the transmission of electricity in

interstate commerce

. 16 U.S.C. § 824d(a). To be just and

reasonable, rates must “reflect to some degree the costs actually

caused by the customer who must pay for them.” Midwest ISO

Transmission Owners v. FERC

, 373 F.3d 1361, 1368 (D.C. Cir.

2004) (cleaned up). This “cost causation principle” requires

“comparing the costs assessed a gainst a party to the burdens4

imposed or benefits drawn by that party.” Id. If FERC

determines that a particular rate is unjust or unreasonable, it

must “ determine the just and reasonable rate

. ” 16 U.S.C.

§ 824e(a)

.

B

PJM Interconnection, LLC is the re gional transmission

organization (RTO) for an area encompassing much of the mid

Atlantic and part of the Midwest. PJM takes its name from

Pennsylvania, New Jersey, and Maryland, the first three states

in which it operated

, but it s territory now extends as far west as

Illinois

. As an RTO

, PJM coordinates the movement of

electricity across the region. It operates transmission facilities

owned by member utilities, approves the construction of new

facilities, and files tariffs allocating among its members the

costs of the facilities

.

This case involves high

- voltage transmission facilities

within the PJM region

. For over a decade, member utilities

disputed how to allocate the cost of these projects

, which

provide both local and regional benefits

. T he facilities most

obviously benefit nearby utilities that use them directly

, but

they also provide “backbone infrastructure ” that improves

reliability and reduce s congestion regionwide

. PJM

Interconnection, L

. L

. C

. , 119 FERC ¶ 61,063, P 80 (2007)

(Opinion No. 494)

. A geographic asymmetry exacerbated the

dispute : Given the location of generators, electricity must flow

longer distances to reach consumers in the eastern part of PJM

than to reach their western counterparts. And because h igh

v oltage facilities work best to transmit electricity over l ong

distances

, they are more useful in the eastern part. See Ill. Com.

II

, 756 F.3d at 558; Ill. Com. I

, 576 F.3d at 475.

Initially, PJM allocated the cost of its high

- voltage

facilities based on w hat FERC calls the violation method (or,5

less concisely, the violation

- based distribution

- factor method)

. T h is method assumes that new projects are approved in

response to violations of reliability standards at overburdened

facilities

. And it allocates costs based on use of those facilities

at the time of each violation. The violation method thus deems

utilities using overburdened facilities to have “c ause[d]” the

relevant problem and to “benefit from” upgrades that eliminate

it

. See Opinion No. 494, 119 FERC ¶ 61,063, P 2 n.3

.

In 2007, FERC ordered PJM to replace its violation

method with a “postage stamp ” method

. This method allocates

the cost of a new facilit y in proportion to each utility’s sale of

electricity, regardless of where the facilit y is located or how

much each utility uses it

. The Commission reasoned that the

postage

- stamp method accounts for the regional benefits of

high

- voltage facilities, incentiviz e s their development

, and

avoid s the trouble of quantifying the specific benefits that each

facility provides to each utility

. Opinion No. 494

, 119 FERC

¶ 61,063, PP 79

– 82.

In Illinois Commerce I

, t he Seventh Circuit set aside

FERC’s order

. It reasoned t hat FERC had failed to make “even

the roughest of ballpark estimates” of the regional benefits said

to justify the postage

- stamp method and had also failed to

explain why quantifying the local benefits

— as it continued to

do for low

- voltage projects

— was now too difficult. 576 F.3d

at 47 5

– 7 8

. Moreover, PJM’s geographic asymmetry made the

distinction between local and regional benefits important :

B ecause nearly all the high

- voltage facilities were built in the

eastern p art of th e grid

, fully regionalizing the ir costs would

substantially overcharge the western utilities

. Id. at 475

– 7 6

.

On remand, FERC again ordered the postage

- stamp

method

. PJM Interconnection L

. L

. C

. , 138 FERC ¶ 61,230

(2012) (Remand Order)

. It concluded that the violation method6

was unjust and unreasonable because it ignore s both regional

benefits and the changing use of individual facilities over time.

Id. PP 38

– 41. The Commission then concluded that the

postage

- stamp method was just and r easonable because it

accounts for the significant, though difficult to quantify,

“system

- wide benefits” to the PJM grid

. Id. P 49. On the

record before it, FERC considered only the violation and

postage

- stamp methods, but it encouraged PJM stakeholders to

develop “hybrid” or other allocation methods. Id. P 2.

The Seventh Circuit set aside the Remand Order in Illinois

Commerce II. The court again faulted FERC for giving neither

a cost

- benefit analysis nor an explanation of why such an

analysis was infeasible

. 756 F.3d at 561

. And it again

concluded that the postage

- stamp method was “guaranteed to

overcharge the western utili ties, as they will benefit much less

than the eastern utilities from eastern projects that are designed

to improve the electricity supply in the east.” Id.

C

While th e Illinois Commerce litigation was ongoing

, FERC promulgated a regulation known as Order No. 1000,

which restructured arrangements for the coordinated

transmission of electricity

. Transmission Planning and Cost

Allocation by Transmission Owning and Operating Public

Utilities, 136 FERC ¶ 61,051 (2 011). Among other things,

Order No. 1000 require s RTOs and their member utilities to

establish tariff formula s allocating the costs of new

transmission facilities in advance

. Id. P 558.

In response

, PJM and its utilities proposed a hybrid

formula for new high

- voltage facilities: allocate half the costs

under the postage

- stamp method and half under a new, flow

based method (also called a solution

- based distribution

- factor

method ). The flow

- based method assigns costs based on how7

much each utility uses the facility in question over time.

A pproving the hybrid formula

, FERC concluded that it struck

a “reasonable balance” between the “broad regional benefits

and specifically identifiable benefits” of high

- voltage facilit i es.

PJM Interconnection, L

. L

. C

. , 14 2 FERC ¶ 61,214, P 417

(2013) ( Compliance Order ). FERC also noted that the proposal

reflected a “reasonable compromise” to resolve the “intensely

practical difficulties” that had provoked extended discord

within PJM. Id. P 420 (cleaned up)

. All the member utilities

supported the compromise, and no party challenged it in court.

The new formula applied only to h igh

- voltage projects that

PJM approved on or after February 1, 2013. See id. PP 1, 381,

433. The Compliance Order thus narrowed the Illinois

Commerce litigation to projects approved between FERC’s

2007 postage

- stamp order and January 31, 2013

. The parties

dub these 32 projects the “Vintage Projects.” Twenty

- nine of

them re main in service

, and three have been cancelled

. Their

total cost was about $2.7 billion.

D

Following the Compliance Order and Illinois Commerce

II

, FERC encouraged interested parties to reach a settlement on

how to allocate the costs of the Vintage Projects

. PJM

Interconnection, L

. L

. C

. , 149 FERC ¶ 61,233, P 10 (2014). In

2016, several parties proposed a settlement that use s three

formulas to assign the costs

. Each of them, l ike the formula

approved for post

- 2013 projects

, h as a hybrid structure

including a postage

- stamp component and a usage

- based

component. Which formula applie s depend s on when the costs

were incurred and whether PJM ha d cancelled the project.

F irst

, f or Vintage Project costs incurred in 2016 or later

, the settlement use s the same formula that FERC had approved

for new transmission projects

— i.e.

, allocate half th e costs8

through the postage

- stamp method and half through the flow

based method. For convenience, w e refer to this approach as

the “going

- forward formula.”

Second

, the settlement makes a series of adjustments for

Vintage Project costs incurred before 2016, which PJM

previously had allocated under the postage

- stamp method. T he

adjustments seek to b ring the allocation s in line with “what

would have been credited or paid” had PJM adopted the going

forward formula from the start. J.A. 181. We refer to these

adjustments as the “historical formula.”

Third

, for the cancelled projects, the settlement allocates

half th e costs through the postage

- stamp method and half

through the violation method. We refer to this approach as the

“cancelled

- projects formula.”

Th is proposal received wide support from PJM

stakeholders

. All the Illinois Commerce petitioners joined it

,

as did many other transmission owners and state regulatory

agencies

. Together, the supporting or unopposed stakeholders

account for virtually all the energy consumption within PJM.

The petitioners here oppose d the settlement. Linden VFT,

LLC owns a merchant transm ission facility that transmits

power from PJM to New York. The Long Island Power

Authority and its affiliate the Long Island Lighting Company

(collectively, LIPA) hold long

- term transmission rights over a

similar facility

. Under the settlement’s hybrid a llocations

, these parties would pay about $30 million more for the Vintage

Projects than they would pay under a pure postage

- stamp

method. Linden and LIPA argued that the settlement was

inconsistent with Illinois C ommerce

, with FERC’s Remand

and Complianc e Order s

, and with the cost

- causation principle.9

FERC approved the settlement over the se objections

. PJM

Interconnection, L

. L

. C

. , 163 FERC ¶ 61,168 (2018)

(Settlement Order)

. Incorporating the reasoning from its

Compliance Order

, FERC concluded that the going

- forward

formula allocates costs consistent with the regional and local

benefits that each transmission owner receives from each

individual facility

. Id. P 3 9

. FERC approved the historical

formula because it roughly recreate s the cost allocation s that

would have occurred had PJM used the going

- forward formula

from the start of each project

. Id. P 40. And the Commission

concluded that the cancelled

- projects formula appropriately

substitute s the violation method for t he flow

- based method

because no ongoing usage data existed for cancelled projects

. Id. P 45. Finally, FERC concluded that the settlement d oes not

make the petitioners worse off relative to the expected outcome

of further litigation, which would not likel y have replaced the

hybrid allocations with a pure postage

- stamp method. Id. PP

41

– 43.

LIPA and Linden moved for rehearing of the Settlement

Order. Linden also asked FERC to clarif y that it was not liable

to pay adjustments under the historical formula. The

Commission denied both motions. PJM Interconnection,

L

. L

. C

. , 169 FERC ¶ 61,238 (2019) ( Rehearing Order ).

LIPA and Linden petitioned for judicial review

. Several

transmission owners and state regulatory commissions

, as well

as PJM

, have intervened in support of FERC. We have

jurisdiction to review the petitions under 16 U.S.C. § 825 l (b).

II

The Administrative Procedure Act requires us to set aside

FERC orders that are “arbitrary, capricious, an abuse of

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

§ 706(2)(A). A decision is not arbitrary if the agency has10

“examined the rel evant considerations and articulated a

satisfactory explanation for its action, including a rational

connection between the facts found and the choice made.” Old

Dominion

, 898 F.3d at 1260 (cleaned up). Because ratemaking

is imprecise and APA review is d eferential, we do not require

the Commission to allocate costs with “exacting precision.” Id.

(cleaned up). But we do set aside cost allocations that are either

unreasonable or inadequately explained. See id

.

Illinois Commerce and Old Dominion illustrate these

principles in the context of high

- voltage transmission projects.

As explained above, the Seventh Circuit twice has set aside a

pure postage

- stamp allocation, on the ground that it

unreasonably ignores the significant local benefits accru ing to

eastern PJM utilities but not to western ones. In Old Dominion

,

we confronted a PJM tariff amendment that would have

required a pure flow

- based allocation for certain high

- voltage

projects. 898 F.3d at 1257

– 59. We set it aside as unreasonably

ignoring the significant regional benefits accruing throughout

the PJM grid. Id. at 1261

– 63. Both courts described the

contested cost allocations as “grossly disproportionate” to the

benefits received by individual utilities

. I d. a t 1261 (quoting

Ill. Com. II

, 756 F.3d at 565).

LIPA and Linden contend that the Settlement Order and

its hybrid allocation s are likewise arbitrary. We disagree.

A

FERC may approve a contested settlement “if th e record

contains substantial evidence upon w hich to base a reasoned

decision or the Commission determines there is no genuine

issue of material fact

. ” 18 C.F.R. § 385.602(h)(1)(i)

. FERC

reads this language to allow approval when the “overall result

of the settlement is just and reasonable

, ” even i f “individual

aspects” of it “may be problematic.” Trailblazer Pipeline Co.

,11

85 FERC ¶ 61,345

, 62,342 (1998 ). In that circumstance, FERC

must further conclude that the challenger “ would be in no

worse position ” under the settlement “ than if the case were

litigated.” Trailblazer Pipeline Co.

, 87 FERC ¶ 61,110, 61,439

(1999). FERC found each of the three hybrid cost allocations

here to be just and reasonable, but it also invoked the

Trailblazer framework and found that LIPA and Linden would

not have been better off litigating the merits. We uphold all

these findings

, which is more than enough to justify the overall

settlement. 1

FERC adequately justified its approval of each formula.

Start with the going

- forward formula

, which a l locates costs

through a mix of the postage

- stamp and flow

- based methods

. FERC approved the formula based on reasoning in its 2013

Compliance Order, which had approved the same formula for

future high

- voltage transmission projects. Settlement Order,

163 FERC ¶ 61,168, P 39 ; Rehearing Order, 169 FERC

¶ 61,238, PP 41

– 45

. Doing so was not arbitrary. As FERC had

earlier explained, the postage

- stamp component takes account

of “the full spectrum of be nefits associated with high

- voltage

facilities, including difficult to quantify regional benefits ” such

as improved reliability, reduced congestion, and greater

carrying capacity. Compliance Order, 142 FERC ¶ 61,214,

P 414. We too have recognized that hi gh

- voltage transmission

systems provide “significant regional benefits” to the PJM

network

. Old Dominion

, 898 F.3d at 1260. As for the flow

based component, FERC reasonably looked to usage data as a

proxy for specific benefits

— in other words, it looked t o this

data “to identify the subset of customers that benefit from a

1 We thus need not consider whether FERC may approve a settlement without addressing the merits of each contested rate , even

though the Federal Power Act requires “[a]ll rates and charges made”

to be just and reasonable

, 16 U.S.C. § 824d(a)

.12

facility simply through electrical proximity

. ” Compliance

Order, 142 FERC ¶ 61,214, P 417. And FERC’s decision to

approve a hybrid formula incorporating both measures was

undoubtedly reasonable given the various benefits of high

voltage facilities. I ndeed, it is compelled by precedents finding

it arbitrary either to ignore local benefits by using a pure

postage

- stamp method ( Illinois Commerce ) or to ignore

regional benefi ts by using a pure flow method ( Old Dominion ).

As for the selection of a 50 : 50 ratio for the hybrid formula, the

materials we have cited make clear that regional and local

benefits are both substantial, thus requiring a significant weight

for each compone nt of the formula

. And any debate over the

choice between a 50 : 50 ratio and, say, a ratio of 60 : 40 one way

or the other would “amount to a quibble about exacting

precision,” rather than “a wholesale departure from the cost

causation principle.” Old Domin ion

, 898 F.3d at 1261 (cleaned

up)

.

The historical formula follows neatly from the going

forward formula. As FERC explained, the historical formula

requires adjustments to approximate the cost allocation s that

would have occurred had PJM applied the going

- forward

formula from the start of each Vintage Project. Settlement

Order, 163 FERC ¶ 61,168, P 40; Rehearing Order

, 169 FERC

¶ 61,238, P 48. LIPA and Linden do not challenge th is finding.

And because the going

- forward formula reasonably matches

costs to benefits, so does the historical formula

.

Finally, FERC reasonably approved the cancelled

- projects

formula. For these projects

, the re was no ongoing usage data

to support ap plication of the flow

- based method

. Unable to

measure changing usage over time, the parties substituted the

violation method to measure which utilities caused the

reliability violations that necessitated the projects. Settlement

Order, 163 FERC ¶ 61,168, P 45; Rehearing Order, 169 FERC13

¶ 61,238, P 52. Under the circumstances, t hat was a reasonable

way to assess usage issues, for the cost

- causation principle

compares costs to “ the burdens imposed or the benefits drawn”

by individual utilities. Midwest IS O Transmission Owners

, 373 F.3d at 1368

. And as explained above, the 50:50 weighing

of local burdens and benefits (as measured by the violation

method) and regional benefits (as measured by the postage

stamp method) was also reasonable.

Our determination that each formula in the settlement is

just and reasonable is reason enough to uphold it

, but we also

note that FERC reasonably concluded LIPA and Linden would

not have done better through litigation. The challengers do

their best to obscure this point, but what they seek is application

of a pure postage

- stamp method

— or at least a hybrid formula

with a more heavily weighted postage

- stamp component. The

Seventh Circuit has twice set aside a pure postage

- stamp

formula for the Vintage Projects. We have little doubt that, if

faced once again with a pure or almost pure postage

- stamp

formula, it would call strike three.

B

LIPA and Linden make several attacks on FERC’s

reasoning, but n one is persuasive.

First

, LIPA and Linden contend that the settl ement

violates Illinois Commerce II

, w hich they say require s a cost

benefit analysis to quantify project benefits

. It does not. The

Seventh Circuit discussed cost

- benefit analysis at length

, but

its holding was narrower. The court set aside the postage

stamp method because

, in treating all benefits a s regional

, it

was “guaranteed to overcharge the western utilities” and to

produce a “grossly disproportionate” cost allocation

. 756 F.3d

at 561, 5 64

– 65. As we later explain ed

, the Illinois Commerce

decisions hold that a postage

- stamp regime goes “ too far” in14

weighing regional benefits over local ones, but “nothing in

those decisions casts doubt on” FERC’s view that high

- voltage

projects have substa ntial regionwide benefits. Old Dominion

, 898 F.3d at 1261. And given that view, FER C had at least “an

articulable and plausible reason to believe ” that a hybrid, 50 : 50

formula would make project costs “at least roughly

commensurate with” project benefits

— which is good enough

under Illinois Commerce II

. See 756 F.3d at 562 (cleaned up)

.

Second

, LIPA and Linden contend that FERC could not

a

pprove the going

- forward formula simply because i t matches

the one used for new high

- voltage projects. Instead, they

contend, the Commission had to separately consider the

formula as applied to each Vintage Project. B ut w hile FERC

may create different rules for different kinds of projects

, see

P ub. Ser v. E lec. & Gas Co. v. FERC

, 989 F.3d 10, 18 (D.C.

Cir. 2021), “a regulator need not always carve out exceptions

for arguably distinct subcategories of projects,” Old Dominion

, 898 F.3d at 1262

. Nor must a regulator always consider cost

allocation rules on a project

- by

- project basis

, which would

unravel the framework of ex ante tariffs established by Order

No. 1000 and approved by this Court. S.C. Pub. Serv. Auth. v.

FERC

, 762 F.3d 41, 82

– 83 (D.C. Cir. 2014). Instead, FERC

must ensure only that there is “some resemblance” between

costs and benefits. P ub. Serv. Elec. & Gas Co.

, 989 F.3d at 13

–

14. And without evidence that the Vintage Projects are

different from other hig h

- voltage transmission facilities within

PJM

, the Commission c ould reasonably extend to the Vintage

Projects the previously approved, unchallenged formula that

now generally governs newer projects. 2

2 Linden has fi led a separate challenge to th at formula as

ap plied to two of the newer projects

. Consol. Edison Co. v. FERC

, No. 15

- 1183 (D.C. Cir. filed June 25, 2015). We express no view on

the merits of that case

.15

Third

, LIPA and Linden contend that the Settlement Order

failed to explain what they characterize as a departure from the

decision to make the Compliance Order purely prospective

. T he Compliance Order applied to projects approved after

January 20 13, and it stated that “administrative complications

created by implementing the hybrid method should be limited,

since this method will apply on a prospective basis only.” 142

FERC ¶ 61,21 4

, P 433. But the order did not disfavor any

further application s of the same formula. Instead

, it stressed

that the Order No. 1000 compliance process remained ongoing

, and the governing formulas remained subject to change. Id. PP

431

– 32. So there was no inconsistency when FERC

, after five

years of experience with the h ybrid formula, allowed the

parties to extend it to the Vintage Projects. See Settlement

Order, 163 FERC ¶ 61, 168

, P 39. Nor was there any lack of

explanation on this point. As FERC later noted, the

Compliance Order’s “prospective application” did “not

preclude the parties and the Commission from using a just and

reasonable cost method in a settlement to resolve a remanded

proceeding.” Rehearing Order, 169 FERC ¶ 61,238, P 46.

Fourth

, LIPA and Linden contend that the Settlement

Order impermissibly departed from the 2012 Remand Order,

which rejected the violation method “as the sole basis for

allocating costs ” of high

- voltage projects. 1 38 FERC ¶ 61,230,

P 37

. That decision reasoned that the violation method does

not account for either (1) the specific benefits that utilities

receive from using the facilities over time or (2) the facilities’

regionwide benefits. Id. P P 37

– 4 7

. In approving the

settlement, FERC reasonably addressed both points. As it

explained, accounting for ongoing usage over time is

impossible for cancelled projects

, and the postage

- stamp

component of the hybrid formula adequately accounts for

regionwide benefits. Settlement Order, 163 FERC ¶ 61,168

, P

45; Rehearing Order, 169 FER C ¶ 61,238, P 54.16

Finally

, LIPA and Linden contend that FERC prevented

them from contest ing the settlement in a live hearing

. But

FERC has discretion to resolve disputed issues on a written

record

. Minisink Residents for Envt’l Pres. & Safety v. FERC

, 762 F.3d 97, 114 (D.C. Cir. 2014 ). Here, the Commission

relied on the extensive written records compiled in this

proceeding and in the Order No. 1000 compliance proceeding.

Moreover, LIPA and Linden had ample opportunity to objec t

through written submissions, which they did in nearly 20

filings including five expert affidavits. FERC did not abuse its

discretion in approving the settlement on a written record.

I II

Linden further contends that

, under the settlement, it need

not make any of the payment s set forth in the historical

formula. We agree.

The historical formula imposes monthly Transmission

Enhancement Charge a djustments (TEC adjustments)

beginning in January 2016 and continuing through December

2025. The “ [e] ffective [d] ate” of these TEC adjustments is

January 1, 2016. J.A. 100. For merchant transmission

facilities, the TEC adjustments are based on “F irm

T ransmission W ithdrawal R ights

, ” which are guaranteed rights

to transmit electricity

. PJM Tariff, sched. 12(b)(x)(B)(2).

Linden surrendered its withdrawal rights on January 1, 2018

, almost five months before FERC approved the settlement. The

parties agree that Linden thus need not pa y TEC adjustments

for 2018 to 2025. They disagree over whether Linden must pay

TEC adjustments for 2016 and 2017.

Section 4(c) of schedule 12

- C of the PJM tariff imposes

the TEC adjustments. Section 4(c)(i)(2) provides the following

“adjustment” to the a djustments:17

If all Responsible Customers in a Zone or Merchant

Transmission Facility are no longer subject to

Transmission Enhancement Charges under the PJM

Tariff during the period in which Transmission

Enhancement Charge Adjustments are collected

, the n,

during the portion of that period that such Responsible

Customers are not subject to Transmission

Enhancement Charges

, the payments from or credits

to such Responsible Customers shall cease

....

J.A. 101

– 02. L inden is the only responsible customer in its

merchant facility

. According to Linden, the “period in which

[TEC] Adjustments are collected” began when FERC approved

the settlement, because PJM did not and could not collect any

payments before then. Therefore, Linden reasons, it was “ no

longer subject to” TEC adjustments during any of that period,

and so its “payments

... shall cease.” FERC responds that TEC

adjustments began to accrue

— and thus were “collected”

— as

soon as the settlement became effective in January 2016

. In

resolving th is dispute over tariff interpretation, we must

enforce unambiguous tariff language, but defer to FERC’s

reasonable interpretation of ambiguous text. Colo. Interstate

Gas Co. v. FERC

, 5 9 9 F.3d 698, 701 (D.C. Cir. 2010)

.

The plain meaning of “collected” una mbiguously supports

Linden. Section 4(c)(i)(2) concerns the collection of

“adjustments”

— i.e.

, financial liabilities for which payment can

be obtained

. In that context, “ c ollect” means “ [ t ] o call for and

obtain payment of.” Collect

, American Heritage Dictionary

(5th ed. 2018); accord Collect

, Oxford English Dictionary ( 2 d

ed. 1989 ) (“ [ t ] o gather (contributions of money, or money due,

as taxes, etc.) from a number of people ” ). FERC has not

identified a single example

, in a dictionary or otherw ise, where

“collect” means to accrue liability

. Nor have we found any.18

This strongly suggests that “collect” simply cannot bear that

meaning. See D HS v. MacLean

, 574 U.S. 383, 394 (2015)

.

Context confirms that “collect” here means collect. As

FERC notes, s chedule 12

- C impos es liability for TEC

adjustments beginning on its “ [ e ] ffective [ d ] ate ” of January 1,

2016. PJM Tariff, sched. 12

- C §§ 2

– 3. But s chedule 12

- C also

plainly distinguishes the concepts of accrual and collection.

For a lthough it imposes liability beginning on the effective

date

, it permits collection only after an “ implementation date ”

defined as “the date of a FERC order

... authorizing PJM to

begin collecting ” TEC adjustments. Id. § 3 (emphasis added).

Schedule 12

- C’s procedures u nderscor e th is distinction

. During the interim period between the effective and

implementation dates

, PJM had to “track and accumulate the

differences between” what it was collect ing under the existing

rate and what the settlement would require if FERC approved

it

. PJM Tariff, sched. 12

- C § 3. A fter the implementation date,

PJM would issue “credits or charges” t hat equal ed “the

aggregate of such differences. ” Id. Schedule 12

- C thus

recognizes that utilities beg a n accruing liability as of the

settlement’s effective date

, but that PJM would not “begin

collecting” until FERC approved the settlement

.

FERC contends that the settlement agreement

, which

states that “PJM shall collect” adjustments “[e]ffective as of

January 1, 2016,” J.A. 86

– 88, shows that collection began as

of then

. But this language was not incorporated into PJM’s

tariff

, and it is flatly inconsistent with the tariff provisions

expressly linking collection to the implementation date rather

than the effective date. Because the tariff is unambiguous on

this point, it is controlling. See Colo. Interstate

, 599 F.3d at

701.19

I V

Linden ask s us to vacate FERC’s order holding it liable for

TEC adjustments

. Vacatur is the normal remedy under the

APA, which provides that a reviewing court “shall

... set aside”

unlawful agency action. 5 U.S.C. § 706(2). Nonetheless, we

have held th at remand without vacatur is sometimes

appropriate, depending on the seriousness of the agency error

and the disruptive consequences of vacatur. S ee Allied

- Signal,

Inc. v. N RC

, 988 F.2d 146, 150

– 51 (D.C. Cir. 1993).

For the legal error identified above

, v acatur is clearly

warranted. The “seriousness” of a gency error turns in large

part on “how likely it is the agency will be able to justify its

decision on remand.” Heartland Reg’l Med. Ctr. v. Sebelius

, 566 F.3d 193, 197 (D.C. Cir. 2009) (cleaned up)

. And

disruptive consequences matter “only insofar as the agency

ma y be able to rehabilitate its rationale.” Comcast Corp. v.

FCC

, 579 F.3d 1, 9 (D.C. Cir. 2009). Here

, because the

controlling tariff provision is unambiguous, FERC c annot

rehabilitat e its preferred interpretation on remand.

The intervenors contend that a remand without vacatur

would have been warranted had we set aside the entire

settlement on the ground that FERC’s approval was

in adequately reasoned. Having upheld the settlement, we need

not consider that argument. We note only that the concerns

rais ed by the intervenors, positing a highly disruptive judicial

intervention based on a likely curable agency error, have no

application to the narrow legal error that we have identified.

V

For these reasons, we set aside FERC’s ruling that Linden

must pay TEC adjustment s , and we remand for any further20

proceedings that may be necessary to implement this ruling

. In

all other respects, we deny the petitions for review.

So ordered.