United States Court of Appeals 

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued October 18, 2013 Decided December 3, 2013 

No. 12-1158 

SOUTHWEST POWER POOL, INC.,

PETITIONER

v. 

FEDERAL ENERGY REGULATORY COMMITTEE, 

RESPONDENT

AMERICAN ELECTRIC POWER CORPORATION, ET AL., 

INTERVENORS

On Petition for Review of Orders of the 

Federal Energy Regulatory Commission 

Barry S. Spector argued the cause for petitioner. With 

him on the briefs was Jeffrey G. DiSciullo. Ryan J. Collins

entered an appearance. 

 Sean T. Beeny, Barry Cohen, Amanda Riggs Conner, N. 

Beth Emery, Noel Symons, Lisa Sharp, David W. 

D'Alessandro, M. Denyse Zosa, Gary Newell, and Rebecca 

Sterzinar were on the brief for joint intervenors in support of 

petitioner. Matthew A. Fitzgerald entered an appearance. 
2

 Carol J. Banta, Attorney, Federal Energy Regulatory 

Commission, argued the cause for respondent. With her on 

the brief were David L. Morenoff, Acting General Counsel, 

and Robert H. Solomon, Solicitor. 

Stephen L. Teichler argued the cause for intervenors 

Midwest Independent Transmission System Operator, Inc. and 

Entergy Services, Inc. in support of respondents. With him on 

the brief were Ilia Levitine, John S. Moot, and Gregory W. 

Camet. 

Before: TATEL AND GRIFFITH, Circuit Judges, and 

WILLIAMS, Senior Circuit Judge. 

Opinion for the Court filed by Senior Circuit Judge

WILLIAMS. 

WILLIAMS, Senior Circuit Judge: This dispute between 

two regional transmission organizations (“RTOs”) turns on 

the interpretation of a single contract provision. The Federal 

Energy Regulatory Commission resolved the conflict against 

petitioner Southwest Power Pool (“SPP”). Applying both the 

Administrative Procedure Act and the “Chevron-like analysis” 

that governs review of such an interpretation, Colorado 

Interstate Gas Co. v. FERC, 599 F.3d 698, 701 (D.C. Cir. 

2010), we find that the Commission failed to provide a 

reasoned explanation for its decision. It leapt to an 

interpretation of one item of evidence without explaining its 

implicit rejection of alternative interpretations, and, equally 

without explanation (or at least adequate explanation), it 

disregarded evidence that the applicable law required it to 

consider. See Order on Petition for Declaratory Order, 136 

FERC ¶ 61,010 (2011) (“Order”), rehearing denied, Order on 

Rehearing, 138 FERC ¶ 61,055 (2012) (“Order on 

Rehearing”). Accordingly, its decision was arbitrary and 

capricious, and we vacate and remand the orders. 
3

* * * 

SPP is an RTO adjacent to another RTO, the Midwest 

Independent Transmission System Operator (“MISO”), 

recently renamed Midcontinent Independent System Operator, 

evidently to reflect its continuing expansion to the south. 

Entergy Arkansas, an operating subsidiary of Entergy 

Corporation and at the time of the petition not part of any 

RTO, abuts both SPP and MISO. 

In 2011 Entergy Arkansas made a regulatory filing 

addressing the possibilities of joining MISO or SPP, and 

indicating a preference for MISO. Order, 136 FERC ¶ 61,010 

at P 7. That preference rested at least in part on the 

considerable savings in production costs that joining MISO 

would yield relative to joining SPP. Entergy Corp., RTO Path 

for Entergy Operating Companies 4, 9; Joint Appendix 

(“J.A.”) 225, 230. To realize those savings, however, MISO 

must be able to move to Entergy Arkansas electricity 

generated elsewhere in MISO. Although Entergy Arkansas 

has transmission connections to both SPP and MISO, its 

connection to MISO is relatively limited compared to those to 

SPP and others. MISO would therefore need to rely on these 

other, non-MISO transmission providers. MISO believes that 

its Joint Operating Agreement (“JOA”) with SPP gives it the 

right to rely on SPP’s transmission facilities to do so, even 

after Entergy Arkansas becomes part of MISO itself, an event 

that appears imminent—Entergy Arkansas has received 

multiple regulatory approvals to join MISO. See Press 

Release, Entergy Corp., APSC Issues Final Conditional Order 

on Entergy Arkansas’ MISO Integration (Apr. 11, 2013). 

Section 5.2 of the JOA, the provision invoked by MISO, 

provides: 

Sharing Contract Path Capacity. If the Parties have 

contract paths to the same entity, the combined contract 
4

path capacity will be made available for use by both 

Parties. This will not create new contract paths for either 

Party that did not previously exist. SPP will not be able 

to deal directly with companies with which it does not 

physically or contractually interconnect and the [MISO] 

will not be able to deal directly with companies with 

which it does not physically or contractually interconnect. 

 The parties agree that at the time of FERC’s decision, 

with Entergy Arkansas distinct from MISO, both RTOs had 

“contract paths to the same entity,” to wit Entergy Arkansas. 

Thus Section 5.2 allowed one RTO to use the other’s 

transmission network to move electricity to Entergy Arkansas. 

That is where agreement ends. 

The alternative readings of Section 5.2 are these: MISO 

understands “contract path to the same entity” to include any 

physical or contractual interconnection and to apply regardless 

of whether the “entity” is a part of either RTO. So, even if 

Entergy Arkansas becomes part of MISO, Entergy Arkansas 

will (under MISO’s view) be an “entity” to which both RTOs 

have contract paths. SPP argues that an RTO cannot have a 

“contract path to” itself or to part of itself. Thus, once 

Entergy Arkansas joins MISO, Section 5.2 will no longer 

(under SPP’s view) apply, despite the existence of a “physical 

or contractual” interconnection between the part of MISO 

made up of Entergy Arkansas and the other parts of MISO. 

After the parties negotiated for some time in vain, MISO 

petitioned FERC for a declaratory judgment on the 

interpretation of Section 5.2. FERC adopted MISO’s reading, 

finding that the term “contract path” was broad enough to 

encompass any physical or contractual interconnection, and 

that “entity” could include any operating entity, whether or 

not it was part of one of the RTOs. Order, 136 FERC ¶ 

61,010 at PP 61-62; Order on Rehearing, 138 FERC ¶ 61,055 
5

at P 19. We discuss the details of the Commission’s decision 

as they become relevant. 

* * * 

Before reaching the merits of SPP’s arguments, we must 

first address FERC’s assertions that SPP lacks standing and 

that, in any case, its claims are unripe. 

On standing, FERC contends that SPP’s interest in the 

interpretation of Section 5.2 is too attenuated to create an 

injury that is “actual or imminent.” Lujan v. Defenders of 

Wildlife, 504 U.S. 555, 560-61 (1992). It says that no harm 

will ensue for SPP unless Entergy Arkansas elects to join 

MISO and secures the necessary state and federal approval,

and MISO then seeks to use Section 5.2 to transmit electricity 

to Entergy Arkansas. Thus FERC characterizes SPP’s injury 

as “too speculative.” 

We have held that an agency interpretation that defines 

contractual rights and obligations may itself create enough of 

an injury to confer standing on a party to that contract. See 

Dominion Transportation, Inc. v. FERC, 533 F.3d 845, 852 

(D.C. Cir. 2008). We need not explore the scope of that 

decision, because the Commission’s decision here cast a very 

present shadow over the three-way maneuvering between 

SPP, MISO and Entergy Arkansas. The latter’s parent 

corporation (Entergy) proclaimed in its 2011 presentation on 

joinder with MISO that “[r]esolution of the JOA issue in 

MISO’s favor would increase the potential production cost 

savings and further tip the benefit ratio in MISO’s favor.” 

Entergy Corp., RTO Path for Entergy Operating Companies

9; J.A. 230. It is surprising that FERC should think that 

standing rules require SPP to remain in limbo while its 

competitor MISO woos Entergy Arkansas with FERC’s 
6

assurance of access to SPP’s infrastructure—an assurance that 

SPP believes is unlawful. 

FERC’s ripeness argument fares no better. Ripeness of 

course typically involves an inquiry into the fitness of the 

issues for judicial review and the hardship to the parties of 

withholding that review. Abbott Labs. v. Gardner, 387 U.S. 

136, 149 (1967). But a showing of hardship is ordinarily 

unnecessary where the agency “has suggested no institutional 

interests in postponing review . . . , and adjudication will not 

benefit from additional facts.” Pub. Serv. Elec. & Gas Co. v. 

FERC, 485 F.3d 1164, 1168 (D.C. Cir. 2007). 

Neither SPP nor FERC has suggested a need for further 

factual development. And although FERC insists that it may 

address “implementation” issues in a subsequent proceeding, 

it nowhere suggests that its interpretation of Section 5.2 has 

not crystallized enough for this court’s review. Burlington N. 

R. Co. v. Surface Transp. Bd., 75 F.3d 685, 691 (D.C. Cir. 

1996). Instead, the Commission repackages its standing 

argument, asserting that many “contingencies” lie between the 

order under review and any harm to SPP, rendering the order 

unripe. Our discussion of standing of course dooms that 

argument. 

* * * 

Our review of the Commission’s decision in the end does 

not call on us to answer the “Chevron-like” question whether 

FERC has adopted a “reasonable interpretation” of the 

contract—“not necessarily the only possible interpretation, 

nor even the interpretation deemed most reasonable by the 

courts.” Entergy Corp. v. Riverkeeper, Inc., 556 U.S. 208, 

218 (2009); Am. Elec. Power Serv. Corp. v. FCC, 708 F.3d 

183, 186 (D.C. Cir. 2013). Here FERC’s treatment of the 

issue founders on APA principles—the requirements that it 
7

“examine the relevant data and articulate a satisfactory 

explanation for its action including a ‘rational connection 

between the facts found and the choice made.’” Motor Vehicle 

Mfrs. Ass’n of U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 

463 U.S. 29, 43 (1983) (quoting Burlington Truck Lines Inc. 

v. United States, 371 U.S. 156, 168 (1962)). Agency action 

that fails either requirement is arbitrary and capricious. Id. 

Neither SPP nor FERC contends that Section 5.2’s 

meaning is unambiguous. Although FERC attempts to draw 

meaning from a couple of terms, its theme is only that they do 

not preclude MISO’s preferred interpretation. Only 

Intervenor MISO contends that the text is in fact 

unambiguous. But its argument consists largely of 

declarations that if the parties intended SPP’s interpretation, 

they could have made that clear. Of course; the parties’ 

potential ability to make a provision clear is a universal 

characteristic of ambiguity. But it hardly establishes that the 

parties affirmatively made MISO’s preferred reading clear. 

Agreeing with SPP and the Commission that Section 5.2 is 

ambiguous on the relevant issue, we turn to the process by 

which the Commission sought to resolve that ambiguity. 

SPP raises two principal complaints about FERC’s 

decisionmaking, first, that the Commission misinterpreted the 

evidence on which it relied and, second, that it erred in 

refusing to consider relevant evidence before it. 

FERC relied heavily on what it termed “course of 

performance” evidence, to wit the only prior use of Section 

5.2—a transaction between MISO, SPP, and a third party, 

coincidentally, Entergy Arkansas. The particular 

circumstances of the transaction are critical. 

It is undisputed that both SPP and MISO have (or at least 

had at the relevant times) contract paths to Entergy Arkansas 
8

within the meaning of Section 5.2. MISO’s is an interchange 

agreement between MISO (in the form of a MISO 

transmission owner, Ameren Company), Entergy Arkansas 

and a third party. Order, 136 FERC ¶ 61,010 at P 3; Affidavit 

of Carl A. Monroe on behalf of SPP ¶ 12; Affidavit of 

Thomas J. Mallinger on behalf of MISO ¶ 13. During a 

period when that contract path was out of order, MISO used 

SPP’s path to Entergy Arkansas in order to “allow Ameren to 

continue to serve its radial load on the Entergy transmission 

system.” Mallinger Aff. ¶ 13; Order on Rehearing, 138 FERC 

¶ 61,055 at P 20. 

The Commission regarded this episode as supporting 

MISO’s view of Section 5.2. Though acknowledging that it 

was a “use of SPP’s path to Ameren through SPP and across 

Entergy Arkansas,” the Commission seemed to find decisive 

the fact that the path in question “was still used to provide 

transmission service to Ameren, an internal MISO operating 

member.” Order on Rehearing, 138 FERC ¶ 61,055 at P 20.

Thus, so far as we can see, FERC acknowledges that the 

only service provided by SPP under Section 5.2 was between 

MISO and a third party, Entergy Arkansas. Why it is 

important that the MISO member using this service then went 

on to reach its own operating area via Entergy Arkansas is 

never explained. The service SPP provided appears consistent 

both with its view of Section 5.2 and with MISO’s broader 

view (though not in any way relying on that broader view). 

Given the episode’s apparent complete consistency with both 

parties’ competing views, we are at a loss to see why FERC 

regarded the episode as decisive in favor of MISO. Its 

unexplained leap from neutral evidence to a decision in favor 

of one side rendered its order arbitrary and capricious. 

FERC’s confident reading of the single use of Section 5.2 

led it to dismiss additional types of evidence offered by SPP. 
9

First, SPP introduced an affidavit by Carl Monroe, SPP’s 

chief negotiator for the JOA, stating that at the time of the 

negotiations, SPP understood that Section 5.2 would apply 

only when the electricity was transmitted to a third party, not 

when it was delivered to part of the originating RTO. Monroe 

Aff. ¶ 15. Second, SPP pointed to definitions of “contract 

path” used by the North American Electric Reliability 

Corporation and the North American Energy Standards Board. 

It urged the relevance of these by pointing to our statement 

that “[r]elying on the trade usage of [a] term is appropriate, as 

construing terms in light of their commonly understood 

meaning is a hallmark of reasonable interpretation.” 

Colorado Interstate Gas Co. v. FERC, 599 F.3d at 703 

(quoted in SPP’s Request for Rehearing at 10 n.27, J.A. 333). 

The trade materials SPP cited are replete with words of art, 

and without the Commission’s having explored them at all we 

are in no position to assess their force in support of SPP’s 

contention. 

FERC, however, “decline[d] to consider” these materials. 

It observed, correctly, that the Restatement (Second) of 

Contracts § 203(b) and Delaware law (agreed by the parties to 

be controlling) accord “greater weight” to course of 

performance evidence than to evidence based on usage of 

trade or course of dealing (as FERC characterized the Monroe 

Affidavit). In a literal sense, of course, FERC afforded 

“greater weight” to course of performance evidence, as it 

accorded no weight at all to any other. See Order on 

Rehearing, 138 FERC ¶ 61,055 at PP 21-22 (“declin[ing]” to 

consider either type of evidence). But FERC points to nothing 

in Delaware law or the Restatement supporting total disregard 

of either type of extrinsic evidence. We may assume 

arguendo that in some instances course of performance 

evidence would be so overwhelming as to justify disregard of 

other evidence, but the seemingly neutral impact of the single 

episode of Section 5.2’s use makes any such assumption 
10

irrelevant. Thus, together with its unexplained reading of that 

episode, the Commission’s complete failure to consider the 

evidence proffered renders its orders arbitrary and capricious. 

* * * 

The orders are therefore

Vacated and remanded.