IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 14-60822

EL PASO ELECTRIC COMPANY, 

 Petitioner

v.

FEDERAL ENERGY REGULATORY COMMISSION, 

 Respondent

On Petitions for Review of Orders

of the Federal Energy Regulatory Commission

Before REAVLEY, HAYNES, and HIGGINSON, Circuit Judges.

HAYNES, Circuit Judge:

El Paso Electric Co. (“EP Electric”) appeals from three decisions1 in 

which the Federal Energy Regulatory Commission (“FERC” or the 

“Commission”) reviewed and required revisions to certain compliance filings

that EP Electric and other utilities filed with FERC pursuant to Order No. 

 

1 Collectively, we refer to the decisions being challenged as FERC’s “Compliance 

Orders,” unless we specify a particular order. The Compliance Orders include: Pub. Serv. Co. 

of Colo., “Order on Compliance Filings,” 142 FERC 61,206 (Mar. 22, 2013) (hereinafter “First 

Compliance Order”); Pub. Serv. Co. of Colo., “Order on Rehearing and Compliance,” 148 

FERC 61,213 (Sept. 18, 2014) (hereinafter, “First Order on Rehearing”); and Pub. Serv. Co. 

of Colo., “Order on Rehearing and Compliance,” 151 FERC 61,128 (May 14, 2015) (hereinafter 

“Second Order on Rehearing”).

United States Court of Appeals

Fifth Circuit

FILED

August 8, 2016

Lyle W. Cayce

Clerk

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1000. Order No. 1000 is FERC’s rule regulating regional transmission 

planning and cost allocation by public utilities, also known as “jurisdictional 

utilities.” See Transmission Planning and Cost Allocation by Transmission 

Owning and Operating Public Utilities, Order No. 1000, 136 FERC 61,051, 76 

Fed. Reg. 49,842 (2011) (hereinafter “Order No. 1000”), order on reh’g, Order 

No. 1000-A, 139 FERC 61,132, 77 Fed. Reg. 32,184 (2012) (hereinafter “Order 

No. 1000-A”), order on reh’g, Order No. 1000-B, 141 FERC 61,044, 77 Fed. Reg. 

64,890 (2012) (hereinafter “Order No. 1000-B”).2 The vast majority of EP 

Electric’s challenges to FERC’s actions through these compliance orders fail. 

However, we conclude that FERC has acted arbitrarily and capriciously in its 

mandates regarding the role of non-jurisdictional utilities in cost allocation 

and regional planning in the WestConnect region. We therefore GRANT the 

petitions for review in part, VACATE FERC’s Compliance Orders on these 

issues for further explanation and proceedings, and DENY review or DISMISS 

the petitions in all other respects.

I. Background

A. Factual Background

This case concerns a scheme of planning, cost allocation, and regulation 

imposed by FERC on EP Electric and the Intervenor electricity providers.3 

This regulatory scheme relates to FERC’s attempts to encourage regional 

planning and construction of facilities to transmit electricity. In the Federal 

Power Act (“FPA”), Congress gave FERC jurisdiction “over all facilities” for 

“the transmission of electric energy in interstate commerce and . . . the sale of 

 

2 We refer collectively to these rules as “Order No. 1000” unless otherwise specified.

3 We granted leave for the following entities to intervene in this appeal: Arizona 

Public Service Company, Black Hills Power, Inc., Black Hills Colorado Electric Utility 

Company, LP, Cheyenne Light, Fuel, and Power Company, NV Energy, Inc., Public Service 

Company of New Mexico, Tucson Electric Power Company, UNS Electric, Inc., Xcel Energy 

Services Inc., and Public Service Company of Colorado.

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electric energy at wholesale in interstate commerce.” 16 U.S.C. § 824(b)(1). 

Section 205 of the FPA prohibited “unreasonable rates and undue 

discrimination ‘with respect to any transmission or sale subject to the 

jurisdiction of the Commission,’” New York v. FERC, 535 U.S. 1, 7 (2002) 

(quoting 16 U.S.C. § 824d(a)–(b)), and Section 206 of the FPA gave FERC’s 

predecessor “the power to correct such unlawful practices,” id. (citing 16 U.S.C. 

§ 824e(a)), including on its own motion, S.C. Pub. Serv. Auth. v. FERC (South 

Carolina), 762 F.3d 41, 49 (D.C. Cir. 2014). 

In 2011, FERC enacted Order No. 1000 to address changes in the electric 

power industry and to keep rates just and reasonable. Id. at 52. As relevant 

to the challenges we address in this appeal, Order No. 1000 requires:

Each transmission provider must participate in a regional 

transmission planning process that complies with the planning 

principles in [a previous order,] Order No. 890, produces a regional 

transmission plan for development of new regional transmission 

facilities, and includes procedures to identify transmission needs 

driven by public policy requirements established by federal, state, 

or local laws or regulations and evaluate potential solutions to 

those needs. 

South Carolina, 762 F.3d at 52 (citing Order No. 1000 ¶¶ 2, 146, 203–05, 76 

Fed. Reg. at 49,845, 49,867, 49,876–77).

Order No. 1000 mandated cost allocation reforms designed to incentivize 

the development of cost-efficient transmission facilities in the regional 

planning process. It did so, in part, by encouraging transparency and certainty 

about the costs and benefits of such projects, and about which parties would be 

eligible to fund and develop each project. See Order No. 1000 ¶ 11, 76 Fed. 

Reg. at 49,846. These cost allocation reforms require each transmission 

provider subject to FERC’s jurisdiction to incorporate in their open access 

transmission tariff (“OAT Tariff”) “a method (or set of methods) for allocating 

ex ante the costs of new regional transmission facilities that complies with six 

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regional cost allocation principles.” South Carolina, 762 F.3d at 53 (citing 

Order No. 1000 ¶ 558, 76 Fed. Reg. at 49,929). 

OAT Tariffs must comply with certain cost allocation principles, the most 

pertinent of which is cost causation.4 Under cost causation, “[t]he cost of 

transmission facilities must be allocated to those within the transmission 

planning region that benefit from those facilities in a manner that is at least 

roughly commensurate with estimated benefits.” Id. at 53 (alteration in 

original) (quoting Order No. 1000 ¶ 586, 76 Fed. Reg. at 49,932). This cost 

causation principle targets something called the “‘free rider’ problem,” which 

FERC acknowledged that it sought to “address through its cost allocation 

reforms” in Order No. 1000. Order No. 1000-A ¶ 562, 77 Fed. Reg. at 32,271. 

A free rider is an entity that is subsidized by other entities because it refuses 

to invest in transmission development, allows other entities to pay for that 

development, and reaps the benefits.5 The free rider problem adversely affects 

the development of transmission facilities because “[a]ny individual 

beneficiary [of a new transmission facility] has an incentive to defer 

investment in the hopes that other beneficiaries [in the region] will value the 

project enough to fund its development.” Order No. 1000 ¶ 486, 76 Fed. Reg. 

at 49,919. With the stated purpose of helping to alleviate the free rider 

 

4 OAT Tariffs originated before Order No. 1000. Transmission providers must file an 

OAT Tariff “containing minimum terms of non-discriminatory transmission service.” South 

Carolina, 762 F.3d at 50 (citation omitted). Under Order No. 1000, OAT Tariffs now must 

incorporate the regional planning and cost allocation processes in which a utility will 

participate. Id. at 53, 56. 

5 As Order No. 1000 stated: “[F]ree riders by definition are entities who are being 

subsidized by those who pay the costs of the benefits that free riders receive for nothing.” 

Order No. 1000-A ¶ 578, 77 Fed. Reg. at 32,274; see also id. ¶ 576, 77 Fed. Reg. at 32,273 

(“[F]ree riders for purposes of Order No. 1000 are entities who do not bear cost responsibility 

for benefits that they receive in their use of the transmission grid, specifically benefits they 

receive from new transmission facilities selected in a regional transmission plan for purposes 

of cost allocation.”).

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problem, FERC mandated binding cost allocation, meaning that entities would 

not be allowed to opt out of their share of the costs of transmission facilities 

selected in regional transmission planning.6 Id. ¶¶ 723–25, 76 Fed. Reg. at 

49,949–50. 

Another important principle for this appeal is that Sections 205 and 206 

of the FPA only give FERC the authority to directly regulate “jurisdictional” 

utilities, a specified category of public utilities that transmit power in 

interstate commerce. See generally South Carolina, 762 F.3d at 93. The 

regional planning and cost allocation requirements of Order No. 1000 therefore 

only directly apply to jurisdictional utilities. See Order No. 1000-A ¶ 275, 77 

Fed. Reg. at 32,337. FERC has thus far declined to exercise any authority it 

may or may not have under Section 211A of the FPA to require participation 

in these processes by non-jurisdictional utilities.7 See South Carolina, 762 

F.3d at 92–94; see also 16 U.S.C. § 824j-1(b) (stating that FERC 

“may . . . require an unregulated transmitting utility to provide transmission 

services . . . at rates that are comparable to those” the utility charges itself, 

and on terms and conditions “that are not unduly discriminatory or 

preferential”). 

B. Procedural History 

Together, EP Electric and Intervenors are members of a regional 

planning organization called WestConnect. EP Electric and Intervenors 

emphasize the unique nature of their geographic and transmission planning 

 

6 This binding cost allocation process only applies to projects selected in the regional 

transmission plan for the purposes of cost allocation, meaning these projects are approved as 

more efficient or cost-effective solutions to regional needs. See Order No. 1000 ¶ 5, 76 Fed. 

Reg. at 49,845.

7 We express no opinion about whether (if at all) or in what manner FERC may 

exercise authority over non-jurisdictional utilities under Section 211A of the FPA, since

FERC has not attempted to exercise any authority it may or may not have under this 

provision.

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arrangement. The WestConnect region is geographically comprised of ten nonjurisdictional utilities and eleven jurisdictional utilities. This sets it apart 

from other regions in the Eastern and Western United States, which the 

parties claim are overwhelmingly owned by public utilities and run by 

jurisdictional regional organizations that have long-established transmission 

planning processes that impose binding cost allocation. Since the jurisdictional 

utilities in WestConnect are dispersed “like Swiss cheese” throughout the 

region, the region has long relied on voluntary coordination and planning for 

regional transmission development. This situation has resulted in shared 

costs and many jointly owned projects, even given the different regulatory 

framework in this region than other regions with more jurisdictional utilities. 

The parties contend that regional planning that included only public utilities 

would not work for the WestConnect region. Transmission projects generally 

require cooperation between both types of utilities. 

EP Electric and the WestConnect jurisdictional utilities coordinated 

with each other to file tariff revisions in attempts to comply with Order No. 

1000. FERC addressed each of these revisions in its Compliance Orders.

1. FERC’s First Compliance Order

The first WestConnect compliance filing noted that jurisdictional and 

non-jurisdictional utilities alike tentatively intended to enroll in the 

WestConnect region. EP Electric proposed that costs be allocated depending 

on the agreement of beneficiaries identified through the regional planning 

process, and its compliance filing specified that no entity was obligated to 

implement cost allocation. Of note here, FERC’s First Compliance Order 

required revision of the proposed cost allocation process to provide for “binding” 

cost allocations “upon identified beneficiaries.” Pub. Serv. Co. of Colo., “Order 

on Compliance Filings,” 142 FERC 61,206, 62,164–65 ¶ 257 (Mar. 22, 2013) 

(hereinafter “First Compliance Order”). It also required that the jurisdictional 

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utilities enroll in the WestConnect region and provide a list of enrolled utilities 

in their tariffs. First Compliance Order ¶¶ 25–26, 142 FERC at 62,123. 

2. FERC’s First Order on Rehearing 

WestConnect jurisdictional utilities responded in the second compliance 

filing by seeking a rehearing. They also proposed to include non-jurisdictional 

utilities in the regional planning as “Coordinating Transmission Owners” who 

would have all the rights of an enrolled jurisdictional utility, except that they 

would not be subject to binding cost allocation. The WestConnect utilities 

proposed to exclude any project from regional cost allocation that “electrically 

interconnects with, or that is demonstrated to provide quantifiable benefits” to 

a non-enrolled transmission owner in the WestConnect region. The utilities 

proposed to study and identify projects that met regional needs, including 

those of the non-jurisdictional utilities, but to obtain funding from participants 

in a voluntary manner rather than through a binding cost allocation that could 

not include the non-jurisdictional utilities. The non-jurisdictional utilities 

supported this approach. 

In FERC’s First Order on Rehearing, FERC accepted the inclusion of 

non-jurisdictional utilities as Coordinating Transmission Owners for regional 

planning and the ability of the regional planning process to account for the 

Coordinating Transmission Owners’ needs. Pub. Serv. Co. of Colo., “Order on 

Rehearing and Compliance,” 148 FERC 61,213, 62,289–90 ¶¶ 54–55 (Sept. 18, 

2014) (hereinafter, “First Order on Rehearing”). Again, FERC rejected the idea 

that projects benefitting Coordinating Transmission Owners (nonjurisdictional utilities) could be excluded from binding cost allocation. Id. ¶ 56, 

148 FERC at 62,290. FERC reasoned that excluding such projects from 

regional planning “would unduly restrict consideration of transmission 

facilities that nonetheless may have regional benefits and are determined to 

be more efficient or cost-effective transmission solutions to regional 

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transmission needs.” Id. FERC ordered the WestConnect utilities to revise 

their proposals accordingly. 

3. FERC’s Second Order on Rehearing 

The WestConnect utilities again sought a rehearing and filed proposed 

revisions, objecting that the First Order on Rehearing would create free 

ridership and violate cost causation. Specifically, the WestConnect utilities 

objected that FERC’s First Order on Rehearing mandated that jurisdictional 

utilities pay the costs to develop new transmission facilities and exempted nonjurisdictional utilities from those costs. The WestConnect utilities argued that 

this structure violated cost causation, which requires allocating costs in at 

least a roughly commensurate fashion to those who receive the benefits of 

transmission development. Additionally, if non-jurisdictional utilities could 

benefit from transmission development without paying for it, they would 

become the subsidized free riders that Order No. 1000 sought to reduce or 

eliminate. In the alternative, the WestConnect utilities also proposed to make

a project ineligible for cost allocation if a non-jurisdictional utility opted out of 

benefits allocated to it and the re-allocation of costs to jurisdictional utilities 

increased their original costs more than 10%. The non-jurisdictional utilities 

supported this proposal. 

FERC rejected this proposal and the request for rehearing, noting that 

[w]hile [the situation] may create the potential for free ridership if 

a non-public utility transmission provider elects to not enroll in a 

region and benefits from a transmission project selected in the 

regional transmission plan for purposes of cost allocation, that 

potential exists because the transmission project has benefits for 

entities that are not required to enroll, and have not enrolled, in 

the region.

Pub. Serv. Co. of Colo., “Order on Rehearing and Compliance,” 151 FERC 

61,128, 61,785 ¶ 29 (May 14, 2015) (hereinafter “Second Order on Rehearing”). 

FERC stated that “Order No. 1000 did not seek to eliminate all instances of 

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free ridership.” Id. ¶ 30, 151 FERC at 61,785. FERC asserted that it could 

choose to balance competing goals, enact reforms on an incremental basis, that 

it need not ensure perfect cost causation, and that these reforms were not 

inconsistent with Order No. 1000. Id. FERC noted that the parties had worked 

cooperatively together in the past and encouraged them to minimize free rider 

concerns themselves by working with each other to accept their respective 

shares of costs associated with the benefits of transmission planning. Id. ¶ 32, 

151 FERC at 61,785–86.

Finally, FERC declined to accept WestConnect’s 10% cap proposal for 

cost allocation “because the proposal might lead to the transmission planning 

process rejecting regional cost allocation for a proposed transmission solution 

that continues to be a more efficient or cost-effective solution for the remaining 

beneficiaries compared to other alternatives even after a cost shift.” Id. ¶ 57, 

151 FERC at 61,791. EP Electric and the Intervenors timely petitioned for 

review of FERC’s First Order on Rehearing, which was held in abeyance on 

FERC’s motion until a petition was filed from FERC’s Second Order on 

Rehearing. All of FERC’s Compliance Orders are now before us.

II. Standard of Review

We review FERC’s orders under the “arbitrary and capricious” standard 

of the Administrative Procedure Act (“APA”). See La. Pub. Serv. Comm’n v. 

FERC (La. II), 771 F.3d 903, 909 (5th Cir. 2014) (citing 5 U.S.C. § 706(2)(A)), 

cert. denied, 135 S. Ct. 2072 (2015). FERC acts reasonably and permissibly 

under this standard when it “examine[s] the relevant data and articulate[s] a 

satisfactory explanation for its action including a rational connection between 

the facts found and the choice made.” Id. (quoting Motor Vehicle Mfrs. Ass’n of 

U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983)). FERC’s 

factual findings are conclusive if supported by substantial evidence, which is 

“such relevant evidence as a reasonable mind might accept as adequate to 

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support a conclusion.” South Carolina, 762 F.3d at 54 (citation omitted); see 

also 16 U.S.C. § 825l(b).

FERC’s choices in regulating rates, tariffs, and related practices involve 

technical issues within its purview that are entitled to great deference. La. II, 

771 F.3d at 909–10; South Carolina, 762 F.3d at 54–55. Therefore, when FERC 

designs rates, we give deference to those designs and defer to FERC’s 

construction of any ambiguous language in agreements setting rates, “so long 

as [FERC’s construction] is reasonable.” See La. II, 771 F.3d at 910 (emphasis 

added). However, the deference we give to FERC is not unlimited. We do not 

defer to FERC’s constructions of tariffs unless FERC “relied on its factual or 

technical expertise in arriving at its interpretation.” Id. Additionally, we do

not owe FERC deference if it “has not substantiated the application of its 

policy, either through the development of specific facts or by making a reasoned 

explanation.” Fla. Gas Transmission Co. v. FERC, 876 F.2d 42, 45 (5th Cir. 

1989). When FERC fails to rely on its technical expertise, or fails to 

substantiate the application of its policy, we may conclude that FERC’s actions 

are arbitrary and capricious and vacate and remand FERC’s orders for further 

consideration.8 See id.; see also Mich. Pub. Power Agency v. FERC, 405 F.3d 8, 

16 (D.C. Cir. 2005) (remanding for further explanation where FERC failed to 

adequately explain a new policy).

III. Discussion

EP Electric and the Intervenors challenge multiple facets of FERC’s 

 

8 The Supreme Court has emphasized the deference courts must give to FERC, but 

that deference only applies when FERC has “articulate[d] a satisfactory explanation for its 

action.” FERC v. Elec. Power Supply Ass’n, 136 S. Ct. 760, 782, 784 (2016) (citation omitted). 

That explanation is lacking here. Therefore, we exercise our “important but limited 

role . . . to ensure that the Commission engaged in reasoned decisionmaking” by remanding 

for a satisfactory explanation of FERC’s decision in the Compliance Orders. Id. at 784.

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decisions in the Compliance Orders. We address each challenge in turn.9

A. FERC’s Mandates Regarding the Non-Jurisdictional Utilities

In this appeal, the Utilities argue that FERC’s mandate of binding cost 

allocation was arbitrary and capricious because it applies only to the 

jurisdictional utilities and thus forces the jurisdictional utilities to subsidize 

projects benefitting the non-jurisdictional utilities. This creates a “free rider” 

problem that Order No. 1000 sought to reduce or eliminate. The Utilities 

therefore assert that this marks a departure from Order No. 1000 and 

unlawfully violates the principle of cost causation that FERC follows to ensure 

just and reasonable rates.

As a threshold issue, we conclude that this challenge is not a collateral 

attack on Order No. 1000. Although Order No. 1000’s failure to require the 

participation of non-jurisdictional utilities in binding cost allocation has been 

generally challenged, see South Carolina, 762 F.3d at 92–97, the Utilities’ 

challenge differs in this case because of the circumstances of the WestConnect 

region. Before the D.C. Circuit, FERC argued that non-jurisdictional utilities 

were likely to voluntarily participate, but it is clear now that non-jurisdictional 

utilities in WestConnect do not intend to subject themselves to binding cost 

allocation. The Utilities point out that not a single non-jurisdictional utility 

has enrolled in the WestConnect planning region—instead, all have chosen to 

participate as Coordinating Transmission Owners and avoid binding cost 

allocation. The Utilities’ attack on FERC’s treatment of non-jurisdictional 

utilities also stems from a discrepancy between how FERC described its goals 

in Order No. 1000—namely, to ensure just and reasonable rates by reducing 

 

9 EP Electric and Intervenors briefed these issues separately. Intervenors “adopt and 

incorporate the list of issues identified by El Paso in its brief,” but “focus their briefing” only 

on certain arguments. Therefore, we refer to arguments made only in EP Electric’s brief as 

EP Electric’s arguments. When discussing arguments made fully by both EP Electric and 

the Intervenors, we refer to the parties collectively as the “Utilities.” 

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free ridership and following cost causation principles—and how those 

principles were applied in the WestConnect region. Cf. City of Redding v. 

FERC, 693 F.3d 828, 837 (9th Cir. 2012) (“The relevant question is ‘whether a 

reasonable party in the petitioner’s position would have perceived a very 

substantial risk that the order meant what the Commission now says it 

meant.’” (citation omitted)). Therefore, we conclude this challenge does not 

constitute a collateral attack, and we consider it on the merits. See generally 

Dominion Res., Inc. v. FERC, 286 F.3d 586, 589–90 (D.C. Cir. 2002). 

We conclude that FERC’s Compliance Orders fail to adequately explain 

how the mandates in those orders do not ensure unjust and unreasonable rates 

as between jurisdictional and non-jurisdictional utilities (and their customers)

in the WestConnect region. We therefore grant the petition for review and 

remand this issue to FERC for further proceedings consistent with this 

opinion. 

FERC argues that it need not account for the non-jurisdictional utilities 

or more forcefully incentivize their participation in binding cost allocation for 

three primary reasons. First, FERC argues that the FPA only requires it to 

regulate jurisdictional utilities. Accordingly, it need not account for the 

benefits to the non-jurisdictional utilities in any analysis of whether the 

regional planning process requires paying costs roughly commensurate with 

the benefits received. FERC chose not to regulate non-jurisdictional utilities 

through Order No. 1000. Thus, FERC contends that any free ridership 

resulting from its Compliance Orders for the WestConnect region does not 

contravene Order No. 1000’s purpose of reducing free ridership. Second, FERC 

argues that it may regulate incrementally, relying at first on the voluntary 

participation of non-jurisdictional utilities before attempting to more forcefully 

incentivize participation. Third, FERC argues that cost causation need not be 

perfect, and that this imprecise form of cost causation will still result in more 

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efficient regional transmission planning, such that FERC claims it is acting 

within its discretion to balance competing objectives. 

It is true that Order No. 1000 declined to regulate non-jurisdictional 

utilities and therefore does not address free ridership by those utilities. It is 

also certainly within FERC’s discretion to balance competing objectives, and 

FERC’s regulations need only roughly correlate costs to benefits. Yet, FERC 

has a statutory duty to ensure just and reasonable rates, and Order No. 1000 

emphasized the cost causation principle in service of that goal. See Order No. 

1000-A ¶ 592, 77 Fed. Reg. at 32,276; 16 U.S.C. § 824d(a) (giving FERC 

regulatory authority to ensure “just and reasonable” rates and practices and 

declaring that “any such rate or charge that is not just and reasonable

is . . . unlawful”); see also Morgan Stanley Capital Grp. Inc. v. Pub. Util. Dist. 

No. 1 of Snohomish Cty., 554 U.S. 527, 545 (2008) (“There is only one statutory 

standard for assessing wholesale-electricity rates, whether set by contract or 

tariff—the just-and-reasonable standard.”). As the Seventh Circuit held, 

utilities and FERC should not approve rates for transmission or electric 

services that do not “reflect to some degree the costs actually caused by” the 

person or entity paying them. Ill. Commerce Comm’n v. FERC, 576 F.3d 470, 

476 (7th Cir. 2009) (quoting KN Energy, Inc. v. FERC, 968 F.2d 1295, 1300 

(D.C. Cir. 1992)). 

As they stand, the Compliance Orders do not apply that foundational 

principle of cost causation for about half of the utilities in the WestConnect 

region.10 FERC’s Compliance Orders nowhere provide a reasoned explanation 

 

10 Order No. 1000 clearly linked cost causation, the elimination or reduction of free 

ridership, just and reasonable rates, and more efficient transmission planning and 

development. Order No. 1000-A states: 

The requirements of Order No. 1000 are based on the principle of cost 

causation, which requires that costs be allocated in a way that is roughly 

commensurate with benefits. The principle of cost causation is intended to 

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for why the non-jurisdictional utilities have incentive or obligation to 

participate in binding cost allocation when they can get many of the same 

benefits at the jurisdictional utilities’ expense.11 Cf. Fla. Gas, 876 F.2d at 45 

(vacating and remanding FERC orders for failing to provide a reasoned 

explanation supporting FERC’s policies); State Farm, 463 U.S. at 50, 57 

(explaining that “the courts may not accept appellate counsel’s post hoc 

rationalizations for agency action” and remanding where an agency “failed to 

supply the requisite ‘reasoned analysis’”). Furthermore, FERC does not 

explain how it can meet its obligation to ensure just and reasonable rates by 

effectively assuring that many of the costs of new development will be imposed

on only half of the utilities in the WestConnect region. See Order No. 1000 

¶ 640, 76 Fed. Reg. at 49,939 (stating that parties cannot opt out of cost 

allocation for a transmission project if they disagree that they will benefit from 

it, since “[p]ermitting each entity to opt out would not minimize the regional 

free rider problem that [FERC sought] to minimize in [Order No. 1000]”). 

Before this court, FERC argues that the Compliance Orders may not 

result in unjust and unreasonable rates because it may be able to use the 

“reciprocity condition” to incentivize participation of non-jurisdictional utilities 

in binding cost causation. See generally South Carolina, 762 F.3d at 92 

 

prevent subsidization by ensuring that costs and benefits correspond to each 

other. Indeed, in seeking to eliminate free riders on the transmission grid, 

Order No. 1000 seeks to eliminate a form of subsidization, as free riders by 

definition are entities who are being subsidized by those who pay the costs of 

the benefits that free riders receive for nothing. 

Order No. 1000-A ¶ 578, 77 Fed. Reg. at 32,274; see also Order No. 1000 ¶ 487, 76 Fed. Reg. 

at 49,919 (associating benefits-based cost allocation with more just and reasonable rates).

11 See, e.g., First Order on Reh’g ¶¶ 54–57, 148 FERC at 62,289–91 (describing how 

non-jurisdictional utilities may participate in WestConnect’s regional planning process as 

Coordinating Transmission Owners without being bound to cost allocation and should be able 

to reject any cost allocation that attempts to assign a Coordinating Transmission Owner costs 

in proportion to the benefits that the Coordinating Transmission Owner would receive from 

the project).

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(explaining that the “reciprocity condition,” as applied by Order No. 1000, 

requires that non-jurisdictional utilities that choose to access the transmission 

lines of jurisdictional utilities provide transmission service to those 

jurisdictional utilities on comparable terms). According to FERC, under the 

reciprocity condition, “if a non-jurisdictional utility takes transmission service 

from a jurisdictional utility, it must participate in regional planning and cost 

allocation processes.” FERC Br. 8; see also Order No. 1000 ¶¶ 818–19, 76 Fed. 

Reg. at 49,961; Order No. 1000-A ¶¶ 771–75, 77 Fed. Reg. at 32,300–01. Yet, 

as FERC explained in Order No. 1000-A:

A non-public utility transmission provider may continue to satisfy 

the reciprocity condition in one of three ways. First, it may provide 

service under a tariff that has been approved by the Commission 

under the voluntary “safe harbor” provision of the pro forma [Open 

Access Transmission Tariff (“OATT”)]. A non-public utility 

transmission provider using this alternative submits a reciprocity 

tariff to the Commission seeking a declaratory order that the 

proposed reciprocity tariff substantially conforms to, or is superior 

to, the pro forma OATT. The non-public utility transmission 

provider then must offer service under its reciprocity tariff to any 

public utility transmission provider whose transmission service 

the non-public utility transmission provider seeks to use. Second, 

the non-public utility transmission provider may provide service 

to a public utility transmission provider under a bilateral 

agreement that satisfies its reciprocity obligation. Finally, the nonpublic utility transmission provider may seek a waiver of the 

reciprocity condition from the public utility transmission provider.

Order No. 1000-A ¶ 771, 77 Fed. Reg. at 32,300 (emphasis added). 

How the reciprocity condition might operate in the WestConnect region 

is a question the parties have raised, which has been left unanswered by the 

Compliance Orders and FERC’s arguments on appeal. For example, although 

FERC has stated that the reciprocity condition may be satisfied in three ways, 

see id., in the Compliance Orders, FERC only addressed one method of 

satisfying the reciprocity condition. See First Order on Reh’g ¶ 55 n.101, 148 

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FERC at 62,290 n.101 (discussing only the ability “to maintain a reciprocity 

tariff under the voluntary ‘safe harbor’ provision”). In fact, FERC only vaguely 

mentioned the reciprocity condition one time in the Compliance Orders, in a 

footnote, and utterly failed to explain how it would effectively operate to 

incentivize participation in the unique WestConnect region. See id. 

Intervenors argue before us that the reciprocity condition would not work to 

incentivize participation by the non-jurisdictional utilities in the WestConnect 

region. Intervenors assert that only the public utility from which the nonjurisdictional utility seeks service can enforce reciprocity and that geography

or pre-existing agreements might often prevent non-jurisdictional utilities 

from having to seek service from the same jurisdictional utilities that demand 

participation in binding cost allocation for specific development projects. See 

generally Intervenors’ Reply Br. 9–12. We do not address the validity of EP 

Electric and Intervenors’ arguments on this point. We can only say that the 

agency record lacks the information we need to properly evaluate this issue.

It is well settled that we “must disregard any post hoc rationalizations of 

[an agency’s] action and evaluate it solely on the basis of the agency’s stated 

rationale at the time of its decision.” Luminant Generation Co. v. U.S. EPA, 

675 F.3d 917, 925 (5th Cir. 2012) (citing Burlington Truck Lines, Inc. v. United 

States, 371 U.S. 156, 168–69 (1962)). We cannot determine whether the 

reciprocity condition as applied by Order No. 1000 would sufficiently 

incentivize participation and lead to just and reasonable rates in the 

WestConnect region due to FERC’s failure to address the reciprocity 

condition’s effect during agency proceedings. See United States v. Garner, 767 

F.2d 104, 117 (5th Cir. 1985) (noting that appellate courts must rely on the 

agency’s stated rationale at the time of its decision “[p]artly in order to provide 

courts with a foundation for judicial review”). We therefore do not rely on the 

use of the reciprocity condition as a rationale for upholding the Compliance 

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Orders.12 If FERC views the operation of the reciprocity condition as a 

reasonable justification for its actions, it must more fully explain that logic on 

remand.

Absent a more reasoned explanation for why the non-jurisdictional

utilities will participate in the binding cost allocation process, or why their lack 

of participation will not result in unjust and unreasonable rates, we conclude 

that the Compliance Orders are arbitrary and capricious and cannot be 

approved in their current form.13 See, e.g., Fla. Gas, 876 F.2d at 45; Ill. 

 

12 The dissenting opinion argues we should consider the reciprocity condition and 

trust FERC’s judgment that the condition will incentivize the non-jurisdictional utilities’ 

participation. Deference to FERC on this issue is not possible because FERC has not made 

clear how the reciprocity condition will operate in this unique region to incentivize 

participation. Due to that lack of explanation in the face of the Utilities’ objections below, 

the Utilities were not given the opportunity to challenge FERC’s terse reasoning, except in 

equally terse form on appeal and without a properly developed agency record. To avoid this 

scenario, our precedent prevents us from considering post hoc rationalizations, and we 

decline to do so here. See Luminant, 675 F.3d at 925; Garner, 767 F.2d at 117. We respect 

FERC’s expertise, but when FERC does not use that expertise to explain its mandates, we 

cannot fill the vacuum with hopeful speculation. See Fla. Gas, 876 F.2d at 45; Ill. Commerce 

Comm’n, 576 F.3d at 475–76, 478; Mich. Pub. Power Agency, 405 F.3d at 16.

13 The dissenting opinion relies on FERC’s reasoning for rejecting a 10% cost cap in 

the Second Order on Rehearing. In that Order, FERC specified that if a Coordinating 

Transmission Owner rejects binding cost allocation for a project that would provide benefits 

to that Owner, the transmission planning process removes the benefits that Owner would 

reap and recalculates future cost allocation determinations such that they only account for 

the benefits accorded to the entities that have agreed to binding cost allocation. See Second 

Order on Reh’g ¶ 57, 151 FERC at 61,791. The dissenting opinion argues this sufficiently 

satisfies FERC’s mandate of ensuring just and reasonable rates because the new cost 

allocation would allocate costs “commensurate with the benefits considered.” Id. (emphasis 

added). We respectfully disagree that this language provides a sufficient explanation of how 

this scheme will result in just and reasonable rates. It is merely a reworded version of 

FERC’s argument that, because it need not regulate non-jurisdictional utilities, the process 

need not account for the benefits that accrue to those utilities. Even if those benefits are 

excluded from cost allocation calculations after the non-jurisdictional utilities opt out of 

paying for their share of a specific project, FERC has suggested that the jurisdictional 

utilities involved would still be left to pay the entire cost of that project—including the cost 

associated with the benefits received by the non-paying, non-jurisdictional utilities. See 

Second Order on Reh’g ¶ 57, 151 FERC at 61,791 (rejecting the proposal to make a project 

ineligible for binding cost allocation if “the cost shift to remaining beneficiaries would exceed 

10 percent of their prior cost allocation” because it might exclude too many projects from 

regional planning and cost allocation); id. at ¶ 31, 151 FERC at 61,785 (admitting that “this 

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Commerce Comm’n, 576 F.3d at 475–76, 478 (remanding when FERC failed to 

adequately explain the approval of a pricing scheme and failed to measure the 

correlation between benefits and costs, inquiring why “a different method . . . , 

based more closely on cost-causation principles, [would] jeopardize” FERC’s 

policy “or be infeasible”). We therefore GRANT the petition for review and 

REMAND this case to FERC for further explanation and fact finding. 

B. EP Electric’s Other Challenges

EP Electric also separately challenges whether FERC violated the APA 

by requiring binding cost allocation at the regional planning stage and by 

requiring the regional planning process to select a particular developer, 

entitling that developer to rely on cost allocation for a given project. EP 

Electric argues that FERC unlawfully sub-delegated its ratemaking duties 

under the FPA by giving the WestConnect Planning Management Committee 

(“WestConnect Committee”) the power to select projects with binding cost 

allocation. Binding cost allocation also violates the Mobile-Sierra doctrine,14

 

situation may create the potential for free ridership”). The non-jurisdictional utilities thus 

may receive benefits for free, while the jurisdictional utilities and their customers may pay 

more than their share of the costs associated with the benefits they receive. FERC admitted 

in the Compliance Orders that this scheme has the potential to result in free ridership by the 

non-jurisdictional utilities, see id. at ¶ 31, 151 FERC at 61,785, but has failed to explain how 

the current orders satisfy its statutory mandate—except by ignoring the benefits the nonjurisdictional utilities would receive. This does not suffice. It may be that the reciprocity 

condition provides sufficient incentive, or that FERC has some other reason to think that 

costs will be allocated in a manner that is commensurate with the benefits received by 

jurisdictional and non-jurisdictional utilities. On this record, we do not discern such an 

explanation, and it is our duty as the reviewing court to ensure that we receive a sufficient 

explanation. See Fla. Gas, 876 F.2d at 45; Ill. Commerce Comm’n, 576 F.3d at 475–76, 478; 

Mich. Pub. Power Agency, 405 F.3d at 16.

14 The Mobile-Sierra doctrine “address[es] the Commission’s authority ‘to modify 

rates set bilaterally by contract rather than unilaterally by tariff.’” South Carolina, 762 F.3d 

at 85–86 (quoting Morgan Stanley, 554 U.S. at 532) (citing United Gas Pipe Line Co. v. Mobile 

Gas Serv. Corp. (Mobile), 350 U.S. 332 (1956), and Fed. Power Comm’n v. Sierra Pac. Power 

Co. (Sierra), 350 U.S. 348 (1956)). “Under the Mobile-Sierra doctrine, [FERC] must presume 

that the [electricity] rate set out in a freely negotiated wholesale-energy contract meets the 

‘just and reasonable’ requirement imposed by law. The presumption may be overcome only 

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according to EP Electric. Finally, EP Electric claims that in mandating that 

the WestConnect Committee select a developer for each project in the regional 

planning process, FERC has improperly infringed on states’ exclusive 

authority over the siting and construction of transmission facilities. 

We conclude that all of these challenges are barred as impermissible 

collateral attacks, save the argument regarding improper sub-delegation, and 

we find that challenge lacks merit. We have previously declined to “entertain 

a petition for review that collaterally attacks a prior FERC order.” City of 

Redding, 693 F.3d at 837 (citation omitted); see, e.g., La. Pub. Serv. Comm’n v. 

FERC, 761 F.3d 540, 556–57, 560 (5th Cir. 2014). “[A]n objection is a collateral 

attack on an earlier order ‘only if a reasonable firm in [petitioners’] position 

would have perceived a very substantial risk that the [order] meant what the 

Commission now says it meant.’” Cent. Hudson Gas & Elec. Corp. v. FERC, 

783 F.3d 92, 105 (2d Cir. 2015) (alterations in original) (quoting Dynegy 

Midwest Generation, Inc. v. FERC, 633 F.3d 1122, 1126 (D.C. Cir. 2011)). 

To distinguish between collateral attacks and permissible challenges, we 

ask whether the FERC order the petition challenges was a clarification or a 

modification of a prior FERC order.15 See generally Dominion, 286 F.3d at 589. 

FERC’s Compliance Orders on the issues challenged by EP Electric did little 

more than clarify Order No. 1000’s directives. See Pac. Gas & Elec. Co. v. 

 

if FERC concludes that the contract seriously harms the public interest.” Morgan Stanley, 

554 U.S. at 530.

15 The inquiry into whether FERC violated the APA by changing its interpretation of 

Order No. 1000 through the Compliance Orders is similar to the collateral attack inquiry. 

Compare Pac. Gas & Elec. Co. v. FERC, 464 F.3d 861, 868–69 (9th Cir. 2006), with City of 

Idaho Falls v. FERC, 629 F.3d 222, 227, 230–31 (D.C. Cir. 2011). In this context, both 

inquiries require us to discern whether FERC clarified or modified Order No. 1000 through 

the Compliance Orders. Since we find that most of EP Electric’s challenges are collateral 

attacks because they challenge mere clarifications of Order No. 1000, we do not review these 

challenges on their merits, and we do not separately address EP Electric’s procedural 

arguments. 

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FERC, 464 F.3d 861, 868–69 (9th Cir. 2006) (holding a challenge was an 

impermissible collateral attack on an order that “simply clarified and 

implemented its previous order,” but did not “substantively alter the [order’s] 

meaning or scope”). The fact that the D.C. Circuit disposed of many similar 

arguments in South Carolina buttresses this conclusion. 

First, the Compliance Orders merely clarified that Order No. 1000 meant 

to impose binding cost allocation, which Order No. 1000 clearly signaled and 

the D.C. Circuit has already recognized. See, e.g., Order No. 1000-A ¶¶ 567–

68, 77 Fed. Reg. at 32,272; Order No. 1000 ¶ 558,76 Fed. Reg. at 49,929; South 

Carolina, 762 F.3d at 56. EP Electric may not bring this collateral attack on 

binding cost allocation, and we DISMISS its petition as to this issue. See La. 

Pub. Serv. Comm’n, 761 F.3d at 558, 560. 

Second, the selection of one developer that will be eligible for cost 

allocation in the regional planning process is a predictable clarification of

Order No. 1000’s reforms, and we DISMISS the petition for review as to this 

issue. Order No. 1000 explicitly declined to grant developers rights to build 

projects, but noted that its “framework” allowed “the developer” of a facility 

selected in a regional transmission plan for the purposes of cost allocation “to 

rely on the relevant cost allocation method or methods within the region should 

it desire to move forward with its transmission project.” Order No. 1000 ¶ 339, 

76 Fed. Reg. at 49,900 (emphasis added). This suggests that Order No. 1000 

contemplated that one developer could rely on the cost allocation for its 

proposed project, even if that was not made explicit. Granting one developer 

eligibility to rely on binding cost allocation may also serve FERC’s goals of 

comparably evaluating all potential transmission solutions and promoting the 

more efficient or cost-effective solutions. See, e.g., Order No. 1000 ¶¶ 255, 332, 

339, 76 Fed. Reg. at 49,885–86, 49,900.

EP Electric’s related attack on the single-developer requirement as an 

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improper usurpation of state authority over siting and construction fails for 

similar reasons. We conclude that neither Order No. 1000 nor the Compliance 

Orders “require facility construction nor allow a party to build without 

securing necessary state approvals.” South Carolina, 762 F.3d at 62–64. We 

DISMISS EP Electric’s petition as to this issue, as it constitutes a collateral 

attack. See La. Pub. Serv. Comm’n, 761 F.3d at 558, 560.

Finally, we DENY review as to EP Electric’s argument that the 

Compliance Orders violate the Mobile-Sierra doctrine. The Mobile-Sierra

doctrine prevents FERC from abrogating a valid contract setting rates unless

that contract seriously harms the public interest. See Morgan Stanley, 554 

U.S. at 548. EP Electric argues that, conversely, FERC cannot create a 

contract and impose it on unwilling parties through its mandate of binding cost 

allocation and other regional planning reforms. We agree with the D.C. Circuit 

that the Mobile-Sierra doctrine is inapposite here, and we DISMISS the 

petition insofar as it brings this collateral attack. See South Carolina, 762 F.3d 

at 85–86. 

The sole remaining challenge that is not barred as a collateral attack is 

EP Electric’s argument that FERC improperly delegated its authority to 

review rates under FPA Section 205 by giving the WestConnect Committee the 

power to impose binding cost allocation. According to EP Electric, Order No. 

1000 indicated that FERC would review proposed tariffs of developers selected 

in the regional planning processes through its Section 205 authority. We agree 

that there is some inconsistency between the Compliance Orders and Order 

No. 1000 on this issue. Compare Order No. 1000 ¶ 543, 76 Fed. Reg. at 49,927, 

and Order No. 1000-A ¶ 568, 77 Fed. Reg. at 32,272, with First Order on Reh’g 

¶ 341, 148 FERC at 62,353. We therefore reach the merits of this challenge. 

See generally City of Redding, 693 F.3d at 836–38 (holding a challenge was not 

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a collateral attack in part because FERC had given inconsistent guidance on

its policy). 

Nevertheless, we cannot agree with EP Electric that FERC has 

“abdicate[d] its role as a rational decision-maker” through the Compliance 

Orders. See La. Pub. Serv. Comm’n, 761 F.3d at 551–52 (citation omitted). 

Even if FERC has abandoned its practice of evaluating tariffs and cost 

allocations de novo through Section 205 proceedings, it has extensively 

reviewed the procedures that will produce cost allocations through these 

Compliance Orders. Additionally, FERC has retained the authority to review 

transmission planning and cost allocations pursuant to FPA Section 206, 

through which FERC may review challenges on its own motion or through 

complaints about rates and practices. 16 U.S.C. § 824e(a). FERC “exercised 

its role when it initially reviewed” WestConnect’s regional planning and cost 

allocation processes, and “FERC has clarified that it will continue to exercise 

oversight . . . in a Section 206 complaint proceeding.” La. Pub. Serv. Comm’n, 

761 F.3d at 552. We DENY EP Electric’s petition for review of FERC’s 

delegation of authority to the WestConnect Committee.

IV. Conclusion

For the reasons stated, we GRANT the petitions for review in part, as to 

the challenge to the role of non-jurisdictional utilities in the regional planning 

and cost allocation processes of the WestConnect region. We VACATE FERC’s 

Compliance Orders on this issue and REMAND for further explanation and 

fact finding consistent with this opinion. We DENY review as to EP Electric’s 

argument that FERC improperly sub-delegated its authority to the 

WestConnect Committee. We DISMISS the petitions as to the remaining 

challenges, as we conclude those challenges constitute impermissible collateral 

attacks.

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REAVLEY, Circuit Judge, dissenting:

There is no justification to remand for “a more reasoned explanation for 

why the non-jurisdictional utilities will participate in the binding cost 

allocation process, or why their lack of participation will not result in unjust 

and unreasonable rates.” The Majority errs by labelling Order No. 1000’s 

reciprocity condition a post hoc rationalization and errs more deeply still by 

failing to accord FERC’s policy decision appropriate deference.

FERC, Order No. 1000 includes the “reciprocity condition” that requires 

non-jurisdictional utilities to “participate in transmission planning and cost 

allocation in exchange for open access.” S. Carolina Pub. Serv. Auth. v. 

F.E.R.C., 762 F.3d 41, 92 (D.C. Cir. 2014) (citing Order No. 1000 ¶¶ 818–19, 

76 Fed.Reg. at 49,961). “By conditioning non-public utilities’ access to the open 

systems of public utilities on the former’s adherence to the planning and cost 

allocation requirements, [Order No. 1000] encourages non-public utilities to 

participate in planning and cost allocation.” Id. at 93; see also id. at 94–95 

(explaining that the reciprocity condition requires “both transmission planning 

and cost allocation” from “utilities that choose to seek Commissionjurisdictional transmission service”).

The court here disregards the reciprocity condition because only one 

mention is made in the Compliance Orders. However, in the Second Order on 

Rehearing, FERC reminds that “if a coordinating transmission owner does not 

accept the cost allocation, the transmission planning process removes the 

benefits of those coordinating transmission owners that do not accept the cost 

allocation” and cost allocation determinations therefore remain 

“commensurate with the estimated benefits considered.” Second Order on 

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Rehearing at ¶ 57. In any event, the reciprocity condition is a rule found within 

Order No. 1000 and cannot be written off as a mere post hoc rationalization.

FERC has the responsibility of deciding how to achieve its statutory 

mandate of ensuring just and reasonable rates, and we must trust its judgment 

that the reciprocity condition adequately incentivizes participation of the nonjurisdictional utilities. We are not “to ask whether [the] decision is the best 

one possible or even whether it is better than the alternatives,” including the 

Utilities’ alternative suggestions. F.E.R.C. v. Elec. Power Supply Ass’n, 136 S. 

Ct. 760, 782 (2016). “[N]owhere is that more true than in a technical area like 

electricity rate design.” Id. 

Thus, FERC does not have to convince us that its approach is sounder 

than the Utilities’ approach. “The disputed question here involves both 

technical understanding and policy judgment,” and the record establishes that 

FERC “engaged in reasoned decisionmaking” by weighing competing views, 

selecting an approach based on the methods and goals of Order No. 1000, and 

“intelligibly” articulating “the reason for making that choice.” Id. at 784. This 

is sufficient. Id. For but one example of FERC’s reasoned decisionmaking, 

consider Paragraph 31 of the Second Order on Rehearing. There, FERC 

explained why it would permit the non-jurisdictional utilities to participate in 

the WestConnect region as Coordinating Transmission Owners without 

imposing binding cost allocation upon them:

The Commission has accepted Filing Parties’ proposal to 

plan for non-public utility transmission providers, as coordinating 

transmission owners, without requiring that those non-public 

utility transmission providers enroll in the WestConnect 

transmission planning region and, thus, be subject to binding cost 

allocation. The Commission explained that doing so “will increase 

transparency, support the building of a record with respect to 

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transmission planning, and allow regional transmission planning 

to be conducted inclusive of nonpublic utility transmission 

providers, so as to expand opportunities for identifying and 

proposing more efficient or cost-effective regional transmission 

projects.” Allowing a non-public utility transmission provider to 

determine, consistent with its statutes, whether to accept the cost 

allocation may further expand open, transparent planning. By not 

enrolling, the non-public utility transmission providers are not full 

members of the WestConnect transmission planning region and, 

therefore, cannot be involuntarily allocated the costs of new 

transmission facilities that are selected in the regional 

transmission plan for purposes of cost allocation. While this 

situation may create the potential for free ridership, as it does 

when any entity not enrolled in the transmission planning region 

benefits from a new transmission facility, it is not inconsistent 

with Order No. 1000.

(Second Opinion on Rehearing at ¶ 31.) 

This is precisely the reasoned decision-making to which we must defer. 

FERC has decided that, even accounting for the Utilities’ free rider objection, 

other considerations support its determination. The Majority perceives a 

major concession in this paragraph: that under the Compliance Orders, there 

may be free riders. Majority Op. at 17–18 n.13. It is no such thing for three 

reasons. First, as has been already explained, the statement regarding free 

riders merely shows that, even when considering “the potential for free 

ridership,” FERC’s policy decision best serves its goals. This conclusion merits 

our deference. 

Second, the statement demonstrates that the sort of free rider problem 

the Utilities complain of is not unique but rather is the same free rider problem 

that arises “when any entity not enrolled in the transmission planning region 

benefits from a new transmission facility.” In other words, this particular free 

rider problem is indistinguishable from the free rider problem acknowledged 

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in Order No. 1000. (Order No. 1000 ¶ 660, 76 Fed.Reg. at 49,942, (“We 

acknowledge that this Final Rule’s approach may lead to some beneficiaries of 

transmission facilities escaping cost responsibility because they are not located 

in the same transmission planning region as the transmission facility. 

Nonetheless, the Commission finds this approach to be appropriate.”).

Third, there is simply no support for the conclusion that a “potential for 

free ridership” is fatal to FERC’s regulatory scheme. See South Carolina, 762 

F.3d at 88 (“[N]othing requires the Commission to ensure full or perfect cost 

causation”). All plans have drawbacks. FERC’s “balancing of the competing 

goals” and incremental approach to reform demand our deference. Id.

At bottom, the Majority errs by treating the required “satisfactory 

explanation” as one that actually persuades the court as to the wisdom of 

FERC’s decision or that actually rebuts the Utilities’ speculative contentions 

regarding unintended consequences.1 Across three compliance orders, FERC 

has “addressed th[is] issue seriously and carefully, providing reasons in 

support of its position and responding to the principal alternative advanced.” 

Electric Power Supply Association, 136 S. Ct. at 784. We must defer.

 

1 See Majority Op. at 13–14, 17 (“FERC’s Compliance Orders nowhere provide 

a reasoned explanation for why the non-jurisdictional utilities have incentive or 

obligation to participate in binding cost allocation when they can get many of the 

same benefits at the jurisdictional utilities’ expense. . . . FERC does not explain how 

it can meet its obligation to ensure just and reasonable rates by effectively assuring 

that many of the costs of new development will be imposed on only half of the utilities 

in the WestConnect region. . . . Absent a more reasoned explanation for why the nonjurisdictional utilities will participate in the binding cost allocation process, or why 

their lack of participation will not result in unjust and unreasonable rates, we 

conclude that the Compliance Orders are arbitrary and capricious and cannot be 

approved in their current form.”).

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