United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued November 29, 2005 Decided January 10, 2006

No. 04-1145

IDACORP ENERGY L.P.,

PETITIONER

v.

FEDERAL ENERGY REGULATORY COMMISSION,

RESPONDENT

CALIFORNIA INDEPENDENT SYSTEM OPERATOR

CORPORATION, ET AL.,

INTERVENORS

Consolidated with

04-1287, 04-1288

On Petitions for Review of Orders of the

Federal Energy Regulatory Commission

Lawrence G. Acker argued the cause for petitioner

IDACORP Energy L.P. With him on the briefs was Brett A.

Snyder.
2

J. Phillip Jordan argued the cause for petitioner California

Independent System Operator Corporation. With him on the

briefs were Robert V. Zener and Anthony J. Ivancovich.

Beth G. Pacella, Attorney, Federal Energy Regulatory

Commission, argued the cause for respondent. With her on the

brief were John S. Moot, General Counsel, and Robert H.

Solomon, Deputy Solicitor. Dennis Lane, Former Solicitor,

entered an appearance.

Lawrence G. Acker and Brett A. Snyder were on the brief

for intervenor IDACORP Energy L.P. in support of respondent.

J. Phillip Jordan, Robert V. Zener, Anthony J. Ivancovich,

Mark D. Patrizio, Stan Berman, and Joseph H. Fagan were on

the brief for intervenors California Independent System

Operator Corporation and Pacific Gas and Electric Company in

support of respondent. Michael E. Ward entered an appearance.

Before: ROGERS, TATEL, and GRIFFITH, Circuit Judges.

Opinion for the Court filed by Circuit Judge TATEL.

TATEL, Circuit Judge: Despite daunting technical

discussions of neutrality adjustments and megawatt-hours

contained in the parties’ many briefs, this case is really just a

billing dispute between the entity that runs the California

electric grid and one of its customers. The Federal Energy

Regulatory Commission rejected the customer’s claim for a

refund, and the customer now argues the biller (1) impermissibly

changed its invoice retroactively, and (2) failed to follow the

correct methodology for ensuring that certain charges stayed

within pre-arranged limits. The biller filed a cross-petition,

claiming the Commission (1) improperly interpreted its

agreement with the customer, and (2) should have permitted it
3

to increase the pre-arranged limit on charges. Finding that

FERC appropriately rejected the customer’s first challenge but

seeing merit to the second, we grant in part and deny in part its

petition for review. Because the biller has yet to suffer any

injury, we are without jurisdiction to address its cross-petition.

I.

A non-profit organization, the California Independent

System Operator Corporation (CAISO), runs the electric grid for

most of California. Petitioner IDACORP is one of several

“Scheduling Coordinators” which receives energy from CAISO.

CAISO charges Scheduling Coordinators in amounts governed

by a tariff on file with the Federal Energy Regulatory

Commission (FERC).

The dispute in this case centers on charges imposed during

a seven-month period in 2000. Specifically, IDACORP

contends that during that period CAISO misapplied a cap

contained in tariff section 11.2.9.1: 

The total charges levied under Section 11.2.9 shall not

exceed $0.095/MWh [i.e., 9.5 cents per megawatthour] . . . unless: (a) [CAISO’s] Governing Board

reviews the basis for the charges above that level and

approves the collection of charges above that level for

a defined period; and (b) [CAISO] provides at least

seven days’ advance notice to Scheduling Coordinators

of the determination of [CAISO’s] Governing Board.

Tariff section 11.2.9, entitled “Neutrality Adjustments,”

authorizes CAISO to “levy additional charges or payments as

special adjustments” in five categories: (a) amounts needed to

round charges up to the nearest whole dollar, (b) penalties levied

by CAISO, (c) amounts needed to balance CAISO’s accounts at

the end of each trading day, (d) payment adjustments, and
4

(e) awards from good faith negotiations or alternative dispute

resolution procedures.

FERC accepted CAISO’s contention that its charges had not

exceeded the cap. Cities of Anaheim, Azusa, Banning, Colton

and Riverside, Cal. v. CAISO, 105 F.E.R.C. ¶ 61,021, at 61,179

(2003) (“October 2003 Order”), reh’g 102 F.E.R.C. ¶ 61,274

(2003) (“March 2003 Order”), reh’g 95 F.E.R.C. ¶ 61,197

(2001) (“May 2001 Order”), reh’g 94 F.E.R.C. ¶ 61,268 (2001)

(“March 2001 Order”), reh’g denied, 106 F.E.R.C. ¶ 61,205

(2004) (“March 2004 Order”). IDACORP petitioned for review,

finding fault with two aspects of FERC’s ruling: (1) allowing the

retroactive exclusion of certain types of charges from the cap,

and (2) permitting the application of the cap to the monthly

average of charges rather than to each hour’s charges

independently. We address these claims in turn. For each, we

review FERC’s decision under the familiar arbitrary and

capricious standard, affirming if the Commission “made a

reasoned decision” and gave “a satisfactory explanation for its

action including a rational connection between the facts found

and the choice made.” Pac. Gas & Elec. v. FERC, 373 F.3d

1315, 1319 (D.C. Cir. 2004) (internal quotation marks omitted).

CAISO filed a conditional cross-petition.

II.

IDACORP first challenges CAISO’s treatment of what are

known as “out-of-market” (OOM) purchases. Just as the name

implies, OOM purchases are energy purchases from outside the

market CAISO administers. CAISO makes such purchases to

ensure it can satisfy Scheduling Coordinators’ demands for

energy when those demands exceed supplies in CAISO’s

market. CAISO then divides the costs of those purchases among

Scheduling Coordinators based on the amount of energy each

consumes.
5

CAISO’s tariff allocated most neutrality adjustment charges

among Scheduling Coordinators in the same way as OOM

purchases, with one important difference: Only neutrality

adjustment charges are subject to section 11.2.9.1’s cap.

CAISO’s initial invoices billed the two types of charges together

as “neutrality costs.” During the course of proceedings

challenging CAISO’s application of the cap, however, CAISO

argued that OOM charges fall outside the cap’s reach. FERC

agreed, reasoning as follows:

After careful review of [CAISO’s] arguments and

related Tariff provisions, we agree with [CAISO’s]

reasoning that its recovery of OOM dispatch costs is

not constrained by Section 11.2.9.1’s stated hourly

limit of $0.095/MWh. We recognize that [CAISO]

included OOM charges in its neutrality adjustment

charge billings as a matter of administrative

convenience, and that proper application of the

neutrality adjustment charge allocation

mechanism—i.e., recovery of the costs explicitly stated

under Section 11.2.9—does not include OOM dispatch

costs. Thus, while we maintain our finding that

[CAISO’s] recovery of neutrality adjustment charges

is limited to $0.095/MWh, we clarify that any other

costs assessed under provisions other than Section

11.2.9 are not subject to that limit.

March 2003 Order, 102 F.E.R.C. at 61,849. Accordingly, FERC

directed CAISO “to separate all costs recoverable under Section

11.2.9 from all other costs included in the invoiced ‘neutrality

costs.’” Id.

In response, CAISO submitted a “compliance filing,” in

which it identified the charges properly invoiced under section

11.2.9. Letter from Anthony J. Ivancovich, Senior Regulatory
6

Counsel, CAISO, et al. to Magalie R. Salas, Secretary, FERC

(June 10, 2003) (“Compliance Filing”). CAISO contended,

however, that providing further detail about the proper

categorization of non-section 11.2.9 charges mistakenly

invoiced as neutrality adjustments “would be a purposeless

expenditure of time and resources” because it would result in no

change in the total amount charged to any Scheduling

Coordinator. Id. at 6. Because none of the section 11.2.9

charges exceeded the cap, CAISO concluded it owed no refunds.

Id. at 5. FERC accepted the compliance filing. October 2003

Order, 105 F.E.R.C. at 61,183. After unsuccessfully seeking

rehearing on this issue, see March 2004 Order, 106 F.E.R.C.

¶ 61,205, IDACORP petitioned for review here.

IDACORP contends that FERC’s decision to permit CAISO

to amend its invoice and move OOM charges out of the

“neutrality adjustment” category amounted to “retroactive

ratemaking.” As all parties agree, CAISO may not engage in

retroactive ratemaking, defined as “imposing a rate increase for

[power] already sold.” Pac. Gas & Elec. Co., 373 F.3d at 1319

(quoting Ark. La. Gas Co. v. Hall, 453 U.S. 571, 578 (1981))

(alteration in original). But FERC saw no retroactive

ratemaking, explaining that its acceptance of the compliance

filing “does not allow [CAISO] to change its rate structure,” but

instead “requires [CAISO] to correct an invoicing mistake.”

October 2003 Order, 105 F.E.R.C. at 61,180. We agree.

Because the ban on retroactive ratemaking requires

compliance with the filed tariff, we begin with section 11.2.9.1.

See Pac. Gas & Elec., 373 F.3d at 1320 (requiring “adequate

notice before the approved rate is changed”). Section 11.2.9.1’s

cap applies only to “[t]he total charges levied under Section

11.2.9.” IDACORP nowhere claims that any of the five

categories listed in section 11.2.9 encompasses OOM charges.

Indeed, as FERC points out—and IDACORP does not
7

contest—a different tariff provision, section 11.2.4.2.1, covers

“[a]ll costs incurred by [CAISO] for [OOM] dispatch

instructions.”

Put another way, pointing to no “rate increase” CAISO

seeks to impose, IDACORP asks us to bind CAISO to its

original invoice. Its claim, then, sounds more like retroactive

invoicing than retroactive ratemaking. The ban on retroactive

ratemaking, however, imposes no obstacle to amending

invoices; in fact, the prohibition on retroactive ratemaking may

well require an amended invoice if the original invoice deviated

from the tariff. See Maislin Indus., U.S., Inc. v. Primary Steel,

Inc., 497 U.S. 116, 131 (1990) (allowing collection of filed rate

even after parties had negotiated a lower rate).

IDACORP’s complaint that CAISO’s compliance filing

failed to indicate the basis for non-section 11.2.9 charges lends

no support to its retroactive ratemaking claim. Concerns about

non-section 11.2.9 charges relate only to the accuracy of the

amounts billed, which have remained unchanged since the time

of the original invoice. Thus, any non-section 11.2.9 inaccuracy

would lead to a garden variety billing dispute, not a claim of

retroactive ratemaking.

In short, when CAISO moved OOM charges out of the

billing category subject to the cap, it did not engage in

retroactive ratemaking, but instead simply brought the invoices

in line with the tariff. We will therefore deny this portion of the

petition for review.

III.

This brings us to IDACORP’s contention that FERC acted

arbitrarily and capriciously in failing to require hourly

application of the section 11.2.9.1 cap. Applying the cap hourly

would forbid CAISO from charging in excess of 9.5 cents per
8

megawatt-hour in any individual hour even if it charged less

than 9.5 cents per megawatt-hour in other hours. By

comparison, applying the cap monthly would permit charges in

excess of 9.5 cents per megawatt-hour in some hours so long as

the average charge per megawatt-hour over the entire month did

not exceed 9.5 cents.

FERC ordered CAISO to apply the cap hourly, reasoning

that “[t]he provision . . . does not include language indicating

that the limit—which, we note, is stated using a ‘per megawatthour’ unit—is not intended for application on an hourly basis.”

March 2001 Order, 94 F.E.R.C. at 61,934. As the proceedings

progressed, FERC adhered to this decision, despite CAISO’s

repeated insistence that the cap should instead be applied

annually. May 2001 Order, 95 F.E.R.C. at 61,687; March 2003

Order, 102 F.E.R.C. at 61,849-50. In the compliance filing

FERC ultimately accepted, CAISO purported to apply the cap

hourly. It computed the “hourly” charge assessed to each

Scheduling Coordinator under section 11.2.9 by computing the

total charge for each month and dividing by the number of hours

in the month. Compliance Filing at 5. In its compliance filing,

CAISO also explained that its “Settlements process requires that

the amounts . . . be calculated as of the end of each month, rather

than day by day or hour by hour,” but provided no further

explanation. Id. at 2.

FERC initially credited CAISO’s explanations: “[CAISO]

explains that its calculations were limited by the data available,

but demonstrates that they in fact reflect hourly costs.” October

2003 Order, 105 F.E.R.C. at 61,179. But backing away from

this explanation in its order on rehearing, FERC stated that

“IDACORP is correct that the amounts were not calculated on

an hour-by-hour basis.” March 2004 Order, 106 F.E.R.C. at

61,699. Instead, FERC accepted the compliance filing for

different reasons:
9

[T]he report demonstrates that the amounts at issue are

de minimis, and IDACORP has not shown that it has

been harmed by [CAISO’s] calculating the charges on

a monthly, rather than an hour-by-hour, basis. Indeed,

IDACORP presents no evidence of any amount for

which it is due a refund. Given that the data provided

by [CAISO] shows that the amounts at issue were very

small (and were actually negative in all months), we

find that the administrative burden involved in

performing further calculations to comply precisely

with our earlier directive in every hour of the seven

months at issue, for every Scheduling Coordinator,

would be extremely costly while potentially causing

substantial delay in both this proceeding and [another

pending proceeding involving CAISO] by depleting

[CAISO’s] limited resources. Therefore, we conclude

that any further recalculations of the neutrality

adjustment charges are unwarranted.

Id. (footnote omitted). In support of its conclusion that the

amounts at issue are de minimis, FERC explained: “For

example, [CAISO] notes that the amount of costs credited or

debited as of the end of June 2000 with regard to the entire

market was [negative] $798.11. The amount per Scheduling

Coordinator would be a fraction thereof. All other months

reflected similarly minimal, negative amounts.” Id. n.9 (citation

omitted).

As IDACORP points out, however, FERC’s explanation

doesn’t follow given that small monthly totals can mask

volatility when debits and credits are permitted to offset each

other. A simple example illustrates this point: Suppose CAISO

on one occasion charged IDACORP $1,000,000, and then on

another gave IDACORP a refund of $1,000,798.11. These

amounts are hardly de minimis, but the aggregated
10

total—resulting from subtracting the refund from the

charge—would be negative $798.11, just as CAISO found.

Were this indeed the case, it would affect IDACORP’s bill quite

dramatically: The $1,000,000 charge would be lowered to the

maximum allowable under the cap while the cap would have no

effect on the refund. Perhaps FERC would respond that this

case does not involve million-dollar variances reaching far

above and falling far below the cap. Its order, however,

nowhere makes this point, nor does anything in the record reveal

the extent of hourly fluctuations.

At oral argument, CAISO’s counsel insisted that the charges

at issue are by their very nature de minimis. As he explained,

CAISO imposed neutrality adjustment charges only under

section 11.2.9(c), which authorizes it to levy charges for

“amounts required to reach an accounting trial balance of zero

in the course of the Settlement process in the event that the

charges calculated as due from [CAISO’s] Debtors are lower

than payments calculated as due to [CAISO’s] Creditors for the

same Trading Day,” but requires CAISO to make payments “[i]n

the event that the charges due from [CAISO’s] Debtors are

higher than the payments due to [CAISO’s] Creditors.”

According to CAISO’s counsel, this subsection functions as a

mere “accounting fudge factor.” Oral Arg. Tr. 42. If true, this

explanation might well support FERC’s conclusion that the

amounts at issue are de minimis, as it would demonstrate that

the low aggregated totals are not masking volatility in individual

charges. But because FERC didn’t rely on this explanation, we

may not consider it. See SEC v. Chenery Corp., 318 U.S. 80, 87

(1943) (“The grounds upon which an administrative order must

be judged are those upon which the record discloses that its

action was based.”). Accordingly, we will grant this portion of

IDACORP’s petition and remand to FERC for further

proceedings consistent with this opinion.
11

We hasten to note that nothing in this opinion requires

FERC to mandate hourly application of the cap. Instead, we are

simply remanding for FERC to reconsider its order. In doing so,

FERC should consider whether hourly application may be

impractical given that the charges at issue appear to arise at most

once each day, coming about only when “the charges calculated

as due from [CAISO’s] Debtors are lower than payments

calculated as due to [CAISO’s] Creditors for the same Trading

Day.” Tariff § 11.2.9(c) (emphasis added). Of course, the fact

that section 11.2.9.1 limits the dollar amount charged “per

megawatt-hour”—FERC apparently relied on this in requiring

hourly application of the cap, see March 2001 Order, 94

F.E.R.C. at 61,934—in no way suggests that the cap must be

applied on an hourly basis. The mere presence of the word

“hour” in “megawatt-hour” does not mean that a megawatt-hour

must be consumed in a single hour. A megawatt-hour is not a

unit of time, but a unit of energy. Indeed, as the Federal Energy

Regulatory Commission conceded at oral argument, a megawatthour can be consumed over any period of time—in ten seconds,

ten minutes, a day, or a week.

IV.

The additional issues the parties raise need not detain us

long. IDACORP challenges FERC’s denial of its first motion to

intervene, but that denial caused it no prejudice given that FERC

eventually permitted IDACORP to participate in the

proceedings. Accordingly, we will dismiss this portion of

IDACORP’s petition for lack of jurisdiction. See 16 U.S.C.

§ 825l(b) (granting judicial review only to “[a]ny party . . .

aggrieved” by FERC’s order). 

We also lack jurisdiction over CAISO’s cross-petition, in

which it challenges FERC’s interpretation of the section 11.2.9.1

cap and the Commission’s rejection of CAISO’s attempt to

increase the cap from 9.5 cents to 35 cents per megawatt-hour.
12

Acknowledging that it was not “aggrieved” by FERC’s order,

CAISO nonetheless argues that it “will be aggrieved if

IDACORP is successful in its challenge to the FERC-ordered

separation of the OOM costs and other costs from the neutrality

charges.” CAISO’s Opening Br. 15. But because we have

rejected IDACORP’s challenge, CAISO remains

unaggrieved—a fact unaffected by our grant of another part of

IDACORP’s petition. CAISO continues to insist that it will owe

no refund, claiming that section 11.2.9 charges are small enough

to avoid triggering the 9.5 cents per megawatt-hour cap. See

Oral Arg. Tr. 42 (“This is a tiny item.”). Any injury to CAISO

is therefore not only conjectural, but believed by CAISO itself

to be unlikely to occur. We will therefore dismiss CAISO’s

cross-petition for lack of jurisdiction. See Interstate Natural

Gas Ass’n of Am. v. FERC, 285 F.3d 18, 45 (D.C. Cir. 2002)

(requiring injury that is “not conjectural or hypothetical” for

petitioner to be “aggrieved” (internal quotation marks omitted)).

Of course, should CAISO become aggrieved due to some action

FERC takes on remand, it may then seek judicial review of the

issues raised in its cross-petition.

V.

Finding no retroactive ratemaking, we deny the portion of

IDACORP’s petition relating to OOM charges. But because we

conclude that FERC’s acceptance of CAISO’s compliance filing

was arbitrary and capricious, we grant IDACORP’s petition in

part. We dismiss the remainder of IDACORP’s petition and the

entirety of CAISO’s cross-petition, both for lack of jurisdiction.

So ordered.