United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

–————

No. 01–1314 September Term, 2002

Filed On: March 5, 2003

IDAHO POWER COMPANY,

PETITIONER

v.

FEDERAL ENERGY REGULATORY COMMISSION,

RESPONDENT

ARIZONA PUBLIC SERVICE COMPANY,

INTERVENOR

–————

BEFORE: Edwards, Randolph, and Tatel, Circuit Judges

O R D E R

Upon consideration of intervenor’s petition for rehearing

filed January 27, 2003, and respondent’s response thereto;

petitioner’s motion for leave to exceed the page limits, and

the lodged opposition, it is

ORDERED that the motion for leave to exceed the page

limits be granted. The Clerk is directed to file the lodged

document. It is

FURTHER ORDERED that the petition be granted. It is

FURTHER ORDERED that the opinion in Idaho Power

Co. v. FERC, 312 F.3d 454 (D.C. Cir. 2002), be amended as

follows:

Delete the last sentence of the opinion and insert in lieu

thereof:
2

The case is remanded to FERC for consideration of the

appropriate remedy in light of this opinion.

Per Curiam

FOR THE COURT:

Mark J. Langer, Clerk

 BY:

 Michael C. McGrail

 Deputy Clerk
Notice: This opinion is subject to formal revision before publication in the

Federal Reporter or U.S.App.D.C. Reports. Users are requested to notify

the Clerk of any formal errors in order that corrections may be made

before the bound volumes go to press.

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued October 15, 2002 Decided December 13, 2002

No. 01-1314

IDAHO POWER COMPANY,

PETITIONER

v.

FEDERAL ENERGY REGULATORY COMMISSION,

RESPONDENT

ARIZONA PUBLIC SERVICE COMPANY,

INTERVENOR

On Petition for Review of Orders of the

Federal Energy Regulatory Commission

Charles G. Cole argued the cause for petitioner. With him

on the briefs were Gary A. Morgans and Alice E. Loughran.

Larry D. Gasteiger, Attorney, Federal Energy Regulatory

Commission, argued the cause for respondent. With him on

 Bills of costs must be filed within 14 days after entry of judgment.

The court looks with disfavor upon motions to file bills of costs out

of time.
2

the brief were Cynthia A. Marlette, General Counsel, and

Dennis Lane, Solicitor.

John D. McGrane was on the brief for intervenor.

Before: EDWARDS, RANDOLPH and TATEL, Circuit Judges.

Opinion for the Court filed by Circuit Judge EDWARDS.

EDWARDS, Circuit Judge: Petitioner, Idaho Power Company, challenges two FERC orders barring Idaho Power from

entering into a 10-year contract to provide electricity to the

IP Merchant Group (‘‘IP Merchant’’) from December 2000

through December 2010. See Idaho Power Co., Order Denying Petition for Declaratory Order, 94 F.E.R.C. ¶ 61,311

(2001) (‘‘Order Denying Petition’’); Idaho Power Co., Order

Denying Rehearing and Clarifying Prior Order, 95 F.E.R.C.

¶ 61,224 (2001) (‘‘Order Denying Rehearing’’). Before receiving the ill-fated bid from IP Merchant, Idaho Power had been

furnishing electric transmission service to the Arizona Public

Service Company (‘‘APS’’). APS had a ‘‘right of first refusal’’

to match the IP Merchant bid for service from Idaho Power.

In order to exercise its right of first refusal, APS had to

‘‘agree to accept a contract term at least equal to [the]

competing request’’ offered by IP Merchant in its bid for

transmission service from Idaho Power. Idaho Power Company Open Access Transmission Tariff § 2.2 (‘‘Idaho Power

OATT’’), Joint Appendix (‘‘J.A.’’) 230. However, because it

could only seek service from Idaho Power in 18-month increments, APS was unable to match IP Merchant’s 10-year

contract bid. FERC nonetheless ruled that Idaho Power was

obliged to continue providing service to APS, because the

‘‘transmission service requests were not substantially the

same in all respects [due to] the dissimilarity in available

terms of service.’’ Order Denying Rehearing, 95 F.E.R.C. at

61,759. In other words, FERC reasoned that the offers by

APS and IP Merchant were not ‘‘substantially the same in all

respects,’’ and thus not competing bids, because IP Merchant

offered a 10-year term while APS offered only an 18-month

term. Order Denying Petition, 94 F.E.R.C. at 62,145; Order

Denying Rehearing, 95 F.E.R.C. at 61,759.
3

FERC’s interpretation of the right of first refusal provision

defies reason. Idaho Power’s Open Access Transmission

Tariff (‘‘OATT’’) and FERC’s orders creating the applicable

pro forma tariff provide that, in order to exercise a right of

first refusal, ‘‘the existing firm service customer must agree

to accept a contract term at least equal to a competing

request by any new Eligible Customer.’’ Idaho Power OATT

§ 2.2, J.A. 230; Promoting Wholesale Competition Through

Open Access Non-Discriminatory Transmission Services by

Public Utilities; Recovery of Standard Costs by Public Utilities and Transmitting Utilities, Order No. 888-A, F.E.R.C.

Stats. & Regs. ¶ 31,048 (1997) (‘‘Order No. 888-A’’). FERC

has turned the Tariff and orders on their heads by suggesting

that the competitor must put forward an offer identical to the

incumbent’s in order for the competing bids to be ‘‘substantially the same in all respects.’’ Under this reasoning, the

competitor is not allowed to make a better offer, which of

course ensures that the incumbent never loses. This is a

nonsensical construction of the ‘‘right of first refusal,’’ which

we reject as arbitrary and capricious. Accordingly, we grant

Idaho Power’s petition for review.

I. BACKGROUND

A. The Pro Forma Tariff

In 1996, FERC promulgated a set of rules designed to

create a more competitive environment in the electric utility

industry. Promoting Wholesale Competition Through Open

Access Non-Discriminatory Transmission Services by Public

Utilities; Recovery of Stranded Costs by Public Utilities and

Transmitting Utilities, Order No. 888, F.E.R.C. Stats. &

Regs. 31,036 (1996) (‘‘Order No. 888’’), order on reh’g, Order

No. 888-A, order on reh’g, Order No. 888-B, 81 F.E.R.C.

61,248 (1997), order on reh’g, Order No. 888-C, 82 F.E.R.C.

61,046 (1998), aff’d in part and remanded in part sub nom.

Transmission Access Policy Study Group v. FERC, 225 F.3d

667 (D.C. Cir. 2000), aff’d jurisdictional ruling sub nom. New

York v. FERC, 535 U.S. 1 (2002). These rules required each

utility to separate its transmission function from its wholesale
4

merchant function (i.e., the selling of electric power at wholesale rates). They also required each utility to file and take

transmission under an OATT designed to assure access to

transmission service on a non-discriminatory basis. FERC’s

rules specified the terms of a pro forma tariff designed to

achieve the competitive goals of Order No. 888. Order No.

888 at 31,926-64. With limited exceptions, each utility’s

OATT must conform to the non-rate terms and conditions

specified in the pro forma tariff. Report of the Committee on

Electric Utility Regulation, 18 ENERGY L.J. 197, 200 (1997)

(‘‘The FERC will allow deviations from the pro-forma’s terms

and conditions to reflect regional practices, but these deviations are limited primarily to scheduling deadlines. With

very limited exceptions, the FERC has rejected all other

deviationsTTTT’’). FERC revised the pro forma tariff in

Order No. 888-A.

The pro forma tariff required each utility to create an Open

Access Same Time Information System (‘‘OASIS’’), an electronic system for accepting transmission requests that would

make them known simultaneously to all potential customers.

While § 13.2 of the pro forma tariff specified that requests

for long-term firm service would generally be accepted in the

order in which they are received, Order No. 888-A at 30,515-

16, it also noted a special provision in § 2.2 for determining

priority where an incumbent customer seeks to renew service.

Id. at 30,516.

Section 2.2 of the tariff provided the incumbent customer

with a right of first refusal to match the duration offered by a

new customer at the full OATT rate. Section 2.2 provides, in

relevant part:

If at the end of the contract term, the Transmission

Provider’s Transmission System cannot accommodate all of the requests for transmission service the

existing firm service customer must agree to accept

a contract term at least equal to a competing request by any new Eligible Customer and to pay the
5

current just and reasonable rate, as approved by the

Commission, for such service.

Id. at 30,511. FERC explained in the Preamble to the pro

forma tariff in Order No. 888-A that, ‘‘[b]ecause the purpose

of the right of first refusal provision is to be a tie-breaker, the

competing requests should be substantially the same in all

respects.’’ Id. at 30,198.

B. The Transmission Service Requests

Idaho Power provides transmission service in accordance

with the rates, terms and conditions of its OATT. Idaho

Power filed its OATT pursuant to FERC Order No. 888, and

FERC accepted it as the filed rate. Atlantic City Elec. Co.,

77 F.E.R.C. ¶ 61,144 (1996) (non-rate terms and conditions);

Allegheny Power Sys., Inc., 80 F.E.R.C. ¶ 61,143 (1997)

(rates). Idaho Power revised its OATT pursuant to Order

No. 888-A, and FERC accepted the revisions. Idaho Power’s

OATT is substantially the same as the pro forma tariff that

FERC issued. Significantly, § 2.2 of Idaho Power’s OATT is

identical to § 2.2 of the pro forma tariff.

APS is Idaho Power’s incumbent customer, receiving service from Borah/Brady Substation in southeastern Idaho,

through Brownlee Substation in western Idaho, to the LaGrande Substation in northeastern Oregon. The history surrounding the dealings between APS and Idaho Power is

somewhat convoluted. In 1998, APS submitted several requests through Idaho Power’s OASIS for long-term, point-topoint transmission service for an eight-year period. The

following year, Idaho Power provided APS with a facility

study that demonstrated that existing long-term obligations

prevented Idaho Power from meeting APS’s service request

for the full eight-year period without constructing facility

upgrades. Idaho Power offered APS 100 MW of transmission service on Borah West that PacifiCorp had contractual

rights to use, but could not due to system limitations. However, Idaho Power cautioned that this service would terminate

when PacifiCorp upgraded the facilities and exercised its preexisting rights to the capacity.

After further negotiations between Idaho Power and APS

failed to yield an executed service agreement, FERC directed
6

Idaho Power to provide APS with partial interim transmission service. Idaho Power Co., Order Rejecting Unexecuted

Service Agreements, and Requiring the Filing of New Service

Agreements and the Provision of Partial Interim Transmission Service, 90 F.E.R.C. ¶ 61,009 (2000). Since Idaho Power’s facility study indicated that it could provide 100 MW of

APS’s requested firm point-to-point service for a term of 18

months rather than the eight years that APS requested,

FERC required Idaho Power to file new service agreements

providing APS with firm transmission service for an 18-month

term. Id. at 61,019. FERC also stated that APS would be

entitled to roll over its service at the end of the 18-month

term, if it chose not to construct additional facilities and the

capacity committed to PacifiCorp remained available. Id.

This FERC order effectively restricted APS’s ability to bid to

18-month increments.

Subsequently, on November 8, 2000, IP Merchant submitted a request on Idaho Power’s OASIS for 200 MW of longterm firm point-to-point transmission service for the period

December 1, 2000 through December 31, 2010. The following

day, APS sent a letter to Idaho Power stating that it was

exercising its rollover rights for an additional 18-month period from April 1, 2001 through September 30, 2002. Then on

November 15, 2000, IP Merchant submitted a second request

on Idaho Power’s OASIS for an additional 200 MW of longterm firm point-to-point transmission service. This service

was also from the Idaho Power system to LaGrande, for a 10-

year period from January 1, 2001 to December 31, 2010.

On December 20, 2000, Idaho Power advised APS of its

right of first refusal. Idaho Power simultaneously informed

APS that it was filing a Petition for Declaratory Order. The

Petition requested guidance as to whether, if APS submitted

a 10-year or longer request for which the continuation of

service beyond 18 months would be contingent on the continuing availability of capacity over Borah West, this contingent

request would be sufficient to match the 10-year, noncontingent IP Merchant request. In response to the Petition,

APS questioned the validity of the IP Merchant transmission

requests in light of the fact that they were not ‘‘precon-
7

firmed’’ requests, no service agreements had been executed,

and no facilities study agreements or financial commitments

had been proffered. Arizona Public Service Company’s Motion to Intervene, Protest and Request for Expedited Consideration at 14-16, 19 n.39, Idaho Power Co., 94 F.E.R.C.

¶ 61,311 (2001), J.A. 78-80, 83 n.39. APS also argued that,

since it is ‘‘willing to match the Idaho Merchant Group’s term

of 10 years, and to extend it for an additional 5 years, for a

term from April 1, 2001 through March 31, 2016, to the extent

necessary for APS to retain service,’’ it should prevail over IP

Merchant under OATT’s tie-breaking mechanism. Id. at 19,

J.A. 83. However, APS did not seek a waiver from FERC’s

order limiting it to 18-month terms so that it could compete

fully against IP Merchant in exercising its right of first

refusal.

C. FERC’s Orders

Despite the shorter term offered by APS, FERC ruled in

its initial order that APS could roll over its contract. FERC

acknowledged that the priority rule was designed to ‘‘provide[ ] a mechanism for allocating transmission capacity when

there is insufficient capacity to accommodate all requesters.’’

Order Denying Petition, 94 F.E.R.C. at 62,144. However,

FERC stated that, under Order No. 888-A, the two customers’ requests had to be ‘‘ ‘substantially the same in all

respects’ ’’ in order to be competing. Id. at 62,145 (quoting

Order No. 888-A at 30,197) (emphasis in original). FERC

found that the two requests were not, in fact, substantially

the same: Instead, it found them to be ‘‘vastly different,’’

primarily because they flowed in different directions and used

different portions of the Idaho Power system. Id. FERC

also noted that ‘‘the dissimilarity in available terms of service

also supports the variant nature of the two customers’ transmission service requests.’’ Id. FERC further noted that

APS expressed an intention to match the IP Merchant

Group’s 10-year offer, but was restricted from doing so by a

prior FERC order. Id. Since FERC found that the requests were not substantially the same in all respects, the

agency ruled that they were not competing. It thus ordered

Idaho Power to give the available 75 MW to APS. Id.
8

Idaho Power petitioned for rehearing. It first noted that a

central factual premise for FERC’s order – that the two

requests flowed in different directions and used different

portions of the Idaho Power system – was incorrect. Rather,

the requests flowed in the same direction over the 80-mile

line in dispute. Further, Idaho Power argued that, because

APS had not matched the IP Merchant Group’s offer, the IP

Merchant Group should be the priority applicant.

FERC denied Idaho Power’s request for rehearing. It

retreated from its reliance on the alleged physical differences

between the services, stating that, while it had ‘‘discussed the

physical differences between the transmission service requests, our primary rationale for determining that the transmission service requests were not substantially the same in

all respects was the dissimilarity in available terms of service.’’ Order Denying Rehearing, 95 F.E.R.C. at 61,759.

Since APS was limited to 18-month increments, FERC reasoned that ‘‘to permit IP Merchant’s longer term service

request to obtain transmission capacity at the expense of

Arizona Public Service would inappropriately disadvantage an

existing transmission customer.’’ Id. Thus, FERC awarded

the 75 MW of service to APS, for the 18-month period ending

September 30, 2002. Idaho Power now petitions this court

for review.

II. ANALYSIS

A. Standing

The first issue we must address is whether Idaho Power

possesses constitutional standing to challenge FERC’s orders.

FERC argues that Idaho Power suffered no ‘‘injury in fact’’

because the utility cannot prove that FERC’s orders will

cause any monetary loss. We reject this argument.

The two principal forms of standing are ‘‘Article III (case

or controversy)’’ and ‘‘prudential.’’ Article III standing entails three requirements:

First, the plaintiff must have suffered an ‘‘injury in

fact’’—an invasion of a legally protected interest
9

which is (a) concrete and particularized, and (b)

‘‘actual or imminent, not ‘conjectural’ or ‘hypothetical.’ ’’ Second, there must be a causal connection

between the injury and the conduct complained of—

the injury has to be ‘‘fairly TTT trace[able] to the

challenged action of the defendant, and not TTT th[e]

result [of] the independent action of some third

party not before the court.’’ Third, it must be

‘‘likely,’’ as opposed to merely ‘‘speculative,’’ that the

injury will be ‘‘redressed by a favorable decision.’’

Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61 (1992)

(citations omitted); see also El Paso Natural Gas Co. v.

FERC, 50 F.3d 23, 26 (D.C. Cir. 1995) (describing the requirements for demonstrating an injury in fact).

FERC’s only standing argument is that Idaho Power suffered no injury in fact because the utility cannot prove that

FERC’s orders will cause it to lose any profits. FERC

points out Idaho Power’s statement that FERC’s orders

required it ‘‘to enter into a contract that, for an eighteenmonth period, would generate $1,312,875, and forgo entering

into a ten-year contract that would yield $8,752,500,’’ Br. of

Petitioner at 28, and states that the two amounts, adjusted

for time differential, are equivalent. Thus, at least for the

next 18 months, FERC argues that ‘‘petitioner is in exactly

the same position revenue-wise, regardless of which contract

it is required to accept.’’ Br. of Respondent at 23.

This argument is meritless. Idaho Power has suffered an

injury in fact because FERC’s orders bind it to an 18-month

contract with APS and preclude it from entering a long-term

10-year contract with IP Merchant.

As a general matter, in a perfectly competitive market, a long-term contract incorporates a premium for

stability, and a pipeline naturally values a longerterm transportation contract more highly, ceteris

paribusTTTT If the maximum approved rate artificially limits a rival shipper’s ability to outbid the

existing shipper, the rival shipper may offer a
10

higher-value contract by bidding up the contract

duration instead.

United Distrib. Cos. v. FERC, 88 F.3d 1105, 1140 (D.C. Cir.

1996). ‘‘[T]he reality [is] that contract duration is a measure

of value.’’ Id. Because Idaho Power possesses a legallyprotected interest in entering a longer-term contract, it suffered a cognizable injury when it was compelled to forgo a 10-

year contract with IP Merchant and instead enter a shorterterm contract with its associated market risks. That injury

was immediate, concrete, and particularized.

We have previously recognized that an agency ruling that

replaces a certain outcome with one that contains uncertainty

causes an injury that is felt immediately and confers standing.

In Rio Grande Pipeline Co. v. FERC, 178 F.3d 533 (D.C. Cir.

1999), petitioner Rio Grande Pipeline Company could either

justify the rates for its service through 18 C.F.R. § 342.2(a),

in which it was required to ‘‘file cost, revenue and throughput

data supporting the proposed rate,’’ or through § 342.2(b),

which required only ‘‘a sworn statement that the proposed

rate is agreed to by at least one non-affiliated person who

intends to use the service.’’ Rio Grande Pipeline Co., 178

F.3d at 536. The major advantage to the former provision

was that rates justified under § 342.2(b) were ineffective if a

protest to the initial rate was filed; after the protest, the

carrier would be required to seek a § 342.2(a) justification.

Id. Rio Grande requested FERC approval pursuant to

§ 342.2(a). FERC denied this request. However, the agency ‘‘noted TTT that since Rio Grande had supplied the affidavit

required by § 342.2(b), and no entity had protested the

charged rate, Rio Grande was free to charge the proposed

rate in its transactions.’’ Id. at 537. When Rio Grande

petitioned this court for review, FERC argued that the

petitioner had suffered no injury in fact, because it remained

free to establish the same rates under § 342.2(b). Id. at 539-

40. However, we found that FERC’s orders caused the

petitioner a ‘‘present economic injury’’ because approval under that section left the rates open to challenge at any time

by third parties, while approval under § 342.2(a) would have

afforded greater certainty. Id. at 540.

FERC argues that Idaho Power is unlikely to suffer any

economic loss in the future because at least three parties –
11

APS, the IP Merchant Group, and PacifiCorp – have expressed an interest in using that capacity for the extended 10-

year period. However, the energy markets are notoriously

volatile. See Andrew S. Katz, Using the EEI-NEM Master

Contract to Manage Power Marketing Risks, 21 ENERGY L.J.

269, 271 (2000); With Tariff Modifications, Pipelines Move to

Reduce Credit Risk, INSIDE F.E.R.C., Aug. 26, 2002, LEXIS,

News Library, News Group File (explaining that three gas

pipelines’ move to amend their tariffs to include greater

protection from ‘‘noncreditworthy’’ customers ‘‘[h]ighlight[s]

the increasingly volatile nature of energy markets and companies’’). Even if market volatility did not diminish these

parties’ interest in Idaho Power’s capacity, it could doubtlessly diminish the profits that Idaho Power could obtain in the

future. FERC’s arguments to the contrary do not correspond with the reality of the energy markets.

The bottom line is that it is inconceivable that Idaho Power

could be subjected to a FERC order requiring it to enter into

a specific contract concerning the use of its property but lack

standing to challenge that order. See Green v. McElroy, 360

U.S. 474, 493 n.22 (1959) (noting that there is generally

standing to enforce ‘‘a legally protected right to be free from

arbitrary interference with private contractual relationships’’); see also Lujan, 504 U.S. at 561-62 (noting that ‘‘there

is ordinarily little question that the action or inaction has

caused [the plaintiff] injury’’ when ‘‘the plaintiff is himself an

object of the action (or forgone action) at issue’’).

B. FERC’s Orders

In general, this court ‘‘gives substantial deference to

[FERC’s] interpretation of filed tariffs, ‘even where the issue

simply involves the proper construction of language.’ ’’ Koch

Gateway Pipeline Co. v. FERC, 136 F.3d 810, 814 (D.C. Cir.

1998) (quoting Nat’l Fuel Gas Supply Corp. v. FERC, 811

F.2d 1563, 1569 (D.C. Cir. 1987)).

We first look to see if the language of the tariff is

unambiguous—that is, if it reflects the clear intent

of the parties to the agreement. If the tariff language is ambiguous, we defer to the Commission’s
12

construction of the provision at issue so long as that

construction is reasonable.

Koch Gateway Pipeline Co., 136 F.3d at 814. If the tariff’s

language is unambiguous, this court need not defer to

FERC’s interpretation. After all, ‘‘a court need not accept

‘an agency interpretation that black means white. However,

if the choice lies between dark grey and light grey, the

conclusion of the agency TTT will have great weight.’ ’’ Nat’l

Fuel Gas Supply Corp., 811 F.2d at 1572 (quoting Consol.

Gas Supply Corp. v. FERC, 745 F.2d 281, 291 (4th Cir. 1984))

(ellipses added). It is also well understood that no deference

is due if FERC’s interpretation is inconsistent with prior

agency interpretations. Id. at 1571 (‘‘If the agency’s interpretation of a contract has vacillated, deference might give

the agency license to act arbitrarily by making inconsistent

decisions without justification.’’).

In this case, we reject FERC’s interpretation of the ‘‘right

of first refusal,’’ because it is inconsistent with prior agency

interpretations and, also, because it is nonsensical. It would

be a great challenge indeed to devise a more backward

interpretation of the tariff than that which FERC urges on

the court. FERC essentially contends that § 2.2 of the pro

forma tariff and Idaho Power’s OATT precludes a competitor

from coming forward with a better offer than the incumbent’s

present deal. This interpretation runs contrary to the text of

Idaho Power’s OATT, FERC Orders No. 888 and 888-A, and

the agency’s own prior interpretations.

1. Idaho Power’s OATT

FERC’s interpretation is directly at odds with the language

and logic of § 2.2 of Idaho Power’s OATT. The OATT

provides that if ‘‘the Transmission Provider’s Transmission

System cannot accommodate all of the requests for transmission service the existing firm service customer must agree to

accept a contract term at least equal to a competing request

by any new Eligible Customer.’’ Idaho Power OATT § 2.2,

J.A. 230. The OATT does not provide that the competing

request must be ‘‘substantially the same in all respects’’ as

the incumbent’s proposed rollover. In fact, the definition
13

contained in the tariff is consistent with the ordinary meaning

of ‘‘competing.’’ The generally accepted definition of ‘‘compete’’ is ‘‘to seek to strive for something (as a position,

possession, reward) for which others are also contending.’’

WEBSTER’S THIRD NEW INTERNATIONAL DICTIONARY 463 (1993).

Likewise, the language of the tariff suggests that two offers

are competing if there is an inability to accommodate both.

FERC’s interpretation of the tariff would nullify the language in § 2.2 which provides that, when two requests are

competing, the incumbent customer must change the term of

its request to at least equal the new eligible customer’s

request. The agency’s interpretation holds that ‘‘the dissimiliarity in available terms of service’’ means that the incumbent

has no obligation to match the longer-term competitive bid.

Order Denying Rehearing, 95 F.E.R.C. at 61,759. Under

this interpretation, the incumbent would never have to change

its term of service to match the competitor’s superior offer;

rather, the utility could not consider the competitor’s offer

precisely because it is better. This interpretation is not only

nonsensical; it also relieves the incumbent of any obligation

to ‘‘agree to accept a contract term at least equal to a

competing request.’’ A tariff should not be interpreted in a

manner that renders one of its terms meaningless. Great

Lakes Gas Transmission Ltd. P’ship, 93 F.E.R.C. ¶ 61,008 at

61,019 & n.8 (2000). The fact that FERC’s orders directly

conflict with the plain meaning of the tariff alone merits a

reversal.

2. FERC Orders No. 888 and 888-A

FERC’s orders also conflict with and misinterpret Orders

No. 888 and 888-A. The Preamble to Order No. 888 provides

that the incumbent must match the challenger’s longer proposed term – not that the challenger must come forward with

an offer identical to the incumbent’s. It states that for an

existing customer to renew its service, ‘‘the existing customer

must agree to match the rate offered by another potential

customer TTT and to accept a contract term at least as long as

that offered by the potential customer.’’ Order No. 888 at

31,665. Moreover, the Preamble does not suggest that two
14

offers are competing when they are identical. Instead, it

supports the classical definition of competition by stating that

the incumbent’s obligation to match the term and price of the

new customer’s service request arises when ‘‘not enough

capacity is available to meet all requests for service.’’ Id.

There is no suggestion that the two requests must be substantially the same in all respects for this obligation to apply.

Order No. 888-A also contradicts FERC’s interpretation.

A number of transmission customers had sought changes to

the tariff, because, they claimed, ‘‘the Commission’s right of

first refusal provision fails to adequately protect existing

transmission customers’ rights to continued service.’’ Order

No. 888-A at 30,195. FERC rejected these complaints and

retained the matching requirements of § 2.2:

We reject arguments to modify the requirement in

section 2.2 that existing long-term firm transmission

customers seeking to exercise their right of first

refusal must agree to a contract term at least as

long as that sought by a potential customer. The

objective of a right of first refusal is to allow an

existing firm transmission customer to continue to

receive transmission service under terms that are

just, reasonable, not unduly discriminatory, or preferential. Absent the requirement that the customer

match the contract term of a competing request,

utilities could be forced to enter into

shorter-term arrangements that could be detrimental from both an operational standpoint (system

planning) and a financial standpoint.

Id. at 30,197-98. Order No. 888-A thus states clearly and

unambiguously that the incumbent must match the new potential customer’s superior offer.

FERC’s notion that the challenger’s offer must be substantially the same in all respects to the incumbent’s rollover

provision is, in fact, based on a gross misinterpretation of one

sentence in Order No. 888-A. Examining the full context of

Order No. 888-A’s statement that the two offers must be

‘‘substantially the same in all respects’’ makes FERC’s error

apparent. The quoted language appears in a paragraph in
15

which FERC rejected the arguments of incumbent customers

that it could be difficult for them to match the challenger’s

superior offer. The National Rural Electric Cooperative

Association had argued that the incumbent’s obligation to

match the price offered by another customer should be

capped at the maximum transmission rate that the incumbent

customer is obligated to pay prior to the end of its contract

term. Id. at 30,196. FERC responded:

The fact that existing customers historically have

been served under a particular rate design does not

serve to ‘‘grandfather’’ that rate methodology in

perpetuity. Because the purpose of the right of first

refusal provision is to be a tie-breaker, the competing requests should be substantially the same in all

respects.

Id. at 30,198. It is clear from this passage that FERC was

imposing a requirement for the existing customer to come

forward with an offer substantially the same in all respects to

the challenger’s, rather than requiring that the challenger

come forward with an offer substantially the same in all

respects to the incumbent’s contract terms. The challenged

orders thus directly conflict with Orders No. 888 and 888-A,

and grossly misinterpret the language in Order No. 888-A.

3. Prior FERC Interpretations

The petitioner also points out that FERC’s reasoning in

this case is flatly inconsistent with the agency’s decisions

interpreting § 2.2 of the pro forma tariff. FERC has ruled

repeatedly that § 2.2 requires the incumbent to match the

term of service offered by the new customer.

For example, in Dynegy Power Marketing, Inc. v. Ameren

Services Co., 93 F.E.R.C. ¶ 61,201 (2000), the agency directed

the transmission provider to grant the incumbent’s request to

roll over its service, provided that there were no competing

requests for the service. In discussing potential offers from

challengers, FERC stated that ‘‘[i]f there is a competing

request with a term exceeding [the incumbent’s] request, [the

incumbent] has the right of first refusal to match the competing request or to forfeit its own request.’’ Id. at 61,665 n.12.
16

FERC has consistently adopted this interpretation of § 2.2

of the pro forma tariff. See, e.g., Promoting Wholesale

Competition Through Open Access Non-Discriminatory

Transmission Services by Public Utilities, 101 F.E.R.C.

¶ 61,104, 2002 F.E.R.C. LEXIS 2234, at *15 (‘‘The Commission requires existing customers to match the term of competing requests for service so that utilities will not be forced to

enter into shorter-term agreements.’’); Wisconsin Pub. Power Inc. SYS. v. Wisconsin Pub. Serv. Corp., 84 F.E.R.C.

¶ 61,120, at 61,656 (1998) (holding that the incumbent must

match the challenger’s competing term). FERC does not cite

a single case to the contrary. Thus, we must conclude that in

addition to doing violence to the language of the tariff and the

agency’s prior orders, the challenged orders are inconsistent

with prior and subsequent agency interpretations of § 2.2 of

the pro forma tariff.

4. APS’s System Constraints

Finally, FERC suggests that APS should not be required

to match IP Merchant’s longer term offer, because APS was

limited to 18-month terms caused by system constraints. See

Order Denying Petition, 94 F.E.R.C. at 62,145 (‘‘To say that

OATT Section 2.2 controls would create a situation where an

offer to match a longer service term is unattainable.’’). However, neither Idaho Power’s OATT nor the FERC orders

creating the pro forma tariff excuse the incumbent from

matching a competitor’s offer on these grounds. Nowhere

does the tariff state that an incumbent who cannot match a

competing bid due to system constraints or contractual restraints nevertheless has the right to roll over its contract for

a shorter term than the challenger offers. FERC has not

pointed to any phrase in the language of the tariff that would

authorize such an exception.

Furthermore, the history of the pro forma tariff makes it

clear that FERC intended no such exceptions. When some

parties sought rehearing of Order No. 888 on the grounds

that its rule for incumbents was too strict, FERC rejected

their efforts to secure exceptions. Order No. 888-A at 30,196-

97. The agency stated, ‘‘We reject arguments to modify the
17

requirement in section 2.2 that existing long-term firm transmission customers seeking to exercise their right of first

refusal must agree to a contract term at least as long as that

sought by a potential customer.’’ Id. at 30,197. Moreover,

the agency ‘‘reject[ed] the proposition that either existing

wholesale customers or transmission providers providing service to retail native load customers should be insulated from

the possibility of having to pay an increased rate for transmission in the future.’’ Id. at 30,198. FERC insisted on this

rule even when some utilities claimed that adherence to it

would place them at a competitive disadvantage. Id. at

30,196.

Thus, it does not matter that APS was limited to 18-month

increments due to system constraints at Borah West and

preexisting rights possessed by PacifiCorp. These are economic factors that may always affect an incumbent’s ability to

exercise a right of first refusal. However, these contingencies of the marketplace do not alter the substantive parameters of the right of first refusal.

III. CONCLUSION

Accordingly, for the reasons enumerated above, Idaho Power’s petition for review is hereby granted. FERC’s orders

are reversed and vacated. The case is remanded to FERC for

consideration of the appropriate remedy in light of this opinion.