### F OR P UBLICATION



## UNIT E D ST AT E S CO URT O F APPE AL S FO R T H E NINT H CIRCUIT

C A L I F O R

N I A 

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M I R A N T 

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I C A S 

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G Y 

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### , L P; N E V

A D A 

### P O W

E R 

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and

C I T Y O F 

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N D A L E 

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F E D E R A L 

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G Y 

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### , Respondent. N o. 01-71934

F ERC No. EL 00-000, et al.

OPI NI ON

T H E 

### P E O P L E O F T H E 

### S T A T E O F 

### C A L I F O R

N I A 

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E L



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### , A ttorney G eneral,

Petitioners
, N o. 01-71944

### C A L I F O R N I A 

### PUC V



### . F ERC 2

N E V A D A 

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N Y 

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v

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F E D E R A L 

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G Y 

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S O U T H E R

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N I A 

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### . F ERC 3

B E A C H 

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N E R A T I O N 

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V I C E 

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N Y 

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P O R T O F 

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N I A 

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N E V A D A 

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### . F ERC 4

C I T Y O F 

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N A 

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M I E C O 

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N C 

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v

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F E D E R A L 

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G Y 

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S O U T H E R

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N I A 

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R A 

### , Attorney General; C I T Y O F 

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### , Petitioners-Intervenors
,

P O R T L A N D 

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I C 

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P O R A T I O N 

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C H A N T 

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G Y 

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T H E R N 

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### . F ERC 5

M E R R I L L 

### L Y N C H 

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V I C E S 

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R I G A T I O N 

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N I A 

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N T A 

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N D 

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### C A L I F O R N I A 

### PUC V



### . F ERC 6

P A C I F I C 

### G A S 

### & E L E C T R I C 

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N Y 

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T H E 

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N I A 

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V I E R 

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General; S O U T H E R

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A V I S T A 

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P O R A T I O N 

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A D A 

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N I A 

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P O R A T I O N 

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I C 

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R I G A T I O N 

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N T A 

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N I A 

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G Y 

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N G E L E S 

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N D 

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I C A S 

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G Y 

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A N T 

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### D E L T A 

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N D 

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### N o. 02-72136

### C A L I F O R N I A 

### PUC V



### . F ERC 7

P O T E R E O 

### , L L C (C O L L E C T I V E L Y 

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G Y 

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T H E R N 

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N I A 

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P 

### ; P A C I F I 

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P 

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O J E C T 

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A L 

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I C T 

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N G 

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N I A 

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N C 

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,

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.

F E D E R A L 

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G Y 

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,

M E T R O P O L I T A

N 

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I C T O F 

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N 

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N I A 

### , Respondent-Intervenor.

S O U T H E R

N 

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N I A 

### E D I S O N 

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P A C I F I C 

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### & E L E C T R I C 

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N Y 

### , Petitioner-Intervenor
,

S A L T 

### R I V E R 

### P R

O J E C T 

### A G R I C U L T U R

A L 

### I M P R O V E M E N T A N D 

### N o. 02-72488

### C A L I F O R N I A 

### PUC V



### . F ERC 8

P O W E R 

### D I S T R

I C T 

### ; P A C I F I 

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P 

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N C 

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F E D E R A L 

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G Y 

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S O U T H E R

N 

### C A L I F O R

N I A 

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M I E C O 

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N C 

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,

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.

F E D E R A L 

### E N E R

G Y 

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### , Respondent. N o. 02-72548

S A N 

### D I E G O 

### G A S 

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### , P etitioner ,

M I E C O 

### , I

N C 

### ., Intervenor
, N o. 02-72585

### C A L I F O R N I A 

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### . F ERC 9

v

.

F E D E R A L 

### E N E R

G Y 

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### , Respondent.

C A L I F O R

N I A 

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P O R T O F 

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N C 

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,

v

.

F E D E R A L 

### E N E R

G Y 

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### , Respondent. N o. 03-74471

P O R T L A N D 

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I C 

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M O D E S T O 

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R I G A T I O N 

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I C T 

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N T A 

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N I A 

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A T O R 

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A N S C A N A D A 

### E N E R G Y 

### ; C A L I F O R

N I A 

### P U B L I C 

### N o. 03-74647

### C A L I F O R N I A 

### PUC V



### . F ERC 10

U T I L I T I E S 

### C O M M I S S I O N 

### ; S O U T H E R N 

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N I A 

### E D I S O N 

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N Y 

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N I A 

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I C I T Y 

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D 

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N Y 

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E L



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R A 

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General; N O R T H E R N 

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N I A 

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E R 

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T O F 

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N Y 

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P 

### ; E L 

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C H A N T 

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A T I O N 

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O U P 

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N C 

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,

v

.

F E D E R A L 

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G Y 

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S O U T H E R

N 

### C A L I F O R

N I A 

### E D I S O N 

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M I E C O 

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N C 

### ., Intervenor
,

v

. N o. 03-74729

### C A L I F O R N I A 

### PUC V



### . F ERC 11

F E D E R A L 

### E N E R

G Y 

### R E G U L A T O R Y 

### C O M M I S S I O N 

### , Respondent.

S O U T H E R

N 

### C A L I F O R

N I A 

### E D I S O N 

### C O M P A N Y 

### , P etitioner ,

M I E C O 

### , I

N C 

### ., Intervenor
,

v

.

F E D E R A L 

### E N E R

G Y 

### R E G U L A T O R Y 

### C O M M I S S I O N 

### , Respondent. N o. 04-70564

S O U T H E R

N 

### C A L I F O R

N I A 

### E D I S O N 

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### , P etitioner ,

C A L I F O R

N I A 

### E L E C T R

I C I T Y 

### O V E R S I G H T 

### B O A R

D 

### ; M I E C O 

### , I

N C 

### ., Intervenors
,

v

. N o. 04-72162

### C A L I F O R N I A 

### PUC V



### . F ERC 12

F E D E R A L 

### E N E R

G Y 

### R E G U L A T O R Y 

### C O M M I S S I O N 

### , Respondent
,

C A L I F O R

N I A 

### I N D E P E N D E N T 

### S Y S T E M 

### O P E R A T O R 

### C O R

P O R A T I O N 

### , Intervenor
,

P O R T O F 

### S E A T T L E 

### W A S H I N G T O N 

### ; A V I S T A 

### E N E R

G Y 

### I N C 

### .; C A L I F O R

N I A 

### E L E C T R I C T Y 

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### B O A R D 

### ; D Y N E G Y 

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### M A R K E T I N G 

### , I N C 

### ., E L 

### S E G U N D O 

### P O W

E R 

### L L C, L O N G 

### B E A C H 

### G E

N E R A T I O N 

### L L C, C A B R I L L O 

### P O W

E R 

### I L L C, A

N D 

### C A B R I L L O 

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E R 

### I I L L C (C O L L E C T I V E L

Y 

### , “D Y N E G Y 

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T H E 

### P E O P L E O F T H E 

### S T A T E O F 

### C A L I F O R

N I A 

### , E X R

E L



### . X A V I E R 

### B E C E R R A 

### , Attorney

General, P etitioner ,

C A L I F O R

N I A 

### E L E C T R

I C I T Y 

### O V E R S I G H T 

### B O A R

D 

### ; P O R T O F 

### S E A T T L E 

### ; M I E C O 

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N C 

### ., Intervenors
,

v

. N o. 04-72169

### C A L I F O R N I A 

### PUC V



### . F ERC 13

F E D E R A L 

### E N E R

G Y 

### R E G U L A T O R Y 

### C O M M I S S I O N 

### , Respondent
,

C A L I F O R

N I A 

### I N D E P E N D E N T 

### S Y S T E M 

### O P E R A T O R 

### C O R

P O R A T I O N 

### , Intervenor
,

P O R T O F 

### S E A T T L E 

### W A S H I N G T O N 

### ; C O R A L 

### P O W E R 

### , L .L .C.; A V I S T A 

### E N E R G Y 

### I N C 

### .; P U G E T 

### S O U

N D 

### E N E R G Y 

### , I N C 

### ; C A L I F O R

N I A 

### E L E C T R I C T Y 

### O V E R S I G H T 

### B O A R D 

### ; D Y N E G Y 

### P O W E R 

### M A R K E T I N G 

### , I N C 

### ., E L 

### S E G U N D O 

### P O W

E R 

### L L C, L O N G 

### B E A C H 

### G E

N E R A T I O N 

### L L C, C A B R I L L O 

### P O W

E R 

### I L L C, A

N D 

### C A B R I L L O 

### P O W

E R 

### I I L L C (C O L L E C T I V E L

Y 

### , “D Y N E G Y 

### ”), Applicants-Intervenors.

P A C I F I C 

### G A S 

### & E L E C T R I C 

### C O M P A

N Y 

### , P etitioner ,

M I E C O 

### , I

N C 

### ., Intervenor
,

v

. N o. 04-72210

### C A L I F O R N I A 

### PUC V



### . F ERC 14

F E D E R A L 

### E N E R

G Y 

### R E G U L A T O R Y 

### C O M M I S S I O N 

### , Respondent
,

C A L I F O R

N I A 

### I N D E P E N D E N T 

### S Y S T E M 

### O P E R A T O R 

### C O R

P O R A T I O N 

### , Intervenor
,

D U K E 

### E N E R G Y 

### N O R T H 

### A M E R

I C A 

### , L L C, D U K

E 

### E N E R G Y 

### T R A D I N G A N D 

### M A R K E T I N G 

### , L L C, (C O L L E C T I V E L Y 

### , “D U K E 

### E N E R G Y 

### ”); S O U T H E R

N 

### C A L I F O R

N I A 

### E D I S O N 

### C O M P A

N Y 

### , (E D I S O N 

### ); P O R T O F 

### S E A T T L E 

### W A S H I N G T O N 

### ; C O R A L 

### P O W E R 

### , L

. L .C.; A V I S T A 

### E N E R G Y 

### , I N C 

### .; C A L I F O R

N I A 

### E L E C T R

I C T Y 

### O V E R S I G H T 

### B O A R

D 

### ; D Y N E G Y 

### P O W E R 

### M A R K E T I N G 

### , I N C



### . , E L 

### S E G

U N D O 

### P O W E R 

### L L C, L O N G 

### B E A C H 

### G E N E R A T I O N 

### L L C, C A B R

I L L O 

### P O W E R 

### I L L C, A

N D 

### C A B R I L L O 

### P O W E R 

### I I L L C (C O L L E C T I V E L Y 

### , “D Y N E G Y 

### ”), Applicants-Intervenors.

### C A L I F O R N I A 

### PUC V



### . F ERC 15

P A C I F I C 

### G A S 

### & E L E C T R I C 

### C O M P A

N Y 

### , Petitioner
,

M I E C O 

### , I

N C 

### ., Intervenor
,

v.

F E D E R A L 

### E N E R

G Y 

### R E G U L A T O R Y 

### C O M M I S S I O N 

### , R espondent

. No. 04-72539

S O U T H E R

N 

### C A L I F O R

N I A 

### E D I S O N 

### C O M P A N Y 

### , Petitioner
,

M I E C O 

### , I

N C 

### ., Intervenor
,

v.

F E D E R A L 

### E N E R

G Y 

### R E G U L A T O R Y 

### C O M M I S S I O N 

### , R espondent

. No. 04-72756

### C A L I F O R N I A 

### PUC V



### . F ERC 16

P A C I F I C 

### G A S 

### & E L E C T R I C 

### C O M P A

N Y 

### , Petitioner
,

M I E C O 

### , I

N C 

### ., Intervenor
,

v.

F E D E R A L 

### E N E R

G Y 

### R E G U L A T O R Y 

### C O M M I S S I O N 

### , R espondent

. No. 04-73242

T H E 

### P E O P L E O F T H E 

### S T A T E O F 

### C A L I F O R

N I A 

### ; X A V I E R 

### B E C E R

R A 

### , Attorney General, Petitioners
,

M I E C O 

### , I

N C 

### ., Intervenor
,

v.

F E D E R A L 

### E N E R

G Y 

### R E G U L A T O R Y 

### C O M M I S S I O N 

### , R espondent

. No. 04-73259

### C A L I F O R N I A 

### PUC V



### . F ERC 17

C A L I F O R

N I A 

### P U B L I C 

### U T I L I T I E S 

### C O M M I S S I O N 

### ; C A L I F O R N I A 

### E L E C T R I C I T Y 

### O V E R S I G H T 

### B O A R D 

### , Petitioners
,

P O R T O F 

### S E A T T L E 

### , W A S H I N G T O N 

### ; M I E C O 

### , I

N C 

### ., Intervenors
,

v.

F E D E R A L 

### E N E R

G Y 

### R E G U L A T O R Y 

### C O M M I S S I O N 

### , R espondent

. No. 04-73405

T H E 

### P E O P L E O F T H E 

### S T A T E O F 

### C A L I F O R

N I A 

### ; X A V I E R 

### B E C E R

R A 

### , Attorney General, Petitioners
,

M I E C O 

### , I

N C 

### ., Intervenor
,

v.

F E D E R A L 

### E N E R

G Y 

### R E G U L A T O R Y 

### C O M M I S S I O N 

### , R espondent

. No. 04-73491

### C A L I F O R N I A 

### PUC V



### . F ERC 18

P A C I F I C 

### G A S 

### & E L E C T R I C 

### C O M P A

N Y 

### , Petitioner
,

C A L I F O R

N I A 

### E L E C T R

I C I T Y 

### O V E R S I G H T 

### B O A R

D 

### ; S O U T H E R

N 

### C A L I F O R

N I A 

### E D I S O N 

### C O M P A

N Y 

### , Petitioners-Intervenors
,

M O D E S T O 

### I R

R I G A T I O N 

### D I S T R

I C T 

### ; T H E 

### P E O P L E O F T H E 

### S T A T E O F 

### C A L I F O R

N I A 

### , E X 

### R E L



### . X A

V I E R 

### B E C E R R A 

### , Attorney

General; A V I S T A 

### E N E R G Y 

### I N C 

### .; C A L I F O R

N I A 

### I N D E P E N D E N T 

### S Y S T E M 

### O P E R

A T O R 

### C O R P O R A T I O N 

### ; E N R

O N 

### P O W E R 

### M A R K E T I N G 

### I N C 

### .; M I E C O 

### , I

N C 

### ., Intervenors
,

v.

F E D E R A L 

### E N E R

G Y 

### R E G U L A T O R Y 

### C O M M I S S I O N 

### , R espondent
,

D Y N E G Y 

### P O W E R 

### M A R K E T I N G 

### , I N C 

### .; M O D E S T O 

### I R

R I G A T I O N 

### D I S T R

I C T 

### ; N O R T H E R N 

### C A L I F O R

N I A 

### P O W

E R 

### A G E N C Y 

### ; C A L I F O R

N I A 

### I N D E P E N D E N T 

### S Y S T E M 

### O P E R

A T O R 

### C O R

P O R A T I O N 

### ; T H E 

### P E O P L E O F T H E 

### S T A T E O F 

### C A L I F O R

N I A 

### , E X 

### R E L



### . X A

V I E R 

### B E C E R R A 

### , Attorney

General, Respondents-Intervenors

. No. 04-74984

### C A L I F O R N I A 

### PUC V



### . F ERC 19

S O U T H E R

N 

### C A L I F O R

N I A 

### E D I S O N 

### C O M P A N Y 

### , Petitioner
,

M O D E S T O 

### I R

R I G A T I O N 

### D I S T R

I C T 

### ; T H E 

### P E O P L E O F T H E 

### S T A T E O F 

### C A L I F O R

N I A 

### , E X 

### R E L



### . X A

V I E R 

### B E C E R R A 

### , Attorney

General; S E M P R A 

### E N E R G Y 

### T R A D I N G 

### C O R P 

### .; A V I S T A 

### E N E R

G Y 

### I N C 

### .; C A L I F O R

N I A 

### I N D E P E N D E N T 

### S Y S T E M 

### O P E R

A T O R 

### C O R P O R A T I O N 

### ; E N R

O N 

### P O W E R 

### M A R K E T I N G 

### I N C 

### .; C I T Y O F 

### L O S 

### A N G E L E S 

### D E P A R

T M E N T O F 

### W A T E R A N D 

### P O W E R 

### ; W I L L I A M S 

### P O W

E R 

### C O M P A N Y 

### , I N C 

### ; M I E C O 

### , I

N C 

### ., Intervenors
,

v.

F E D E R A L 

### E N E R

G Y 

### R E G U L A T O R Y 

### C O M M I S S I O N 

### , R espondent

. No. 04-75496

C A L I F O R

N I A 

### P U B L I C 

### U T I L I T I E S 

### C O M M I S S I O N 

### ; C A L I F O R N I A 

### E L E C T R I C I T Y 

### O V E R S I G H T 

### B O A R D 

### , Petitioners
,

M O D E S T O 

### I R

R I G A T I O N 

### D I S T R

I C T 

### ; T H E 

### P E O P L E O F T H E 

### S T A T E O F 

### C A L I F O R

N I A 

### , E X 

### R E L



### . X A

V I E R 

### No. 04-75503

### C A L I F O R N I A 

### PUC V



### . F ERC 20

B E C E R R A 

### , Attorney

General; S E M P R A 

### E N E R G Y 

### T R A D I N G 

### C O R P 

### .; A V I S T A 

### E N E R

G Y 

### I N C 

### .; E N R

O N 

### P O W E R 

### M A R K E T I N G 

### I N C 

### .; W I L L I A M S 

### P O W E R 

### C O M P A

N Y 

### , I N C 

### ; M I E C O 

### , I

N C 

### ., Intervenors
,

v.

F E D E R A L 

### E N E R

G Y 

### R E G U L A T O R Y 

### C O M M I S S I O N 

### , R espondent
,

T H E 

### P E O P L E O F T H E 

### S T A T E O F 

### C A L I F O R

N I A 

### , E X R

E L



### . X A V I E R 

### B E C E R R A 

### , Attorney

General, Respondent-Intervenor

.

P A C I F I C 

### G A S 

### & E L E C T R I C 

### C O M P A

N Y 

### , Petitioner
,

M O D E S T O 

### I R

R I G A T I O N 

### D I S T R

I C T 

### ; T H E 

### P E O P L E O F T H E 

### S T A T E O F 

### C A L I F O R

N I A 

### , E X 

### R E L



### . X A

V I E R 

### B E C E R R A 

### , Attorney

General; S E M P R A 

### E N E R G Y 

### T R A D I N G 

### C O R P 

### .; A V I S T A 

### E N E R

G Y 

### I N C 

### .; P U G E T 

### S O U

N D 

### E N E R G Y 

### , I N C 

### ; C A L I F O R

N I A 

### I N D E P E N D E N T 

### S Y S T E M 

### O P E R

A T O R 

### C O R P O R A T I O N 

### ; E N R

O N 

### P O W E R 

### No. 04-75609

### C A L I F O R N I A 

### PUC V



### . F ERC 21

M A R K E T I N G 

### , I N C



### . ; W I L L I A M S 

### P O W

E R 

### C O M P A N Y 

### , I N C 

### ; M I E C O 

### , I

N C 

### ., Intervenors
,

v.

F E D E R A L 

### E N E R

G Y 

### R E G U L A T O R Y 

### C O M M I S S I O N 

### , R espondent

.

S O U T H E R

N 

### C A L I F O R

N I A 

### E D I S O N 

### C O M P A N Y 

### , Petitioner
,

T U C S O N 

### E L E C T R

I C 

### P O W E R 

### C O M P A N Y 

### , Intervenor
,

M O D E S T O 

### I R

R I G A T I O N 

### D I S T R

I C T 

### , Respondent-Intervenor
,

T H E 

### P E O P L E O F T H E 

### S T A T E O F 

### C A L I F O R

N I A 

### , E X 

### R E L



### . X A

V I E R 

### B E C E R R A 

### , Attorney

General; A V I S T A 

### E N E R G Y 

### I N C 

### .; C A L I F O R

N I A 

### I N D E P E N D E N T 

### S Y S T E M 

### O P E R

A T O R 

### C O R P O R A T I O N 

### ; E N R

O N 

### P O W E R 

### M A R K E T I N G 

### I N C 

### .; W I L L I A M S 

### P O W

E R 

### C O M P A N Y 

### , I N C 

### ; M I E C O 

### , I

N C 

### ., Intervenors
,

v. No. 04-75720

### C A L I F O R N I A 

### PUC V



### . F ERC 22

F E D E R A L 

### E N E R

G Y 

### R E G U L A T O R Y 

### C O M M I S S I O N 

### , R espondent
,

______________________________
W I L L I A M S 

### P O W

E R 

### C O M P A

N Y 

### , I N C 

### ; P A C I F I 

### C O R

P 

### , Applicants-Intervenors

.

T H E 

### P E O P L E O F T H E 

### S T A T E O F 

### C A L I F O R

N I A 

### , E X R

E L



### . X A V I E R 

### B E C E R R A 

### , Attorney

General, Petitioner
,

M O D E S T O 

### I R

R I G A T I O N 

### D I S T R

I C T 

### ; T H E 

### P E O P L E O F T H E 

### S T A T E O F 

### C A L I F O R

N I A 

### , E X R

E L



### . X A V I E R 

### B E C E R R A 

### , Attorney

General; A V I S T A 

### E N E R G Y 

### I N C 

### .; C A L I F O R

N I A 

### I N D E P E N D E N T 

### S Y S T E M 

### O P E R

A T O R 

### C O R P O R A T I O N 

### ; E N R

O N 

### P O W E R 

### M A R K E T I N G 

### , I N C



### . ; W I L L I A M S 

### P O W

E R 

### C O M P A N Y 

### , I N C 

### ; M I E C O 

### , I

N C 

### ., Intervenors
,

v.

F E D E R A L 

### E N E R

G Y 

### R E G U L A T O R Y 

### C O M M I S S I O N 

### , R espondent

. No. 04-75838

### C A L I F O R N I A 

### PUC V



### . F ERC 23

T H E 

### P E O P L E O F T H E 

### S T A T E O F 

### C A L I F O R

N I A 

### , E X R

E L



### . X A V I E R 

### B E C E R R A 

### , Attorney

General, Petitioner
,

M O D E S T O 

### I R

R I G A T I O N 

### D I S T R

I C T 

### ; T H E 

### P E O P L E O F T H E 

### S T A T E O F 

### C A L I F O R

N I A 

### , E X 

### R E L



### . X A

V I E R 

### B E C E R R A 

### , Attorney

General; S E M P R A 

### E N E R G Y 

### T R A D I N G 

### C O R P 

### .; A V I S T A 

### E N E R

G Y 

### I N C 

### .; C A L I F O R

N I A 

### I N D E P E N D E N T 

### S Y S T E M 

### O P E R

A T O R 

### C O R P O R A T I O N 

### ; E N R

O N 

### P O W E R 

### M A R K E T I N G 

### , I N C



### . ; C A L I F O R

N I A 

### I N D E P E N D E N T 

### S Y S T E M 

### O P E R

A T O R 

### C O R P O R A T I O N 

### ; C I T Y O F 

### L O S 

### A N G E L E S 

### D E P A R

T M E N T O F 

### W A T E R A N D 

### P O W E R 

### ; A V I S T A 

### E N E R

G Y 

### I N C 

### .; W I L L I A M S 

### P O W

E R 

### C O M P A

N Y 

### , I N C 

### ; S E M P R A 

### E N E R G Y 

### T R A D I N G 

### C O R P 

### .; M I E C O 

### , I

N C 

### ., Intervenors
,

v.

F E D E R A L 

### E N E R

G Y 

### R E G U L A T O R Y 

### C O M M I S S I O N 

### , R espondent

. No. 04-75840

### C A L I F O R N I A 

### PUC V



### . F ERC 24

C A L I F O R

N I A 

### P U B L I C 

### U T I L I T I E S 

### C O M M I S S I O N 

### ; C A L I F O R N I A 

### E L E C T R I C I T Y 

### O V E R S I G H T 

### B O A R D 

### , Petitioners-Appellants
,

T H E 

### P E O P L E O F T H E 

### S T A T E O F 

### C A L I F O R

N I A 

### , E X R

E L



### . X A V I E R 

### B E C E R R A 

### , Attorney

General; A V I S T A 

### E N E R G Y 

### I N C 

### .; E N R

O N 

### P O W E R 

### M A R K E T I N G 

### I N C 

### .; M I E C O 

### , I

N C 

### ., Intervenors
,

v.

F E D E R A L 

### E N E R

G Y 

### R E G U L A T O R Y 

### C O M M I S S I O N 

### , Respondent-Appellee

. No. 04-76095

P A C I F I C 

### G A S 

### & E L E C T R I C 

### C O M P A

N Y 

### , Petitioner
,

M I E C O 

### , I

N C 

### ., Intervenor
,

v.

F E D E R A L 

### E N E R

G Y 

### R E G U L A T O R Y 

### C O M M I S S I O N 

### , R espondent

. No. 05-71761

### C A L I F O R N I A 

### PUC V



### . F ERC 25

S O U T H E R

N 

### C A L I F O R

N I A 

### E D I S O N 

### C O M P A N Y 

### , Petitioner
,

M I E C O 

### , I

N C 

### ., Intervenor
,

v.

F E D E R A L 

### E N E R

G Y 

### R E G U L A T O R Y 

### C O M M I S S I O N 

### , R espondent

. No. 05-72614

T H E 

### P E O P L E O F T H E 

### S T A T E O F 

### C A L I F O R

N I A 

### , Petitioner
,

P O R T O F 

### S E A T T L E 

### ,

Petitioner-Intervenor
,

P O R T L A N D 

### G E N E R A L 

### E L E C T R

I C 

### C O M P A N Y 

### ; E L 

### S E G

U N D O 

### P O W

E R 

### L L C 

### ; C A L I F O R

N I A 

### E D I S O N 

### C O M P A

N Y 

### , Intervenors
,

M I E C O 

### , I

N C 

### ., Intervenor
,
and

P I N N A C L E 

### W E S T 

### C O M P A

N Y 

### , No. 05-72678

### C A L I F O R N I A 

### PUC V



### . F ERC 26

v.

F E D E R A L 

### E N E R

G Y 

### R E G U L A T O R Y 

### C O M M I S S I O N 

### , R espondent
,

______________________________ S O U T H E R

N 

### C A L I F O R

N I A 

### E D I S O N 

### C O M P A N Y 

### , Applicant-Intervenor

.

C A L I F O R

N I A 

### P U B L I C 

### U T I L I T I E S 

### C O M M I S S I O N 

### ; C A L I F O R N I A 

### E L E C T R I C I T Y 

### O V E R S I G H T 

### B O A R D 

### , Petitioners
,

M I E C O 

### , I

N C 

### ., Intervenor
,

v.

F E D E R A L 

### E N E R

G Y 

### R E G U L A T O R Y 

### C O M M I S S I O N 

### , R espondent

. No. 05-72954

P A C I F I C 

### G A S 

### & E L E C T R I C 

### C O M P A

N Y 

### , Petitioner
,

S O U T H E R

N 

### C A L I F O R

N I A 

### E D I S O N 

### C O M P A N Y 

### ; T H E 

### P E O P L E O F T H E 

### No. 06-71320

### C A L I F O R N I A 

### PUC V



### . F ERC 27

S T A T E O F 

### C A L I F O R

N I A 

### , E X 

### R E L



### . X A V I E R 

### B E C E R

R A 

### , Attorney

General, Petitioners-Intervenors
,

M I E C O 

### , I

N C 

### ., Intervenor
,

v.

F E D E R A L 

### E N E R

G Y 

### R E G U L A T O R Y 

### C O M M I S S I O N 

### , R espondent
,

T U C S O N 

### E L E C T R

I C 

### P O W E R 

### C O M P A N Y 

### ; P A C I F I 

### C O R

P 

### , Respondents-Intervenors
,

______________________________ C A L I F O R

N I A 

### E L E C T R

I C I T Y 

### O V E R S I G H T 

### B O A R

D 

### ; W I L L I A

M S 

### P O W E R 

### C O M P A

N Y 

### , I N C 

### ; C O N S T E L L

A T I O N 

### E N E R

G Y 

### C O M M O D I T I E S 

### G R

O U P 

### , I N C 

### .; P O R T L A N D 

### G E N E R A L 

### E L E C T R

I C 

### C O M P A N Y 

### ; A V I S T A 

### E N E R

G Y 

### I N C



### . ; C O N S T E L L

A T I O N 

### E N E R

G Y 

### C O M M O D I T I E S 

### G R

O U P 

### , I N C 

### .; E N R

O N 

### P O W E R 

### M A R K E T I N G 

### , I N C 

### .; C I T Y O F 

### S E A T T L E 

### , W A S H I

N G T O N 

### ; M I D W

A Y 

### S U N S E T 

### C O G E

N E R A T I O N 

### C O M P A

N Y 

### , Applicants-Intervenors

.

### C A L I F O R N I A 

### PUC V



### . F ERC 28

T H E 

### P E O P L E O F T H E 

### S T A T E O F 

### C A L I F O R

N I A 

### , E X R

E L



### . X A V I E R 

### B E C E R R A 

### , Attorney

General, Petitioner
,

S O U T H E R

N 

### C A L I F O R

N I A 

### E D I S O N 

### C O M P A N Y 

### , Petitioner-Intervenor
,

F E D E R A L 

### E N E R

G Y 

### R E G U L A T O R Y 

### C O M M I S S I O N 

### , R espondent
,

P A C I F I C 

### G A S 

### & E L E C T R I C 

### C O M P A

N Y 

### ; A V I S T A 

### E N E R

G Y 

### ; T H E 

### C I T Y O F 

### L O S 

### A N G E L E S 

### D E P A R

T M E N T O F 

### W A T E R A N D 

### P O W E R 

### ; E N R O N 

### P O W E R 

### M A R K E T I N G 

### I N C 

### .; P O R

T L A N D 

### G E N E R A L 

### E L E C T R

I C 

### C O M P A

N Y 

### ; C A L I F O R

N I A 

### E L E C T R

I C I T Y 

### O V E R S I G H T 

### B O A R

D 

### ; M I E C O 

### , I

N C 

### ., Intervenors
,

v.

M O D E S T O 

### I R

R I G A T I O N 

### D I S T R

I C T 

### ; T H E 

### C I T Y O F 

### S A

N T A 

### C L A R A 

### ; C I T Y O F 

### R E D D I N G 

### , Respondents-Intervenors

. No. 06-71642

### C A L I F O R N I A 

### PUC V



### . F ERC 29

C A L I F O R

N I A 

### P U B L I C 

### U T I L I T I E S 

### C O M M I S S I O N 

### ; C A L I F O R N I A 

### E L E C T R I C I T Y 

### O V E R S I G H T 

### B O A R D 

### , Petitioners
,

S O U T H E R

N 

### C A L I F O R

N I A 

### E D I S O N 

### C O M P A N Y 

### , Petitioner-Intervenor
,

M I E C O 

### , I

N C 

### ., Intervenor
,

v.

F E D E R A L 

### E N E R

G Y 

### R E G U L A T O R Y 

### C O M M I S S I O N 

### , R espondent

. No. 06-72006

S O U T H E R

N 

### C A L I F O R

N I A 

### E D I S O N 

### C O M P A N Y 

### , Petitioner
,

P A C I F I C 

### G A S 

### & E L E C T R I C 

### C O M P A

N Y 

### ; C O R A L 

### P O W E R 

### , L .L .C..; M I E C O 

### , I

N C 

### .,

Intervenors
,
and

C A L I F O R

N I A 

### E L E C T R

I C I T Y 

### O V E R S I G H T 

### B O A R

D 

### , No. 06-72195

### C A L I F O R N I A 

### PUC V



### . F ERC 30

v.

F E D E R A L 

### E N E R

G Y 

### R E G U L A T O R Y 

### C O M M I S S I O N 

### , R espondent

.

T H E 

### P E O P L E O F T H E 

### S T A T E O F 

### C A L I F O R

N I A 

### , E X R

E L



### . X A V I E R 

### B E C E R R A 

### , Attorney

General; C A L I F O R

N I A 

### P U B L I C 

### U T I L I T I E S 

### C O M M I S S I O N 

### ; P A C I F I C 

### G A S 

### & E L E C T R I C 

### C O M P A

N Y 

### ; S O U T H E R

N 

### C A L I F O R

N I A 

### E D I S O N 

### C O M P A

N Y 

### , Petitioners
,

M I E C O 

### , I

N C 

### ., Intervenor
,

v.

F E D E R A L 

### E N E R

G Y 

### R E G U L A T O R Y 

### C O M M I S S I O N 

### , R espondent

. No. 08-74306

T H E 

### P E O P L E O F T H E 

### S T A T E O F 

### C A L I F O R

N I A 

### , E X R

E L



### . X A V I E R 

### B E C E R R A 

### , Attorney

General; C A L I F O R

N I A 

### P U B L I C 

### U T I L I T I E S 

### C O M M I S S I O N 

### ; P A C I F I C 

### G A S 

### & E L E C T R I C 

### C O M P A

N Y 

### ; S A N 

### D I E G O 

### No. 08-74834

### C A L I F O R N I A 

### PUC V



### . F ERC 31

G A S 

### & E L E C T R

I C 

### C O M P A

N Y 

### ; S O U T H E R

N 

### C A L I F O R

N I A 

### E D I S O N 

### C O M P A N Y 

### , Petitioners
,

S A C R A M E N T O 

### M U

N I C I P A L 

### U T I L I T Y 

### D I S T R I C T 

### ; C I T Y O F 

### P A S A D E N A 

### , C A L I F O R

N I A 

### ; M I E C O 

### , I

N C 

### ., Intervenors
,

v.

F E D E R A L 

### E N E R

G Y 

### R E G U L A T O R Y 

### C O M M I S S I O N 

### , R espondent

.

T H E 

### P E O P L E O F T H E 

### S T A T E O F 

### C A L I F O R

N I A 

### , E X R

E L



### . X A V I E R 

### B E C E R R A 

### , Attorney

General; C A L I F O R

N I A 

### P U B L I C 

### U T I L I T I E S 

### C O M M I S S I O N 

### ; S O U T H E R N 

### C A L I F O R

N I A 

### E D I S O N 

### C O M P A

N Y 

### ; P A C I F I C 

### G A S 

### & E L E C T R I C 

### C O M P A

N Y 

### , Petitioners
,

M I E C O 

### , I

N C 

### ., Intervenor
,

v. No. 09-71953

### C A L I F O R N I A 

### PUC V



### . F ERC 32

F E D E R A L 

### E N E R

G Y 

### R E G U L A T O R Y 

### C O M M I S S I O N 

### , R espondent

.

T H E 

### P E O P L E O F T H E 

### S T A T E O F 

### C A L I F O R

N I A 

### , E X R

E L



### . X A V I E R 

### B E C E R R A 

### , Attorney

General; C A L I F O R

N I A 

### P U B L I C 

### U T I L I T I E S 

### C O M M I S S I O N 

### ; S O U T H E R N 

### C A L I F O R

N I A 

### E D I S O N 

### C O M P A

N Y 

### ; P A C I F I C 

### G A S 

### & E L E C T R I C 

### C O M P A

N Y 

### , Petitioners
,

M I E C O 

### , I

N C 

### ., Intervenor
,

v.

F E D E R A L 

### E N E R

G Y 

### R E G U L A T O R Y 

### C O M M I S S I O N 

### , R espondent

. No. 09-71961

T H E 

### P E O P L E O F T H E 

### S T A T E O F 

### C A L I F O R

N I A 

### , E X R

E L



### . X A V I E R 

### B E C E R R A 

### , Attorney

General; C A L I F O R

N I A 

### P U B L I C 

### U T I L I T I E S 

### C O M M I S S I O N 

### ; P A C I F I C 

### G A S 

### & E L E C T R I C 

### C O M P A

N Y 

### ; S O U T H E R

N 

### C A L I F O R

N I A 

### E D I S O N 

### C O M P A

N Y 

### , Petitioners
, No. 10-71708

### C A L I F O R N I A 

### PUC V



### . F ERC 33

v.

F E D E R A L 

### E N E R

G Y 

### R E G U L A T O R Y 

### C O M M I S S I O N 

### , R espondent

.

T H E 

### P E O P L E O F T H E 

### S T A T E O F 

### C A L I F O R

N I A 

### , E X R

E L



### . X A V I E R 

### B E C E R R A 

### , Attorney

General; C A L I F O R

N I A 

### P U B L I C 

### U T I L I T I E S 

### C O M M I S S I O N 

### ; P A C I F I C 

### G A S 

### & E L E C T R I C 

### C O M P A

N Y 

### ; S O U T H E R

N 

### C A L I F O R

N I A 

### E D I S O N 

### C O M P A

N Y 

### , Petitioners
,

M I D W A Y 

### S U N S E T 

### C O G E

N E R A T I O N 

### C O M P A N Y 

### , Intervenor
,

v.

F E D E R A L 

### E N E R

G Y 

### R E G U L A T O R Y 

### C O M M I S S I O N 

### , R espondent

. No. 11-71542

### C A L I F O R N I A 

### PUC V



### . F ERC 34

T H E 

### P E O P L E O F T H E 

### S T A T E O F 

### C A L I F O R

N I A 

### , E X R

E L



### . X A V I E R 

### B E C E R R A 

### , Attorney

General; C A L I F O R

N I A 

### P U B L I C 

### U T I L I T I E S 

### C O M M I S S I O N 

### ; P A C I F I C 

### G A S 

### & E L E C T R I C 

### C O M P A

N Y 

### ; S O U T H E R

N 

### C A L I F O R

N I A 

### E D I S O N 

### C O M P A

N Y 

### , Petitioners
,

v.

F E D E R A L 

### E N E R

G Y 

### R E G U L A T O R Y 

### C O M M I S S I O N 

### , R espondent

. No. 12-70406

T H E 

### P E O P L E O F T H E 

### S T A T E O F 

### C A L I F O R

N I A 

### , E X R

E L



### . X A V I E R 

### B E C E R R A 

### , Attorney

General; C A L I F O R

N I A 

### P U B L I C 

### U T I L I T I E S 

### C O M M I S S I O N 

### ; P A C I F I C 

### G A S 

### & E L E C T R I C 

### C O M P A

N Y 

### ; S O U T H E R

N 

### C A L I F O R

N I A 

### E D I S O N 

### C O M P A

N Y 

### , Petitioners
,

v.

F E D E R A L 

### E N E R

G Y 

### R E G U L A T O R Y 

### C O M M I S S I O N 

### , R espondent

. No. 12-70407

### C A L I F O R N I A 

### PUC V



### . F ERC 35

T H E 

### P E O P L E O F T H E 

### S T A T E O F 

### C A L I F O R

N I A 

### , E X R

E L



### . X A V I E R 

### B E C E R R A 

### , Attorney

General; C A L I F O R

N I A 

### P U B L I C 

### U T I L I T I E S 

### C O M M I S S I O N 

### ; P A C I F I C 

### G A S 

### & E L E C T R I C 

### C O M P A

N Y 

### ; S O U T H E R

N 

### C A L I F O R

N I A 

### E D I S O N 

### C O M P A

N Y 

### , Petitioners
,

v.

F E D E R A L 

### E N E R

G Y 

### R E G U L A T O R Y 

### C O M M I S S I O N 

### , R espondent

. No. 12-71034

O n Petition for Review of an Order of the F ederal Energ

y Reg ulatory

Commission

Arg ued and Submitted March 22, 2017 San F rancisco, California

F iled April 21, 2017

B efore: Sidney

R. Thomas, Chief J udg e, and M. Marg aret McKeown and Richard R. Clifton, Circuit J udg es.
Opinion by

Chief J udg e Thomas

### C A L I F O R N I A 

### PUC V



### . F ERC 36

SUMMARY * *



### F ederal Energy Regulatory Com m ission

The panel g ranted in part, and d e n i e d in part, a petition for review broug ht by various entities challeng ing the F ederal Energ y Reg ulatory Commission (“ FERC”)’s calculation o f certain refunds arising out of the C a l i fornia energ y crisis in 2000 and 2001.

The panel held that F ERC did not act arbi t r a ri ly o r capricio u sly in its construction of tariffs, and d enied the petition as to the q

uestion of w hether refunds should be netted hourly or a cross the entire r efund period. F ERC found that in order to c a lculate the total refund shortfall r esulting from Bonneville P ower Administration v. F E RC
, 422 F .3d 908 (9th Cir. 2005), the California I ndependent Sy stem O perator C o r p oration should net sales and purchases over hourly intervals. F ERC applied the same rationale to the California Power Ex chang e Corporation (“Cal-PX”), a nd dire c ted it to perform its final refund netting purchases a nd s a l e s over hourly interva l s t o reflect the period during which the oblig ation was incurred.

Addressing a $5 million deficit in the Cal-PX settlement clearing accou n t that resulted from a transfer o f f unds from the settlement clearin g account to the operating account in March 2001, the panel held that F ERC a cted arbitrarily a nd capriciously in allocating the refund only to net buy ers a n d

** T h is su m m ary co n stitu

t es n o p art o f th e o p in io n o f th e co u rt. It h as b een p rep ared b y

co u rt staf

f f o r th e co n v en i en ce o f

th e read er.

### C A L I F O R N I A 

### PUC V



### . F ERC 37

not to all market participants. The panel g ranted the petition as to this issue.

COUNSEL

Stan B erman (arg

ued) and Eric Todderud, Sidley A ustin L L P, Seattle, W ashing ton; Mark D. Patriz io a nd J oshua S. L evenberg
, Pacific Gas and Electric Company ; for Petitioner Pacific Gas and Electric Company

.
Candace J

. Mor e y ; Arocles Ag u ilar, General Counsel; San F rancisco, California; as and f or Petition e r P u blic Utilities Commission of the State of California.

Kevin J

. McKeon, J udith D. Cassel, and W hitney E. Sny der, Hawke McKeon & Sniscak L L P, H arrisburg
, Pennsy lvania; Danette E. Valdez
, Supervising Deputy Attorn e y G e neral; Martin Goy e tte, Senior Assistant A ttorney General ; M a r k B reckler, Chief Assistant Attorney General; Of f i ce of the Attorney General, San F rancisco, California; for Petitioners People of the State of California ex rel. Xavier B ecerra, Attorney General.

Richard L

. Roberts and Catherine M. Giovannoni, Steptoe & J ohnson L L P, W ashing ton, D.C.; Russell C. Swartz
, J

. Eric I sken, and Russell A. Archer, Southern California Edison Company
, Rosemead, California; for Petitioners Southern California Edison Company

.

B eth Guralnick Pacella (arg ued), Deputy Solicitor; Robert H

. Solomon, Solicitor; Max Minz ner, Gen eral Counsel; W a shing ton, D.C.
, f

o r R espondent F ederal E n erg y Reg ulatory

Commission.

### C A L I F O R N I A 

### PUC V



### . F ERC 38

OP INION

THOMAS, Chief J udg e :

T h i s petition f

or review returns to us as part of a l o n g series o f administrative cases a rising out of the Ca l i fornia energ y c risis in 2000 and 2001, the backg round of which we have d e s c r i b ed in d etail in e arlier o pinions. 1 

### This petition requires us to determine whether the F ederal E n e r g y Reg ulatory Commi ssion (“F ERC” or “Commission”) acted arbitrarily or capriciously

in calculating certain refunds.

W e review F ERC decisions to determine whether they a re “arbitrary
, capricious, a

n abuse of d iscretion, o r o therwise not in accordance with law

. ” P a c. Gas & Elec. Co. v. FERC
, 373 F .3d 1315, 1319 (D.C. C i r

. 2 0 04) (citing 5 U .S.C. §706(2)(A); Sithe/Indep. Power Partners v. FERC
, 165 F .3d 944, 948 ( D.C. Cir. 19 9 9)). “F E RC must be able to demonstrate that it has made a reasoned decision based upon substantial evidence in the record.” I d. ( q uoting N. States Power Co. v. FERC
, 30 F .3d 1 77, 1 80 ( D.C. Cir. 1994)). The Court also must ensure that F ERC “ articulate[ s] a satisfactory

ex p lanation for its action includin g a r ational connection between the facts found a

nd the c hoice made.” Id. (alteration in orig inal) (quo t i n g M

otor V e hicle Mfrs. Ass’n of the U.S., Inc. v. State Farm Mut. Ins. Co. , 463 U.S. 29, 43 (1983)).

1 S ee, e.g

. , M

PS Merch

. S

ervs., In c. v.FERC
, 8 3 6 F.3 d 1 1 55
, 1 1 6 0 (9 th Cir. 2 01 6 ); Ca l . ex rel. Ha rris v. FERC , 8 0 9 F.3 d 4 9 1 , 4 9 6

– 9 8 (9 th Cir. 2 0 15 ); Pu b

. Utils. Co mm’n o f S ta te o f Ca l. v. FERC
, 4 6 2 F.3 d 1 0 2 7
, 1 0 3 6

– 4 5 ( 9 t h Ci r

. 2 0 0 6 ); Bo n n eville Po w er Ad min

. v. FERC
, 4 2 2 F.3 d 9 0 8
, 9 1 1

– 1 4 (9 t

h Cir. 2 0 0 5 ); Ca l. ex rel. Lo ckyer v. FERC
, 3 8 3 F.3 d 1 0 0 6
, 1 0 0 8

– 1 1 (9 th

Cir. 2 0 0 4 ).

### C A L I F O R N I A 

### PUC V



### . F ERC 39

W e g rant the petition in part and deny it in part.

I

After we concluded in Bonneville Power Administration

v. FERC that F ERC had act ed outside its jurisdiction when ordering g overnmental e n tities/non-public utilities to pay refunds, 422 F .3d 908, 926 (9th Cir. 2 0 05), the Commission vacated each of its orders in the California refund proceeding to the ex tent that they o rdered g overnmental ent i t i e s/nonpublic utilities to pay refunds. San Diego Gas & E lec. Co. v

. Sellers of Energy & Ancillary Servs. ( “ 2007 Order on Remand”), 12 1 F ERC ¶ 6 1,067, 61,352–53, 2007 W L 3047581, at * 9 ( 2007). 2 

### The Commission d irected the California Power Ex chang e Corporation (“Cal-PX”) and the California I ndependent Sy stem Operator Corporation (“CalI SO”) to complete refund calculations with a ll entities t h at participated in the Cal-PX and Cal-I SO markets and not to redo the refund calculations to r emove the g overnmental entities/non-public utilities. Id.

F ERC ag r eed with the California parties ( “California”) 3 

### that en erg y sales and p urchases should be netted before calculating each party ’s refund amount, but i t found that netting these sales and p urchases over the entire refund period coul d h a ve the indirect e ffect of requiring g overnmental

2 A ll p ro ceed in g s b elo w sh are th i s case n am e. Ord ers w ill b e ref erred to b y th eir y ear an d title f

o r th e sak e o f

b rev ity an d to av o id co n f

u sio n

.

3 P etitio n ers th e Calif

o rn ia P arties co n s ist o f th e P u b lic Utilities Co m m i ssio n o f th e State o f Calif orn ia; th e P eo p le o f th e State of Calif o rn ia ex rel. Xav i e r B ecerra, A t to rn ey Gen eral; P acif ic Gas an d Electric Co m

p an y ; an d So u th ern

Calif o rn ia Ed iso n

Co m p an y

.

### C A L I F O R N I A 

### PUC V



### . F ERC 40

e n t ities and other n on-public utilities to pay refunds. 2 0 0 8 Order o n Rehearing and Motions f o r Clarification a

nd Accounting
, 125 F ERC ¶ 61, 2 1 4
, 6 2,112–13, 2008 W L 4962565, at *4–5 (2008). F ERC instead found that in order to c alculate the total refund shortfall resulting from Bonneville
, Cal-I SO should net s a l e s and purchases over hourly intervals. I

d. T he Commission noted that under the Cal-I SO Tariff, a s ettlement period was defined in terms o f hourly intervals, and therefore, it directed Cal-I SO to net over hourly intervals to ensure c onsistency with its tariff requirements. Id.

I n a later order, F ERC applied the same rationale to CalPX, whose ta r i ff a lso specified hourly settlement intervals, and dir e c t e d Cal-PX to perform its f inal refund calculations netting purchases and sales over hourly intervals to reflect the period during which the o blig ation was incurred. 2011 Order Accepting Compliance F iling s and Providing Guidance, 136 F ERC ¶ 61,036, 2011 W L 2750775, at *11 (2011).

C a l ifor n i a a r gu e s t h a t t h e a p p l i c a b l e t a r i ff s
un am b ig uously r equire Cal-I SO and Cal-PX to net for the entire refund period, not over hour l y intervals. Althoug h California makes a pla u sible c ase for its interpretation, we cannot conclude that F E R C a cted arbitrarily or capriciously in its interpretation of the tariffs. Thoug h the tariffs provide for netting in certain situations over a n interva l s h o rter than

an hour or f

o r netting charg es over an hour and later summing the charg e s over the day and o ver the entire month to g enerate monthly invoices, nothing sug g ests that the netting interv a l s h o uld span the entire refund period, which lasted nine months. Similarly
, F ERC’s interpreta tion of the tariff amendments was likewise r easonable. Cal-I SO A mendment No. 51 a

nd Cal-PX A m e ndment No. 23 seg reg ated

### C A L I F O R N I A 

### PUC V



### . F ERC 41

t r a n sactions during the refund period. T he amendments di d not address calculating the total n et refunds; they related only to performing set t l e ment reruns and invoice adjustments (prerequisites to calculating f inal refunds). F ERC reasonably interpreted the amendments as inapplicable.

California also arg ues that F ERC’s decision to net g overnmental entity sales on an hourly basis departed from its prior orders w ithout ex planation. However, the prior orders cited d o n o t address how the refunds should be netted; they address cost offset allocations.

California also sug g ests that the result is unduly discriminatory because h o u r ly netting improperly permits g overnmental entities and n on-publ i c utilities to receive unlawfully e x cessive rates charg ed for sales made in one hour (without having to repay sellers for the ex cessive rates), while collecting refunds if that same entity boug ht power in another hour or in a different market in that same hour. The data do sug g est some disparity

. However, th a t i s a natural consequence of our jurisdictional decision in Bonneville

.

I n sum, althoug h the t a r i ff s are not specific on these points, we cannot conclude that F E RC acted a r bitrarily o r capriciously

in its construction of the tariffs.

I I

The second issue in the petition f or r eview concerns a $5 million deficit in the Cal-PX settlement clearing account that resulted from a transfer of funds f rom the settlement clearing account to the operating accou n t in March 2001; the $5 million was used f

or operating ex penses. The Commission determined that the deficit was attributable to a n accounting

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error on the part of Cal-PX and found that, g iven the delay in discovering t h at the funds had erroneously b een transferred, it appeared unlikely that Cal-PX w ould “be able to determine ho w, precisely
, this $5 million was used, separate and apart from other funds in the operating account during the same period.” 2011 Order Accepting Compliance Fi ling s a nd Providing Guidance, 1 36 F E RC ¶ 61,067, 2011 W L 2750775, at *15. Therefore, the Commission d etermined that the most efficient and equitable solution was t o treat the settlement account deficit “like a r efun d s hortfall a nd allocate the shortfall among a ll n et refund recipients in proportion to their final refund positions.” Id. The Com m ission denied rehearing of its decision, concluding that o n l y net refund recipients ( n e t b uy e r s) would be f inancially affected by the reduction in the total amount of available funds and that this approach was consistent wit h its d ecisions about h ow to allocate other shortfalls. 2012 Order Deny ing Rehearing (I I ), 138 F ERC ¶ 61,092, 61,398, 2012 W L 372854, at *3 (2012).

California arg ues that F ERC should have allocated the $5 million deficit to both buy ers and sellers, rather t h a n just to net buy ers. I n this respect, we a r e g u i d e d by Pacific Gas & Electric
, in which the D.C. Circuit concluded that F ERC was required to allocate costs across the entire market. 373 F .3d

a t 1 319–22. Pacific Gas & Electric involved Cal-P X “winding up” i t s business affairs. I d. at 1317–18. B ecause CalPX had no funding source during the wind-up p e r i o d, F ERC alloc a ted the costs of Cal-PX’s wind-up a nd ong oing operations among its customer s o n t he basis o f their prior purchases. I

d. at 1318, 1320. However, the D.C. Circuit h eld that “F ERC’s imposition of a d ditional charg es on C al-PX’s customers allocated on the basis of their p rior purchases without reflection of any new jurisdictional services directly violate[ d] the filed-rate doctrine or the rule ag ainst retroactive

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rulemaking

. ” Id. at 1320. B ecause Cal-PX’s f ormer customers had already paid the f iled r a t e for the past jurisdictional services, any imposition of new c osts based on the previous transactions was prohibited. Id. T h e court also held that F E RC’s cost allocation methodolog y was unreasonable because there was no connection between “the siz e of [ a customer’s] account balance” and the “customer’s likely benefit from

. . . [ Cal-Px ’s] wind-up activities.” Id. at 1321.

Here, the allocation of the sh o r t f al l is not a new charg e but is the r esult of Cal-PX’s accounting e r r o r. Nonetheless, the $5 million was used for operating ex penses and, as noted in Pacific Gas & Electric
, a l l m arket p articipants benefitted from the continued o p e ration of Cal-PX. Id. at 1231. Therefore, consistent with the trea t m e n t in Pacific Gas & Electric
, the shortfall should be allocated among all mar k et participants. See id.

F ERC arg ues that its decision was consistent wi t h prior proceeding s and, specifically
, that the shortfall af ter Bonneville w as allocated to r efu n d re cipients based on their final n et refund posi t i o n s

. See 2007 Order on Remand, 121 F ERC ¶ 61,067, 61,352–53, 2007 W L 3047581, at *9. However, allocation o f the B o nneville shortfall is disting uishable because it was a shortfall in refunds. B ecause g overnmental entities could not be ordered to pay refunds, there was less money to be a llocated to b uy ers. Here, on the other hand, the shortfall ex i s ts in the a ccount from which refunds will be made, b ut is u n r e l a ted to the refund proceeding

.

I n sum, w e a gr e e with the log ic employ ed by the D.C. Circuit and conclude t h a t F E RC acted arbitrarily a nd

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capriciously in a llocating the r efund o nly to net buy ers a nd not to all market participants.

I I I

I n c onclus i o n, we deny the petition as to the question whether refunds should be netted hourly or acro s s the entire refund pe r i o d

. W e g rant the p etition as to the allocation o f the deficit in the Cal-PX settlement c l e ar ing account. Each party shall bear its own fees and costs on appeal.

P ETITION G RANTED IN P ART; D ENIED IN P A RT.