Opinion ID: 1373126
Heading Depth: 2
Heading Rank: 2

Heading: The MISO OATT

Text: The district court also concluded that CIPCO's state law claims necessarily require the resolution of a substantial federal question because CIPCO's state law claims implicate MISO's FERC filed and regulated OATT. According to the district court: CIPCO's claims are founded on [MISO's] refusal to pay a rate that is anything but the rate that is set forth in the [MISO] OATT. The conduct that CIPCO seeks to condemn or the lawfulness of [MISO's] conduct is wholly governed by the [MISO] OATT. Because [MISO's] duties or obligations arise under the [MISO] OATT, any claim asserting that CIPCO is entitled to a rate that is not provided by the [MISO] OATT is necessarily based on an assumed violation of the [MISO] OATT. CIPCO's action turns entirely upon [MISO's] compliance with a federal regulation; absent a violation of the [MISO] OATT, no state-law liability could survive.... ... CIPCO essentially asks the court to conclude that CIPCO is entitled to a rate that is not included in, and is in addition to, the current rate that [Alliant] developed for third party use of the ITS. CIPCO's right to relief requires the court to determine a hypothetical reasonable rate for the transmission service that [MISO] provided over the ITS, which includes CIPCO's facilities.... Such a determination must be made by FERC. (CIPCO's Add. at 47-48.) We understand the district court's reasoning to be that because the scope of the MISO OATT extends to the use of CIPCO's system in the form of third-party rates for the use of the entire ITS, CIPCO's state law claims seeking compensation for that use implicitly challenge the reasonableness of those FERC-approved rates. Claims that require a court to second-guess the reasonableness of FERC-filed rates require the resolution of a substantial federal question. See Bryan, 377 F.3d at 432 (concluding that the plaintiff's state law claim necessarily raised a substantial question of federal law because it would authorize a court to award damages and effectively alter a filed rate dictated by a federally filed tariff). On the other hand, if the MISO OATT does not cover service over CIPCO's lines, then it is clear that the adjudication of CIPCO's state law claims, and the determination of damages for the use of CIPCO's system, would not undermine or implicate the FERC's rate-making authority in any way. See Fax Telecommunicaciones Inc. v. AT & T, 138 F.3d 479, 487 (2d Cir.1998) (finding no federal question jurisdiction over the plaintiff's breach-of-contract claim where the basis for the claim was independent of the rate on file with the FCC); cf. In re NOS Commc'ns, 495 F.3d 1052, 1060 (9th Cir.2007) ([I]nsofar as [the state-claim plaintiffs] can prove damages that do not refer to the filed-rate, its state law claims may proceed.). The analysis we must undertake to ascertain whether the scope of MISO's OATT covers the use of CIPCO's transmission system is akin to the analysis required to apply the filed rate doctrine. See Bryan, 377 F.3d at 430 n. 8 (observing that while the filed rate doctrine is not coterminous with the scope of federal question jurisdiction ... [i]n certain circumstances ... the inquiries merge); see also Am. Tel. & Tel. Co. v. Cent. Office Tel., Inc., 524 U.S. 214, 229, 118 S.Ct. 1956, 141 L.Ed.2d 222 (1998) (Rehnquist, C.J., concurring) (explaining that because [t]he tariff does not govern... the entirety of the relationship between the common carrier and its customers the filed rate doctrine need pre-empt only those suits that seek to alter the terms and conditions provided for in the tariff); Iowa Network Servs., Inc. v. Qwest Corp., 466 F.3d 1091, 1097 (8th Cir. 2006) (rejecting a claim that the filed rate doctrine precluded a state utility board from determining whether a filed tariff applied to a particular type of traffic). The scope of the MISO OATT and the provisions of MISO's service agreements with Ameren and RPGI are important to our jurisdictional analysis. But we cannot tell from the record whether the MISO OATT or the relevant service agreements account for service over CIPCO's transmission system. And the parties do little to clarify the issue. CIPCO contends that because CIPCO's transmission system was not transferred to MISO's functional control, and because MISO has no authority to provide service over transmission facilities that have not been transferred to its functional control, MISO's OATT and the applicable service agreements do not account for the use of CIPCO's system. We also note that in a letter in the record, Alliant representsalbeit after the initiation of this disputethat Alliant's zonal rate under the [MISO] OATT does not include the costs of CIPCO's facilities, but only recovers the costs of [Alliant's] facilities. No CIPCO revenue requirements are included in the computation of the [Alliant] zonal rate under the [MISO] OATT. (J.A. at 285.) The appellees disagree, but do so with ambiguity. MISO recognizes that under the MISO OATT and the MISO Transmission Owners Agreement by which it is bound, MISO is without authority to provide transmission service over facilities that have not been transferred to MISO's functional control. [3] On the one hand, MISO agrees both that CIPCO's system has not been transferred to MISO and that the service agreements by which MISO transmits energy to RPGI and its members contemplate no compensation for CIPCO. (MISO's Br. at 25.) On the other hand, MISO also disputes that it has engaged in the unauthorized use of CIPCO's system. Despite these representations, MISO obliquely suggests that CIPCO's state law claims implicate MISO's OATT and its service agreements with Ameren and RPGI. Nowhere, however, do we understand MISO clearly to take the position that its OATT incorporates a rate for third-party use of the entire ITS. Somewhat more clearly, RPGI contends that CIPCO gave Alliant the exclusive authority to sell service over the [ITS] to third parties, [and][p]ursuant to that authority, [Alliant] has developed a rate for use of the [ITS], and has filed that rate (now as part of the MISO's filed tariff) at FERC. (RPGI's Br. at 36.) We find that assertion difficult to square with § 5.15 of the O & T Agreement, ante p. 6, which gives both Alliant and CIPCO the right to enter into agreements with third parties to wheel power over the ITS, subject to the express approval of the other. Neither CIPCO nor the appellees direct us to the legally operative language in the MISO OATT or in the relevant service agreements demonstrating the scope of the OATT and the inclusion of service over CIPCO's system within the rates set out in the MISO OATT. While CIPCO's omission in this regard may be understandable (because most parties will be hard pressed to demonstrate what they claim to be absent from the record), the appellees' reliance on largely unsupported representationsparticularly in the complex context of this caseis not. We are unable to invoke federal-question jurisdiction based on the appellees' less than adequately supported say so alone. Not only have the appellees failed to convince us that CIPCO's state law claims challenge rates approved by the FERC in MISO's OATTa showing that would make this case more difficult [4] the FERC's orders denying CIPCO relief do not support the district court's conclusion that CIPCO's state law claims necessarily raise a substantial federal question. As the FERC observed, CIPCO has no legal relationship with MISO, having never joined MISO. And contrary to the district court's characterization of the transmission service at issue in this litigation, the FERC reject[ed] [CIPCO's] argument that [MISO] is the jurisdictional provider of the alleged transmission service at issue. Cent. Iowa Power Coop., 113 FERC at ¶ 61,427. According to the FERC, the alleged service in question is non-jurisdictional... and is not jurisdictional service by [MISO]. Thus, [CIPCO's] ... arguments concerning the applicability of various provisions of the [MISO] OATT are rejected. ( Id. at 409.) As we understand the FERC's orders, it concluded that the MISO OATT is not implicated by the non-jurisdictional service at issue because the disputed service was provided by CIPCO, a non-jurisdictional provider, rather than by MISO. Nowhere in its orders did the FERC suggest that to redress its grievance, CIPCO could seek review of the reasonableness of MISO's existing rates or agreements; instead, the FERC indicated that [i]f the parties were to agree on (or a court with jurisdiction were to determine) a charge to be paid by [MISO] or [Alliant] and then reflected in a jurisdictional rate, then the jurisdictional entity ... could file the proposed charge with [the FERC]. Cent. Iowa Power Coop. v. Midwest Indep. Transmission Sys. Operator, Inc., 110 FERC at ¶ 61,392. Contrary to RPGI's assertion at oral argument, we do not read the term parties as used in the FERC order to be restricted to only CIPCO and Alliant, but to also include MISO as one of the parties to the FERC proceeding. The implication of this language is that CIPCO's system is not reflected in an existing jurisdictional rate. We conclude that the FERC's conclusions are sound and consistent with the FPA, [5] which bases the FERC's authority... on the identities of the [service providers], rather than the nature of the transactions. Transmission Agency of N. Cal. v. FERC, 495 F.3d 663, 674 (D.C.Cir.2007). FERC's rate jurisdiction under § 205 ... expressly appl[ies] only to public utilities. Bonneville Power Admin., 422 F.3d at 918. Contrary to the district court's conclusion that the FERC must calculate a reasonable rate for the use of CIPCO's transmission system, CIPCO is expressly exempted from the FERC's jurisdiction under 16 U.S.C. § 824(f). Accordingly, a state court's calculation of quasi contract or tort damages for the use of CIPCO's transmission facilities does not directly implicate the FERC's rate-making authority. That CIPCO may be awarded damages potentially in the form of a rate that is not included in the MISO OATT is, we think, the inevitable consequence of the stark jurisdictional boundary that the FPA draws between public utilities and nonpublic utilities. We recognize that the FERC has the authority to review the rates of non-jurisdictional transmission-service providers insofar as those rates affect the rates of jurisdictional providers. Section 206 of the FPA, 16 U.S.C. § 824e(a), grants the FERC authority to consider any rule, regulation, practice, or contract affecting the rate of a public utility. Pursuant to this statutory authority, the FERC may analyze and consider the rates of non-jurisdictional utilities to the extent that those rates affect jurisdictional transactions, in effect a form of indirect regulation of the rates of non-jurisdictional utilities. Pac. Gas & Elec. Co. v. FERC, 306 F.3d 1112, 1114, 1116 (D.C.Cir.2002). As described by the D.C. Circuit in the context of a non-jurisdictional utility voluntarily participating in a FERC-jurisdictional ISO, the rate of the non-jurisdictional utility can be conceptualized not as its own rate but rather as a cost of the [regional] ISO that must be reviewed as a part of the FERC's ultimate evaluation of whether the jurisdictional ISO's rates are just and reasonable. Id. at 1116-17. Here, however, CIPCO has not voluntarily joined MISO. Further, in this context, we do not think that this indirect regulatory authority is a sufficient basis for concluding that a state court's potential calculation of CIPCO's damages constitutes a federal issue. It is not clear that such a determination would affect MISO's future rates in any way. As MISO and RPGI acknowledge, if the state court adjudicating CIPCO's state claims orders MISO to pay for the cost of its prior use of CIPCO's transmission system, it is not clear that MISO may simply pass this cost on in the form of an increased future rate. The ... rule against retroactive ratemaking prohibits [the FERC] from adjusting current rates to make up for a utility's over- or under-collection in prior periods. Consol. Edison Co. of N.Y., Inc. v. FERC, 347 F.3d 964, 969 (D.C.Cir.2003) (internal marks omitted). It is possible that the calculation of a reasonable sum for service over CIPCO's lines will affect MISO's rate for future transmission service over CIPCO's lines if the parties take the necessary steps to carry out a prospective rate change by incorporating CIPCO's entitlement to revenue, as determined by the state court or by agreement, into MISO's rate after the completion of this litigation. See Transmission Agency of N. Cal., 495 F.3d at 671 ( [O]nce Vernon becomes a [participating transmission owner], its [transmission revenue requirement] becomes a component of the rate design under which CAIRO operates. (emphasis added)). But this is not MISO's only option for dealing with the consequences of CIPCO's assumed successful prosecution of its claims. It is also possible that RPGI will find it necessary to contract with CIPCO directly for transmission service from the point at which MISO's tariffed service leaves off and CIPCO's begins, a contract that would be totally independent of MISO's OATT. We decline to find the required federal question here based on the possibility that the adjudicating court's calculation of damages will have some effect on a jurisdictional utility's future, yet-to-be-formulated rate. The FERC's limited authority to review the rates of non-jurisdictional utilities does not transform every adjudication implicating a non-jurisdictional utility's rate, rule, regulation, practice or contract, 16 U.S.C. § 824e(a), into a federal question simply because that decision may at some point in the future affect the rates of a jurisdictional utility, cf. Gulf States Utils. Co. v. Ala. Power Co., 824 F.2d 1465, 1472 n. 9 (5th Cir.1987) (recognizing that, if successful, the plaintiff's fraudulent contract claims would affect the filed rates by eliminating them, but concluding that Congress did not intend through the FPA to preempt such indirect effects). In our view, so concluding would improperly blur the jurisdictional boundary created by Congress that prevents the FERC from regulating the rates of non-public utilities. After careful consideration of the parties' briefs, their oral arguments, and the record, we conclude that the appellees have not met their burden to demonstrate that CIPCO's implied-contract and tort claims implicate the MISO OATT or the MISO service agreements by which MISO transmits power to the RPGI members. See California ex rel. Lockyer v. Dynegy, Inc., 375 F.3d 831, 838 (9th Cir.2004) ([T]he burden of establishing federal jurisdiction falls to the party invoking the statute.), cert. denied, 544 U.S. 974, 125 S.Ct. 1836, 161 L.Ed.2d 724 (2005); see also Kytel Int'l Group, Inc. v. Rent-A-Center, Inc., 43 Fed.Appx. 420, 423-24 (2d Cir.2002) (unpublished) (remanding because it was unclear whether the plaintiff's state law claim was independent of any rates on file with the FCC, and directing the district court to remand the case to state court if it could not make this determination from the record). Nothing in this opinion should be construed as expressing any opinion on the merits of CIPCO's state law claims.