Opinion ID: 185117
Heading Depth: 2
Heading Rank: 3

Heading: The City's Petition

Text: The City first contends that the Commission should haveconcluded that the City's ability to comply with a license wassuperior to NEW's ability under section 15(a)(2) of the FPA. Under section 15(a)(2), the Commission is required to consider (and explain such consideration in writing) each of the following: (A) The plans and abilities of the applicant to comply with (i) the articles and conditions of any license issued to it and (ii) other applicable provisions of this subchapter. (B) The plans of the applicant to manage, operate and maintain the project safely. (C) The plans and abilities of the applicant to operate and maintain the project in a manner most likely to provide efficient and reliable electric service. (D) The need of the applicant over the short and long term for the electricity generated by the project or projects to serve its customers.... (E) The existing and planned transmission services of the applicant, taking into consideration system reliability, costs, and other applicable economic and technical factors. (F) Whether the plans of the applicant will be achieved, to the greatest extent possible, in a cost effective manner. (G) Such other factors as the Commission may deem relevant....16 U.S.C. s 808(a)(2). Applying these factors, the Commission determined that there were no environmental or economic differences between NEW's and the City's applications. The City contends that its license application was superiorto NEW's because of the City's relationship to local agencies; its increased cost effectiveness; its ability to finance theOconto Falls Project at a lower interest rate; its technicalexperience in operating public water and sewer operations; and its closer headquarters.5 The Commission, however,__________ 5 The Commission responds that the City waived its argumentsregarding cost effectiveness, inclusion of campground costs andlower financing rate because the City failed to preserve them onrehearing. Although the City did not make these specific costeffectiveness challenges, it did challenge the Commission's determination of the two applicants' relative cost effectiveness. See City'sRehearing Request 4-8. In making the cost effectiveness arguconsidered the City's arguments. It determined that: proximity was not significant because many licensees are headquartered far from their projects with no bad effect; theCongress intended that municipal preference not apply inrelicensing proceedings; NEW had experience with hydro-power projects which the City lacked, including operating theOconto Falls Project since 1992; both applicants had emergency plans; and although the City's projected cost effectiveness was 8.4 per cent greater than NEW's, forecasts ofeconomic benefits are considered comparable unless the difference is more than 20 per cent, see City of Augusta et al.,72 FERC p 61,114, at n.58 (1995). The Commission's determination that the City's application was essentially equal toNEW's is supported by substantial evidence. Also unconvincing is the City's argument that the Commission erroneously applied a first to file tie-breaker to grantNEW the license. First, the City asserts that section 4.37(b)of the Commission's regulations, 18 C.F.R. s 4.37(b), prohibits the Commission from using the first to file tie-breaker.6 __________ ment, the City preserved its specific arguments related to thatchallenge. See City of Vernon v. FERC, 845 F.2d 1042, 1047 (D.C.Cir. 1988). In addition, not until its Rehearing Order did theCommission weigh the City's increased recreation costs while allegedly failing to consider the City's lower financing costs. Therefore,the City had no opportunity to raise these points before its petitionfor judicial review. 6 18 C.F.R. s 4.37(b) provides: If two or more applications for ... licenses (not including applications for a new license under section 15 of the Federal Power Act) are filed ... the Commission will select between or among the applicants on the following bases: .... (b) If both of two applicants are either a municipality or a state, or neither of them is a municipality or a state, and the plans of the applicants are equally well adapted to develop, conserve, and utilize in the public interest the water re- sources of the region, taking into consideration the ability of each applicant to carry out its plans, the Commission will The Commission's interpretation of its regulations is entitledto substantial deference. See Associated Builders & Contractors, Inc. v. Herman, 166 F.3d 1248, 1254 (D.C. Cir. 1999). The City correctly notes that the Commission ruled, and thiscourt affirmed, that an orphan proceeding is governed bysection 15 of the FPA, see Oconto Falls, 141 F.3d at 674-75,and that section 4.37(b) is not applicable to a section 15 newlicense proceeding.7 From there, however, the City arguesthat no provision of section 4.37(b) may be applied in anyproceeding governed by section 15 of the FPA. But section4.37(b) is inapplicable only to proceedings for a new licenseunder section 15 of the Federal Power Act. 18 C.F.R.s 4.37 (emphasis added). Although an orphan proceeding isgoverned by section 15 of the FPA, it is not a new licenseproceeding under that section. Next, the City argues that the first to file tie-breaker isan impermissible retroactive policy change. According to theCity, the Commission is bound by its prior decision to denyany applicant or class of applicants a preference becausethe purpose of Congress was to place all applicants in arelicensing on an equal footing. Order No. 513, FERCStats. and Regs., p 30,854, at 31,443-445 (1989) (finding rulesof preference inappropriate in subsequent license proceedings). Order No. 513, however, does not address orphanedprojects and does not dispense with tie-breakers in all section15 proceedings. As we earlier determined, Congress neverenvisioned the problem of orphaned projects. The statute issimply silent on the subject.... Oconto Falls, 41 F.3d at677. Similarly, Commission precedent is silent on orphaned __________ favor the applicant with the earliest application acceptance date. The Commission has held that section 4.37(b) applies where, ashere, one applicant is a non-municipality and the other applicant is amunicipality ineligible for the section 7(a) municipal preference. See Idaho Water Resource Bd., 84 FERC p 61,146, at n.14 (1998). 7 18 C.F.R. s 4.37 is inapplicable to new license [applications]under section 15 of the Federal Power Act. projects. Its action here, therefore, does not constitute aretroactive policy change. More plausible, but still unconvincing, the City argues thatthe first to file tie-breaker is unfairly prejudicial becausethe Commission's delay in granting the City's petition toobtain WEPCO's ICP prevented it from filing its applicationbefore NEW filed. The City's argument, however, assumesthat it had the same right to WEPCO's ICP as did NEW. Infact the City's rights significantly differed from NEW's. When NEW's offer to buy the Oconto Falls Project fellthrough, WEPCO hired NEW to operate the project. NEW's access to WEPCO's ICP arose from its contractualrelationship with WEPCO, a relationship which the City hadevery right to seek but failed to pursue. As the Commissionrecognized, the City was free to bid on the project, when[WEPCO] solicited offers. License Order, 81 FERC at61,984. The City will not be heard to complain now. Not to be deterred, the City also attacks NEW's agencyrelationship with WEPCO, arguing that WEPCO improperlyacted as a co-applicant in violation of 18 C.F.R. s 16.25. While section 16.25 precludes a previous license holder suchas WEPCO from filing a license application in response to theCommission's notice soliciting applications, it does not address co-applicant status.8 The Commission appropriatelydetermined that neither the FPA nor its own regulationsprohibited WEPCO from conditionally selling the OcontoFalls Project to NEW, from hiring NEW as its operatingagent or from initially refusing to provide the City with theICP. While an agency relationship may provide some advantages in filing a license application, it does not constitute a coapplicant relationship in violation of section 16.25. See License Order, 81 FERC at 61,984. For the foregoing reasons, we conclude that the Commission did not err in granting NEW a license to operate the __________ 8 When a project becomes orphaned, the Commission is requiredto publish a notice soliciting applications from potential applicantsother than the existing licensee. 18 C.F.R. s 16.25. Oconto Falls Project and, accordingly, both WDNR's and theCity's petitions for review are Denied.