Opinion ID: 4270493
Heading Depth: 2
Heading Rank: 3

Heading: Interpreting the 2015 FERC Order

Text: When interpreting an order, we start with the order. What does it say? What, on its face, does it do? ETI seeks to convince us that FERC’s order retroactively reallocates 2007 Bandwidth Payments, but the order simply says nothing about that. The word “reallocation” is not used; nor is any synonym or functionally equivalent phrasing. There are no broad statements from which an objective reader can infer any intent to retroactively reallocate the 2007 Bandwidth Payments. And there are no statements shedding light on a supposed need or motivation to do so. ETI’s position looks suspect already. FERC was specific about what its order does. Most basically, the order approves ETI’s compliance filing. 151 FERC ¶ 61112, 61698 (“Entergy’s compliance filing is accepted.”). Indeed, assessing the acceptability of the compliance filing was the order’s raison d’être. This observation raises two question. First, with its filing, what did FERC order with respect to Entergy’s compliance filing? (If FERC had previously ordered a retroactive reallocation, then we have our answer.) Second, did Entergy’s compliance filing itself purport to effect a retroactive reallocation? (If so, FERC’s acceptance of the filing would likely establish a retroactive reallocation, even if FERC had not previously contemplated such a measure.) If the answers to these questions do not point to a retroactive reallocation, then ETI is left with the difficult task 11 Case: 17-50042 Document: 00514447565 Page: 12 Date Filed: 04/26/2018 No. 17-50042 of persuading us that the 2015 FERC Order somehow effectuated a retroactive reallocation by the way. 1. FERC’s orders requiring the Entergy compliance filing did not call for a retroactive reallocation of 2007 Bandwidth Payments. As noted already, the bandwidth formula remained in flux for years after the 2007 Bandwidth Payment had been made, meaning the initial payment had necessarily been calculated incorrectly. Once FERC got the formula ironed out, it became clear that two Entergy Operating Companies needed to make further payments to achieve rough cost equalization. FERC ordered Entergy to submit a single filing that would “comply with” its “final orders regarding the annual bandwidth calculations pending in numerous dockets.” 148 FERC ¶ 61085, 61514 (July 31, 2014). The formal directive was: to file, within 45 days of this order, a comprehensive bandwidth recalculation report showing the updated payments and receipts based on the 2006 and 2007 calendar year data in compliance with all bandwidth formula and bandwidth calculation adjustments that the Commission accepted or ordered, effective as of June 1, 2007 and June 1, 2008, respectively, along with supporting calculations for each identified adjustment. Id. at 61514. In its briefing, ETI points us to the words “comprehensive” and “recalculation.” But those words don’t help its cause. FERC required a comprehensive compliance filing because it was allowing Entergy to comply with several orders in one submission. And FERC required a recalculation because a recalculation was patently necessary in light of its rulings that changes to the bandwidth formula impacted the original calculations. FERC did not order Entergy to submit a compliance filing retroactively reallocating 12 Case: 17-50042 Document: 00514447565 Page: 13 Date Filed: 04/26/2018 No. 17-50042 the 2007 Bandwidth Payments, and its subsequent acceptance of the compliance filing did not perforce achieve such an outcome. 5 ETI’s reading of the procedural history is different. ETI places great importance on an alleged 2007 FERC statement that the initial Bandwidth Payments were approved “expressly subject to revision and refund.” From this, ETI contends that the initial calculation was subject to a complete do-over, which occurred in 2015. Even if ETI accurately described FERC’s 2007 statement, use of the word “revision” would be a thin reed upon which to hang its reallocation arguments. But in fact FERC never said that its initial allocation decision was subject to revision and refund, which explains ETI’s telling failure to quote the cited FERC order. Rather, FERC stated that its initial decision was simply “subject to refund.” 120 FERC ¶ 61094, 61536. ETI’s attempt to rewrite the FERC order speaks volumes, and there is no textual support for its assertion that the initial determination was effectively tentative. FERC’s actual 2007 phrasing favors PUCT and TIEC, who are arguing that the 2015 FERC Order resolved only the issue of “refunds and surcharges.” The process they describe—an initial payment followed by a trueup years later—is consistent with FERC’s original approval “subject to refund.” 120 FERC ¶ 61094, 61536. We have located only one FERC statement that favors ETI. In the July 31, 2014 order already discussed, FERC said that “now is the appropriate time for Entergy to recalculate and reallocate the bandwidth payments and receipts among the Operating Companies.” 148 FERC ¶ 61085, 61514 (emphasis added). Here we have the word reallocate, but its use does not necessarily 5To illustrate, in another FERC order accepting an Entergy compliance filing, FERC stated that the filing contained a “comprehensive bandwidth recalculation report showing the payment/receipt amounts based on 2009 test year data, including all workpapers.” 156 FERC ¶ 61195 (Sept. 22, 2016). This language is nearly identical to the language used in the 2015 FERC Order. It is not indicative of an extraordinary retroactive reallocation. 13 Case: 17-50042 Document: 00514447565 Page: 14 Date Filed: 04/26/2018 No. 17-50042 indicate an intent that Entergy conduct a retroactive reallocation as opposed to a supplemental true-up process with no retroactive effect. Both processes could be said to involve a reallocation. In any event, FERC used the word only in passing. When it came time to issue a specific directive, the word is conspicuously absent. FERC’s detailed formal instruction—quoted above— does not include a mandate to “reallocate” payments and receipts. See id. 2. Entergy’s compliance filing did not contain a retroactive reallocation that FERC approved in the 2015 FERC Order. Given that FERC accepted Entergy’s compliance filing, then (notwithstanding its instructions regarding the scope of that filing) perhaps ETI would prevail if its compliance filing included a retroactive reallocation. The compliance filing did no such thing. FERC itself described the substance of the relevant document: “Entergy’s compliance filing consists of the recalculation of the true-up payments and receipts based on 2006 test year data and supporting workpapers for each identified adjustment, along with the applicable interest calculation through September 24, 2014, the date the payments and receipts will be made among the Entergy Operating Companies.” 151 FERC ¶ 61112, 61698 (emphasis added). This description is inconsistent with Entergy’s claim that its filing “consisted of the recalculation and reallocation of” 2007 Bandwidth Payments. 6 But it corresponds with the account put forth by PUCT and TIEC. Our examination of Entergy’s compliance filing likewise fails to unearth a hidden retroactive reallocation of 2007 Bandwidth Payments. 7 The 6The phrase “recalculation and reallocation” occurs at least five times in ETI’s brief. But Entergy never used the phrase prior to this litigation. 7 ETI makes much of the fact that neither TIEC nor any other party “protested the bandwidth formula recalculation amounts.” But if this lack of protest is relevant, it only demonstrates that no party even conceived of the possibility that Entergy’s bandwidth compliance filing included a retroactive reallocation of already-litigated-and-paid 2007 Bandwidth Payments. Similarly, the fact that neither PUCT nor TIEC challenged the 2015 14 Case: 17-50042 Document: 00514447565 Page: 15 Date Filed: 04/26/2018 No. 17-50042 compliance filing describes itself as a mere “bandwidth recalculation report” or “recalculation report.” 8 The bulk of the filing is a series of substantive explanations. Thus, headings “A” through “H” describe various accounting methods and decisions in a high level of detail. Despite this granular explanation, the compliance filing nowhere mentions any sort of retroactive reallocation. If the filing did contain a retroactive reallocation, it would presumably be found in Section III of the document, titled “Comprehensive Calculation of the Bandwidth Payments and Receipts.” This section is the original source of the table that later appeared in the 2015 FERC Order. According to Entergy’s compliance filing, the table does not represent a retroactive reallocation of 2007 Bandwidth Payments and instead simply summarizes “remaining or true-up amounts” to be allocated in light of the recalculation. In this section of the filing, Entergy also explains that Entergy Gulf States’ share is being “allocate[d]” between ETI and EGSL according to a predetermined method. But, again, no mention of reallocation. Having reviewed Entergy’s filing, we conclude that FERC’s acceptance of the document did not necessarily effectuate a retroactive reallocation of 2007 Bandwidth Payments. 3. The 2015 FERC Order does not retroactively reallocate 2007 Bandwidth Payments FERC Order only lends credence to their present contention that the order is copacetic and that PUCT’s order adheres. ETI’s characterization of the PUCT order as “an improper collateral attack on FERC’s final decision” is not sensible. 8 Indeed FERC’s characterization of the compliance filing comes from the filing itself, which states: “The instant compliance filing consists of the recalculation of the true-up payments and receipts based on 2006 test year data and supporting workpapers for each identified adjustment, along with the applicable interest calculation through September 24, 2014.” Compare that description with the description ETI now provides on appeal: “Entergy’s filing consisted of the recalculation and reallocation of the Bandwidth payments and receipts based on 2006 test period cost data and supporting workpapers for each identified adjustment, along with the applicable interest calculation from June 1, 2007 through September 24, 2014.” (Emphasis added.) Entergy’s pre-litigation description is helpful, and in its own way, so is the tell-tale revision on appeal. 15 Case: 17-50042 Document: 00514447565 Page: 16 Date Filed: 04/26/2018 No. 17-50042 Here is what we know so far: FERC did not ask for a compliance filing that performed a retroactive reallocation of the 2007 Bandwidth Payments, and the compliance filing FERC approved contained no such reallocation. ETI cannot point to any clear FERC statement imposing a retroactive reallocation, and the measure is not necessary to achieve FERC’s goal of roughly equalizing the Operating Companies’ productions costs on a prospective basis. See 137 FERC ¶ 61029 P.157 (explaining that Bandwidth Payments “occur prospectively”). Lastly, Entergy did not ask for a retroactive reallocation, and no party made it an issue before FERC. Nonetheless, ETI says the retroactive reallocation is there on the face of the order. For this proposition, ETI relies almost entirely on the order’s inclusion of the table listing $41.3 million as the “Total 2007 bandwidth (payments)/receipts including interest.” Here we have the retroactive reallocation of the 2007 Bandwidth Payments, or so says ETI. We now consider that claim. As already seen, Entergy created the table, and FERC reproduced it in the 2015 FERC Order. The table does list $41.3 million as the “Total 2007 bandwidth (payments)/receipts including interest.” But this table was not created in a vacuum and cannot be interpreted in a vacuum. In light of the context already provided, we will not hastily conclude that Entergy hid a dramatic retroactive reallocation in plain sight, nor that FERC blessed it. What is this table and what does each column represent? In its order, FERC described the table as a summary of “the remaining or true-up amounts to be paid/received on September 24, 2014.” If that is what this table is, then only its third column is operative, for that is the column that documents the “Remaining 2007 bandwidth amounts to be (paid)/received.” Under this reading, the district court was correct in dubbing the middle column “merely an accounting assumption,” and it erred by failing to recognize that the 16 Case: 17-50042 Document: 00514447565 Page: 17 Date Filed: 04/26/2018 No. 17-50042 adjacent column also contained a mere accounting assumption. The last column is substantive; the other columns show the math. There is nothing strange about using hypothetical inputs to determine ETI and EGSL’s share of the remaining Bandwidth Payments seeing as how they did not exist in 2007 to receive the initial Bandwidth Payments. Because neither ETI nor EGSL actually received a 2007 Bandwidth Payment, FERC had to assign them a hypothetical share of the original $120.1 million payment to determine what portion of the remaining true-up each should receive. This does not mean there was some sort of retroactive reallocation with consequences far outreaching FERC’s objective or Entergy’s compliance task. We are satisfied that the table does not call for a retroactive reallocation of 2007 Bandwidth Payments. Indeed, this entire dispute ultimately boils down to whether the table is a summary of “the remaining or true-up amounts to be paid/received on September 24, 2014,” or whether it is instead a summary of “the comprehensive recalculation/reallocation of 2007 Bandwidth Payments and remaining or true-up amounts to be paid/received on September 24, 2014.” On its face, the FERC order declares that it is the former. Other textual clues abound. The 2015 FERC Order recounts that Entergy first calculated “the incremental 2006 bandwidth receipts due” and then allocated Entergy Gulf State’s share between ETI and EGSL. 151 FERC ¶ 61112, 61699. And the order distinguishes between “original bandwidth payments and receipts” previously at issue and the associated “refunds and surcharges” presently at issue. Id. at ¶ 61701 (“[W]hile the original bandwidth payments and receipts in 2007 for the 2006 test year involved Entergy Gulf States, . . . any refunds and surcharges associated with the 2007 bandwidth payments and receipts now must reflect the current members of the System Agreement . . . .”). Thus, the order does not resolve issues relating to the “original bandwidth payments” and merely addresses remaining “refunds and 17 Case: 17-50042 Document: 00514447565 Page: 18 Date Filed: 04/26/2018 No. 17-50042 surcharges,” which it “allocate[s].” Id. These features conform precisely to PUCT’s and TIEC’s shared interpretation. ETI’s textual quiver has but one remaining arrow. It, too, misses the mark. ETI contends that the 2015 FERC Order must represent a “redo” of the 2007 Bandwidth Payments because the accepted compliance filing was to be deemed “effective as of June 1, 2007.” The June 1, 2007 effective date is no more consistent with a retroactive reallocation than it is with an allocation of true-up payments. Here, the effective date was used to calculate interest. See id. at 61698 (noting that FERC’s order requiring the compliance filing “directed that interest be included with the bandwidth payments/receipts made pursuant to the comprehensive recalculation from June 1, 2007”). It does not establish a retroactive reallocation of past receipts. In summation, our review of the 2015 FERC Order and its underlying orders and filings persuades us that its effect was merely to distribute true-up Bandwidth Payments among the Operating Companies entitled to receive them. 9 There was no retroactive reallocation of past Bandwidth Payments. D. PUCT’s Order Is Consistent with the 2015 FERC Order In the ordinary course an Operating Company receiving a Bandwidth Payment passes the benefit through to customers, thus ensuring reasonable, nondiscriminatory rates. And so it was here. The 2015 FERC Order entitled ETI to an additional $10.9 million Bandwidth Payment for the 2006 test year. PUCT’s straightforward reading of the order was that the Bandwidth Payment was an “incremental” or further payment that had to be passed along to customers. We affirm the rightness of this reading today. 9 PUCT has additional arguments—an argument invoking the presumption against preemption and an argument premised on stipulations ETI entered into when settling its lawsuits against PUCT in 2009. We do not need to reach these arguments to render our decision, and so we do not address them. 18 Case: 17-50042 Document: 00514447565 Page: 19 Date Filed: 04/26/2018 No. 17-50042 In 2009, FERC recognized that PUCT’s pass-through order properly “accept[ed] the Commission’s determination of the amount of receipts to be distributed to” Entergy Gulf States under the filed rate. 127 FERC ¶ 61126, 61548. The same is true of the order we review today. PUCT has accepted FERC’s determination of the amount of receipts to be distributed to ETI under the filed rate. It had authority to order that same sum passed along to customers pursuant to routine procedure. There is no conflict.