Opinion ID: 19840
Heading Depth: 2
Heading Rank: 2

Heading: FERC's Consideration of EPE's Evidence

Text: 18 Although the Act authorizes FERC to order EPE to sell power to the City if doing so is in the public interest, we believe that FERC improperly refused to take into consideration evidence that the potential condemnation might impair EPE's ability to serve its other customers. During FERC's summary proceedings, EPE submitted evidence indicating that the City's planned condemnation and severance could impair EPE's ability to render adequate service to its customers outside of Las Cruces and could impose an undue burden upon EPE. In the Order, FERC reasoned that EPE's evidence concerning potential adverse effects of condemnation was not relevant insofar as the proper forum for addressing such concerns is the condemnation proceeding. See Order, 86 FERC 61,253. In denying EPE's motion for rehearing, FERC reiterated its irrelevance argument. See Rehearing Order, 87 FERC at 61,874. We believe that this failure to address adequately EPE's reliability concerns was arbitrary and capricious. 19 Even if an agency's interpretation meets Chevron muster, the Administrative Procedure Act (the APA) authorizes us to reverse an agency's actions if it acted arbitrarily or capriciously in adopting its interpretation by failing to give a reasonable explanation for how it reached its decision. Public Util. Counsel, 183 F.3d at 410 (citations omitted). This includes a determination of 'whether each of the order's essential elements is supported by substantial evidence', and whether the agency 'abused or exceeded its authority.' Gulf States Util. Co. v. Federal Energy Regulatory Comm'n, 1 F.3d 288, 291 (5th Cir. 1993) quoting In re Permian Basin Area Rate Cases, 390 U.S. 747, 790, 792, 88 S.Ct. 1344, 20 L.Ed.2d 312 (1968). Moreover, this inquiry requires us to evaluate whether or not the agency has given reasoned consideration to the evidence before it. See Gulf States, 1 F.3d at 291 quoting Borden, Inc. v. Federal Energy Regulatory Comm'n, 855 F.2d 254, 258, 259 (5th Cir. 1988). 20 In the Order, FERC listed three reasons why granting the City's request was in the public interest: [EPE] will be fully and fairly compensated, there will be no undue burden on [EPE] or impairment of its ability to provide adequate service to its other customers, and the service we are ordering is only temporary to allow Las Cruces to complete its extensive efforts . . . to arrange an alternative source of supply. Order, 86 FERC at 61,253. In the Rehearing Order, FERC added that the City's ultimate objective of reducing the cost of electricity for its citizens when balanced against the adequate compensation afforded to EPE yields a fourth reason why this sale is in the public interest. See Rehearing Order, 87 FERC at 61,874. Indeed, FERC goes so far as to say that these potential cost savings are in the public interest regardless whether subsequent developments may prevent the achievement of this objective. See id. 21 For FERC to insist that considering the potential disadvantages of condemnation is premature while at the same time citing to the potential advantages of condemnation is hardly reasoned consideration of the evidence before it. FERC's insistence that there will be no undue burden on EPE or impairment of its services to other customers rests on its assertion that these effects would occur, if at all, only as a result of the City leaving EPE's powersupply system altogether. According to FERC, because the Order does not immediately result in such severance it does not pose a risk to EPE's ability to serve its customers. Such purposeful naivete does a grave disservice to EPE. The City has been clear in noting its intention to condemn EPE's facilities in Las Cruces and sever them from the remainder of EPE's system. The Order acknowledges that this is the City's objective. See Order, 86 FERC at 61,252. Condemnation and severance are likely results of the Order making the potential impact of these proceedings quite relevant to FERC's determination. 22 The City is seeking a firm source of power for no other reason than to proceed with its condemnation of EPE's distribution facilities. To categorize facilitating the condemnation as being in the public interest necessarily implies that the condemnation is in the public interest. Moreover, the City's objective of reducing the costs of its citizens' power is inextricably linked to the results of the condemnation proceeding. The City cannot distribute the purchased energy without condemning EPE's distribution network. Thus FERC bases its decision upon a result that could come about only through condemnation. We cannot allow FERC to rely on the potential advantages of condemnation to bolster its public interest findings while ignoring the potential disadvantages of the same proceedings. 23 At the very least, EPE's evidence concerning the effects of condemnation and severance could create a genuine issue of material fact concerning whether or not the Order is in the public interest and/or otherwise inconsistent with section 202(b). Under FERC's rules this would require more than the summary proceedings FERC engaged in here. See 18 C.F.R. 385.217(b). FERC's refusal to consider EPE's evidence on this matter leaves the question open as to the existence of an issue of material fact warranting an evidentiary hearing. As we are not charged with determining what constitutes a issue of material fact in this context, we leave it to FERC to decide whether or not a hearing is appropriate based upon the parties' submissions. 24 Ultimately, FERC's arbitrary refusal to evaluate relevant evidence concerning potential reliability problems resulting from the City's proposed condemnation of EPE's distribution facilities violates both the APA and possibly FERC's own procedural rules. Accordingly, we REVERSE both orders to the extent that they are inconsistent with this opinion and REMAND for further proceedings consistent with this opinion. 25 AFFIRMED in part, REVERSED in part, and REMANDED.