Opinion ID: 6320167
Heading Depth: 1
Heading Rank: 3

Heading: Ill Com. II, 756 F.3d at 565).

Text: LIPA and Linden contend that the Settlement Order and its hybrid allocations are likewise arbitrary. We disagree.
FERC may approve a contested settlement “if the record contains substantial evidence upon which to base a reasoned decision or the Commission determines there is no genuine issue of material fact.” 18 C.F.R. § 385.602(h)(1)(i). FERC reads this language to allow approval when the “overall result of the settlement is just and reasonable,” even if “individual aspects” of it “may be problematic.” Trailblazer Pipeline Co., 11 85 FERC ¶ 61,345, 62,342 (1998). In that circumstance, FERC must further conclude that the challenger “would be in no worse position” under the settlement “than if the case were litigated.” Trailblazer Pipeline Co., 87 FERC ¶ 61,110, 61,439 (1999). FERC found each of the three hybrid cost allocations here to be just and reasonable, but it also invoked the Trailblazer framework and found that LIPA and Linden would not have been better off litigating the merits. We uphold all these findings, which is more than enough to justify the overall settlement. 1 FERC adequately justified its approval of each formula. Start with the going-forward formula, which allocates costs through a mix of the postage-stamp and flow-based methods. FERC approved the formula based on reasoning in its 2013 Compliance Order, which had approved the same formula for future high-voltage transmission projects. Settlement Order, 163 FERC ¶ 61,168, P 39; Rehearing Order, 169 FERC ¶ 61,238, PP 41–45. Doing so was not arbitrary. As FERC had earlier explained, the postage-stamp component takes account of “the full spectrum of benefits associated with high-voltage facilities, including difficult to quantify regional benefits” such as improved reliability, reduced congestion, and greater carrying capacity. Compliance Order, 142 FERC ¶ 61,214, P 414. We too have recognized that high-voltage transmission systems provide “significant regional benefits” to the PJM network. Old Dominion, 898 F.3d at 1260. As for the flowbased component, FERC reasonably looked to usage data as a proxy for specific benefits—in other words, it looked to this data “to identify the subset of customers that benefit from a 1 We thus need not consider whether FERC may approve a settlement without addressing the merits of each contested rate, even though the Federal Power Act requires “[a]ll rates and charges made” to be just and reasonable, 16 U.S.C. § 824d(a). 12 facility simply through electrical proximity.” Compliance Order, 142 FERC ¶ 61,214, P 417. And FERC’s decision to approve a hybrid formula incorporating both measures was undoubtedly reasonable given the various benefits of highvoltage facilities. Indeed, it is compelled by precedents finding it arbitrary either to ignore local benefits by using a pure postage-stamp method (Illinois Commerce) or to ignore regional benefits by using a pure flow method (Old Dominion). As for the selection of a 50:50 ratio for the hybrid formula, the materials we have cited make clear that regional and local benefits are both substantial, thus requiring a significant weight for each component of the formula. And any debate over the choice between a 50:50 ratio and, say, a ratio of 60:40 one way or the other would “amount to a quibble about exacting precision,” rather than “a wholesale departure from the costcausation principle.” Old Dominion, 898 F.3d at 1261 (cleaned up). The historical formula follows neatly from the goingforward formula. As FERC explained, the historical formula requires adjustments to approximate the cost allocations that would have occurred had PJM applied the going-forward formula from the start of each Vintage Project. Settlement Order, 163 FERC ¶ 61,168, P 40; Rehearing Order, 169 FERC ¶ 61,238, P 48. LIPA and Linden do not challenge this finding. And because the going-forward formula reasonably matches costs to benefits, so does the historical formula. Finally, FERC reasonably approved the cancelled-projects formula. For these projects, there was no ongoing usage data to support application of the flow-based method. Unable to measure changing usage over time, the parties substituted the violation method to measure which utilities caused the reliability violations that necessitated the projects. Settlement Order, 163 FERC ¶ 61,168, P 45; Rehearing Order, 169 FERC 13 ¶ 61,238, P 52. Under the circumstances, that was a reasonable way to assess usage issues, for the cost-causation principle compares costs to “the burdens imposed or the benefits drawn” by individual utilities. Midwest ISO Transmission Owners, 373 F.3d at 1368. And as explained above, the 50:50 weighing of local burdens and benefits (as measured by the violation method) and regional benefits (as measured by the postagestamp method) was also reasonable. Our determination that each formula in the settlement is just and reasonable is reason enough to uphold it, but we also note that FERC reasonably concluded LIPA and Linden would not have done better through litigation. The challengers do their best to obscure this point, but what they seek is application of a pure postage-stamp method—or at least a hybrid formula with a more heavily weighted postage-stamp component. The Seventh Circuit has twice set aside a pure postage-stamp formula for the Vintage Projects. We have little doubt that, if faced once again with a pure or almost pure postage-stamp formula, it would call strike three.
LIPA and Linden make several attacks on FERC’s reasoning, but none is persuasive. First, LIPA and Linden contend that the settlement violates Illinois Commerce II, which they say requires a costbenefit analysis to quantify project benefits. It does not. The Seventh Circuit discussed cost-benefit analysis at length, but its holding was narrower. The court set aside the postagestamp method because, in treating all benefits as regional, it was “guaranteed to overcharge the western utilities” and to produce a “grossly disproportionate” cost allocation. 756 F.3d at 561, 564–65. As we later explained, the Illinois Commerce decisions hold that a postage-stamp regime goes “too far” in 14 weighing regional benefits over local ones, but “nothing in those decisions casts doubt on” FERC’s view that high-voltage projects have substantial regionwide benefits. Old Dominion, 898 F.3d at 1261. And given that view, FERC had at least “an articulable and plausible reason to believe” that a hybrid, 50:50 formula would make project costs “at least roughly commensurate with” project benefits—which is good enough under Illinois Commerce II. See 756 F.3d at 562 (cleaned up). Second, LIPA and Linden contend that FERC could not approve the going-forward formula simply because it matches the one used for new high-voltage projects. Instead, they contend, the Commission had to separately consider the formula as applied to each Vintage Project. But while FERC may create different rules for different kinds of projects, see Pub. Serv. Elec. & Gas Co. v. FERC, 989 F.3d 10, 18 (D.C. Cir. 2021), “a regulator need not always carve out exceptions for arguably distinct subcategories of projects,” Old Dominion, 898 F.3d at 1262. Nor must a regulator always consider costallocation rules on a project-by-project basis, which would unravel the framework of ex ante tariffs established by Order No. 1000 and approved by this Court. S.C. Pub. Serv. Auth. v. FERC, 762 F.3d 41, 82–83 (D.C. Cir. 2014). Instead, FERC must ensure only that there is “some resemblance” between costs and benefits. Pub. Serv. Elec. & Gas Co., 989 F.3d at 13– 14. And without evidence that the Vintage Projects are different from other high-voltage transmission facilities within PJM, the Commission could reasonably extend to the Vintage Projects the previously approved, unchallenged formula that now generally governs newer projects. 2 2 Linden has filed a separate challenge to that formula as applied to two of the newer projects. Consol. Edison Co. v. FERC, No. 15-1183 (D.C. Cir. filed June 25, 2015). We express no view on the merits of that case. 15 Third, LIPA and Linden contend that the Settlement Order failed to explain what they characterize as a departure from the decision to make the Compliance Order purely prospective. The Compliance Order applied to projects approved after January 2013, and it stated that “administrative complications created by implementing the hybrid method should be limited, since this method will apply on a prospective basis only.” 142 FERC ¶ 61,214, P 433. But the order did not disfavor any further applications of the same formula. Instead, it stressed that the Order No. 1000 compliance process remained ongoing, and the governing formulas remained subject to change. Id. PP 431–32. So there was no inconsistency when FERC, after five years of experience with the hybrid formula, allowed the parties to extend it to the Vintage Projects. See Settlement Order, 163 FERC ¶ 61,168, P 39. Nor was there any lack of explanation on this point. As FERC later noted, the Compliance Order’s “prospective application” did “not preclude the parties and the Commission from using a just and reasonable cost method in a settlement to resolve a remanded proceeding.” Rehearing Order, 169 FERC ¶ 61,238, P 46. Fourth, LIPA and Linden contend that the Settlement Order impermissibly departed from the 2012 Remand Order, which rejected the violation method “as the sole basis for allocating costs” of high-voltage projects. 138 FERC ¶ 61,230, P 37. That decision reasoned that the violation method does not account for either (1) the specific benefits that utilities receive from using the facilities over time or (2) the facilities’ regionwide benefits. Id. PP 37–47. In approving the settlement, FERC reasonably addressed both points. As it explained, accounting for ongoing usage over time is impossible for cancelled projects, and the postage-stamp component of the hybrid formula adequately accounts for regionwide benefits. Settlement Order, 163 FERC ¶ 61,168, P 45; Rehearing Order, 169 FERC ¶ 61,238, P 54. 16 Finally, LIPA and Linden contend that FERC prevented them from contesting the settlement in a live hearing. But FERC has discretion to resolve disputed issues on a written record. Minisink Residents for Envt’l Pres. & Safety v. FERC, 762 F.3d 97, 114 (D.C. Cir. 2014). Here, the Commission relied on the extensive written records compiled in this proceeding and in the Order No. 1000 compliance proceeding. Moreover, LIPA and Linden had ample opportunity to object through written submissions, which they did in nearly 20 filings including five expert affidavits. FERC did not abuse its discretion in approving the settlement on a written record.