Opinion ID: 2790973
Heading Depth: 3
Heading Rank: 2

Heading: Failure to Preserve on Rehearing

Text: Joint Intervenors also argue that New York Petitioners waived their challenges to the Zone Orders—with the exception of the argument that New York transmission initiatives made the creation of the Lower Hudson Valley Zone unnecessary—by failing to raise them in a petition for rehearing. FPA’s requirement that a party must raise its objections in a petition for rehearing “enables the Commission to correct its own errors, which might obviate judicial review, or to explain why in its expert judgment the party’s objection is not well taken, which facilitates judicial review.” Save Our Sebasticook, 431 F.3d at 381; see also ASARCO, Inc. v. FERC, 777 F.2d 764, 774‐75 (D.C. Cir. 1985) (examining the Natural Gas Act’s identical mandatory‐rehearing provision). Thus, to preserve an objection for judicial review, a party must raise it in a request for FERC rehearing “with ‘specificity.’” Allegheny Power v. FERC, 437 F.3d 1215, 1220 (D.C. Cir. 2006) (quoting Wisc. Power & Light Co. v. FERC, 363 F.3d 453, 460 (D.C. Cir. 2004)). Joint Intervenors point to two objections in particular that they claim New York Petitioners did not preserve: (1) that FERC failed to quantify consumer price impacts and (2) that the creation of the Lower Hudson Valley Zone was not necessary to maintain reliability. We agree that that New York Petitioners failed to 29 raise the first of these objections with sufficient specificity in their petitions for rehearing. In its request for rehearing of the Zone Order, the NYPSC objected to FERC’s conclusion that the benefits of creating the Lower Hudson Valley Zone justified the zone’s costs. In essence, the NYPSC argued that FERC had identified only long‐term benefits from the creation of the Lower Hudson Valley Zone, because even assuming that the zone’s creation would eventually “incent new generation” there, those resources would not materialize for several years—particularly in light of state regulatory initiatives that (the NYPSC argued) would alleviate the transmission constraint identified by NYISO. J.A. 1076. Upon the creation of the new zone, however, consumer rates would increase immediately, so FERC’s failure to identify short‐term benefits of the new zone therefore suggested that the rate increases were unjustified. The NYPSC thus urged FERC to either delay or phase in the rate increases associated with establishing the new zone. But nowhere did it make the specific argument that New York Petitioners do now—i.e., that FERC was obliged to quantify the amount by which consumer rates would increase. See N.Y. Pet’rs’ Br. at 19 (“Despite FERC’s refusal to do so, the FPA requires that it quantify and review the extent of the possible price impacts to ensure that they fall within a reasonable 30 range of rates.”). Nor did the NYPSC raise this argument in seeking rehearing of the Demand Curve Order, when it also highlighted FERC’s failure to identify short‐term benefits from the Lower Hudson Valley Zone in light of ongoing state initiatives, and therefore urged FERC to have NYISO phase in the new zone’s demand curve. We do not intend to suggest that a petitioner may never, in seeking judicial review, supplement an argument raised in its request for rehearing by adding new nuances or framing the argument in a slightly different way. See, e.g., City of Oconto Falls v. FERC, 204 F.3d 1154, 1162 n.5 (D.C. Cir. 2000). But the NYPSC’s failure even to mention to FERC that quantifying price impacts was required led FERC (quite understandably) not to consider that question at all. For us to address New York Petitioners’ argument on the merits would therefore disserve the FPA’s purpose of enabling FERC to correct any error in its initial order or explain why, in its considered judgment, there was no error. Accordingly, we conclude that the quantification argument has not been preserved for our consideration. See Allegheny Power, 437 F.3d at 1220 (finding that an objection had not been preserved where it was not made specifically in the petitioner’s request for rehearing and did not elicit a response from FERC). In light of the foregoing discussion, however, we also conclude that New York Petitioners’ more general cost‐benefit argument—i.e., that 31 FERC failed to identify non‐speculative short‐term benefits of creating the Lower Hudson Valley Zone that would justify consumer rate increases—has been adequately preserved. Joint Intervenors also contend that New York Petitioners failed to preserve their argument that FERC improperly relied on reliability concerns to justify the creation of the Lower Hudson Valley Zone. In its request for rehearing of the Zone Order, the NYPSC raised reliability concerns only in connection with its argument that FERC should establish criteria for NYISO to determine when the Lower Hudson Valley Zone should be eliminated. It pointed out that, in the Zone Order, FERC justified the creation of the new zone based in part on the fact that reliability concerns required locating a certain amount of generation within the zone itself, so higher capacity prices would be justified based on the zone’s higher net cost of new entry vis‐à‐vis other zones. See Zone Order at P 26. The NYPSC argued that the “sustained price separation” contemplated by FERC was unjust, and asked FERC to prescribe a process for the elimination of the new zone. J.A. 1083. In the Zone Rehearing Order, however, FERC cited reliability concerns not only as a reason for tolerating price separation, but also in response to the NYPSC’s separate argument that the zone should be delayed or phased in: FERC claimed that the accurate price 32 signals created by the new zone would enhance short‐term reliability. Zone Rehearing Order at PP 13‐16. Perhaps for this reason, New York Petitioners now argue that FERC improperly cited reliability concerns to justify the immediate creation of the new zone—and not just to justify its refusal to require elimination criteria. New York Petitioners did not specifically argue on rehearing, as they do now, that FERC’s decision to create the Lower Hudson Valley Zone was erroneous because there was inadequate evidence of a reliability concern. Under the circumstances, however, this failure does not preclude us from addressing the merits of New York Petitioners’ argument. To the extent that there is error in FERC’s reliance on reliability concerns to justify the immediate establishment of the new zone—as opposed to a delay or a phase‐in—New York Petitioners specifically argued on rehearing that the new zone should be delayed or phased in, so the adequacy of FERC’s reasoning in rejecting that argument is properly before us. Similarly, to the extent that FERC cited reliability concerns in deciding not to establish elimination criteria for the new zone, that decision also was objected to on reconsideration, see 33 J.A. 1080‐83, so we may examine the adequacy of FERC’s explanation on that subject, too—including its reliance on reliability concerns.5