Court Opinion

ID: 6501078
Source: CourtListenerOpinion
Date Created: 2022-07-19 15:00:36.615574+00
Date Added: 2024-06-11T09:40:53.824817
License: Public Domain

United States Court of Appeals
         FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued November 10, 2021              Decided July 19, 2022

                       No. 20-1295

               XCEL ENERGY SERVICES INC.,
                      PETITIONER

                             v.

       FEDERAL ENERGY REGULATORY COMMISSION,
                    RESPONDENT

                Consolidated with 20-1426

              On Petitions for Review of Orders
       of the Federal Energy Regulatory Commission

     Bryan Killian argued the cause for petitioner. With him
on the briefs were Stephen M. Spina and Joseph Lowell.

    Lopa Parikh, Jeremy C. Marwell, Margaret E. Peloso, and
Matthew X. Etchemendy were on the brief for amicus curiae
Edison Electric Institute in support of petitioner.

     Jared Fish, Attorney, Federal Energy Regulatory
Commission, argued the cause for respondent. With him on
the brief were Matthew R. Christiansen, General Counsel, and
                               2
Robert H. Solomon, Solicitor. Susanna Y. Chu, Attorney,
entered an appearance.

    Before:   HENDERSON, MILLETT, and WALKER, Circuit
Judges.

    Opinion for the Court filed by Circuit Judge MILLETT.

     MILLETT, Circuit Judge: Electricity grids are natural
monopolies. To prevent utilities such as grid operators from
abusing their market power, Congress has given the Federal
Energy Regulatory Commission the responsibility to ensure
that rates and rules under its jurisdiction are “just and
reasonable[.]” 16 U.S.C. § 824d(a). The issue in this case is
whether the Commission reasonably used that authority to
reject a rule the agency found would risk favoring a vertically
integrated operator’s own power plants over those of its rivals.

     The Public Service Corporation of Colorado is a grid
owner and subsidiary of petitioner Xcel Energy Services, Inc.
(collectively, “PS Colorado”). The utility is vertically
integrated in that it both operates an electricity transmission
network and owns power plants that generate about 60% of the
power on its grid.

     In 2020, PS Colorado filed an application with the
Commission to change how it processes power plant requests
to interconnect—that is, to plug in—to its grid. Under
Commission rules, grid operators generally must consider
requests to connect on a first-come, first-served basis. PS
Colorado proposed a fast-track process for generators looking
to replace an existing power plant with a new one on the same
site. (By generators, we mean both power plants and owners
and developers of powers plants.) The company reasoned that
this fast-track process would avoid wasteful grid-impact
                                3
studies and would allow new power plants to join the network
more quickly. PS Colorado noted that the agency had granted
virtually identical requests filed by other grid operators.

     The Commission denied PS Colorado’s request. It held
that the proposal risked unduly preferring the company’s own
power plants over would-be entrants to its grid. While the
Commission had granted similar interconnection proposals in
the past, all of those had been filed by independent grid
operators, which are operators that do not also own generators
on their networks. The agency was less concerned in those
cases that the operator would have a reason to prefer some
generators over others.

     We hold that the Commission reasonably explained its
rejection of PS Colorado’s proposal. There was nothing
arbitrary or capricious about its decision to bar a vertically
integrated grid operator from adopting a rule that could favor
its own generators and so cement its dominant market position.
The Commission’s holding is consonant with decades of
agency policy reflected in orders upheld by the Supreme Court
and our court. The Commission also reasonably applied a
different rule to a vertically integrated grid operator than it did
to independent grid operators because vertically integrated
operators have distinct competitive incentives.

    We therefore deny the petitions for review.

                                I

                                A

    The Federal Power Act gives the Commission the
authority to regulate “both the transmission and the wholesale
marketing of electricity in interstate commerce” to protect the
public interest. Public Citizen, Inc. v. FERC, 7 F.4th 1177,
                               4
1182–1183 (D.C. Cir. 2021). In that capacity, the Commission
oversees prices for interstate electricity “and all rules and
practices affecting such prices.” FERC v. Electric Power
Supply Ass’n, 577 U.S. 260, 266 (2016).

     Section 205 of the Act mandates that electrical utilities’
rates and rules within the Commission’s jurisdiction be “just
and reasonable,” and it bars regulated utilities from “mak[ing]
or grant[ing] any undue preference or advantage to any person
or subject[ing] any person to any undue prejudice or
disadvantage[.]” 16 U.S.C § 824d(a), (b). Such utilities must
seek permission from the Commission to make any changes to
their rates or rules. Id. § 824d(d). A utility seeking a rate or
rule adjustment under Section 205 bears the burden of showing
that its proposal is just and reasonable. Emera Maine v. FERC,
854 F.3d 9, 24 (D.C. Cir. 2017).

                               B

                               1

     Throughout most of the 20th century, electricity in the
United States was generated, transmitted, and distributed by
vertically integrated monopolies.       See Midwest ISO
Transmission Owners v. FERC, 373 F.3d 1361, 1363 (D.C. Cir.
2004) (Roberts, J.). Prodded in part by parallel efforts in
Congress, in the mid-1990s the Commission undertook efforts
to boost competition in the market for wholesale electricity.
See Transmission Access Policy Study Group v. FERC, 225
F.3d 667, 682 (D.C. Cir. 2000) (per curiam), aff’d sub nom.
New York v. FERC, 535 U.S. 1 (2002). As part of that process,
the Commission determined that vertically integrated grid
operators were unduly discriminating against independent
generators. As owners of both transmission wires and power
plants, these grid operators had the incentive and ability to
favor their own generators over those of rivals either by
                               5
“refus[ing] to deliver energy produced by competitors or [by]
deliver[ing] competitors’ power on terms and conditions less
favorable than those they appl[lied] to their own
transmissions.” New York, 535 U.S. at 8–9.

     To redress that problem, the Commission’s Order No. 888
required grid operators to provide unaffiliated power plants
with equal access to their grids. See Promoting Wholesale
Competition Through Open Access Non-Discriminatory
Transmission Services by Public Utilities, 61 Fed. Reg. 21,540
(May 10, 1996) (“Order No. 888”). By “remedy[ing] undue
discrimination in access to the monopoly owned transmission
wires[,]” id. at 21,541, the Commission sought to promote
vigorous competition between generators.

     To ensure that generators received equal access to
transmission grids, the agency required operators to offer
standard terms and conditions for transmission service,
outlined in a pro forma tariff designed by the Commission.
Order No. 888, 61 Fed. Reg. at 21,618; Transmission Access
Policy, 225 F.3d at 682. The Commission permitted grid
operators to alter these standard terms only if they could show
that “such deviations are ‘consistent with, or superior to’ the
terms in the pro forma tariff.” Sacramento Mun. Util. Dist. v.
FERC, 428 F.3d 294, 296 (D.C. Cir. 2005) (quoting Order No.
888, 61 Fed. Reg. at 21,619). To further prevent market
abuses, the Commission encouraged utilities to hand over
control of their grids to independent system operators—that is,
neutral third parties that would have no reason to favor one set
of generators over another. Order No. 888, 61 Fed. Reg. at
21,551.

      Soon after issuing Order No. 888, the Commission
identified two additional roadblocks to open markets. First,
utilities were not employing independent system operators in
                              6
sufficient numbers, leaving “lingering opportunities for
transmission owners to discriminate in their own favor[.]”
Midwest ISO, 373 F.3d at 1364. Second, before a generator
could take advantage of the newly non-discriminatory
transmission rates, it had to connect to the grid. The
Commission was concerned that operators could use the
complex process of interconnecting to the grid to “favor[]
affiliated generators over independents[.]” National Ass’n of
Regul. Util. Comm’rs v. FERC, 475 F.3d 1277, 1279 (D.C. Cir.
2007).

     To address the first issue and “remove remaining
opportunities for discriminatory transmission practices[,]” the
Commission issued Order No. 2000, which offered more
inducements to grid owners to hand over control of their
networks to independent regional transmission organizations.
Regional Transmission Organizations, 65 Fed. Reg. 810, 811
(Jan. 6, 2000) (“Order No. 2000”); see also Public Util. Dist.
No. 1 v. FERC, 272 F.3d 607, 611 (D.C. Cir. 2001) (per
curiam). In this opinion, we will refer to independent regional
transmission organizations and independent system operators
collectively as “independent operators.”

     The Commission then turned to the problem of operators
favoring their own generators when considering grid
interconnection requests. See ESI Energy, LLC v. FERC, 892
F.3d 321, 324 (D.C. Cir. 2018). In 2003, the Commission
issued an order directing operators to adopt a standard set of
procedures for processing applications from generators to plug
in to the grid.         See Standardization of Generator
Interconnection Agreements & Procedures, 68 Fed. Reg.
49,846, 49,847 ¶ 2 (Aug. 19, 2003) (“Order No. 2003”); see
also National Ass’n, 475 F.3d at 1279 (upholding Order No.
2003); Standardization of Small Generator Interconnection
Agreements & Procedures, Order No. 2006, 70 Fed. Reg.
                               7
34,190 (June 13, 2005). The Commission explained that it was
issuing Order No. 2003 to:

    (1) [l]imit opportunities for Transmission Providers to
    favor their own generation, (2) facilitate market entry
    for     generation     competitors      by    reducing
    interconnection costs and time, and (3) encourage
    needed investment in generator and transmission
    infrastructure.

Order No. 2003, 68 Fed. Reg. at 49,848 ¶ 12.

     Under the standard procedures the Commission outlined in
its order, operators generally consider interconnection requests
on a first-come, first-served basis. See Order No. 2003, 68 Fed.
Reg. at 49,851 ¶ 35. Recognizing that vertically integrated
operators are more likely to play favorites among
interconnection applicants than are independent operators, the
Commission provided that vertically integrated operators
cannot deviate from the standard interconnection process
unless they show that their proposed changes are “consistent
with or superior to” the baseline rules. Id. at 49,850 ¶ 26.

     In contrast, the Commission considers independent
operators’ proposed changes to the interconnection process
under a more flexible approach called the “independent entity
variation” standard, which allows independent operators more
freedom “to customize [interconnection procedures] to meet
their regional needs.” Order No. 2003, 68 Fed. Reg. at 49,850
¶ 26; see also id. at 49,860 ¶ 147. Under the independent entity
variation standard, the Commission will approve variations
from the pro forma interconnection rules if they are “just and
reasonable and not unduly discriminatory[] and would
accomplish the purposes of Order No. 2003.” Interconnection
Queuing Practices, 122 FERC ¶ 61252, ¶ 13 n.10 (2008).
                              8
                              2

     Though the Commission believed that its standardized
interconnection process would reduce operators’ opportunities
to act anticompetitively, the agency recognized that it has
downsides. Some grids have long queues for interconnection
requests, leaving generators in the dark about when they can
start selling power and how much it will cost to join the
network. See Reform of Generator Interconnection Procedures
& Agreements, Order No. 845, 83 Fed. Reg. 21,342, 21,345
¶¶ 23–25 (May 9, 2018); Interconnection Queuing Practices,
122 FERC ¶ 61252, at ¶¶ 4, 15.

     The Commission has responded in several ways. Most
relevantly here, in 2008 the agency encouraged independent
operators to propose streamlined interconnection procedures.
Interconnection Queuing Practices, 122 FERC ¶ 61252, at
¶ 18; see also Order No. 845, 83 Fed. Reg. 21,342. Operators
answered the call, and several received Commission approval
to speed their review of certain generator projects. See, e.g.,
Midwest Indep. Transmission Sys. Operator, Inc., 124 FERC
¶ 61183, ¶¶ 41–42, 44 (2008). The Commission has also
signed off on similar modifications for vertically integrated
operators like PS Colorado as long as the changes have met the
requirement that they be “consistent with or superior to” the
Commission’s baseline pro forma rules. See Public Serv. Co.
of Colorado, 169 FERC ¶ 61182, ¶ 30 (2019).

     Independent operators also have asked the Commission to
allow a fast track for interconnection requests from
replacement generators, which are new facilities built on the
site of retired, previously interconnected plants. In 2019, the
Midcontinent Independent System Operator (“MISO”), an
independent operator running much of the grid in the corridor
between Manitoba, Canada to the north and Louisiana in the
                               9
south, proposed this approach. See Midcontinent Indep. Sys.
Operator, Inc., 167 FERC ¶ 61146, ¶ 8 (2019). MISO argued
that its proposal would lighten the interconnection backlog and
speed the construction of cheaper and more environmentally
friendly power plants. Id. at ¶¶ 5, 19.

     The Commission granted MISO’s request. Midcontinent,
167 FERC ¶ 61146, at ¶ 61. It found that fast tracking
replacement generators would avoid unnecessary costs and
duplicative grid-impact studies and would speed up entry of
more efficient power plants. Id. at ¶¶ 61–62. The agency held
that MISO’s proposal was not unduly discriminatory because,
“[i]n this circumstance,” owners of existing generators looking
to rebuild on the same site “are not similarly situated to
developers of new resources for the purpose of obtaining
interconnection service in MISO.” Id. at ¶ 63. That was so,
the Commission said, because unlike new plant developers,
existing generator owners have already shown how their
electrical generation will affect the grid and have already paid
for any necessary upgrades. Id. at ¶¶ 64–65.

                               C

                               1

     PS Colorado is a utility that operates more than 4,700
miles of transmission lines in Colorado and transmits
electricity for about 75% of the state’s population. See TRI-
STATE GENERATION & TRANSMISSION ASS’N, XCEL ENERGY, &
BLACK HILLS ENERGY, 10-YEAR TRANSMISSION PLAN FOR THE
STATE OF COLORADO 50–51 (2020). Besides running the grid,
the company also owns the generators that produce about 60%
of the electricity on its network. See Public Serv. Co. of
Colorado, 171 FERC ¶ 61115, ¶ 36 (2020) (“May Order”)
(J.A. 61).
                               10
    In March 2020, PS Colorado filed a request with the
Commission to, as relevant here, create a streamlined process
for replacement generators that was modelled on MISO’s.
Under PS Colorado’s proposal, a replacement generator would
be eligible to avoid the interconnection queue if, among other
things, it is built on the same location as the previous generator
and, generally speaking, will burden the grid no more than its
predecessor plant. See May Order ¶¶ 11–18 (J.A. 53–55); J.A.
8–9, 22.

     PS Colorado argued that its plan is “consistent with or
superior to” the pro forma interconnection rules. J.A. 11. It
asserted that the benefits the Commission had recognized for
MISO’s replacement generator program applied with full force
to its plan: The new fast track would increase transparency in
the replacement process, speed up the general interconnection
queue, and avoid wastefully delaying replacement generators.
PS Colorado asserted that the proposal would reduce
opportunities for discrimination by stating clearly how it would
consider replacement requests. The utility also insisted that, as
the Commission had recently concluded, new and existing
generators are not similarly situated, and so it was not unduly
discriminatory for PS Colorado to treat them differently.

                                2

     In May 2020, the Commission rejected PS Colorado’s
proposal. May Order ¶ 1 (J.A. 49). The Commission
concluded that the utility’s proposal was not “consistent with
or superior to” the baseline rules in the pro forma tariff because
it could allow a “more favorable interconnection process for
[its] own generation and make it more difficult for its
generation competitors to enter the market.” Id. ¶¶ 34–35 (J.A.
61). That, according to the Commission, could give PS
Colorado’s own power plants an undue preference and frustrate
                                11
Order No. 2003’s goals of “limit[ing] opportunities for
transmission providers to favor their own generat[ors] and
* * * facilitat[ing] market entry for generation competitors[.]”
Id. ¶ 35 (J.A. 61).

      The agency elaborated that PS Colorado owns power
plants generating most of the energy on its grid, and the utility’s
plan would help its own generators retain their valuable
transmission capacity and ward off potential competitors. May
Order ¶¶ 36–37 (J.A. 61). The Commission noted that, under
its standard interconnection rules, when an existing generator
retires, the bandwidth on the grid it had occupied can be made
available for a new generator. But under PS Colorado’s plan,
the retiree’s transmission capacity would instead likely be
locked up by incumbent generator owners, the largest of which
is PS Colorado itself. See id.

     The Commission explained that its grant of MISO’s
analogous proposal did not require granting PS Colorado’s
because MISO is an independent operator that “does not own
generating facilities[,]” and so, unlike PS Colorado, MISO
does not “have an incentive to obstruct independent generation
from accessing the grid.” May Order ¶ 38 (J.A. 62). For that
same reason, approval of MISO’s proposal was provided under
the less onerous “independent entity variation” standard, while
PS Colorado had to show that its new rule would advance the
Commission’s goals of preventing discrimination, promoting
market entry, and encouraging grid investment at least as well
as the pro forma tariff. Id. ¶¶ 35, 38 (J.A. 61–62).

                                3

    PS Colorado requested rehearing. It first argued that the
Federal Power Act precludes the Commission from granting an
independent operator’s tariff amendment while denying an
identical proposal from a vertically integrated operator just
                               12
because of its integrated status. Second, PS Colorado noted
that the Commission had not referred to the “independent entity
variation” standard in its decision to approve MISO’s
replacement generator plan, and so it was arbitrary for the
agency to rely on that standard in distinguishing the two cases.
See J.A. 68. Third, PS Colorado asserted that its proposal
would not allow it to unduly discriminate against independent
generators. Fourth, PS Colorado argued that the agency
arbitrarily departed from its finding in the MISO order that new
and existing generators are not similarly situated. The
company contended that new and replacement generators were
just as differently situated on its grid as on MISO’s, and so it
was unfair for the Commission to treat its proposal differently.
Finally, PS Colorado argued that the Commission erred by
ignoring the evidence favoring its proposal, including benefits
the agency had recognized in its Midcontinent decision.

    Two months after PS Colorado’s rehearing petition was
denied by operation of law, the Commission addressed PS
Colorado’s arguments and reaffirmed its May Order. See
Public Serv. Co. of Colorado, 172 FERC ¶ 61297, ¶ 2 (2020)
(“Rehearing Order”) (J.A. 98).

     In its rehearing decision, the Commission rejected PS
Colorado’s argument that the independent entity variation
standard was unduly discriminatory. Rehearing Order ¶ 6
(J.A. 101). The agency said that the greater flexibility afforded
independent operators is rooted in a “recognition of their
operating characteristics”—that is, their lack of self-interest in
favoring some generators over others. Id. That difference also
explained why all the grid operators the Commission had
previously approved to run a streamlined generator
replacement process had been independent operators. Id. ¶ 7
(J.A. 101–102).
                               13
     The Commission then turned to PS Colorado’s argument
that its proposal was just and reasonable. The agency stood by
its holding in Midcontinent that new and existing generators are
differently situated. Rehearing Order ¶ 13 (J.A. 105). The
Commission explained that it had rejected PS Colorado’s plan
because, though it “may feature safeguards against patent
undue discrimination,” the proposal would structurally “enable
existing generation (of which the majority is owned by [PS
Colorado]) to be replaced via an expedited interconnection
process[,]” while requiring new generation “to undergo the full
interconnection process[.]” Id. The plan would thus
“inherently favor [PS Colorado’s] existing generating
resources.” Id. So the Commission’s decision “ensure[d] that
[PS Colorado], as the entity proposing reforms that stand to
disproportionately benefit replacement of its own generation,
is not afforded undue preference over” other generator owners
and developers. Id. (J.A. 106).

     The Commission closed by explaining that “the potential
for undue discrimination in favor of [PS Colorado’s]
generation is considerable, and [any] benefits are not sufficient
to render [the] proposal ‘consistent with or superior to’ the pro
forma” interconnection process. Rehearing Order ¶ 14 (J.A.
106).

    PS Colorado timely petitioned this court for review of both
the May Order and the Rehearing Order.

                               D

     Shortly after rejecting PS Colorado’s proposal, the
Commission accepted a similar plan from the vertically
integrated utility Dominion Energy South Carolina, Inc.
Dominion Energy S.C., Inc., 173 FERC ¶ 61171, ¶ 24 (2020).
Unlike PS Colorado, Dominion had proposed that the
streamlined replacement generator program be administered by
                               14
a neutral third party rather than by the operator itself. Id. The
Commission found that the third-party administrator would
“protect[] against discriminatory implementation” of the new
process, and so concluded that the program’s benefits
outweighed its costs. Id. at ¶ 26.

     Then-Chairman (now Commissioner) Danly concurred.
He wrote separately to say that he now believed the agency’s
rejection of PS Colorado’s proposal had been a mistake.
Dominion Energy, 173 FERC ¶ 61171, at ¶ 3 (Danly,
Chairman, concurring). He argued that the Commission had
rejected PS Colorado’s proposal because it unduly
discriminated against new generators; by that logic, it should
also have rejected Dominion’s proposal, especially because
Dominion owned an even larger share of the electrical capacity
on its grid. Id. at ¶ 4. A neutral administrator would not
obviate that concern, he said, and he observed that the
Commission “did not even hint in [its PS Colorado decisions]
that [it] [was] concerned about the potential for discriminatory
implementation of the generation replacement program.” Id. at
¶ 5.

     In 2021, while this case was pending here, PS Colorado
filed a request with the Commission to adopt a streamlined
replacement generator program administered by an
independent entity. Public Serv. Co. of Colorado, 175 FERC
¶ 61100, ¶ 1 (2021). The agency approved that proposal for the
same reasons it gave in Dominion Energy. Id. at ¶¶ 16–17.

                               II

     We have jurisdiction under 16 U.S.C § 825l(b). We
review Commission orders under the arbitrary and capricious
standard. ESI Energy, 892 F.3d at 329. We will “uphold the
Commission’s factual findings if they are supported by
substantial evidence.” Id. The scope of our review is
                              15
“narrow[,]” and we defer to the Commission’s technical
decisionmaking within its expertise. Electric Power Supply,
577 U.S. at 292 (citation omitted).

                              III

     PS Colorado mounts three challenges to the orders below.
First, it argues that the Commission irrationally concluded that
its plan favoring replacement generators over new generators
is unduly discriminatory, even though the agency had
separately determined that replacement generators are
differently situated from new generation for purposes of
expedited interconnection. Second, it contends that the
Commission’s finding of potential discrimination against new
generators was not supported by substantial evidence. Finally,
PS Colorado asserts that the Commission’s orders contradict
its decision approving a nearly identical plan in Midcontinent.

    None of those arguments succeeds.

                               A

     PS Colorado argues that the Commission’s decision is
built on an untenable contradiction. On the one hand, the
Commission affirmed its holding in Midcontinent that new and
replacement generators are not similarly situated. On the other
hand, the Commission held that the utility’s proposal was
unduly discriminatory because it favored replacement
generators over new generators. That is irrational, in PS
Colorado’s view, because it is not unduly discriminatory to
treat differently situated entities differently.

     PS Colorado’s criticism is not unfair. The Commission
certainly could have explained itself more clearly. But reading
both the May Order and the Rehearing Order together, the
agency’s rationale and its reasonableness can be perceived
                                 16
readily enough. We will “uphold a decision of less than ideal
clarity if the agency’s path may reasonably be discerned.”
Motor Vehicle Mfrs. Ass’n of U.S., Inc. v. State Farm Mut.
Auto. Ins. Co., 463 U.S. 29, 43 (1983) (citations omitted).

                                  1

     The Commission has broad discretion in assessing tariff
proposals under Section 205 of the Federal Power Act. The
phrase “‘just and reasonable’ is obviously incapable of precise
judicial definition[.]” Delaware Div. of Pub. Advoc. v. FERC,
3 F.4th 461, 465 (D.C. Cir. 2021) (quoting Morgan Stanley
Cap. Grp. Inc. v. Public Util. Dist. No. 1, 554 U.S. 527, 532
(2008)). The Commission likewise has “wide discretion to
determine what constitutes undue discrimination.” Missouri
River Energy Servs. v. FERC, 918 F.3d 954, 958 (D.C. Cir.
2019) (formatting modified and citation omitted).

     The Commission has used its discretion and expertise to
craft the “consistent with or superior to” test for deviations
from its pro forma rules. See Order No. 2003, 68 Fed. Reg. at
49,919 ¶ 826. Under this standard, it considers whether an
operator’s proposed tariff is “consistent with the broad non-
discrimination goals” of the Commission’s orders.
Sacramento Mun., 428 F.3d at 297. The Commission has
explained that the test is “difficult to meet,” and an applicant’s
burden under the standard is “significant.” Order No. 2006, 70
Fed. Reg. at 34,236 ¶ 547; see also id. at ¶ 546 (explaining that
the agency adopted the same standard as in Order No. 2003).1

     1
       In Order No. 2003 the Commission adopted the “consistent
with or superior to” test as applied to decisions under Order No. 888,
which is the Commission’s directive that grid operators serve
generators on equal terms. See Order No. 2003, 68 Fed. Reg. at
49,919 ¶ 826.
                              17
     The Commission has repeatedly applied that test to reject
changes to vertically integrated utilities’ interconnection
procedures that the Commission believes would structurally
favor the operator’s own generation and could disadvantage
new generators. For example, the agency has rejected rules that
would have required new generators to pay for too many
studies, see Nevada Power Co., 167 FERC ¶ 61086, ¶¶ 20, 28
(2019), or that would have failed to give new generators
“sufficient flexibility to accommodate delays that may affect
their projects,” Public Serv. Co. of Colorado, 163 FERC
¶ 61146, ¶ 31 & n.49, ¶¶ 32–33 (2018); see also, e.g., Public
Serv. Co. of Colorado, 166 FERC ¶ 61076, ¶ 31 (2019);
Southern California Edison Co., 110 FERC ¶ 61176, ¶ 52
(2005).

                              2

     Here, the Commission reasonably applied the “consistent
with or superior to” standard to conclude that PS Colorado’s
proposal would undermine two of Order No. 2003’s central
anti-discrimination goals: limiting self-dealing and promoting
competition from new power plants. See May Order ¶¶ 35–37
(J.A. 61); Rehearing Order ¶¶ 13–14 (J.A. 105–106).

     The Commission explained that PS Colorado’s proposal
“may result in a more favorable interconnection process for
[its] own generation and make it more difficult for [new]
generation competitors to enter the market.” May Order ¶ 35
(J.A. 61). By “allowing its [own] replacement generation to
circumvent the full interconnection process,” the utility could
give itself “an undue preference”—the ability to skip the
interconnection queue—while leaving its would-be
competitors in the slow lane. Id. ¶ 36. A central goal of Order
No. 2003 is to “facilitate market entry for generation
competitors[.]” Id. ¶ 35. Yet under PS Colorado’s proposal,
                               18
new power plants would lose the access they might otherwise
have had to the “interconnection capacity” that arises when an
existing generator retires, while PS Colorado’s own generators
stood to gain. Id. ¶ 37. PS Colorado’s plan would therefore
“inherently favor [its] existing generating resources[,]”
cementing its dominant market position and potentially
“afford[ing its own generators] undue preference over
developers or owners of third-party generation.” Rehearing
Order ¶ 13 (J.A. 105–106). That, the Commission concluded,
was not “consistent with or superior to” the agency’s standard
rules requiring equal treatment of all generators in the
interconnection queue. Id. ¶ 14 (J.A. 106).

      Decades of precedent support the Commission’s decision
to prevent undue discrimination and promote competition.
After all, the Commission’s “authority generally rests on the
public interest in constraining exercises of market power[.]”
National Ass’n, 475 F.3d at 1280. The Commission, in fact,
has a “responsibility to consider, in appropriate circumstances,
the anticompetitive effects of regulated aspects of interstate
utility operations” in exercising its authority under the Federal
Power Act. Gulf States Utils. Co. v. FPC, 411 U.S. 747, 758–
759 (1973); cf. Morgan Stanley, 554 U.S. at 531 (“The Federal
Power Act * * * gives the Commission the authority to regulate
the sale of electricity in interstate commerce—a market
historically characterized by natural monopoly and therefore
subject to abuses of market power.”) (footnote and citations
omitted).

     The Commission’s rejection here of a tariff amendment
that would make it harder for the competitors of a vertically
integrated transmission operator to enter the market, while
helping to lock in the operator’s own market position, certainly
helps to accomplish that mission.
                                19
                                 3

     PS Colorado points to the Commission’s statement that
new and replacement generators are “not similarly situated[,]”
Rehearing Order ¶ 13 (J.A. 105), and to this court’s caselaw
holding that we will not find undue discrimination unless
“similarly situated” entities are treated differently.
Transmission Agency of N. Cal. v. FERC, 628 F.3d 538, 549
(D.C. Cir. 2010). In PS Colorado’s view, the Commission
contradicted itself here by finding that the proposal’s
preferential treatment of existing generators could unduly
discriminate against new generators.

    Things are not so simple as PS Colorado supposes.

     First, the Commission grounded its conclusion that PS
Colorado had not borne its burden under Section 205 not only
on a prediction of actual undue discrimination, but also on a
finding that the plan would be contrary to the prophylactic
goals of Order No. 2003. See May Order ¶ 35 (J.A. 61)
(rejecting PS Colorado’s proposal because it is “[c]ontrary to
[the] principles” of Order No. 2003 and may “make it more
difficult for [PS Colorado’s] generation competitors to enter
the market”).

     One of the Commission’s chief goals in promulgating
standard interconnection rules was to “minimize opportunities
for undue discrimination” by transmission operators, and it
does that in part by protecting “relatively unencumbered entry
into the market[.]” Order No. 2003, 68 Fed. Reg. at 49,848
¶¶ 11–12. The Commission’s acknowledgment that new and
existing generators are differently situated did not strip it of the
authority to continue “facilitat[ing] market entry for generation
competitors[,]” especially those owned by rivals to integrated
operators. May Order ¶ 35 (J.A. 61); see also id. ¶ 38 (J.A. 61–
62). And the Commission can promote market entry by
                              20
ensuring that “all generat[ors] * * * compete on a level playing
field” in “accessing released interconnection capacity[.]” Id.
¶ 37 (J.A. 61).

     For similar reasons, PS Colorado is mistaken when it says
that the Commission rejected its proposal solely because it
would help the utility’s own power plants. The Commission’s
conclusion was not based merely on the fact that PS Colorado’s
plants could benefit from the rule, but also the risk that the
proposal would structurally disfavor new competition against a
vertical operator. See May Order ¶ 35 (J.A. 61); Rehearing
Order ¶ 13 (J.A. 105–106).

     Second, while the Commission agreed that new and
existing generators can be differently situated, it also
recognized that, when an integrated operator owns most of the
generation on its grid, a rule favoring existing generators
necessarily favors the operator’s own power plants. See
Rehearing Order ¶ 13 (J.A. 105–106). That is, the efficiency
that a rule favoring existing generators generally promotes can
end up undermining competition when adopted by a vertically
integrated operator. Said another way, while PS Colorado’s
plan looks like a non-discriminatory proposal on the surface, in
practice its design “inherently favor[s]” PS Colorado’s existing
generators “over developers or owners of third-party
generation.” Id. So in rejecting PS Colorado’s proposal, the
Commission reasonably exercised its discretion to determine
what constitutes “undue discrimination.” Missouri River
Energy, 918 F.3d at 958.

     To hold otherwise would mean that the Commission’s
finding that new and replacement generators are differently
situated as a general matter somehow silently overruled Order
No. 2003’s determination that integrated operators give
themselves “an unfair advantage” when they delay plugging in
                                21
new independent power plants. Order No. 2003, 68 Fed. Reg.
at 49,848 ¶ 11. That makes no sense, especially in a case where
the Commission was explicitly enforcing Order No. 2003.

     PS Colorado asserts that there is nothing unduly
discriminatory about a plan that allows existing generators to
benefit on the same terms as any other generator already on the
grid. It compares the situation to “an office-wide ice-cream
social” in which “the boss who pays for the event[] takes a
scoop.” PS Colorado Reply Br. 14. That, PS Colorado says,
can hardly be called “favor[ing]” the boss. PS Colorado Reply
Br. 14.

     But the metaphor obscures more than it illuminates. For
one thing, it fails to account for all of those never invited to the
social in the first place—those trying to enter the grid. PS
Colorado’s vision also fails to mention that the “boss” in this
story would not take just a single scoop: PS Colorado would
be in line for six scoops out of every ten, each one of which
might otherwise go to a would-be employee seeking to get in
the door.

     In short, the Commission rejected PS Colorado’s proposal
because it found the plan could favor or at least entrench
generators owned by a vertically integrated operator and limit
opportunities for other power plants to compete, undermining
the goals of Order No. 2003. See May Order ¶¶ 34–38 (J.A.
60–62); Rehearing Order ¶ 13 (J.A. 105–106). That is a
“rational connection between the facts found and the choice
made[,]” which suffices under arbitrary and capricious review.
City & County of San Francisco v. FERC, 24 F.4th 652, 658
                                 22
(D.C. Cir. 2022) (quoting Electric Power Supply, 577 U.S. at
292).2

                                  B

     The Commission’s decision was supported by substantial
evidence.     Substantial evidence, though less than a
preponderance, is “such relevant evidence as a reasonable mind
might accept as adequate to support a conclusion.” Louisiana
Pub. Serv. Comm’n v. FERC, 20 F.4th 1, 7 (D.C. Cir. 2021)
(quoting Consolidated Edison Co. v. NLRB, 305 U.S. 197, 217
(1938)). In making decisions, it is “perfectly legitimate for the
Commission to base its findings * * * on basic economic
theory,” including relying on “generic factual predictions[,]” as
long as the agency “explain[s] and applie[s] the relevant
economic principles in a reasonable manner.” Sacramento
Mun. Util. Dist. v. FERC, 616 F.3d 520, 531 (D.C. Cir. 2010)
(per curiam) (citation omitted).

     2
        PS Colorado argues that later Commission orders approving
replacement generator interconnection proposals seem less
concerned about obstructing new power plants from entering the
grid. See Dominion Energy, 173 FERC ¶ 61171, at ¶ 24 (accepting
vertically integrated operator’s replacement generator fast-track
plan); id. at ¶¶ 3–5 (Danly, Chairman, concurring); Public Serv. Co.
of Colorado, 175 FERC ¶ 61100, at ¶ 15. We need not address those
decisions or determine if they concerned proposals that are, in fact,
materially similar to PS Colorado’s proposal here, because they
postdate the Commission’s decision at issue. “An agency’s decision
is not arbitrary and capricious merely because it is not followed in a
later adjudication.” Brooklyn Union Gas Co. v. FERC, 409 F.3d 404,
406 (D.C. Cir. 2005) (citation omitted). PS Colorado could perhaps
pursue this argument in a future filing under Section 205 of the
Federal Power Act. See 16 U.S.C. § 824d. But the Commission’s
subsequent orders cannot affect our decision today.
                               23
     The Commission’s finding that PS Colorado’s proposal
would contravene Order No. 2003 by favoring its own power
plants and making it more difficult for rival generators to enter
the market was well supported. PS Colorado’s 60% market
share is uncontested, see May Order ¶ 36 & n.55 (J.A. 61), and
its incentive to favor its own generators is a canonical
economic principle, see id. ¶ 38 (J.A. 61–62); see also, e.g.,
Transmission Access Policy, 225 F.3d at 684. Plus, PS
Colorado itself supported the Commission’s technical finding
that the company’s fast-track program would make it harder for
new competitors to enter the grid. See J.A. 12, 91. So it can
hardly contest that finding now.

    PS Colorado argues that the Commission lacked “actual
evidence of undue discrimination or an economic theory
reasonably suggesting a likelihood of undue discrimination.”
PS Colorado Opening Br. 39. That is doubly wrong.

     First, the undisputed purpose and predicted effect of PS
Colorado’s proposal was to allow replacement generators to
keep for themselves bandwidth on the grid that might otherwise
have gone to new competitors. PS Colorado told the
Commission as much, explaining that under its plan,
replacement power plants meeting certain conditions—
including PS Colorado’s own plants—could “retain [their
predecessor’s] contractual interconnection service rights[.]”
J.A. 12.

     That stands in sharp contrast to the Commission’s pro
forma rule that when existing plants go out of service, “those
facilities may * * * be replaced with new facilities at different
locations on the transmission system.” J.A. 12; see also J.A.
91 (PS Colorado rehearing request). In this way, the standard
interconnection rules limit the ability of existing generators’
owners to hold on indefinitely to transmission capacity. When
                               24
plants retire, the grid bandwidth they rely on can be made
available to whichever parties are next eligible in the queue.

     PS Colorado asserted that its plan would allow
replacement generators to efficiently reuse existing
interconnection facilities. Maybe. But that does not change
the fact that, under PS Colorado’s plan, new power plants may
lose access to relatively inexpensive electrical capacity
retained by incumbents. PS Colorado points out that, even
under the pro forma rules, some new generators may be owned
by the same party as their predecessors, leaving the competitive
landscape unchanged. PS Colorado Reply Br. 17–18. But it
was enough for the Commission to find that, under the pro
forma tariff, some new plants owned by others might replace
PS Colorado’s existing generators, adding more competition to
the grid. See May Order ¶¶ 35–37 (J.A. 61).

    In short, the Commission made the kind of “reasonable
prediction” about “the market it regulates” to which we
ordinarily defer. South Carolina Pub. Serv. Auth. v. FERC, 762
F.3d 41, 96 (D.C. Cir. 2014) (per curiam) (citation omitted).

     Second, the Commission’s determination that PS
Colorado has “reason to favor [its] own generation over others”
was a sensible application of basic economic theory long
recognized by courts. Rehearing Order ¶ 6 (J.A. 101). As we
have said, generator-owning “[u]tilities that * * * control
transmission facilities naturally wish to maximize profit” and
so “can be expected to act in their own interest to maintain their
monopoly[.]” Transmission Access Policy, 225 F.3d at 684;
see also Morgan Stanley, 554 U.S. at 536.

     The utility argues that, under our decision in Ameren
Services Co. v. FERC, the Commission must assume that its
earlier orders prevent most, “if not all[,]” discrimination by
integrated operators because “the ‘bad old days’” of vertically
                               25
integrated transmission operators are behind us. PS Colorado
Opening Br. 32–33 (quoting Ameren, 880 F.3d 571, 578 (D.C.
Cir. 2018)). Ameren said no such thing. That case held only
that where just one of many “petitioning transmission owners
* * * still own[ed] a generator[,]” the Commission could not
apply a rule premised on grid operators generally having an
incentive to discriminate against new power plants. Ameren,
880 F.3d at 578. In so holding, we were quick to emphasize
that when grid operators “still own[] integrated generation”—
as PS Colorado does—that “present[s] a competitive motive”
to discriminate against independent power plants. Id. So much
so that the Commission “is not obliged to show actual evidence
to support a determination of potential discrimination” and can
instead “rest on economic theory and logic.” Id. (emphasis
omitted). Which is what the Commission did here.

     PS Colorado contends that the Commission’s finding that
the replacement generator proposal would harm new entrants
conflicts with the agency’s conclusion that the plan would de-
clutter the interconnection queue. There is no contradiction.
The Commission simply weighed the pros and cons of PS
Colorado’s plan and found that it came up wanting: “[T]he
potential for undue discrimination in favor of [PS Colorado’s]
generation is considerable,” and not outweighed by “the
potential benefits” of the proposal. Rehearing Order ¶ 14 (J.A.
106). Such a reasonable balancing of divergent considerations
on a matter within the Commission’s expertise merits
deference. See New England Power Generators Ass’n, Inc. v.
FERC, 881 F.3d 202, 210 (D.C. Cir. 2018) (“Due to practical
challenges and myriad divergent interests, FERC must be given
the latitude to balance the competing considerations and decide
on the best resolution in its regulation of electricity markets.”)
(internal quotation marks and citation omitted).
                              26
    Finally, we lack jurisdiction to consider PS Colorado’s
other arguments that the Commission’s competition analysis
was factually wanting or in conflict with Midcontinent. See PS
Colorado Opening Br. 36; PS Colorado Reply Br. 18–19. The
company did not urge any of those claims with specificity in its
request for rehearing to the Commission, and it has not given a
“reasonable ground for failure to do so.” 16 U.S.C. § 825l(b).

                               C

    The Commission’s orders comported with agency
precedent. The Commission has allowed several independent
operators to adopt a streamlined generator replacement
program, most notably MISO. See Midcontinent, 167 FERC
¶ 61146, at ¶¶ 19, 61. So if PS Colorado and those independent
operators were similarly situated, the agency would have some
explaining to do. But vertically integrated and independent
grid operators are not similarly situated for competition
purposes. See Sections III.A–B, supra. The Commission thus
permissibly treated PS Colorado differently than MISO and
other independent operators.

     That distinction also explains why the agency rejected PS
Colorado’s argument that since grid owners own most of the
power capacity on MISO’s grid, MISO is not so different after
all. That mixes apples and oranges. The Commission’s
competition concerns are centered on the entity operating the
grid and administering the plan, not on who owns the grid. See
Order No. 2000, 65 Fed. Reg. at 811, 852; May Order ¶ 38 &
n.57 (J.A. 61–62). The Midcontinent Independent System
Operator, as its name suggests, runs the MISO electricity grid
but owns no power plants. PS Colorado runs its grid, would
administer the proposed plan, and owns existing power plants
generating about 60% of the electricity on the grid. So the
vertically integrated market structure that concerned the
                                 27
Commission in this case simply does not exist in MISO. See
Rehearing Order ¶ 13 (J.A. 105–106).3

    PS Colorado offers two more arguments that the
Commission departed from its precedent in the challenged
orders. Neither succeeds.

     First, PS Colorado argues that the Commission’s failure in
its Midcontinent decision to mention the “independent entity
variation” standard—its less challenging standard for
independent operators seeking tariff changes—must mean that
the Commission was not applying that test. Not at all. The
Commission’s recognition that independent operators do not
raise the same anti-competitive concerns as vertically
integrated operators long predates Midcontinent.            See
generally, e.g., Order No. 2000, 65 Fed. Reg. at 811. The
agency has therefore consistently approached tariff
modification requests from independent operators differently
than those from vertically integrated entities. See Order No.
2003, 68 Fed. Reg. at 49,850 ¶ 26, 49,860 ¶ 147; May Order
¶ 38 n.57 (J.A. 62); Rehearing Order ¶ 6 & n.21, ¶ 11 & n.38
(J.A. 101, 104). Nothing in Midcontinent turned its back on
that precedent. Cf. Southwest Airlines Co. v. FERC, 926 F.3d
851, 858 (D.C. Cir. 2019) (“[T]he Commission’s consistent
practice, whether adopted expressly in a holding or established
impliedly through repetition, sets the baseline from which
future departures must be explained.”). Anyhow, because PS
Colorado and MISO are differently situated for purposes of

    3
        This is not to say that independent operators are necessarily
incapable of unduly discriminating, including by favoring power
plants owned by grid owners within their network. But no such case
was before the Commission or is before us.
                                  28
competition analyses, the Commission bears no burden to
explain why it treated them differently.4

     Second, PS Colorado’s argument that in Midcontinent the
Commission approved streamlined replacement generator
programs as a free-floating “practice[,]” and so categorically
gave them the Commission’s just-and-reasonable stamp of
approval, is flatly wrong. PS Colorado Opening Br. 49.
Nowhere in Midcontinent did the Commission suggest that it
was adopting such a sweeping rule. After all, a rule may be
just and reasonable in one context and unjust and unreasonable
in another. See, e.g., Emera Maine, 854 F.3d at 23 (“Whether
a rate * * * is unlawful depends on the particular circumstances
of the case.”). The Commission adequately explained its
conclusion that a fast-track program for replacement generators
would be impermissible here, even if it is just and reasonable
in other circumstances.

                                 IV

     For all those reasons, we deny PS Colorado’s petitions for
review.

                                                         So ordered.

     4
           PS Colorado also contends that application of the
“independent entity variation” standard in Midcontinent cannot
distinguish that decision because that standard only gives
independent operators flexibility to address regionally specific
needs, not nationwide concerns like interconnection backlogs. PS
Colorado raised that argument for the first time in its reply brief and
so it is forfeited. See Reporters Comm. for Freedom of the Press v.
FBI, 3 F.4th 350, 364 (D.C. Cir. 2021).