Court Opinion

ID: 9555882
Source: CourtListenerOpinion
Date Created: 2023-08-15 16:02:18.356716+00
Date Added: 2024-06-11T15:36:03.794495
License: Public Domain

United States Court of Appeals
         FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued November 8, 2022           Decided August 15, 2023

                       No. 21-1214

                      VISTRA CORP.,
                       PETITIONER

                            v.

       FEDERAL ENERGY REGULATORY COMMISSION,
                    RESPONDENT

   OFFICE OF THE PEOPLES COUNSEL FOR THE DISTRICT OF
                   COLUMBIA, ET AL.,
                     INTERVENORS

  Consolidated with 21-1216, 21-1217, 22-1063, 22-1065,
                         22-1066

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

    Paul W. Hughes argued the cause for petitioners. With
him on the briefs were Nicholas M. Gladd, Valerie L. Green,
Matthew E. Price, Zachary B. Cohen, Neil L. Levy, David G.
Tewksbury, and Andrew A. Lyons-Berg.
                              2
     Paul M. Flynn argued the cause for intervenor PJM
Interconnection, L.L.C. in support of petitioners. With him
on the brief was Ryan J. Collins.

    Matthew W. Estes, Attorney, Federal Energy Regulatory
Commission, argued the cause for respondent. With him on
the brief were Matthew R. Christiansen, General Counsel,
Robert H. Solomon, Solicitor, and Matthew J. Glover,
Attorney.

    Jeffrey W. Mayes argued the cause for intervenors
Monitoring Analytics, LLC, et al. in support of respondent.
With him on the brief were Robert A. Weishaar, Jr., Kenneth
R. Stark, Regina A. Iorii, Anjali G. Patel, Karen R. Sistrunk,
and William F. Fields.

   Before: MILLETT and CHILDS, Circuit Judges, and
ROGERS, Senior Circuit Judge.

    Opinion for the Court filed by Circuit Judge CHILDS.

     CHILDS, Circuit Judge: Vistra Corporation, joined by
several other electricity suppliers, petitions this Court to
review three underlying orders of the Federal Energy
Regulatory Commission. These orders involve the sale of
electricity in capacity markets. Generally, in such markets,
electricity companies like the ones before us commit to
producing electricity at some agreed-to point in the future if
demand so requires. In return, the companies make money
from the commitment and are compensated for the costs
associated with participating in the market. The capacity
market at issue here, managed by PJM Interconnection, LLC,
has been in place since 2006. Nonetheless, in response to
periodic concerns, the Commission has adjusted the market’s
features to ensure that it remains competitive.
                                3
     In 2021, following complaints from an independent
monitor and a group of state regulators, the Commission
determined that a problem existed with a key feature of the
PJM capacity market then in place. That feature allowed
suppliers to submit offers in PJM’s market based on a default
offer cap as an alternative to an individualized assessment of
the cost of delivering capacity; offers that fell at or below this
market-wide cap were admitted and deemed competitive. The
Commission found that a certain number used to calculate the
default offer cap—specifically, to estimate the duration of
time a supplier might be called to perform during an
emergency—was too high, thus making the resulting default
offer cap too high as well. To fix the problem, the
Commission adopted a proposal from the independent
monitor. This proposal called for relying on individualized
calculations, known as unit-specific review, in place of a
default offer cap that could be applied to all market entrants.
Some suppliers, who preferred to recalibrate the default offer
cap rather than discard it, unsuccessfully objected.

     Vistra and accompanying suppliers (collectively,
Petitioners) bring to us three arguments challenging the
discontinuance of the default offer cap. First, Petitioners
assert that the decision to discard the default offer cap was
arbitrary and capricious because the Commission failed to
explain its reasons for doing so. Second, Petitioners tell us
the Commission failed to account for certain risks undertaken
by suppliers, risks that suppliers believe must be
compensated.        Third, Petitioners contend that the
Commission’s decision infringes upon their rights to set their
own rates under Section 205 of the Federal Power Act. See 8
U.S.C. § 824d. Upon review of the petition and the record,
we are unconvinced.
                               4
     The Commission adequately explained its choice to rely
on unit-specific review rather than a default offer cap,
including that Petitioners’ recalibrated alternative would not
have sufficiently mitigated anti-competition concerns. The
Commission also addressed its accounting of the risks
associated with acquiring a capacity commitment, risks that it
explained are limited to participation in a capacity market.
Finally, Petitioners’ Section 205 rights remain intact. The
Commission reasonably interpreted supplier offers in capacity
markets to be merely inputs into obtaining the market-clearing
price. These inputs are not the ultimate rates that come out of
the market, which are, in turn, subject to Section 205.

     Petitioners earnestly desire a different result, but we
cannot grant it. Our role in this administrative scheme is
limited to checking that the Commission has rationally
explained the basis for its decisions and considered the
relevant evidence and arguments before it. It has done so
here. Accordingly, we deny these petitions.

                               I

                               A

                               1

     The Federal Power Act confers upon the Commission
authority to regulate the generation of electricity and the
transmission and sale of that electricity in interstate
commerce. 16 U.S.C. § 824(a)–(b)(2). To fulfill its duty, the
Commission must “oversee all prices for those interstate
transactions and all rules and practices affecting such prices.”
FERC v. Elec. Power Supply Ass’n, 577 U.S. 260, 266 (2016).
This oversight remains ever concerned about energy suppliers
exerting market power, which is the ability of an energy
                               5
supplier “with a large market share to significantly control or
affect [the] price” of energy. Fed. Energy Regul. Comm’n,
Glossary, https://perma.cc/4GVC-ZE7X (last updated Aug.
31, 2020).

     As relevant to these petitions, Section 205 of the Federal
Power Act grants the Commission jurisdiction over “[a]ll
rates and charges” in relation to the “transmission or sale of
electric energy,” the terms of which the Commission must
ensure are “just and reasonable . . . .” 16 U.S.C. § 824d(a).

                               2

    Before discussing the specific capacity market at issue in
these petitions, it may be useful to lay a foundation by
discussing the market-based system more broadly.

     Although today electricity is a commodity often bought
and sold in a decentralized system, that was not always the
case. In the past, vertically integrated utilities controlled the
industry. Atl. City Elec. Co. v. FERC, 295 F.3d 1, 4 (D.C.
Cir. 2002). In other words, these utilities singularly owned all
services—generation, transmission, and distribution—and
sold electricity as a “bundled package” to customers within a
specific geographic region.        Id. (citation and internal
quotation marks omitted).

     Congress made the industry more competitive late in the
twentieth century with the passage of the Energy Policy Act
of 1992 (EPAct). RICHARD J. CAMPBELL, CONG. RSCH.
SERV., RL44783, THE FEDERAL POWER ACT (FPA) AND
ELECTRICITY MARKETS 4 (2017). Under the EPAct, the
Commission acquired the authority to force previously
exempted vertically integrated utilities to provide
transmission services to wholesale generators. Energy Policy
                               6
Act of 1992, Pub. L. No. 102-486, 106 Stat. 2776, § 721, 106
Stat. 2776, 2915–16.        The Commission exercised this
authority in Order No. 888, which required the transmission
of wholesale energy to be unbundled from the sale of
electricity and mandated that utilities file rates in open-access
tariffs to which the utilities were also subject. Promoting
Wholesale Competition Through Open Access Non-
Discriminatory Transmission Services by Public Utilities;
Recovery of Stranded Costs by Public Utilities and
Transmitting Utilities, Order No. 888, 61 Fed. Reg. 21,540,
21,547, 21,551–52 (May 10, 1996)1; see also New Eng.
Power Generators Ass’n v. FERC, 757 F.3d 283, 285–86
(D.C. Cir. 2014).

      The Commission continued to alter the energy industry
after Order No. 888, and in Order No. 2000, it encouraged
utilities to join regional transmission organizations. Reg’l
Transmission Org., 89 FERC ¶ 61,285 (1999). Among other
things, these organizations manage the electricity grid in their
respective geographic regions, steady the supply of and
demand for energy in those regions, and ensure that the grid
remains reliable over the long haul. Pub. Citizen, Inc. v.
FERC, 7 F.4th 1177, 1186 (D.C. Cir. 2021) (citation omitted).
These regional transmission organizations also operate
markets for the sale and purchase of electricity.

     PJM Interconnection, LLC is one such regional
transmission organization, whose geographic reach spans

1
   The decision of the Commission is In re Promoting
Wholesale Competition by Public Utilities, 75 FERC
¶ 61,080, which appears at FERC Stats & Regs. ¶ 31,036
(1996). The final rule was published in Order No. 888.
                              7
thirteen states and the District of Columbia.2 PJM administers
energy markets where electricity is bought and sold at
auctions, but a well-defined tariff (Tariff), approved by the
Commission, governs the terms of those auctions.

      To ensure that the region maintains an adequate energy
supply, PJM hosts capacity market auctions and acquires
capacity commitments. A capacity commitment entails “a
commitment to produce electricity or forgo the consumption
of electricity when required.” Advanced Energy Mgmt. All. v.
FERC, 860 F.3d 656, 659 (D.C. Cir. 2017) (per curiam).
Consequently, accepting a capacity market commitment
“creates a kind of options contract” between a supplier and a
utility. Id. Pursuant to this contract, at a future time when
there is high demand, a utility can turn to a capacity supplier
to help the utility meet this added demand. Id.

     In 2006, PJM primarily structured its capacity market to
“ensure sufficient resources” by encouraging new service
providers to come online, helping secure adequate revenue for
suppliers to invest in older facilities, and allocating energy
resources to the geographic areas with need.3             PJM
Interconnection, LLC, 117 FERC ¶ 61,331, at PP 3, 6 (2006).
To this end, the capacity market established local delivery
areas and required that suppliers agree to one-year

2
  PJM initially served customers in Pennsylvania and New
Jersey, then later Maryland. Fed. Energy Regul. Comm’n,
Electric Power Markets, https://perma.cc/Z7C5-U9ZD (last
updated May 16, 2023). PJM has since expanded to other
states (discussed above). See id. (showing a map of PJM’s
region).
3
  The capacity market is formally known as the Reliability
Pricing Model. See J.A. 491–698, Tariff, Attachment DD.
                                8
commitments beginning three years from when the
commitment was formed. Locational delivery, forward-
looking contracts, and one-year commitments remain as
capacity market features to this day.

                                B

                                1

     PJM’s capacity market operation is the genesis of the
present petition. After having its capacity market in place for
several years, PJM approached the Commission in 2014 with
concerns about its functioning. Over time, PJM realized that
though its market reliably procured commitments, it failed to
ensure that suppliers reliably performed their obligations.
PJM identified inadequate penalties and diminished incentives
for suppliers to invest in facilities as the key problems. It also
believed that these deficiencies threatened the reliability of
the system and could trigger higher costs for consumers. PJM
therefore proposed several significant reforms, which the
Commission adopted in 2015 in its Capacity Performance
Order.4

     Among other changes, the Capacity Performance Order
implemented a system of penalties and bonuses. Under this
system, capacity suppliers who failed to perform when called
upon were assessed non-performance charges. Conversely,
suppliers who performed to a greater extent than their
obligation, or who performed without any prior obligation
whatsoever, were compensated with bonuses. PJM paid these
bonuses out of revenue from the non-performance charges.

4
  The Commission affirmed its decision in a rehearing order
issued in 2016.
                                9
     The Commission also incorporated a market-wide default
offer cap, which represented a threshold for determining
whether an offer required additional review to mitigate a
potential exertion of market power.5 The default offer cap
functioned, in large part, like a signal level.6 In one direction,
supplier offers that came in at or below the default offer cap
were automatically accepted, “deemed competitive,” and did
not require additional review to determine whether the offers
complied with the rules of the Tariff. J.A. 1066, Indep.
Market Monitor for PJM v. PJM Interconnection, LLC, 176
FERC ¶ 61,137, at P 3 (2021) [hereinafter IMM v. PJM]7; see
also J.A. 594, Tariff, Attachment DD, § 6.4(a) (explaining
that an offer at or below the default offer cap was “not, in and
of itself, . . . deemed an exercise of market power . . . .”). In
the other direction, offers above the default offer cap became
subject to a unit-specific review by PJM and an independent

5
 The default offer cap is formally referred to as the Market
Seller Offer Cap. J.A. 594, Tariff, Attachment DD, § 6.4(a).
6
 Another way to think about the default offer cap is like one
of the more desired community chest cards in Monopoly.
When a player draws one of these fortuitous cards, the player
may have the opportunity to “Advance to Go [and] (collect
$200)” or gain some other immediate benefit.
7
   The 2015 and 2016 proceedings are designated in this
opinion by “PJM Interconnection LLC, . . . .” in accordance
with the official citation. The 2021 and 2022 proceedings are
designated in this opinion by the abbreviation “IMM v.
PJM, . . . ” in accordance with the Commission citation and
tailored to this opinion.
                                10
monitor (the Independent Market Monitor).8 Under unit-
specific review, suppliers could justify their above-cap offers
with appropriate “data and documentation . . . .” J.A. 594,
Tariff, Attachment DD, § 6.4(b). PJM then determined
whether to accept or reject the supplier’s offer.

     PJM would continue accepting and rejecting offers,
starting with the lowest offer, until it filled its projected future
demand for energy. Advanced Energy, 860 F.3d at 659.
Once PJM acquired sufficient capacity to meet that
anticipated demand, it then purchased all of the capacity at the
price of “the highest accepted [offer]—the market-clearing
price.” Id. at 660.

     The default offer cap was intended to account for a low-
cost supplier’s “marginal costs, opportunity costs, and risks
associated with assuming a Capacity Performance
commitment.” J.A. 265, PJM Interconnection, LLC, 155
FERC ¶ 61,157, at P 184 (2016). Marginal costs are reflected
in a supplier’s avoidable cost rate (ACR), which comprises
“the operational costs the resource would not incur in the
following year if it did not have a capacity commitment,”
Advanced Energy, 860 F.3d at 666–67, as “expressed in
dollars per [megawatt]-year,” J.A. 638, Tariff, Attachment
DD, § 6.8(a). An opportunity cost is “the seller’s point of
indifference between offering in the capacity market and

8
   Market Monitoring Analytics, LLC serves as the
Independent Market Monitor for PJM. In this role, Market
Monitoring Analytics acts as a “neutral entity that oversees
compliance with PJM’s market rules.” Del. Div. of Pub.
Advoc. v. FERC, 3 F.4th 461, 469 n.7 (D.C. Cir. 2021) (citing
N.J. Bd. of Pub. Utils. v. FERC, 744 F.3d 74, 91 n.15 (3d Cir.
2014)).
                              11
participating as an energy-only resource.” 9 J.A. 265–66, PJM
Interconnection, LLC, 155 FERC ¶ 61,157, at P 185 (2016).
Finally, the risks associated with assuming a capacity
commitment include only risks that are “unique to resources
with a Capacity Performance obligation . . . .” J.A. 1256,
IMM v. PJM, 178 FERC ¶ 61,121, at P 51 (2022).

    The Commission also based the default offer cap, in part,
on the estimated duration for which a capacity supplier might
be called to perform in a future year.10 The Commission set
this duration to 360 five-minute intervals, known as
Performance Assessment Intervals (PAI), which PJM had
proposed as an appropriate estimate.11 In establishing the cap,

9
   Since accepting a capacity commitment might result in
penalties for non-performance, energy-only suppliers (who
lack a commitment in the first place) had the upside of
earning bonuses but no potential downside of incurring
penalties. In another section of the Tariff, an opportunity cost
is described as “the documented price available to an existing
generation resource in a market external to PJM.” J.A. 637,
Tariff, Attachment DD, § 6.7(d)(ii).
10
   Originally, PJM provided the estimated duration in terms of
hours (Performance Assessment Hours), which tallied to
thirty hours. PJM later changed this calculation to five-
minute intervals (Performance Assessment Intervals), but it
did not change the anticipated duration. To remain consistent
with the current term employed in the underlying orders, this
opinion uses intervals as the unit of measurement.
11
   PJM calculated the PAI based on the system-wide number
of regional transmission organization emergency hours in the
2013/2014 delivery year, which included the anomalous polar
vortex. Delivery years run from June 1 of one year to May 31
                             12
the Commission believed it had approximated the rate that
would be acceptable to a low ACR supplier, which is a
supplier “whose avoidable costs are less than its total
expected Performance Bonus Payments [if it had to be] an
energy-only [supplier].” J.A. 119, PJM Interconnection,
LLC, 151 FERC ¶ 61,208, at P 336 (2015). By contrast, for a
high ACR supplier, “the default offer cap w[ould] be too
low,” because that supplier’s avoidable costs would exceed
what it could earn in bonus payments. J.A. 120, PJM
Interconnection, LLC, 151 FERC ¶ 61,208, at P 339 (2015).
The Commission assumed that a high ACR supplier would
thus tender an offer higher than the default offer cap, which
would require unit-specific review.         J.A. 120, PJM
Interconnection, LLC, 151 FERC ¶ 61,208, at P 339 (2015).
Subsequently, the Commission believed, an offer from a high
ACR supplier “would set the market clearing price . . . [and]
be subject to mitigation” by having its offer set at its net
avoidable cost rate. J.A. 1243, IMM v. PJM, 178 FERC
¶ 61,121, at P 25 (2022).

of the following year. PJM then added an additional seven
hours as contingency.

The full formula for calculating the default offer cap was the
expected performance assessment intervals, times the net cost
of new entry divided by the penalty performance assessment
intervals (i.e., non-performance charge rate), times the
balancing ratio (the average measure of performance in the
three years preceding the auction). J.A. 1234, IMM v. PJM,
178 FERC ¶ 61,121, at P 4 & nn.9, 12 (2021); see also J.A.
594, Tariff, Attachment DD, § 6.4(a). This boils down to net
cost of new entry (Net CONE) times the balancing ratio (B).
See J.A. 594, Tariff, Attachment DD, § 6.4(a).
                              13
    After the Commission adopted the changes in the
Capacity Performance Order, suppliers challenged the
changes in our Court.       We eventually upheld the
Commission’s Capacity Performance Order implementing the
default offer cap and penalty/bonus system. Advanced
Energy, 860 F.3d at 665–69.

                                2

    Six years after adopting the default offer cap, the
Commission again addressed questions about PJM’s capacity
market. In separate complaints, the Independent Market
Monitor and Joint Consumer Advocates from various states
and the District of Columbia asserted that the expected PAI
was inaccurate, leading to a default offer cap that was unjust
and unreasonable. Specifically, the Independent Market
Monitor and Joint Consumer Advocates asserted that the
expected PAI of 360 intervals was “significantly overstated,”
because “the actual expected number of PAH (PAI) in the
energy market is a very small number close to zero . . . .” J.A.
378–79, Complaint of the Independent Market Monitor for
PJM, Docket No. EL19-47-000 (Feb. 21, 2019); see also J.A.
438, Complaint of Joint Consumer Advocates, Docket No.
EL19-63-000 (Apr. 15, 2019). Thus, “the competitive offers
of most [capacity market suppliers] [were] not based on the
opportunity cost of taking on a capacity performance
obligation,” as “the opportunity cost [was] below the net
avoidable cost . . . .” J.A. 379, Complaint of the Independent
Market Monitor for PJM, Docket No. EL 19-47-000 (Feb. 21,
2019).

    Concerned about an excessive PAI hindering effective
market power mitigation, the Independent Market Monitor
and Joint Consumer Advocates called for the Commission to
                             14
exercise its authority to review the soundness of the expected
PAI being employed. The Commission obliged.

     In March 2021, the Commission agreed that 360 PAI was
“no longer just and reasonable for PJM to use” because the
record showed much lower PAI year after year (the March
2021 Order). J.A. 364, 365, IMM v. PJM, 174 FERC
¶ 61,212, at PP 62, 65 (2021). Specifically, the Independent
Market Monitor’s data showed that in 2015, 2016, and 2017
there were zero PAI, and in 2018 there were only twenty-four
PAI. J.A. 348, 355, IMM v. PJM, 174 FERC ¶ 61,212, at PP
12, 32 (2021).12 Even more, an insufficient number of offers
were getting reviewed, because the cap was “higher than or
equal to [ninety-nine percent] of offers subject to an offer
cap” and fewer than one percent of suppliers chose to submit
unit-specific offers that were subject to review. J.A. 1269,
IMM v. PJM, 178 FERC ¶ 61,121, at P 80 (2022); J.A. 347,
IMM v. PJM, 174 FERC ¶ 61,212, at P 10 (2021). As such,
the “excessively high” cap frustrated the Commission’s
market mitigation efforts, because “PJM and the Market
Monitor were not reviewing the offers of the majority of
resources that had the potential to exercise market
power . . . .” J.A. 1267, IMM v. PJM, 178 FERC ¶ 61,121, at
P 77 (2022).

12
   The Commission order incorrectly states that in 2018 there
were “two PAI” when summarizing the Independent Market
Monitor’s data. J.A. 348, IMM v. PJM, 174 FERC ¶ 61,212,
at P 12 (2021). The Independent Market Monitor’s complaint
states that “there were 24 five-minute PAIs (equivalent to 2
PAH)” required in 2018. J.A. 391, Complaint of the
Independent Market Monitor for PJM, Docket No. EL 19-47-
000 (Feb. 21, 2019).
                              15
     The original default offer cap being no good, the
Commission ordered the parties to brief an appropriate
replacement rate as well as “alternative approaches,”
including eliminating the default offer cap altogether. J.A.
368, IMM v. PJM, 174 FERC ¶ 61,212, at PP 71–72 (2021).
Some capacity market suppliers proposed retaining the default
offer cap. These suppliers acknowledged that the PAI was
too high, but believed that recalibrating the values used to
generate the cap could sufficiently address the problem by
bringing suppliers’ true costs closer to the cap. Several
months later, in its September 2021 Order, the Commission
accepted a competing proposal from the Independent Market
Monitor that simply eliminated the default offer cap.

     The Independent Market Monitor’s proposal, the Unit-
Specific Avoidable Cost Rate Proposal, increased reliance on
the existing unit-specific review process and did away with
the default offer cap as a tool for entrance into the market.
(This means the signal lever would no longer automatically
admit certain offers.) Rather than a default offer cap applying
to all suppliers, a supplier’s cap would instead be based on an
individualized assessment of the supplier’s net avoidable
costs.13    The Commission believed that this shift of

13
   Alternatively, suppliers could use the “technology-specific
default gross ACRs already defined in the Tariff minus unit-
specific energy and ancillary service revenues.” J.A. 1235,
IMM v. PJM, 178 FERC ¶ 61,121, at P 7 (2022). These
energy and ancillary service revenues, known as energy and
ancillary services offsets, are “an estimate of the net revenues
a capacity resource will earn from the energy and ancillary
services markets during a given delivery year.” J.A. 1235,
IMM v. PJM, 178 FERC ¶ 61,121, at P 7 n.16 (2022) (quoting
PJM Interconnection, LLC, 177 FERC ¶ 61,209, at P 45
(2021)); see also N.J. Bd. of Pub. Utils. v. FERC, 744 F.3d
                              16
framework would allow suppliers to submit only “offers
consistent with their going-forward costs” and act as a counter
to potential exertion of market power. J.A. 1236, IMM v.
PJM, 178 FERC ¶ 61,121, at P 7 (2022).

     The Commission’s September 2021 Order adopting the
Independent Market Monitor’s unit-specific proposal
canvassed the arguments and proposals of numerous
interested parties. In accepting the Independent Market
Monitor’s proposal, the Commission observed that the
proposal would enable PJM and the Independent Market
Monitor to sufficiently review offers and “best ensure the
capacity market’s overall competitiveness . . . .” J.A. 1088,
IMM v. PJM, 176 FERC ¶ 61,137, at P 61 (2021).

     Following the September 2021 Order, suppliers
submitted requests for rehearing and clarification, which were
denied by operation of law when the Commission failed to act
on the requests within thirty days. 16 U.S.C. § 825l(a).
Notwithstanding this denial, the Commission addressed the
issues that the suppliers raised in their requests in a
subsequent order a few months later (the February 2022
Order).14 This February 2022 Order reiterated many of the
points the Commission made five months earlier, including

74, 108 (3d Cir. 2014) (“‘[E]nergy and ancillary services
offsets[]’ . . . are the expected revenues a new generation
resource will likely earn from the sale of energy and ancillary
services.”).
14
   The Commission refers to this decision as the “Order
Addressing Arguments Raised on Rehearing, Addressing
Requests for Clarification, and Accepting Compliance
Filing.” J.A. 1232, IMM v. PJM, 178 FERC ¶ 61,121 (2022).
                               17
that the default offer cap “creat[ed] a serious risk of
widespread exercise of market power, which . . . [was] unjust
and unreasonable.” J.A. 1243, IMM v. PJM, 178 FERC
¶ 61,121, at P 24 (2022). The order further explained that
unit-specific review based on an individualized assessment
could fulfill the intent underlying the 2015 Capacity
Performance Order: that “the resource whose offer would set
the market clearing price would be subject to mitigation if the
seller had market power, and have its offer set at Net ACR.”
J.A. 1243, IMM v. PJM, 178 FERC ¶ 61,121, at P 25 (2022).

                               II

     Aggrieved by the Commission’s rulings, Petitioners filed
petitions for review in our Court, which we consolidated.15
Petitioners seek review of the Commission’s September 2021
Order (adopting the Unit-Specific Avoidable Cost Rate
Proposal), November 2021 Notice (denying by operation of
law Petitioners’ requests for rehearing and clarification, but
intending for a forthcoming order to consider the issues
Petitioners raised), and February 2022 Order (addressing the
issues raised in the requests for rehearing and clarification).16

15
   This dispute involves six consolidated petitions for review,
filed separately between November 2021 and April 2022.
Upon order from our Court, Petitioners filed joint opening and
reply briefs, and were jointly represented by counsel at oral
argument.
16
   Petitioners filed timely petitions for review following the
Commission’s denial of their requests for rehearing and
clarification. Petitioners then amended those petitions after
the Commission issued its February 2022 Order addressing
issues raised in the requests for rehearing. In April 2022, our
Court instructed the parties to “address in their briefs whether
                             18
    We review these orders under a well-known standard
asking whether the Commission’s actions were “arbitrary,
capricious, an abuse of discretion, or otherwise not in
accordance with law[.]” 5 U.S.C. § 706(2)(A); see also PSEG
Energy Res. & Trade LLC v. FERC, 665 F.3d 203, 207–08
(D.C. Cir. 2011). Though deferential, this standard still

new petitions for review, rather than amended petitions,
[were] required to obtain review of [the Commission’s]
February 18, 2022 order addressing arguments raised on
rehearing.” ECF, April 13, 2022; see also ECF, May 16,
2022 (directing the parties to address standing and “raise all
issues and arguments in the opening brief”). Thereafter,
Petitioners filed new petitions for review addressing the
Commission’s February 2022 order before the statutory
deadline for seeking review expired. Constellation Energy
Corp. v. FERC, No. 22-1063 (docketed Apr. 14, 2022); Elec.
Power Supply Ass’n v. FERC, No. 22-1065 (docketed Apr.
18, 2022); Vistra Corp. v. FERC, No. 22-1066 (docketed Apr.
19. 2022). These briefs are now before us, ECF, June 13,
2022, and Sept. 23, 2022; see also Petitioners’ Br. 18 n.5
(discussing this Court’s orders), 22–23 (addressing standing),
and we have jurisdiction to review the new petitions, see 16
U.S.C. § 825l(b). Further, though not contested by the
Commission, we also have authority to review these petitions
under Article III of the Constitution of the United States.
Petitioners would suffer economic harm if they were required
by the Commission’s decisions to sell capacity at a price
lower than they believe economical, that requirement could be
fairly traceable to the Commission’s decision, and we could
potentially redress it by order of this Court. Exelon Corp. v.
FERC, 911 F.3d 1236, 1240 (D.C. Cir. 2018).
                              19
demands that the Commission “examine the relevant data and
articulate a satisfactory explanation for its action including a
‘rational connection between the facts found and the choice
made.’” Motor Vehicle Mfrs. Ass’n of the U.S., Inc. v. State
Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983) (quoting
Burlington Truck Lines, Inc. v. United States, 371 U.S. 156,
168 (1962)). We also require that the Commission “respond
meaningfully” to alternative proposals raised in its
proceedings. Canadian Ass’n of Petroleum Producers v.
FERC, 254 F.3d 289, 299 (D.C. Cir. 2001).

                              III

     Petitioners assert three challenges to the Commission’s
orders.17 First, Petitioners argue that the Commission’s
actions were arbitrary and capricious when it discarded the
default offer cap without explanation, and failed to address
the reasonable alternatives they presented to avoid jettisoning
the cap. Next, Petitioners argue that the Commission failed to
meaningfully account for supplier concerns that capacity
offers must adequately reflect the risks suppliers undertake
when they participate in capacity market auctions. Finally,
Petitioners argue that, under the current setup, the
Independent Market Monitor’s role tramples on the Section
205 rights of suppliers to set their own rates. We review, and
reject, each of these contentions in turn.

                               A

    To begin, agencies are the experts in their designated
subject areas. As an expert in energy regulation, the

17
     Petitioners do not challenge the Commission’s
determination that the PAI was too high. See Oral Arg. Tr.
11:24–12:2.
                               20
Commission has the “technical understanding” necessary to
carry out its congressionally delegated duties. Elec. Power
Supply Ass’n, 577 U.S. at 295. We must only confirm that
“the Commission engaged in reasoned decision[]making”;
specifically, that the Commission “weighed competing views,
selected [an option] with adequate support in the record, and
intelligibly explained the reasons for making that choice.” Id.
Petitioners argue that the Commission neither adequately
explained its approach and purported departure from prior
findings, nor did the Commission address Petitioners’
alternative proposals that could have retained the default offer
cap. For the reasons below, Petitioners are incorrect.

                               1

     In electing to adopt the Independent Market Monitor’s
proposal, which increased reliance on unit-specific review,
the Commission adequately explained its decision.18 As the
Commission noted, “one way to measure the effectiveness of
seller-side market power mitigation is whether the marginal
offer [gets] reviewed.” J.A. 1088, IMM v. PJM, 176 FERC
¶ 61,137, at P 62 (2021). (The marginal offer is the one that
sets the market-clearing price.) The Commission stated that
reliance on unit-specific review “should ensure that the

18
    Yet, the adopted proposal also allows suppliers to
incorporate certain default values, namely default gross ACR
values, as an alternative to unit-specific review, because these
values are “just and reasonable estimates as part of a
competitive offer.” J.A. 1088, IMM v. PJM, 176 FERC
¶ 61,137, at P 63 (2021). Unlike the market-wide default
offer cap, the Commission believes this individualized offer
cap represents “a reasonable estimate of a competitive
capacity offer for that [particular supplier] . . . .” J.A. 1089,
IMM v. PJM, 176 FERC ¶ 61,137, at P 63 (2021).
                               21
marginal offer is reviewed,” something that the default offer
cap failed to accomplish. J.A. 1088, IMM v. PJM, 176 FERC
¶ 61,137, at P 62 (2021). This decision to eliminate the
default offer cap was profoundly rational since the formula
for determining the cap had led to ninety-nine percent of
offers being equal to or higher than the cap itself. The logic
behind the Commission’s action is underscored by the fact
that the recalibrated default offer cap proposed by Petitioners
reshuffled some numbers but maintained the then-existing
default offer cap. These specific proposals did not lower the
default offer cap and would have still led to an inappropriately
high number of offers avoiding review (discussed further
below).

     We note the Commission plainly told Petitioners that
eliminating the default offer cap was a possibility. In the
March 2021 Order, the Commission expressly directed the
parties to brief: (a) “the appropriate replacement rate,” and (b)
“whether an alternative method . . . would better address the
concern[s]” raised. J.A. 368, IMM v. PJM, 174 FERC
¶ 61,212, at P 72 (2021).             Indeed, the Commission
specifically requested briefing on the soundness of
“remov[ing] the market-wide default market seller offer cap
and instead employ[ing] unit-specific offer caps for all
[suppliers]” who fail the Market Structure Test.19 J.A. 368,
IMM v. PJM, 174 FERC ¶ 61,212, at P 72 (2021). The
decision to discontinue the market-wide default offer cap was,
therefore, contemplated in the directive to brief it as a
possible alternative to merely recalibrating the default offer
cap.

19
    The Market Structure Test is a method to determine
whether a supplier has market power. PJM regards a supplier
to have market power if the supplier fails this test.
                             22
     Petitioners seemingly assert that the Commission was
limited to only “adjusting” the PAI because statements in the
2015 Capacity Performance Order encouraged PJM to revisit
the estimated PAI and submit a new number if warranted.
Petitioners’ Br. 29–30. But these statements did no such
thing. The PAI established in 2015 turned out to be an overly
abundant estimate, perhaps even doomed from the start.20
Moreover, the Commission can change its approach when a
change of direction is acknowledged and fully explained, as
here. Therefore, the seeming assertion that adjusting the
default offer cap was all that the Commission could do is
unavailing.

                             2

     As a secondary argument, Petitioners assert that the
Commission acted arbitrarily and capriciously because it
failed to address reasonable alternative proposals. We
disagree.

     In its September 2021 Order, the Commission
methodically outlined the Independent Market Monitor’s unit-
specific proposal, discussed the challenges to that proposal,
and examined competing proposals by other parties. J.A.
1068–72, IMM v. PJM, 176 FERC ¶ 61,137, at PP 8–17
(2021) (Independent Market Monitor’s proposal and
opposition to it); J.A. 1072–76, IMM v. PJM, 176 FERC
¶ 61,137, at PP 18–26 (2021) (PJM’s proposal and opposition
to it); J.A. 1076–78, IMM v. PJM, 176 FERC ¶ 61,137, at
PP 27–33 (2021) (Joint Consumer Advocates’ proposal and
opposition to it); J.A. 1078–81, IMM v. PJM, 176 FERC
¶ 61,137, at PP 34–42 (2021) (Suppliers’ proposals and

20
  Remember, this estimate included the anomalous Polar
Vortex plus additional hours as contingency.
                              23
opposition to these proposals). As relevant to these petitions,
the Commission examined the efficacy of Petitioners’
proposal to merely revise the default offer cap rather than
eliminate it, and found that approach wanting.

     The Commission concluded that it was “difficult” to
estimate an expected PAI that could “apply broadly to all
sellers” as opposed to determining estimates for individual
suppliers. J.A. 1092, IMM v. PJM, 176 FERC ¶ 61,137, at P
71 (2021). Indeed, retaining the default offer cap, as
Petitioners desired, did not address the Commission’s earlier
findings regarding the potential for market power exertion.
The proposals from suppliers to retain the existing default
offer cap by lowering the PAI and increasing the penalty rate
would leave the market power concern unaddressed, because
the default offer cap would be unchanged and thus still too
high. The Commission also explained how proposals from
the other oversight agencies were similarly less favorable than
the Independent Market Monitor’s proposal. For instance, the
Commission noted that the proposals from PJM and the Joint
Consumer Advocates would result in fewer offers being
reviewed and provided less certainty that the marginal offer
would be reviewed. Further, the PJM and the Joint Consumer
Advocates proposals relied on historical auction rates. As a
result, weakened mitigation in the past could be carried
forward in subsequent auctions, but “[t]he Unit-Specific ACR
Proposal d[id] not have this drawback.” J.A. 1090, IMM v.
PJM, 176 FERC ¶ 61,137, at P 65 (2021).

    We believe that these explanations of its decision to
adopt the Independent Market Monitor’s proposal, including
                             24
stated reasons for declining alternative proposals, show that
the Commission acted neither arbitrarily nor capriciously. 21

                              B

     Petitioners next assert that the Commission failed to
meaningfully address the suppliers’ concerns about offer
values adequately reflecting the risks suppliers undertake as
capacity market participants. On this issue, Petitioners’
arguments mirror contentions that were raised at the agency
level by others in opposition to the Commission’s 2015
Capacity Performance Order. 22         See J.A. 272, PJM

21
    The Commission addressed other implications of its
decision as well, including: potential administrative burdens
and unworkability; over-mitigation; the means for suppliers to
dispute disagreements with the Independent Market Monitor
and PJM; and whether the Commission needed to change the
unit-specific review process before eliminating the default
offer cap. J.A. 1090–93, IMM v. PJM, 176 FERC ¶ 61,137, at
PP 66–73 (2021). The Commission appropriately determined
that these concerns were either unfounded or constituted a
reasonable burden for the affected parties. Id.
22
   We affirmed the Capacity Performance Order in our
Advanced Energy decision. See Advanced Energy Mgmt. All.
v. FERC, 860 F.3d 656 (D.C. Cir. 2017). The petitioners in
Advanced Energy do not appear to have raised in our Court
the energy-market costs arguments asserted now by Vistra
and the accompanying suppliers in these petitions, despite
these contentions having been raised before the Commission
when the 2015 Capacity Performance Order was challenged at
the administrative level.      Compare J.A. 272, PJM
Interconnection, LLC, 155 FERC ¶ 61,157, at P 203 (2016),
with Joint Opening Brief of Petitioners, Advanced Energy
                              25
Interconnection, LLC, 155 FERC ¶ 61,157, at P 203 (2016).
To the extent that Petitioners challenge something new, it is
their alleged inability to “submit an offer based on the
opportunity cost of forgoing bonus payments that it could
receive in the PJM market.” Petitioners’ Br. 27. For the
reasons explained below, the Commission suitably addressed
Petitioners’ concerns, so we reject this ground for relief.

                              1

     Petitioners claim that suppliers need a certain level of
“flexibility” to account for the inherent risks of capacity
market participation, and that the Commission’s prior course
permitted the “flexibility to include various risks in their
offers, so long as the offers remained below the cap.” Reply
Br. 17. By way of example, Petitioners identified alleged
risks associated with liquidated damages, unanticipated
outages, labor disputes, lower energy revenues, weather,
supply chain restrictions, and unit performance. They assert
that these other risks must be incorporated into their capacity
market offers, otherwise they miss out on an opportunity to
make money. As for risks not unique to the capacity market,
Petitioners’ demands have been thrice addressed—and thrice
disapproved—by the Commission.23 We do the same.

Mgmt. All. v. FERC, 860 F.3d 656 (D.C. Cir. 2017) (Nos. 16-
1234, 16-1235, 16-1236, and 16-1239), 2017 WL 105811; see
also Oral Arg. Tr. 19:6–25:9.
23
   The Commission addressed these exact issues in 2016,
2021, and 2022. J.A. 272, IMM v. PJM, 155 FERC ¶ 61,157,
at P 203 (2016); J.A. 1092–93, IMM v. PJM, 176 FERC
¶ 61,137, at P 72 (2021); J.A. 1256, IMM v. PJM, 178 FERC
¶ 61,121, at PP 50–51 (2022).
                              26
     As clear as day, the Commission’s prior orders expressly
stated that energy-market risks were “not intended to [be]
permit[ted]” in capacity market offers, because such risks are
already generally assumed by all PJM market participants.
J.A. 272, PJM Interconnection, LLC, 155 FERC ¶ 61,157, at
P 203 (2016); see also id. (explaining that “volatile energy
prices . . . should not be an element of a cost-justified offer”
under the adopted rules). The Commission reasoned that a
supplier’s ACR calculation “should reflect the cost of
accepting [and performing] a capacity obligation”
specifically, rather than the cost of energy-market
participation generally. J.A. 1256, IMM v. PJM, 178 FERC
¶ 61,121, at P 51 (2022); see also J.A. 272, PJM
Interconnection, LLC, 155 FERC ¶ 61,157, at P 203 (2016).
The September 2021 Order merely reiterated the
Commission’s earlier limitations on what suppliers could
include in their offers, and Petitioners failed to provide
reasons demonstrating that the Commission’s prior
conclusions were no longer appropriate. 24

    The Commission also expressed its apprehension that
allowing suppliers to “price every possible adverse outcome”
would “unreasonably shift all risk” from suppliers to
consumers, “effectively holding sellers harmless at the
expense of ratepayers.” J.A. 1093, IMM v. PJM, 176 FERC
¶ 61,137, at P 72 (2021). Yet, the Commission nonetheless

24
   See J.A. 1092–93, IMM v. PJM, 176 FERC ¶ 61,137, at
P 72 (2021); see also J.A. 1253–54, IMM v. PJM, 178 FERC
¶ 61,121, at P 47 (2022) (explaining that “the scope of risks
adopted in the Capacity Performance Order continues to strike
a reasonable balance by protecting consumers . . . [yet
allowing] risks that are quantifiable, reasonably supported,
and attributable to the seller’s capacity obligation under
Capacity Performance in a seller’s unit-specific offer cap[]”).
                              27
declined to outline an “exhaustive” list of costs that suppliers
could factor. J.A. 1257, IMM v. PJM, 178 FERC ¶ 61,121, at
P 51 (2022). Instead, it provided the flexibility that
Petitioners assert is lacking. As communicated in the
February 2022 Order, costs associated with capacity
performance (including risk management strategies) may be
included in offers, as long as a supplier “reasonably supports
and quantifies such costs.” J.A. 1257, IMM v. PJM, 178
FERC ¶ 61,121, at P 51 (2022).

                               2

     Finally, Petitioners argue that the Commission never
explained why, under the adopted proposal, suppliers could
not account for missed bonus opportunities. Yet, the
Commission’s motivation to cease using the default offer cap
illuminates why excluding bonuses as a given factor in offers
was neither arbitrary nor capricious.

     The Commission determined that the default offer cap
was unjust and unreasonable, because 360 PAI was a
“gross[]” overestimate of the number of the intervals that a
supplier could expect to perform. Oral Arg. Tr. 38:1. This
unjust and unreasonable cap was based, in part, on lost
opportunities to earn bonuses by outperforming a contracted
commitment, or performing without any prior obligation to do
so. Advanced Energy, 860 F.3d at 667. These bonuses were
slated to come out of the penalties assessed against non-
performing suppliers. Though that was the plan, there were
essentially no bonuses paid in the years following adoption of
the default offer cap, because “there were almost no [PAI]”
                               28
where suppliers were called to perform.25 Oral Arg. Tr. 38:2–
3.

     This lack of PAI is important, because “under low PAI,
the opportunity to earn bonuses is reduced, and the likelihood
of earning bonuses enough to exceed the avoidable costs is
also reduced.” J.A. 400, Complaint of the Independent
Market Monitor for PJM, Docket No. EL19-47-000, Att. A
(Feb. 21, 2019). The record before the Commission showed
decidedly low PAI—near zero. The low PAI decreased the
likelihood of suppliers earning bonuses sufficient to exceed
their avoidable costs. As such, the Commission’s decision to
rely on a different approach, which excluded the nearly non-
existent bonus payments as a given component of offers via a
default offer cap, appears to be a rational choice.26

25
   J.A. 705, Brief of Independent Market Monitor for PJM,
Docket No. EL19-47-000 (Apr. 28, 2021) (“The only PAI
since PJM implemented Capacity Performance in 2016, for
which PJM assessed nonperformance charges and paid
performance bonus payments, were on October 2, 2019, for
24 intervals, or two hours.”).
26
    Moreover, that the risk of non-performance charges
remains an explicitly permissible factor in determining a
unit’s avoidable cost rate is similarly rational. Penalties are
static and can be estimated ex ante with greater ease and
accuracy than bonus payments. The Commission “set[s] the
penalty rate at a level that would require resources that fail to
perform” any portion of their capacity commitment when
called upon “to pay the expected full cost of replacement
capacity for that period.” J.A. 60, PJM Interconnection, LLC,
151 FERC ¶ 61,208, at P 159 (2015). Therefore, resources
can calculate the potential penalties they might incur “before
they submit their offers.” J.A. 60–61, PJM Interconnection,
                               29
     Accordingly, because the Commission reasonably
explained its decision as to the factors that suppliers may
include in capacity market offers, we deny this second ground
for relief.

                               C

    Petitioners’ final contention concerns the right of
suppliers to set their own rates under Section 205 of the
Federal Power Act. Petitioners and the Commission dispute
whether offers in capacity market auctions are “rates” that
suppliers may set on their own terms, or mere “inputs” used to
determine the ultimate rate.       Petitioners’ Br. 46; cf.
Respondent’s Br. 29. Petitioners claim that the plain text of
Section 205 supports their view of offers as “rates . . .
demanded” within the scope of the statute. Petitioners’ Br.
46. Further, according to Petitioners, the Commission’s new
approach guts a key feature of Section 205 because the
Independent Market Monitor can challenge a supplier’s offer,
and PJM might accept the Independent Market Monitor’s
suggested offer instead. For the reasons below, Petitioners:

LLC, 151 FERC ¶ 61,208, at P 160 (2015). Those numbers
“allow[] for some degree of certainty before the capacity
auction” and provide a “basis to assess risk . . . .” J.A. 60–61,
PJM Interconnection, LLC, 151 FERC ¶ 61,208, at P 160
(2015). In contrast, actual bonus payouts to any single
supplier can vary based on the surrounding circumstances, if
they are paid at all. See Advanced Energy, 860 F.3d at 667.
By excluding the variable (and effectively illusory) factor as a
guaranteed component of offers, the Commission furthers its
goal of ensuring that just and reasonable rates ultimately
emerge from the capacity market auctions.
                              30
(1) misconstrue the regulatory program at issue, and (2)
incorrectly conclude that capacity market offers are “rates”
within the meaning of Section 205.

                               1

     Section 205 of the Federal Power Act “covers rate filings
by jurisdictional public utilities” and imposes a “just and
reasonable standard[]” on those filed rates. FirstEnergy Serv.
Co. v. FERC, 758 F.3d 346, 352 (D.C. Cir. 2014) (quoting
Ala. Power Co. v. FERC, 993 F.2d 1557, 1571 (D.C. Cir.
1993)). The Commission may investigate whether rates meet
this just and reasonable requirement, but suppliers still have a
right to set their rates in the “first instance.” Id. at 353
(appearing in the quotation from Bos. Edison Co. v. FERC,
233 F.3d 60, 64 (1st Cir. 2000)); see also 16 U.S.C. § 824e.
Petitioners claim that under the unit-specific review model,
the Independent Market Monitor’s alternative proposal
receives “precedence” if the Independent Market Monitor
disagrees with a supplier’s offer. Petitioners’ Br. 46–47. The
Commission, PJM, and the Joint Consumer Advocates
disagree with this claim. We do too.

     Undoubtedly, the Independent Market Monitor plays a
central role in overseeing PJM’s capacity market. Yet, even
though suppliers and the Independent Market Monitor may
submit differing proposals under unit-specific review, the
Independent Market Monitor’s proposal does not
automatically displace an offer submitted by a supplier.
Instead, PJM plays the primary role of determining which
offer makes it to market.

     The 2015 Capacity Performance Order established the
unit-specific review process at issue in these petitions, and
that process involves several steps. First, suppliers submit
                              31
their capacity market offers to PJM and the Independent
Market Monitor within a specified timeframe before the
auction. These offers must be supported by adequate “data
and documentation . . . .” J.A. 594, Tariff, Attachment DD,
§ 6.4(b). Next, after addressing any concerns raised by the
Independent Market Monitor and attempting to reach an
agreement on an appropriate offer, a supplier must notify PJM
regarding whether it and the Independent Market Monitor
have, in fact, reached an agreement. See J.A. 594–95, Tariff,
Attachment DD, § 6.4(b).

     If the Independent Market Monitor and a supplier cannot
agree, the supplier may still submit its offer and supporting
data to PJM, which PJM then reviews independently. PJM,
alone, decides “whether to accept or reject the requested unit-
specific” offer. J.A. 595, Tariff, Attachment DD, § 6.4(b).
Though, even if PJM rejects a supplier’s offer as incompatible
with the Tariff and chooses to set the offer at the price
proposed by the Independent Market Monitor, suppliers are
not without recourse. The parities do not contest that, under
the Tariff, nothing in the review process “precludes
[suppliers] from filing a petition with [the Commission]
seeking a determination” that their offers comply with the
Tariff and therefore should be permitted into the auction. J.A.
595, Tariff, Attachment DD, § 6.4(c); see also J.A. 1091,
IMM v. PJM, 176 FERC ¶ 61,137, at P 67 (2021) (“[A]s
provided in the Tariff, should a dispute arise between a seller
and the Market Monitor, a seller may seek Commission
action.”).

     The September 2021 Order did not change the
Independent Market Monitor’s role as described above. J.A.
1092, IMM v. PJM, 176 FERC ¶ 61,137, at P 72 (2021)
(“After reviewing the comments about the unit-specific
review process, we are not convinced that any changes need
                               32
to be made to the process to implement the Unit-Specific
ACR Proposal.”); see also J.A. 36, PJM Interconnection,
LLC, 151 FERC ¶ 61,208, at P 93 (2015) (“We disagree with
the Market Monitor’s argument that, in addition to PJM’s
authority to review and, as appropriate, reject the sell offer of
a Capacity Performance Resource, the Market Monitor should
also be given the authority to reject an offer.”). PJM likewise
explained to this Court that PJM “adopts the Market
Monitor’s proposed calculation only if PJM first determines
that the [supplier’s] calculation does not comply with the
Tariff” and it also approves the Independent Market
Monitor’s proposal. PJM Intervenor’s Br. 2.

     To summarize the interaction, suppliers can submit their
offers to PJM regardless of the Independent Market Monitor’s
views, then ask the Commission to referee if a dispute
persists. As such, the current Tariff and September 2021
Order make quite clear that suppliers do not play second
fiddle when their proposed offers deviate from that of the
Independent Market Monitor.

                               2

     Petitioners similarly misperceive the nature of their
submissions into the capacity market.          According to
Petitioners, capacity market offers are “rates and charges
made, demanded, or received” within the meaning of Section
205. Petitioners’ Br. 47 (quoting 16 U.S.C. § 824d(a)). The
Commission counters that: (i) suppliers have voluntarily
agreed to abide by the terms of the Tariff, which includes a
unit-specific review process, and (ii) capacity market offers
are not “rates” under Section 205.            We think the
Commission’s second argument is persuasive.
                               33
     Under Chevron, we review the Commission’s
interpretation of the Federal Power Act following a two-step
approach. W. Minn. Mun. Power Agency v. FERC, 806 F.3d
588, 591 (D.C. Cir. 2015) (citing Chevron, U.S.A., Inc. v. Nat.
Res. Def. Council, Inc., 467 U.S. 837, 842–43 (1984)). The
first question is always “whether Congress has directly
spoken to the precise question at issue.” Chevron, 467 U.S. at
842–43. Where Congress’s intent is clear and unambiguous,
“that is the end of the matter[.]” Id. But where Congress’s
intent is not so easily perceived, “the [second] question for the
court is whether the agency’s answer is based on a
permissible construction of the statute.” Id. at 843. Yet, we
need not reach that second question, because the traditional
tools of statutory interpretation available to us show that the
Commission’s reading best accords with “[t]he statute’s plain
text . . . .” Bauer v. Fed. Deposit Ins. Corp., 38 F.4th 1114,
1121 n.2, 1122–23 (D.C. Cir. 2022).

    Section 205 does not expressly define the term “rate.” 27
Yet, Petitioners’ requested reading of offers as “rates . . .

27
    Our case law, taken as a whole, also provides little
instruction. At times, we have referred to capacity market
submissions as “rate[s].” Advanced Energy, 860 F.3d at 659
(“Resource owners offer to sell a set amount of capacity at a
specific rate.”). At other times, we have referred to capacity
market submissions as “prices.” Pub. Citizen, 7 F.4th at 1193
(“[I]n conducting that active monitoring, the Commission
examines auction prices . . . .”). We have also called them
“bids.” New Eng. Power Generators Ass’n, 757 F.3d at 287
(discussing how a market monitor reviews the capacity
market “bids” for auctions run by a similar regional
transmission organization). Still, in some circumstances, we
have referred to a submission as a “rate,” “price,” and “bid,”
all within the same paragraph. Advanced Energy, 860 F.3d at
                               34
demanded” would not seem to comport with the statute itself.
Petitioners’ Br. 46.       Section 205(c) requires that rate
schedules be “file[d] with the Commission” and “ke[pt]
open . . . for public inspection . . . .” 16 U.S.C. § 824d(c). By
contrast, offers into capacity market auctions are confidential
and submitted to PJM, not the Commission. Moreover, the
Commission does not need to review offers submitted into the
auction for justness and reasonableness, Pub. Citizen, 7 F.4th
at 1193, though the Federal Power Act mandates that the
Commission review Section 205 rates for such compliance,
NextEra Energy Res., LLC v. FERC, 898 F.3d 14, 20 (D.C.
Cir. 2018). Thus, unlike Petitioners’ view, the Commission’s
reading that offers are not rates within the meaning of Section
205 is entirely consistent with the statute.

     Our decision in Public Citizen bolsters the Commission’s
interpretation. Public Citizen clarified that “rates” as used in
Section 205 are the open-access transmission tariffs produced
by the auction, not the predicate “auction prices” submitted
into the market. Pub. Citizen, 7 F.4th at 1194. Under the
view taken in Public Citizen, capacity market offers cannot be
the same as the “rates” referred to in Section 205, because
capacity offers are not reviewed by the Commission to
determine whether they are “intrinsically just and

659–60 (discussing suppliers setting their submissions “at a
specific rate,” but PJM ultimately purchasing capacity “at the
rate of the highest accepted bid” “[r]egardless of the
[supplier’s] offer price”). In this opinion, we refer to capacity
market submissions as “offers.” See supra; see also Del. Div.
of Pub. Advoc., 3 F.4th at 463 (“To establish the capacity
market, PJM conducts a yearly auction in which electricity
suppliers submit offers to be available to provide capacity
during a one-year period, three years in the future.”).
                              35
reasonable . . . .” Id. at 1193 (“But in conducting that active
monitoring, the Commission examines auction prices not to
determine whether the prices themselves are intrinsically just
and reasonable, but instead ‘to ensure that the reported
transactions are consistent with the data expected of a
competitive, unmanipulated market.’”) (quoting Mont.
Consumer Couns. v. FERC, 659 F.3d 910, 919 (9th Cir.
2011)).

     With that said, because the Commission provides a
sensible interpretation of offers as inputs into the capacity
market rather than “rates” under Section 205, and our own
precedent accords, we reach the same conclusion as the
Commission: capacity market offers are not “rates” within the
statutory meaning of Section 205; they are inputs into
determining the market-clearing price.

                              IV

     At this point, we can end our review. The Commission
did not act arbitrarily or capriciously when it eliminated the
default offer cap in favor of reliance on unit-specific review,
and it explained its reasons for doing so while responding to
calls for it to adopt alternative proposals. The Commission
also provides a reasonable textual interpretation of rates as
inputs into final offers, which accords with our prior
precedent. We therefore deny these petitions.

                                                 So ordered.