Court Opinion

ID: 3183436
Source: CourtListenerOpinion
Date Created: 2016-03-08 16:05:18.73464+00
Date Added: 2024-06-11T09:37:24.702966
License: Public Domain

United States Court of Appeals
         FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued January 15, 2016                Decided March 8, 2016

                         No. 14-1282

                XCEL ENERGY SERVICES INC.,
                       PETITIONER

                              v.

       FEDERAL ENERGY REGULATORY COMMISSION,
                    RESPONDENT

             OCCIDENTAL PERMIAN LTD., ET AL.,
                     INTERVENORS

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

     Stephen M. Spina argued the cause and filed the briefs for
petitioner.

     Jennifer L. Mersing and Earle H. O'Donnell were on the
brief for intervenor Occidental Permian Ltd. in support of
petitioner.

     Lisa B. Luftig, Attorney, Federal Energy Regulatory
Commission, argued the cause for respondent. With her on the
brief were David L. Morenoff, General Counsel at the time the
brief was filed, and Robert H. Solomon, Solicitor.
                               2

     Carrie L. Bumgarner, Matthew J. Binette, Andrew T.
Swers, and Marvin T. Griff were on the brief for intervenors
Southwest Power Pool Inc. and Tri-County Electric Cooperative,
Inc.

   Before: ROGERS and WILKINS, Circuit Judges, and
WILLIAMS, Senior Circuit Judge.

    Opinion for the Court filed by Circuit Judge ROGERS.

     ROGERS, Circuit Judge: Xcel Energy petitions for review
of three orders of the Federal Energy Regulatory Commission
denying a retroactive refund for unlawful rates. Southwest
Power Pool, Inc., a regional transmission organization, filed a
tariff revision pursuant to section 205 of the Federal Power Act
to implement the formula rate of a non-jurisdictional
participating transmission owner, Tri-County Electric
Cooperative, Inc. To carry out the statutory mandate that rates
be just and reasonable, the Commission subjects the revenue
requirements of non-jurisdictional participating owners to
review under section 205 standards. Unless there is no material
issue, the Commission will either suspend the proposed rates
while it conducts a section 205 review or allow the rates to take
effect where the non-jurisdictional entity voluntarily agrees to
make refunds if the Commission determines the rates are unfair
and unjust. In this instance, contrary to section 205’s mandate
and Commission precedent, and over formal protests by
intervenors, the Commission, despite concluding that the
proposed rates may be unjust and unreasonable, allowed them
to go into effect without suspension or a voluntary refund
commitment by Tri-County.

     On rehearing, the Commission admitted its error of law but
concluded that the only available remedy was prospective under
section 206 of the Federal Power Act. The Commission stated
                                 3

that retroactive suspension of the rates would be inconsistent
with section 2.4(a) of its regulations barring suspension of a rate
schedule after it took effect. We grant the petition in part and
remand the case to the Commission.

                                 I.

     Section 205 of the Federal Power Act (“FPA”) mandates
that “[a]ll rates and charges . . . demanded, or received by any
public utility for . . . the transmission or sale of electric energy
subject to the jurisdiction of the Commission . . . shall be just
and reasonable, and any such rate or charge that is not just and
reasonable is hereby declared to be unlawful.” 16 U.S.C.
§ 824d(a). Section 205(d) provides that unless the Commission
otherwise orders, “ no change shall be made by any public utility
in any such rate, charge, classification, or service, or in any rule,
regulation, or contract relating thereto, except after sixty days’
notice to the Commission and to the public.” Id. § 824d(d).
Section 205(e) empowers the Commission, on its own initiative
or upon complaint, to investigate the lawfulness of a rate in a
newly filed schedule, and to suspend the effectiveness of the
changed schedule for up to five months. Id. § 824d(e). The
Commission may also order that increased rates and charges be
collected subject to refund so that when the rate schedule goes
into effect after suspension, the “interested public utility or
public utilities” must refund the amount of the increased rates or
charges “found not justified” by the Commission. Id.

     Under section 206(a) of the FPA, the Commission may
institute, on its own motion or upon complaint, an investigation
into the rates of public utilities to determine whether the rates
are just and reasonable. 16 U.S.C. § 824e(a). Section 206(b)
requires the Commission to establish a refund effective date that
is no earlier than the date of the publication of its order
instituting the investigation on its own motion or the date of the
                                 4

complaint, as applicable. Id. § 824e(b). If the Commission
determines upon investigation that a public utility’s rates are
unjust and unreasonable, the Commission may prospectively fix
the just and reasonable rate and order refunds of the difference
between the rate charged and the just and reasonable rate for a
fifteen-month period that commences on the refund effective
date.

      In response to the development of regional transmission
organizations (“RTOs”) and independent system operators
(“ISOs”), see generally Pub. Util. Dist. No. 1 of Snohomish Cty.
v. FERC, 272 F.3d 607, 610 (D.C. Cir. 2001), the Commission
determined, in order to carry out section 205’s mandate, that the
transmission revenue requirements of a non-jurisdictional entity
are subject to full review under section 205. The court endorsed
this decision to the extent that the Commission “may analyze
and consider the rates of non-jurisdictional utilities to the extent
that those rates affect jurisdictional transactions,” Pac. Gas &
Elec. v. FERC (“PG&E”), 306 F.3d 1112, 1114 (D.C. Cir.
2002), explaining that when reviewing a non-jurisdictional
entity’s rates as a component of an RTO’s rates, the
Commission is exercising jurisdiction over the RTO, not over
the non-jurisdictional entity, see id. The court has also held that
the Commission has no authority under section 205 to order a
non-jurisdictional entity to make refunds. See Transmission
Agency of N. Cal. v. FERC (“TANC”), 495 F.3d 663, 672 (D.C.
Cir. 2007). The Commission thus will accept the RTO’s filing
of a tariff revision where the non-jurisdictional entity voluntarily
agrees to make refunds in the event the Commission determines
the rate as filed is not just and reasonable, or the Commission
will delay the effective date of the proposed rate while it
conducts a section 205 review, unless there is no material issue.
See, e.g., Lively Grove Energy Partners, LLC, 140 FERC
¶ 61,252, at P 47 & n.59 (2012); City of Banning, 136 FERC
¶ 61,134 (2011); City of Riverside, 128 FERC ¶ 61,207, at P 26
                                5

(2009); cf. Great River Energy, 130 FERC ¶ 61,001 (2011). The
petition before the court arises from the Commission’s failure to
adhere to this established procedure.

     Southwest Power Pool, Inc. (“SPP”) is an RTO and a
“public utility” as defined in the FPA. See Sw. Power Pool, Inc.,
119 FERC ¶ 61,307, at P 11 (2007) (“SPP 2007”); 16 U.S.C.
§ 824(e). As an RTO, SPP “administers the provision of open
access transmission service on a regional basis across the
facilities of” its transmission owning members. Southwest
Power Pool Submission of Tariff Revisions to Incorporate Tri-
County Electric Cooperative, Inc. as Transmission Owner (Jan.
31, 2012) (“Tariff Filing”). Its transmission services are divided
into regional zones, including the Southwestern Public Service
Company Zone (“SPS Zone”). The SPS Zone includes
Southwestern Public Service Company (“SPS”), a wholly-
owned subsidiary of Xcel Energy Services, Inc. (“Xcel”). Xcel
and intervenor Occidental Permian Ltd. are also purchasers of
transmission services from the SPS Zone.

     On February 1, 2012, SPP filed revisions to its Open Access
Transmission Tariff (“OATT”) pursuant to section 205 to
implement Tri-County’s formula rate for transmission service.
According to SPP’s submission, Tri-County had become a
transmission owner in the SPS Zone and its formula rate would
be used to calculate the annual transmission revenue
requirement (“ATRR”). Xcel filed a protest, requesting the
Commission allow SPP’s tariff filing only if Tri-County agreed
voluntarily to make refunds or suspend the proposed rates while
the Commission conducted a section 205 review. See Motion to
Intervene and Protest at 4, 19 (Feb. 22, 2012). The Commission
did neither. On March 30, 2012, the Commission — despite
concluding that there was insufficient evidence to determine
whether Tri-County qualified as a “transmission provider” under
SPP’s OATT, and that the proposed rates may not be just and
                               6

reasonable — accepted the tariff revisions for filing, to become
effective April 1, 2012 as requested, and established hearing and
settlement judge procedures. Sw. Power Pool, Order Accepting
Formula Rate Proposal and Establishing Hearing and
Settlement Judge Procedures (“Order I”), 138 FERC ¶ 61,231,
at PP 1, 14, 15. The Commission offered no explanation of its
departure from its precedent.

     Xcel sought rehearing and a stay, and requested expeditious
action by the Commission. Xcel Request for Rehearing, Motion
for Stay, and Request for Clarification (Apr. 25, 2012) (“2012
Reh’g Request”). It argued that the Commission had clearly
erred, contrary to the mandate in section 205 to protect
consumers from excessive rates, by never fully reviewing Tri-
County’s ATRR before allowing SPP’s rates to take effect after
concluding the proposed rates may be unjust and unreasonable.
Except where proposed rates were not contested or there were
no issues of material fact, Xcel pointed out that “[a]fter TANC,
in every case where the Commission has reviewed the costs of
a non-jurisdictional utility included in an RTO’s or ISO’s rate,
the Commission has only set those rates for hearing where the
non-jurisdictional utility made a commitment to provide
refunds.” Id. at 7 & n.24.1 Xcel therefore requested that the
Commission “reverse its determination to accept the SPP Filing
and, instead, . . . suspend it, subject to refund and hearing
procedures.” Id. at 8. Because the Commission erred as a

       1
          Xcel cited as examples: City of Azusa, 138 FERC
¶ 61,049 (2012); City of Pasadena, 137 FERC ¶ 61,045 (2011);
City of Riverside, 136 FERC ¶ 61,137 (2011); City of Banning,
136 FERC ¶ 61,134 (2011); City of Anaheim, 136 FERC
¶ 61,034 (2011); Midwest Indep. Transmission Sys. Operator,
Inc. (“MISO”), 135 FERC ¶ 61,131 (2011); City of Pasadena,
128 FERC ¶ 61,290 (2009); City of Riverside, 128 FERC
¶ 61,207 (2009).
                                7

matter of law in allowing SPP’s rates to take effect without
conducting a full section 205 review or otherwise ensuring
consumer protection through refunds, Xcel argued that
Commission precedent barring retroactive rate suspension on
rehearing was not dispositive. Id. at 9 n.29. Xcel also sought
a stay of Order I, stating the SPP tariff filing increased revenue
requirements by $1.98 million annually, of which over 97%
would be borne by loads taking service under the SPP tariff
other than Tri-County, of which about 60% will be borne by
SPS and its native load customers. See id. at 11; FPA § 313(c),
16 U.S.C. § 825l(c); 5 U.S.C. § 705. Xcel noted that “SPP has
not yet issued transmission service bills reflecting the Tri-
County ATRR.” 2012 Reh’g Request at 9 n.29.

     On rehearing, the Commission acknowledged that it “erred
in allowing SPP’s rate proposal for Tri-County’s ATRR to go
into effect April 1, 2012, without a commitment from Tri-
County to refund the difference between the as-filed rate and the
rate ultimately found to be just and reasonable by the
Commission.” Sw. Power Pool, Order on Rehearing (“Order
II”), 142 FERC ¶ 61,135, at P 13 (2013). Further, the
Commission acknowledged, “[c]onsistent with Commission
policy in other instances involving non-public utilities, without
such a refund commitment, the effective date for Tri-County’s
ATRR should be the date the Commission makes the ATRR
effective in its order approving the ATRR following hearing and
settlement judge procedures.” Id. It stated, however, that it
lacked jurisdiction to make Tri-County’s collected rates subject
to refund. See id. PP 14–15 (citing Riverside, 128 FERC
¶ 61,207, at P 24 (citing TANC, 495 F.3d at 673–74); Midwest
Indep. Transmission Sys. Operator, Inc. (“MISO”), 135 FERC
¶ 61,131, at P 72 (2011)). But concluding that it would not be
just and reasonable to allow SPP to continue to pass through
“Tri-County’s proposed rate” before the Commission
determined it just and reasonable, the Commission ordered SPP,
                                 8

pursuant to section 206, to file a compliance filing either
removing the tariff sheets allowing it to charge Tri-County’s
proposed rate or providing Tri-County’s voluntary commitment
to make refunds beginning February 22, 2013. Id. at P 16. The
Commission denied the request for a stay as moot. Id. at P 18.

     Xcel sought rehearing and clarification, observing in part
that the Commission had not addressed its position that the rates
at issue were SPP’s rates, not Tri-County’s, and thus its request
that SPP’s rates be suspended and made effective subject to
refund was within the Commission’s jurisdiction. See Request
for Rehearing and Request for Clarification at 4 (Mar. 25, 2013)
(“2013 Reh’g Request”).

     The Commission denied rehearing and accepted SPP’s
compliance filing in which Tri-County agreed to pay forward
looking refunds. Sw. Power Pool, Order Denying Rehearing
and Accepting Compliance Filing Subject to Further
Compliance Filing (“Order III”), 149 FERC ¶ 61,050 (2014).
Rejecting Xcel’s request for suspension of SPP’s rates, the
Commission stated that section 206 provided “the only remedy”
at the time of Xcel’s 2012 rehearing request. Id. at P 25. It
stated it lacked authority to suspend rates retroactively and order
refunds because of its “longstanding policy” that rate schedules
cannot be suspended after they take effect, 18 C.F.R. § 2.4(a).
Id. at P 28. It rejected Xcel’s argument that there is an equitable
presumption in favor of ordering refunds where the Commission
erred as a matter of law because its “legal error” precedent was
not on point as the Commission was not acting pursuant to a
court remand. Id. at P 27.

     In the meantime, an administrative law judge determined
that Tri-County “ha[d] failed to carry its burden to prove that its
facilities [included in exhibits to SPP’s tariff filing] are
Transmission Facilities eligible to be rolled into SPP’s Zone 11
                                9

ATRR.” Sw. Power Pool, Initial Decision, 143 FERC ¶ 63,003,
at P 250 (2013). The Commission affirmed the Initial Decision
on the same day it denied rehearing. Sw. Power Pool, Opinion
and Order on Initial Decision, ORDER NO. 535, 149 FERC
¶ 61,051 (2014).

                                II.

     Xcel petitions for review of the Commission’s three orders
denying a refund of the unlawful rates it paid for eleven months,
from April 1, 2012, to February 22, 2013. See FPA § 313(b), 16
U.S.C. § 825l(b). The court reviews the Commission’s orders
under the Administrative Procedure Act to determine whether the
Commission’s action is arbitrary and capricious or contrary to
law. See, e.g., Sithe/Independence Power Partners v. FERC, 165
F.3d 944, 948 (D.C. Cir. 1999). This is a deferential standard, see
Transmission Access Policy Study Grp. v. FERC, 225 F.3d 667,
714 (D.C. Cir. 2000), but requires that the court at least assure
itself that the Commission’s reason for its decision is both
rational and consistent with the authority delegated to it by
Congress. See 5 U.S.C. § 706(2)(A) & (C); see also Motor
Vehicle Mfrs. Ass’n v. State Farm Mut. Auto. Ins. Co., 463 U.S.
29, 42 (1983).

      It is long-established that the “primary aim [of the FPA] is
the protection of consumers from excessive rates and charges.”
Mun. Light Bds. of Reading & Wakefield v. FPC, 450 F.2d 1341,
1348 (D.C. Cir. 1971), cert. denied, 405 U.S. 989 (1972).
Consistent with this purpose, the Commission has a general
policy of providing refunds in the exercise of its remedial
discretion. Cf. Towns of Concord, Norwood, & Wellesley v.
FERC, 955 F.2d 67, 76 (D.C. Cir. 1992). In the context of
section 205, the Commission implements these policies during
its initial review of rate filings. Typically, where initial review
has not shown the proposed rates are just and reasonable, the
                                10

Commission will suspend the rates and make them subject to
refund while it conducts a section 205 review through hearing
and settlement proceedings. W. Tex. Utils. Co., 18 FERC
¶ 61,189, at 61,374 (1982); Boston Edison Co., 12 FERC
¶ 61,211, at 61,516 (1980); see Conn. Light & Power Co. v.
FERC, 627 F.2d 467, 471 (D.C. Cir. 1980). When a regional
organization, such as an RTO, includes a non-jurisdictional
entity and seeks a tariff revision based on that entity’s ATRR, the
Commission has followed the same procedure where a voluntary
refund commitment is submitted with the RTO’s proposed tariff
revision. See supra note 1 and accompanying text. Here, the
Commission has acknowledged that it erred as a matter of law in
allowing SPP’s proposed rates to take effect, contrary to section
205, without voluntary refund protection despite the
acknowledged need for further section 205 review. The
Commission nonetheless concluded that it was powerless to do
more than order SPP, pursuant to section 206, to ensure
prospective refunds because section 2.4(a) of its regulations
barred suspension once SPP’s rates took effect. See Order III at
P 28. The Commission appears, from the record before the
court, to have misapprehended its remedial powers and thus
arbitrarily declined to weigh the equities underlying Xcel’s
request for retroactive relief.

     First, as a threshold matter, to the extent the Commission
denied Xcel relief because it lacks authority to order refunds
from Tri-County, a non-jurisdictional entity, this was not
responsive to Xcel’s request. See Order II at PP 14–15; Order
III at P 28 & n.43. (The same is true of such arguments as
appear in the Commission’s brief. See, e.g., Resp’t’s Br. 35.)
Xcel did not argue that the Commission has authority under the
FPA to order refunds from Tri-County. Rather, Xcel argued that
the Commission may exercise its remedial authority with respect
to SPP, whose OATT was unlawfully inflated by Tri-County’s
ATRR, resulting in Xcel’s subsidiary SPS paying unlawful rates
                                11

for eleven months. See, e.g., 2012 & 2013 Reh’g Requests at 6
and 16, respectively. SPP’s filing pursuant to section 205
submitted revisions to its tariff, albeit to implement Tri-County’s
ATRR. As Xcel has noted without contradiction by the
Commission, SPP’s proposed rates were filed by SPP, charged
to SPP’s customers by SPP, and were associated with service
purported to be provided by SPP. SPS did not and does not take
transmission service from Tri-County nor had any arrangement
or other obligation to pay for Tri-County’s non-jurisdictional
tariffs. See Pet’r’s Br. 27–28. The Commission acknowledged
that:

         [A]s a regional transmission organization, SPP controls
         the transmission facilities that provide the services and
         has the OATT pursuant to which the services are
         provided, and thus SPP is the entity providing services,
         even if the relevant charges are ultimately traceable to
         [a non-jurisdictional entity] and even if they appear on
         SPP’s invoices as line items and with no “mark up.”

SPP 2007, 119 FERC ¶ 61,307, at P 14; see also TANC, 495 F.3d
at 672; MISO, 135 FERC ¶ 61,131, at P 72.

     Second, the Commission’s reliance on section 2.4(a) of its
regulations and related cases to deny Xcel retroactive relief is
misplaced. See Order III at P 28. Xcel does not dispute that
section 2.4(a) is a general prohibition against suspending a rate
schedule in effect under a final order that was not the product of
the Commission’s legal error. See generally United Gas
Improvement Co. v. Callery Props., Inc, 382 U.S. 223, 229
(1965). Rather, Xcel maintains that the applicability of section
2.4(a) is far from evident where no full section 205 review has
occurred. The Commission relied on Cooperative Power Ass’n
v. FERC, 733 F.2d 577, 580 (8th Cir. 1994), reh’g denied, 739
F.2d 390 (8th Cir. 1984), which upheld reliance on section 2.4(a)
                                12

to deny a retroactive rate suspension. See Order III at P 28 n.44.
Xcel points out that the Eighth Circuit is the only court to have
reviewed the Commission’s application of section 2.4(a) and that
on rehearing the court expressed doubt that the Commission
lacked power on rehearing of an initial rate order to suspend the
rate, but concluded, assuming the Commission had such power,
that its denial in the circumstances was not an abuse of
discretion. See Coop. Power, 739 F.2d at 392. Here, by contrast,
the Commission has admitted its error of law in not adhering to
section 205’s mandate, and Xcel maintains it was tantamount to
an abuse of discretion not to suspend SPP’s rates despite
concluding they may be unjust and unreasonable.

     More telling still, the orders cited by the Commission that
have applied section 2.4(a) to deny rehearing to suspend a rate
are inapposite. See Order III at PP 25 n.36, 28 n.44 (citing
Dynegy Midwest Generation, Inc., 110 FERC ¶ 61,358, at P 5
(2005); FirstEnergy Operating Cos., 86 FERC ¶ 61,152, at
61,543 n.12 (1999); Consumers Energy Co., 80 FERC ¶ 61,316,
at 62,077 (1997); Illinois Power Co., 73 FERC ¶ 61,348, at
62,058 (1995); Kentucky Power Co., 64 FERC ¶ 61,112, at
61,922 (1993)). In none of these cases did the Commission find
that the proposed rates appeared to be unjust and unreasonable
yet placed them in effect without refund protection. Each order
involved a party intervening out of time to raise issues that could
have been raised before the Commission issued its initial order
placing the rate into effect. See Dynegy, 110 FERC ¶ 61,358, at
PP 2–5; Consumers Energy Co., 80 FERC at 62,077; Illinois
Power Co., 73 FERC at 62,057–58; Kentucky Power Co., 64
FERC at 61,923. Xcel’s protest was filed prior to the
Commission’s acceptance of SPP’s OATT revisions in Order I
and raised material factual issues, with supporting analysis,
regarding whether Tri-County’s facilities were qualified
transmission facilities and whether its ATRR was overstated, and
requested that the Commission delay the effectiveness of SPP’s
                                13

proposed rates to conduct a section 205 review. Moreover, the
Commission’s legal error in accepting SPP’s rates without
suspension or refund protection is undisputed.

     In seeking rehearing of Order II, Xcel argued as well that
the Commission had authority under section 309 of the FPA to
remedy its legal error and provide Xcel relief. See 2013 Reh’g
Request at 16. Xcel referenced the Supreme Court’s statement
in analogous circumstances that “[a]n agency, like a court, can
undo what is wrongfully done by virtue of its order,” which was
not final as it was still subject to judicial review. United Gas
Improvement Co., 382 U.S. at 229. Section 309 authorizes the
Commission “to perform any and all acts, and to prescribe, issue,
make, amend, and rescind such orders . . . as it may find
necessary or appropriate to carry out the provisions of [the
FPA].” 16 U.S.C. § 825h. It vests the Commission with broad
remedial authority. See Towns of Concord, 955 F.2d at 73.
Indeed, in examining the parallel provision in the Natural Gas
Act, the court concluded that provision “unquestionably gives
[the Commission] the authority, in fashioning remedies, to
consider equitable principles, one of which is to regard as being
done that which should have been done,” and held the
Commission could order abandonment authorizations of natural
gas certificates to take effect retroactively, notwithstanding the
Commission’s objection that the statute did not permit
retroactive authorizations. N. Natural Gas Co. v. FERC, 785
F.2d 338, 341 (D.C. Cir. 1986).

     Still, the Commission dug in its heels, disclaiming any
power or principle of equity to grant Xcel further relief, stating
it could not act in a manner that was inconsistent with the statute
where rates were accepted and have taken effect even to achieve
what some parties have claimed is a more equitable result.
Order III at P 27 (citing Pub. Utils. Comm’n of Cal. v. FERC,
988 F.2d 154, 168 n.12 (D.C. Cir. 1993)). For instance, the
                                 14

Commission cited City of Anaheim v. FERC, 558 F.3d 521, 525
(D.C. Cir. 2009), which held that the Commission lacked
authority to establish a retroactive effective date and refunds
under section 206 because that provision only allowed the date
to be “fix[ed]” prospectively. Xcel does not maintain the
Commission erred in failing to apply section 206 retroactively
but that it erred in failing to correct its legal error under section
205. The Commission has acknowledged that in allowing SPP’s
rates to take effect immediately without refund protection its
action was contrary to section 205, see Order III at P 13. When
the Commission acts contrary to the statute its action is ultra
vires. Cf. Ind. & Mich. Elec. Co., 502 F.2d 336, 343 (D.C. Cir.
1974). Further, neither City of Anaheim nor Public Utilities
Commission speaks to the Commission’s power under
section 309 or its equivalent.

     On appeal, the Commission, and intervenors SPP and Tri-
County, rely on Indiana & Michigan, 502 F.2d at 343, where the
court vacated an order suspending a rate, holding that the
Commission had exceeded its statutory authority by delaying the
effective date of rate filings beyond the period set in section 205.
On rehearing, the court retroactively suspended the rates to allow
the Commission to complete its section 205 review while
protecting consumers. See id. at 343–44. To the extent
intervenors SPP and Tri-County suggest that case is
distinguishable because the court sought to avoid imposing
surcharges on consumers, no precedent is cited, and we are
aware of none, for the proposition that the Commission’s
equitable authority does not encompass refunds as well as
surcharges. See Nat. Gas Clearing House v. FERC, 965 F.2d
1066, 1073 (D.C. Cir. 1992). Indeed, Xcel points to the example
of Cities of Batavia v. FERC, 672 F.2d 64 (D.C. Cir. 1982), in
which the court, concluding the Commission was mistaken about
its authority to review part of an amended rate schedule,
remanded for the Commission to determine “whether this [was]
                               15

an appropriate case in which to exercise its section 205
suspension and refund jurisdiction,” id. at 77, even though the
contested rate had already gone into effect. The Commission’s
response that in Sea Robin Pipeline Co. v. FERC, 795 F.2d 182,
187 (D.C. Cir.1996), the court clarified review was limited to the
Natural Gas Act’s parallel provision to section 206, avoids the
central issue. Sea Robin simply held that the Commission lacks
authority “to reject, post hoc, a previously accepted provision or
to specify what should replace it.” Id. Under the Commission’s
interpretation that it lacks any power to correct its legal error
even where no section 205 review has occurred despite
recognition it is needed, consumers are denied the protection that
Congress mandated in section 205 without full recourse. Cf. Nat.
Gas Clearinghouse, 965 F.2d at 1074. It is no answer to suggest
that in enacting section 206 to provide only prospective relief
Congress anticipated that there would be situations in which
customers would not be made whole. See Resp’t’s Br. 27–28.
At this point, it is unclear why the Commission has concluded
Congress intended there would be no administrative remedy for
the Commission’s legal error in its initial rate order, an area
where the Commission’s consumer protection responsibilities are
at their most fundamental, particularly when Congress provided
remedial authority in section 309.

      The Commission ignores what distinguishes the instant case,
where it has conceded an error of law by failing, contrary to
section 205’s mandate, to ensure SPP’s rates were just and
reasonable before they took effect or provide refund protection.
In a typical case, where the Commission exercises its section 205
authority to ensure consumer protection against unjust and
unreasonable rates, Xcel is not contesting the applicability of
section 2.4(a) of the Commission’s regulations in denying
retroactive relief where a rate schedule has been approved and
taken effect in a final order. But where the Commission
acknowledges that it acted contrary to section 205’s mandate to
                                16

protect consumers against unjust and unreasonable rates, its
initial rate order is ultra vires and the Commission cannot
rationally ignore the different contexts in which it has refused to
suspend existing rate schedules or its remedial authority in
section 309.

     Xcel observes that this court could exercise its equity power,
see Pet’r’s Br. 50, to respond to the “exigencies of the case” in
order to eliminate “compelling” hardship from non-recoverable
excessive rates, Ind. & Mich., 502 F.2d at 345–46.
Consideration of that option is premature. The Commission has
yet to evaluate the equities of providing refund protection to
recover unlawful rates resulting from its failure to adhere to
section 205’s mandate. On appeal, the Commission has
expressed concern about under-recovery, which it states “there
could be in this case,” Resp’t’s Br. 33, but this was not the
Commission’s rationale in denying relief in Orders II or III. See
SEC v. Chenery Corp., 318 U.S. 80, 87 (1943); see also State
Farm, 463 U.S. at 50.

     Because the Commission’s reliance on section 2.4(a) of its
regulations as applied in its precedent is inapposite, and its
position that its section 205 error of law is irremediable beyond
prospective relief under section 206 appears irreconcilable with
the authority Congress granted it in section 309 to remedy its
errors, we grant the petition in part and remand the case to the
Commission for appropriate action. See Cities of Batavia, 672
F.2d at 77. Xcel suggests that the remedy it seeks would not
involve a change to the originally granted effective date for the
SPP rates of April 1, 2012, and that there is no reason to presume
the necessary correction to Order I would contravene the FPA,
inasmuch as parties were on notice the SPP rate is tentative and
may be adjusted with retroactive effect. See Pet’r’s Br. 40–41
(citing NSTAR Elec. & Gas Corp. v. FERC, 481 F.3d 794, 801
(D.C. Cir. 2007)). We leave these issues for the Commission to
                             17

address as may be appropriate on remand. See Tenn. Valley
Mun. Gas Ass’n v. FPC, 470 F.2d 446, 452–53 (D.C. Cir. 1972);
see also Exxon Co., USA v. FERC, 182 F.3d 30, 49–50 (D.C. Cir.
1999).