Court Opinion

ID: 185132
Source: CourtListenerOpinion
Date Created: 2011-02-05 02:28:10+00
Date Added: 2024-06-11T17:26:13.457126
License: Public Domain

208 F.3d 1037 (D.C. Cir. 2000)
Connecticut Valley Electric Company, Inc., Petitionerv.Federal Energy Regulatory Commission, RespondentGranite State Hydropower Association, et al., Intervenors
No. 98-1294
United States Court of AppealsFOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued October 7, 1999Decided April 14, 2000

[Copyrighted Material Omitted]
On Petition for Review of Orders of the Federal Energy Regulatory Commission
James H. McGrew argued the cause and filed the briefs for  petitioner.
Beth G. Pacella, Attorney, Federal Energy Regulatory  Commission, argued the cause for respondent.  With her on the brief were Jay L. Witkin, Solicitor, and John H. Conway,  Deputy Solicitor.
Earle H. O'Donnell, Donna M. Attanasio, Laurel W.  Glassman, Margaret A. Moore, and Howard E. Shapiro were  on the brief for intervenors Westmoreland-LG & E Partners  and Wheelabrator Claremont Company, L.P.  Allan W.  Anderson, Jr., and David B. Ward entered appearances for  intervenor Granite State Hydropower Association.
Before:  Ginsburg, Rogers, and Tatel, Circuit Judges.
Opinion for the Court filed by Circuit Judge Ginsburg.
Ginsburg, Circuit Judge:

1
Connecticut Valley Electric Company, a local distribution company serving some 10,000 customers in New Hampshire and Vermont, petitions for review  of two orders of the Federal Energy Regulatory Commission  denying Connecticut Valley any relief against a power producing facility that violated S 3(17)(C)(ii) of the Federal Power Act (FPA).  Connecticut Valley claims the Commission's  orders violate § 210 of the Public Utility Regulatory Policies  Act of 1978 (PURPA), and that the Commission is required  by S 3(17)(C)(ii) of the FPA to revoke the facility's status as a  "Qualifying Facility" (QF), or alternatively that the Commission's refusal to revoke the facility's QF status or to provide  any other relief is an abuse of the agency's remedial discretion.

2
We hold that we are without jurisdiction to address Connecticut Valley's claim arising under S 210 of the PURPA. We reject Connecticut Valley's claim that S 3(17)(C)(ii) of the  FPA requires the Commission to revoke the facility's QF  status, and we conclude that the Commission's decision to  deny any relief was a valid exercise of its remedial discretion. We therefore deny the petition for review.

I. Background

3
The Congress enacted Title II of the PURPA, Pub. L. No.  95-617, 92 Stat. 3117, 3134 (1978), in an effort to encourage  the development of cogeneration and small power production  facilities.  A "cogeneration facility" produces both electric energy and steam or some other form of usable energy, 16  U.S.C. S 796(18)(A);  a "small power production facility" produces less than 80 megawatts of electricity using biomass,  waste, renewable resources, or geothermal resources as the  primary energy source, id. S 796(17)(A).  The Supreme Court described S 210 of the PURPA in FERC v. Mississippi, 456  U.S. 742, 750-51 (1982) (citations omitted):

4
... [Congress] felt that two problems impeded the development of nontraditionalgenerating facilities:  (1)traditional electricity utilities were reluctant to purchase power from, and to sell power to, the non-traditional facilities, and (2) the regulation of these alternative energy sources by state and federal utility authorities imposed financial burdens upon the nontraditional facilities and thus discouraged their development.

5
In order to overcome the first of these perceived problems, S 210(a) directs FERC ... to promulgate ...rules requiring utilities to offer to sell electricity to, and purchase electricity from, qualifying cogeneration and small power production facilities....

6
To solve the second problem perceived by Congress, S 210(e), 16 U.S.C. S 824a-3(e), directs FERC to pre-scribe rules exempting the favored cogeneration and small power facilities from certain state and federal laws governing electricity utilities.

7
In order to secure these benefits to qualifying cogeneration  and small power production facilities--so-called Qualifying  Facilities, or QF's--the Commission has promulgated the  following regulations, respectively:  18 C.F.R. SS 292.303-305,  which require an electric utility to sell to a QF electricity for  use in its operations at regulated tariff rates and to buy the  QF's output at the utility's "avoided cost";*  and 18 C.F.R. SS 292.601-602, which exempt a QF from the Public Utility  Holding Company Act of 1935, 15 U.S.C. § 79 et seq., most  state regulation as a public utility, and much of the FPA.  A  small power producer (SPP) is a QF only if it (1) meets  various Commission requirements respecting fuel use, fuel  efficiency, and reliability, 16 U.S.C. § 796(17)(C)(i) and (2) "is  ... not primarily engaged in the generation or sale of electric  power (other than electric power solely from cogeneration  facilities or small power production facilities)," id.  S 796(17)(C)(ii).

8
A.  Regulatory Background:  Gross Versus Net Output

9
There are two ways of measuring the power production  capacity of a QF:  one looks to gross output, which is all  electricity produced by the facility, the other to net output,  which is gross output less the electricity used in the QF's own  operations.  The distinction is important because many QF's  purchase their internal operating needs at tariffed rates from  the electric utility to which they sell their output, which the  utility is required to buy at the utility's full avoided cost.  If  the QF were allowed to sell its gross output to the electric  utility at full avoided cost, then it would in effect be selling  back at a significant markup the quantum of electricity it  purchased from the utility for its internal operating needs.

10
In 1991, the Commission for the first time addressed  whether a facility that sold its gross output would lose its status as a QF because it would no longer be, as required by  S 3(17)(C)(ii),1 "not primarilyengaged in the generation or  sale of electric power (other than electric power solely from  cogeneration facilities or small power production facilities)."Turners Falls Ltd. Partnership, 55 FERC p 61,487.  The  Commission began by recognizing that S 3(17)(C)(ii) is ambiguous:  If a utility provides a QF with power for its operations  through one line, and the QF provides its gross output back  to the utility through a separate line, then in one sense  (namely, the physical) the QF is selling only electricity "solely  from cogeneration or small power production facilities" and  the requirement of S 3(17)(C)(ii) is satisfied;  in another  (namely, the economic) sense, however, the QF is selling back  to the utility electricity that was generated by the utility, in  violation of that section.  See id. at 62,668.

11
In light of this ambiguity and the broad discretion the  Congress granted the Commission in S 3 of the FPA to  determine the requirements for QF certification, the Commission concluded that it could lawfully interpret the statute  either to allow or to preclude a QF's sale of its gross output. See id. at 62,669.  In the end, however, the Commission  decided that the policies of the PURPA are served better if  the statute is read to say that a facility that sells its gross  output is not a QF.  See id. at 62,671.

12
B. Procedural Background:  Petition to Revoke Claremont's QF Status

13
Wheelabrator Claremont Company (hereinafter Claremont)  operates an SPP facility in Claremont, NH.  In 1983 the New  Hampshire Public Utilities Commission approved a settlement agreement among Connecticut Valley, Claremont  (through its predecessor in interest), and the NHPUC's own staff.  See In re New Hampshire/Vermont Solid Waste Project, DR 82-343, Order No. 16,232, 68 NHPUC 96.  The  settlement, as embodied in a contract executed between Connecticut Valley and Claremont and approved by the NHPUC  in 1984, provided that Connecticut Valley would purchase the  "entire electrical output" of Claremont's proposed SPP facility for 20 years at Connecticut Valley's full avoided cost (of  nine cents per kWh, adjusted for inflation) while simultaneously providing Claremont with its needs for electricity in  its operations, at Connecticut Valley's consolidated tariff rate,  which has proven to be less than the adjusted contract rate. Claremont applied to the Commission for QF certification, representing that its output would be 4.5 MW but it did not  specify whether that was its gross or net output.  The  Commission certified the Claremont facility as a QF in 1986,  and in 1987 Claremont began selling to Connecticut Valley its  gross electrical output of 4.5 MW.

14
In 1993 Claremont, in response to an inquiry from the  NHPUC, reported that its gross output was 4.5 and its net  output 3.9 MW.  Connecticut Valley then asked the NHPUC  to investigate whether Claremont qualified as a QF in view of  its having sold its gross output.  Instead, the NHPUC, noting  that the FERC has exclusive jurisdiction over the decertification of a QF, ordered Connecticut Valley to petition the  Commission for revocation of Claremont's QF status.  See In  re Connecticut Valley, DR 93-196, Order No. 21,000  (NHPUC Oct. 18, 1993).

15
Connecticut Valley duly filed a complaint with the Commission seeking revocation of Claremont's QF status based upon  Claremont's sales of gross output and its alleged misrepresentations to the Commission in applying for QF status. Connecticut Valley further requested that, once Claremont's  QF status was revoked, the Commission take jurisdiction over  Connecticut Valley's contract with Claremont pursuant to  SS 205-206 of the FPA and either rescind the contract and  retroactively determine just and reasonable rates for past sales, or at least prospectivelyreform the contract so that  Connecticut Valley need purchase only Claremont's net output.

16
Although the Commission agreed with Connecticut Valley  that Claremont could not be a QF because its gross sales took  it outside the rule of S 3(17)(C)(ii), the Commission denied  Connecticut Valley any relief.  See Connecticut Valley Elec.  Co. v. Wheelabrator Claremont Co., 82 FERC p 61,116, at  61,422 (1998).  The Commission explained that the statute is  ambiguous and could be read to allow gross sales by a QF.Not until Turners Falls, the Commission concluded, had it  made clear that gross sales would violate S 3(17)(C)(ii) and  thus preclude QF status.  See id. at 61,418.  Noting, however,  that many QFs had in good faith entered into long-term  contracts for the sale of their gross output, and not wanting  to upset their settled expectations, the Commission adopted a  remedial policy that was only partially retroactive:  "We will  ... revoke the QF status of any facility which sells in excess  of its net output pursuant to a contract entered into after the  date of issuance of Turners Falls."  Id. at 61,420.  Because  the Claremont contract predated Turners Falls, the Commission declined to revoke Claremont's QF status or to take any  other remedial action.  See id. at 61,422.

17
Connecticut Valley petitioned for rehearing, arguing that  S 3(17)(C)(ii) is not ambiguous and therefore the Commission  should have decertified Claremont or provided Connecticut  Valley some alternative relief for Claremont's acknowledged  violation of the statute.  The Commission denied rehearing, 83 FERC p 61,136 (1998), and Connecticut Valley petitioned  this court for review of both Commission orders.

II. Analysis

18
Connecticut Valley and the Commission agree that S 3(17)(C)(ii) of the FPA an SPP that sells more than its net  output, as Claremont does, cannot be a QF.  The Commission  maintains that it may nonetheless refuse to revoke Claremont's QF status and may deny Connecticut Valley any  alternative relief.  Connecticut Valley claims that the Commission's refusal to revoke Claremont's QF status or to  provide some alternative relief violates § 210 of the PURPA and S 3(17)(C)(ii) of the FPA, and is an abuse of the Commission's remedial discretion.

A. Section 210 of the PURPA

19
Connecticut Valley claims that under the challenged orders  it is required to pay Claremont more for electricity than the  lawful maximum established by § 210 of the PURPA, that is,  its full avoided cost.  The matter is less than straightforward  because S 210 actually caps the total amount (not just the per  unit rate) a utility is required to pay a QF for electricity:  the  utility can be required to pay no more than "the cost to the  electric utility of the electric energy which, but for the  purchase from such cogenerator or small power producer,  such utility would generate or purchase from another source."  16 U.S.C. S 824a-3(d).  Connecticut Valley claims its contract  with Claremont requires it to purchase Claremont's gross  output, whereas but for the purchase from Claremont, Connecticut Valley would need to generate or purchase electricity  equal only to Claremont's net output.  Thus the Commission's refusal to revoke Claremont's QF status and reform the  contract requires Connecticut Valley to pay more than its full  avoided cost.

20
Although neither party raised this issue in their briefs, we  asked the parties to address at oral argument whether we  have jurisdiction to adjudicate in the first instance a dispute  arising under § 210.  See New York State Electric & Gas  Corp. v. FERC, 117 F.3d 1473, 1477 (D.C. Cir. 1997);  Niagara Mohawk Power Corp. v. FERC, 117 F.3d 1485, 1489 (D.C.  Cir. 1997).  The Commission takes the position that we do  not.  Connecticut Valley replies with a variety of arguments,  none of which is responsive to the Commission's jurisdictional  argument.

21
We agree with the Commission that New York State Electric and Niagara Mohawk control this case.  Section 210 sets  up an elaborate enforcement scheme in which the roles of the  Commission, the state public utility commissions (PUCs), and  the federal courts are specifically delineated.  Under  S 210(a), the Commission is required to promulgate regulations governing utilities' purchases of electricity from QFs, including regulations implementing the statutory cap under  SS 210(b)-(d).  16 U.S.C. SS 824a-3(a), (b), (d).  The state  PUCs are then required (by S 210(f), 16 U.S.C. S 824a-3(f))  to implement the Commission's regulations.  If a PUC fails to  implement the regulations, the Commission may bring an  enforcement action against that PUC in federal district court. Alternatively, if a private party petitions the Commission to  initiate an enforcement action against a PUC and the Commission declines, then that party may itself sue the PUC in  federal district court to force implementation of the regulations.  See S 210(h)(2), 16 U.S.C. S 824a-3(h)(2);  see also  New York State Electric, 117 F.3d at 1476.

22
Thus, when Connecticut Valley says that § 210 "requires  FERC to cap QF rates at full avoided cost," it is correct only  in the limited sense that the Commission is required to  promulgate regulations to that effect.  The Commission satisfied that obligation when it promulgated 18 C.F.R.  S 292.304(a)(2), which limits the cost at which a utility purchases power from an SPP at an amount equal to the utility's  full avoided cost.  The Commission's only obligations under  S 210 are the promulgation and periodic revision of these  regulations and of the exemption regulations required by  S 210(e);  therefore, the Commission's decision not to take  any action in response to Claremont's apparent violation of  S 3(17)(C)(ii) cannot be a violation of S 210 by the Commission.  The Commission has in effect merely "announced the  position ... it would take in any future enforcement action  that [Connecticut Valley] might bring," New York State Electric, 117 F.3d at 1476, namely, that it will not seek to remedy  violations of S 210 arising from Claremont's sale of gross  output under a contract entered into prior to the Commission's decision in Turners Falls.

23
Connecticut Valley may have a valid claim that the  NHPUC has violated S 210 by approving a contract that  requires Connecticut Valley to purchase gross output and  therefore to pay more than the utility's full avoided cost.  As  we have said before, "[t]he failure of a state commission to  ensure that a rate does not exceed a utility's avoided cost is a  failure to comply with a [Commission] regulation implementing the PURPA," which "would ordinarily be challenged  through an enforcement action brought in district court under  S 210(h)."  Id.  Based upon the Commission's position as  stated in the orders under review, that agency would presumably decline to bring an enforcement action if Connecticut  Valley petitioned it to do so;  and its declination would clear  the way for Connecticut Valley to bring its own enforcement  action in district court.

24
If this court, in the guise of reviewing the Commission's  present no-action position, were to address the question  whether the petitioner's contract with Claremont violates  S 210, then we would "usurp the role of the district court as  the court of first instance, contrary to the enforcement  scheme adopted by the Congress in S 210(h) of the PURPA."Industrial Cogenerators v. FERC, 47 F.3d 1231, 1235 (D.C.  Cir. 1995).  Therefore, we conclude we are without jurisdiction to address Connecticut Valley's claim arising under S 210.  See id. at 1236;  New York State Electric, 117 F.3d at  1477;  Niagara Mohawk, 117 F.3d at 1489.

B. Section 3(17)(C)(ii) of the FPA

25
Connecticut Valley next challenges the Commission's decision to grandfather contracts entered into prior to its decision  in Turners Falls and therefore not to revoke Claremont's QF  status.  Connecticut Valley claims that in view of the clear congressional decision in FPA S 3(17)(C)(ii)that an SPP  selling more than its net output is not within the definition of  a QF, "the Commission lack[s] the discretion to grandfather  any QF contracts requiring utilities to purchase a QF's gross  output."

26
In order to establish that the Commission has no remedial  discretion, Connecticut Valley must demonstrate not only that  Claremont's sale of gross output violates S 3(17)(C)(ii), but  also that the Commission is required to apply the revocation  rule of Turners Falls to contracts predating that decision. The first point is moot, for the Commission agrees that  Claremont is in violation of the statute.  The second point is  the difficult one for Connecticut Valley because "the breadth  of agency discretion is, if anything, at [its] zenith when the action assailed relates primarily not to the issue of ascertaining whether conduct violates the statute, or regulations, but  rather to the fashioning of policies, remedies and sanctions."  Niagara Mohawk Serv. Corp. v. FPC, 379 F.2d 153, 159 (D.C.  Cir. 1967);  Louisiana Public Power Comm'n v. FERC, 174  F.3d 218, 225 (D.C. Cir. 1999).  In other words, the Commission ordinarily has remedial discretion, even in the face of an  undoubted statutory violation, unless the statute itself mandates a particular remedy.  See, e.g., Towns of Concord,  Norwood, & Wellesley v. FERC, 955 F.2d 67, 72-73, 76 n.8  (D.C. Cir. 1992).

27
Section 3(17)(C)(ii) does not expressly specify a particular  remedy for the violation of its terms.  Compare National  Insulation Transp. Comm. v. ICC, 683 F.2d 533, 537-38 (D.C.  Cir. 1982) (ICC would lack remedial discretion for certain  rate violations because 49 U.S.C. S 10707(d)(1) (1982) expressly mandates refund).  Connecticut Valley argues, nonetheless, that S 3(17)(C)(ii) unambiguously defines the requirements for status as a QF, and the Commission must carry out  this clear congressional command by denying QF status to  any facility that does not fit the bill.

28
We reject this claim because, contrary to the petitioner's  premise, S 3(17)(C)(ii) is not unambiguous.  As the Commission first recognized in Turners Falls, when electricity sales  between a QF and a utility are analyzed from a physical  perspective, S 3(17)(C)(ii) can reasonably be interpreted to  allow a QF to sell its gross output.  See Turners Falls, 55  FERC at 62,668.  Based upon this ambiguity, the Commission, as the agency charged with administering the FPA,  determined that it had discretion to interpret the statute as  allowing or precluding the sale of gross output by a QF;  it  then determined that the interpretation more in keeping with  the purpose of the Act prohibits such sales.  Both interpretations of S 3(17)(C)(ii) are self-evidently reasonable in the face  of this ambiguity, and Connecticut Valley raises no legal  principle that would require the Commission--despite the  severe impact upon both the settled expectations of private  parties and the governmental interest in encouraging the  development of nontraditional generating facilities--to apply retroactively the interpretation of S 3(17)(C)(ii) it ultimately  adopted in Turners Falls.  Cf. Clark-Cowlitz Joint Operating  Agency v. FERC, 826 F.2d 1074, 1081 (D.C. Cir. 1987) (en  banc) (private and governmental interests may overcome  "general principle [that agency] may apply ... new interpretation" retroactively).  In light of the ambiguity of S 3(17)(C)(ii) and the absence of a specific remedial command  from the Congress, we conclude that the Commission retains  remedial discretion to decide whether to revoke Claremont's  status as a QF.

C. Abuse of Remedial Discretion

29
Because we conclude that the Commission has discretion  with respect to remedying Claremont's violation of  S 3(17)(C)(ii), Connecticut Valley is remitted to challenging  the Commission's exercise of that discretion, which we review  only for abuse.  See Louisiana Public Serv. Comm'n v.  FERC, 174 F.3d 218, 225 (D.C. Cir. 1999).  An agency abuses  its remedial discretion if its decision "conflicts with the 'core  purpose[]' " of the statute itadministers, Towns of Concord,  955 F.2d at 74 (quoting Maislin Indus., Inc. v. Primary  Steel, Inc., 497 U.S. 116, 133 (1990)), or if it is not "otherwise  reasonable," that is, based upon a reasonable accommodation  of all the relevant considerations and not inequitable under  the circumstances.  Towns of Concord, 955 F.2d at 75-76;  see  also Koch Gateway Pipeline Co. v. FERC, 136 F.3d 810 (D.C.  Cir. 1998);  Laclede Gas Co. v. FERC, 997 F.2d 936 (D.C. Cir.  1993).  Insofar as the Commission's remedial decision is  based upon factual determinations, they must be supported  by substantial evidence in the record.  See 16 U.S.C.  S 825l(b);  Louisiana Public Serv. Comm'n, 174 F.3d at 225.

30
Connecticut Valley argues that the Commission's decision  not to revoke Claremont's QF status or to provide any  alternative relief is an abuse of discretion for a number of  reasons.  First, Connecticut Valley claims the decision directly conflicts with all three statutory purposes expressed in  S 101 of the PURPA, to wit, "conservation of energy," "optimization of [electric utility] efficiency," and "equitable rates  to electric consumers."  16 U.S.C. § 2611.

31
As the Commission properly notes, however, S 101 applies  only to Title I of the PURPA, whereas QF status is a  creature of Title II.  And the Supreme Court has said that  the core purpose of Title II is "to encourage the development  of cogeneration and small power production facilities" by  addressing "problems imped[ing] the development of nontraditional generating facilities."  FERC v. Mississippi, 456 U.S.  at 750.  In other words, Title II reflects, predominantly,  solicitude for certain types of producers rather than for the  consumers who must pay their rates.  Accordingly, the Commission deemed it material in the orders under review that  "many QFs ... have entered into contracts which require[ ]  or permit[ ] the ... sale of gross output."  82 FERC at  61,419.  Revoking the QF status of those facilities, or altering  their "obligations and responsibilities under[ ] such executed  PURPA sales contracts," id. at 61,420, would undercut the  purpose of the Congress in Title II to encourage the development of these nontraditional generating facilities.  We see no  conflict, therefore, between the Commission's exercise of remedial discretion and the relevant statutory purpose.

32
Nor can we accept Connecticut Valley's second argument,  which is that the Commission's failure even to consider harm  to consumers was an abuse of discretion.  According to  Connecticut Valley, § 210(b) of the PURPA expressly requires the Commission to balance the interests of consumers  against those of producers, thus:

33
The rules prescribed under subsection (a) of this section shall insure that, in requiring any electric utility to offer to purchase electric energy from any [QF], the rates for such purchase ... shall be just and reasonable to the electric consumers of the electric utility and in the public interest....

34
16 U.S.C. S 824a-3(b).  This requirement is directed, however, at the Commission's exercise of rulemaking authority over  the rates utilities must pay QFs for power.  The Supreme  Court has already held that the full avoided cost rule satisfies  the requirements of S 210(b).  See American Paper Inst., 461  U.S. at 415-17.  Therefore the Commission did not abuse its discretion when it omitted explicitly to consider anew the  interests of consumers.

35
Third, Connecticut Valley claims the Commission failed  adequately to consider whether Occidental Geothermal, Inc.,  17 FERC p 61,231 (1981), and Power Developers, Inc., 32  FERC p 61,101 (1985), put Claremont on notice, before the  contract was executed (or at least before Claremont filed its  application for certification as a QF), that a QF may not sell  its gross output.  The Commission did not fail fully to consider those cases.  On the contrary, the Commission expressly read both casesas having resolved issues related to but not  the same as that resolved in Turners Falls:  In Occidental  Geothermal the Commission held that net output is the  appropriate measure of the 80-MW limitation upon SPPs; and in Power Developers it concluded that "a QF may not sell  more than net output at avoided cost rates."  Connecticut  Valley, 82 FERC at 61,417-18.  Although both cases were, of  course, relevant to the Commission's understanding of this  case, the Commission reasonably concluded that it was not  until Turners Falls that it "removed any remaining ambiguity  about whether the 'simultaneous buy-sell' rule permitted a  sale in excess of net output [and] clearly stated that a sale in  excess of net output would deprive a facility of its QF status."Id. at 61,417;  see also 83 FERC p 61,136, at 61,610.  There  was no abuse of discretion here.

36
Fourth, Connecticut Valley argues the Commission failed to  consider whether Claremont intentionally or negligently misled the Commission by stating its gross rather than its net  output in its application for certification.  The Commission  did not have to address this claim in the orders under review,  however;  it was rendered moot when the Commission held  that it was reasonable for a facility applying for QF certification prior to the Turners Falls decision to have believed that  the Commission's "simultaneous buy-sell" rule allowed the QF  to sell its gross output.  See 82 FERC at 61,418.  The  Commission noted that many applicants--and indeed several  state PUCs--had thought gross sales were permitted under  the Commission's regulations, and that although this point  had been "clarified to a significant degree in 1985 in Power Developers," it was not until Turners Falls in 1991 that the  Commission "removed any remaining ambiguity."  Id.  The  Commission could hardly say, therefore, that prior to that  decision a QF was either intentionally deceptive or even  merely negligent if it listed its gross rather than its net  output in applying for QF certification.

37
Finally, Connecticut Valley claims the Commission failed to  support with substantial evidence a key factual determination,  namely, that Claremont had a settled expectation it could  lawfully sell its gross output when it entered into the contract.  As Connecticut Valley conceives the issue, the Commission must show that, in developing and financing the SPP  facility, Claremont actually relied upon being able to sell its  gross output.

38
The Commission never made a factual finding about Claremont's actual reliance, however.  Rather, the Commission  reiterated its general policy "against invalidating contracts  for which a PURPA-based challenge was not timely raised-that is, before the contracts were executed," so as not "to  upset the settled expectations of parties to, and to invalidate  any of their obligations and responsibilities under, such executed PURPA sales contracts."  Id. at 61,419-20;  see also 83  FERC p 61,136, at 61,611.  The Commission reasonably infers the parties' settled expectations from the terms of their  executed contract;  either party may avoid such an inference  by including a specific reservation in its contract or by  challenging the validity of a contract provision at the time it  executes the contract.

39
Because the Commission did not make a factual finding  relative to settled expectations, but rather drew a reasonable  inference in accord with its established policy, it need not  support this aspect of its decision with substantial evidence. Nor does Connecticut Valley claim that the Commission is  legally required to determine settled expectations by making  a case-specific factual inquiry rather than relying upon a rule  of general applicability.  The only question remaining, therefore, is whether the Commission's application of its general rule in this case was arbitrary and capricious.  See Southeastern Michigan Gas Co. v. FERC, 133 F.3d 34, 38 (D.C. Cir.  1998).  Connecticut Valley included no reservation clause in the contract suggesting disagreement about or uncertainty  over the purchase and sale of Claremont's gross output;  nor  was Connecticut Valley challenginggross sales in court or  before the Commission at the time it entered into the contract.  We therefore conclude that the Commission's application in this case of its general rule inferring the settled  expectations of the parties to a contract from the terms of  their agreement was not arbitrary or capricious.

III. Summary and Conclusion

40
We are without jurisdiction to review Connecticut Valley's  claim that the orders under review violate § 210 of the  PURPA.  As to Connecticut Valley's other challenges, we  conclude that the Commission acted within its remedial discretion in refusing to revoke Claremont's QF status or to  provide any other relief to Connecticut Valley.  Therefore, the petition for review is

41
Denied.

Notes:

*
 PURPA S 210(b), 16 U.S.C. S 824a-3(b), caps the total amount  a utility may be required to pay for purchases from a QF at  "incremental cost," also called "full avoided cost," American Paper  Inst., Inc. v. American Elec. Power Serv. Corp., 461 U.S. 402, 404  (1983), which is defined as "the cost to the electric utility of the  electric energy which, but for the purchase from such cogenerator or small power producer, such utility would generate or purchase  from another source," S 210(d), 16 U.S.C. S 824a-3(d).  In promulgating regulations to implement S 210, the Commission adopted  this statutory cap as the amount a utility would be required to pay  for all purchases from a QF.  See 18 C.F.R. S 292.304(b)(2).  In  other words, the Commission set the rate at the maximum level. The Supreme Court approved in American Paper, 461 U.S. at 417.
Calculation of the full avoided cost rate is complicated.  See 18  C.F.R. S 292.304(e).  For purposes of this petition the important  point is that the rate that a QF can require a utility to pay is almost  always higher than the regulated tariff rate at which the QF can  purchase from the utility electricity for its internal operating needs

1
 Turners Falls actually addressed a cogenerator's status as a  QF pursuant to S 3(18)(B)(ii).  Section 3(17)(C)(ii), which applies to  SPPs, and S 3(18)(B)(ii), which applies to cogenerators, are identical;  the parties agree that the Commission's interpretation of  S 3(18)(B)(ii) in Turners Falls applies to both provisions.  For the  sake of consistency, therefore, we refer to S 3(17)(C)(ii) throughout  this opinion.