Court Opinion

ID: 186836
Source: CourtListenerOpinion
Date Created: 2011-02-05 03:06:32+00
Date Added: 2024-06-11T09:45:08.942134
License: Public Domain

United States Court of Appeals
          FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued October 13, 2006           Decided January 12, 2007

                      No. 04-1148

     NATIONAL ASSOCIATION OF REGULATORY UTILITY
               COMMISSIONERS, ET AL.,
                    PETITIONERS

                            V.

       FEDERAL ENERGY REGULATORY COMMISSION,
                    RESPONDENT

                  TENASKA, INC., ET AL.,
                     INTERVENORS

                    Consolidated with
           04-1149, 04-1152, 05-1050, 05-1292

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

     Laurence G. Chaset argued the cause for Governmental
Petitioners. With him on the briefs were James Bradford
Ramsay, Thomas D. Samford, IV, Arocles Aguilar, Aubrey
Williams Turner, Jr., Gisele Lunsford Rankin, Florence P.
Belser, and Robert D. Cedarbaum.
                              2

     Andrew W. Tunnell argued the cause for Utility
Petitioners. With him on the brief were S. Chris Still, Kevin
A. McNamee, Neil H. Butterklee, John D. McGrane, Heath K.
Knakmuhs, and Antoine P. Cobb.

    Lona T. Perry, Attorney, Federal Energy Regulatory
Commission, argued the cause for respondent. With her on
the brief were Robert H. Solomon, Solicitor, and Samuel
Soopper, Attorney.

    Ashley C. Parrish argued the cause for intervenors
Tenaska, Inc., et al. With her on the briefs were Neil L. Levy,
Jennifer L. Key, Glen L. Ortman, Harvey L. Reiter, and
Jonathan D. Schneider. Gregory O. Olaniran entered an
appearance.

   Before: SENTELLE, Circuit Judge, and EDWARDS and
WILLIAMS, Senior Circuit Judges.

   Opinion for the Court filed by Senior Circuit Judge
WILLIAMS.

   Opinion dissenting in part filed by Circuit Judge
SENTELLE.

    WILLIAMS, Senior Circuit Judge: In 1996 the Federal
Energy Regulatory Commission issued Order No. 888 in the
hopes of fostering competition in the electric generating
industry. Such competition clearly depended on generators’
having adequate means of getting their power to market.
FERC’s solution in Order No. 888 was to require transmission
providers, which typically have a natural monopoly, to give
generators equal access to transmission facilities. The
Commission implemented the requirement in part by
mandating the filing of suitable tariffs. See Transmission
Access Policy Study Group v. FERC, 225 F.3d 667, 682–83
                                3

(D.C. Cir. 2000) (“TAPS”). We affirmed Order No. 888 in
TAPS.

     In the period directly after issuing Order No. 888, FERC
had monitored one element of the process—the
interconnection agreements between operators of generators
and transmission facilities—on a case-by-case basis. Finding
that approach “inadequate” and “inefficient,” FERC issued
Order No. 2003 and three successive rehearing orders.
Standardization of Generator Interconnection Agreements
and Procedures, Order No. 2003, 104 F.E.R.C. ¶ 61,103 at
30,430 P 10 (2003), order on reh’g, Order No. 2003-A, 106
F.E.R.C. ¶ 61,220 (2004), order on reh’g, Order No. 2003-B,
109 F.E.R.C. ¶ 61,287 (2004), order on reh’g, Order No.
2003-C, 111 F.E.R.C. ¶ 61,401 (2005). In the interests of
achieving transparency and preventing transmission facility
owners from favoring affiliated generators over independents
in interconnection, the orders require all transmission facilities
to adopt a standard agreement for interconnecting with
generators larger than 20 megawatts.

     Here we review claims advanced by two sets of
petitioners (the two sets are generally aligned with each other
in their positions): four utilities (“Utility Petitioners”) and six
state regulatory agencies (together with an association of such
agencies, the National Association of Regulatory Utility
Commissioners) (“Governmental Petitioners”).                  They
challenge Order No. 2003 and its sequels on the grounds that
FERC exceeded its jurisdiction, unlawfully commandeered
states, departed from its own precedent without explanation,
and made policy decisions that are arbitrary and capricious.
We reject all of these claims and affirm the orders.
                               4

                             * * *

     Petitioners raise a succession of claims that FERC’s
orders usurp jurisdiction not provided by Congress. FERC’s
interpretations of the jurisdictional provisions of the Federal
Power Act (the “Act”) enjoy Chevron deference. Detroit
Edison Co. v. FERC, 334 F.3d 48, 53 (D.C. Cir. 2003) (citing
TAPS, 225 F.3d at 694).

     Section 201(b)(1) of the Act makes the statute applicable
to “the transmission of electric energy in interstate commerce
and to the sale of electric energy at wholesale in interstate
commerce” and gives FERC jurisdiction not only over such
transmission and sales but also over “all facilities for such
transmission or sale of electric energy.”             16 U.S.C.
§ 824(b)(1). At the same time the Act precludes FERC
“jurisdiction . . . over facilities used in local distribution or
only for the transmission of electric energy in intrastate
commerce.” Id. Order No. 2003 asserts jurisdiction over the
terms of interconnection between generators and transmission
providers, even where the transmission facility also engages in
local distribution, but only insofar as the interconnections are
“for the purpose of making sales of electric energy for resale
in interstate commerce.” Order No. 2003 at 30,545–46 P 804.
Utility Petitioners claim that this represents an unlawful
exercise of jurisdiction over dual-use facilities—ones that
engage in both transmission and local distribution.

     Petitioners believe that our opinion in Detroit Edison
controls. There we rejected FERC’s attempt to assert
jurisdiction over unbundled retail service, although such
service involved neither jurisdictional sales nor jurisdictional
transmission. Sales under FERC-jurisdictional tariffs would
have enabled the shipper to escape stranded cost charges
imposed under state-approved tariffs. 334 F.3d at 52.
FERC’s purported jurisdictional hook was that the power was
                                5

being shipped over dual-use facilities that provided both retail
and wholesale distribution services. Id. at 52, 54. We were
unconvinced by this theory for asserting jurisdiction over non-
jurisdictional transactions.

     Here the issue is the inverse of Detroit Edison; Order No.
2003 applies to jurisdictional transactions only. FERC
determined that the provisions of Order No. 2003 should
apply “to interconnections to the facilities of a public utility’s
Transmission System that, at the time the interconnection is
requested, may be used either to transmit electric energy in
interstate commerce or to sell electric energy at wholesale in
interstate commerce.” Order No. 2003-C at 31,656 P 51.
“Interconnections,” though seemingly not defined explicitly in
the orders, clearly are not “facilities,” as that would make the
term “Interconnection Facilities,” as used in the standardized
agreements, a redundancy. See, e.g., Order No. 2003 at
30,577. In fact interconnections appear to be relationships
between parties with respect to electricity flowing over
facilities, and the orders here by their terms control the
agreements governing those relationships.              See, e.g.,
“Standard Large Generator Interconnection Agreement
(LGIA),” id. at 30,616–67.            By establishing standard
agreements FERC has exercised its jurisdiction over the terms
of those relationships. Cf. TAPS, 225 F.3d at 696 (“FPA
§ 201 makes clear that all aspects of wholesale sales are
subject to federal regulation, regardless of the facilities used.”
(emphasis added)).

     In their reply briefs petitioners note that the orders
regulate certain facets of the engineering and construction of
facilities needed for the relevant transmissions. Utility
Petitioners’ Reply Br. at 4; Governmental Petitioners’ Reply
Br. at 5–6 & n.9. But petitioners identify no specific aspect of
the regulations that they claim is untethered to the
Commission’s authority over interstate transmissions and
                                6

wholesale sales. As FERC’s authority generally rests on the
public interest in constraining exercises of market power, see
Associated Gas Distributors v. FERC, 824 F.2d 981, 1003
(D.C. Cir. 1987), whether in the utility’s rates or other service
terms, and as a common test for the lawfulness of rates is their
connection to the reasonably-incurred costs of providing the
regulated service, National Fuel Gas Supply Corp. v. FERC,
900 F.2d 340 (D.C. Cir. 1990), it is hard to see how the statute
could leave FERC weaponless against conduct that might
encourage or cloak the running up of unreasonable costs. The
Commission’s indisputable authority to disallow recovery of
costs imprudently incurred by jurisdictional firms may, of
course, impinge as a practical matter on the behavior of non-
jurisdictional ones. So far as appears, petitioners in this facial
attack have identified no impingement that exceeds what may
be encompassed in such conventional exercises of
jurisdiction.

     Utility Petitioners also dispute FERC’s assertion of
jurisdiction over facilities jointly owned by private firms and
states. This presents questions analogous to those raised by
the transmission-and-distribution facilities just discussed,
though here the divide is between private and public
ownership rather than between transmission and distribution.
Section § 201(f) of the Act provides that “[n]o provision in
this subchapter shall apply to, or be deemed to include, the
United States, a State or any political subdivision of a State.”
16 U.S.C. § 824(f). (They are brought back in with respect to
particular sections not relevant here. See §3(22) of the Act,
16 U.S.C. § 796(22); §§ 210–213, 16 U.S.C. §§ 824i–824l;
Bonneville Power Administration v. FERC, 422 F.3d 908, 916
(9th Cir. 2005).) Therefore, according to petitioners, FERC
may not regulate jointly-owned facilities. Although Order
No. 2003 explicitly states that it applies only “to
Interconnection Service provided by the public utility on its
portion of a jointly owned facility,” Order No. 2003 at 30,546
                               7

P 807, petitioners claim that FERC’s purported distinction is
not possible. In their view, an interconnection affects an
entire facility, not simply the public utility’s portion, and
FERC’s purported exercise of authority over the service
therefore violates § 201(f). The argument fails for reasons
similar to those discussed in the context of FERC’s authority
to regulate jurisdictional transactions occurring over non-
jurisdictional facilities.

      Any proper construction of § 201 must give effect to both
FERC’s jurisdiction over certain transactions occurring over
public utilities and to § 201(f)’s exclusion of state facilities.
As FERC notes in its brief, jurisdictional utilities should not
be able, without linguistic support from Congress, to escape
regulation “simply by partnering with non-jurisdictional
utilities.” Respondent’s Br. at 32. FERC navigated a similar
problem in Order No. 888, which required equal access to
transmission services. There the Commission stated clearly
that it had authority to regulate a public utility,
notwithstanding incidental effects on nonjurisdictional
entities:

    The fact that a public utility may jointly own, with a non-
    jurisdictional entity, transmission facilities through which
    it engages in sales for resale and/or transmission of
    electric energy in interstate commerce does not alter the
    Commission’s authority to regulate that public utility. . . .
    The fact that . . . an order may affect a non-jurisdictional
    joint owner does not undermine the validity of the
    Commission’s order.

Order No. 888-A, FERC Stats. & Regs. ¶ 61,182 at 30,219, 62
Fed. Reg. 12,274, 12,300/2 (Mar. 4, 1997). FERC relied on
the same logic in Order No. 2003. See Order No. 2003 at
30,546 P 807. Utility Petitioners accept the validity of Order
No. 888 as well as other cases that they view as
                                8

distinguishable from the present situation. See, e.g., Mid-
Continent Area Power Pool, 89 F.E.R.C. ¶ 61,135 at 61,387–
88 (1999); Bonneville Power, 422 F.3d at 925.

     According to petitioners, however, Order No. 888
affected the non-jurisdictional entities only in the sense of
invalidating contractual provisions between jurisdictional and
non-jurisdictional co-owners, whereas Order No. 2003
“addresses the request for and construction of facilities . . . by
a non-jurisdictional co-owner.” Utility Petitioners’ Reply Br.
at 5–6. The supposed distinction is of no account, however.
As discussed above, assertion of jurisdiction over specified
transactions, even though affecting the conduct of the
owner(s) with respect to its facilities, is not per se an exercise
of jurisdiction over the facility. The contract modifications
mandated in Order No. 888, forcing the non-jurisdictional
owner to permit certain transactions to occur over the jointly
owned facility, obviously affected that owner’s ownership
rights in, and conduct with respect to, the facility; the
modifications removed a hitherto valid veto power over the
use in question. To the extent that Order No. 2003 conditions
a jurisdictional utility’s participation in the transmission and
interconnection markets on that utility’s securing physical
changes in the facilities, and those changes bear a close
enough relation to FERC’s exercise of jurisdiction over
jurisdictional transactions (petitioners pose no challenge to the
adequacy of that relation), the Order effects no legally
material extension of the authority exercised in Order No.
888.

     The Governmental Petitioners challenge FERC’s
articulation of its assertion of jurisdiction over
interconnections with dual-use facilities (ones for
transmission and local distribution)—namely, FERC’s claim
of authority where such facilities are “used to transmit electric
energy in interstate commerce on behalf of a wholesale
                               9

purchaser pursuant to a Commission-filed OATT [Open
Access Transmission Tariff].” Order No. 2003 at 30,545–46
P 804. See also Order No. 2003-A at 31,071–72 P 710.
Governmental Petitioners claim that this involves
jurisdictional “boot-strapping.” They cite our opinion in
Columbia Gas Transmission Corp. v. FERC, 404 F.3d 459
(D.C. Cir. 2005), where FERC had asserted jurisdiction based
solely on a voluntarily filed tariff “even if FERC would not
otherwise have jurisdiction.” Id. at 461. Here we have the
exact opposite of boot-strapping.        FERC is exercising
jurisdiction only over “interconnections to a ‘distribution’
facility when the facility is included in a public utility’s
Commission-filed OATT and the interconnection is for the
purpose of facilitating a jurisdictional wholesale sale of
electric energy.” Order No. 2003-A at 31,075 P 730
(emphasis added).

     Governmental Petitioners also object that FERC’s
approach creates uncertainty by making jurisdiction turn on
(among other things) whether the facility is covered by an
OATT. FERC acknowledged the potentiality for uncertainty,
but reasoned that most cases would present no controversy
and that, if a dispute should arise, it would depend in the first
instance on the transmission provider to make the relevant
information available to potential interconnecting customers.
Order No. 2003-A at 31,072 P 712. On the record before us,
we see no grounds for upsetting the Commission’s judgment.

     Closely related to the jurisdictional claims is the
Governmental Petitioners’ assertion that FERC erred by not
applying its seven-factor test, which we approved in TAPS,
225 F.3d at 696, to determine whether a facility is an exempt
local distribution facility or a covered transmission facility.
But here, as often mentioned above, at least with regard to the
exercises of power disputed before us, FERC is exerting
jurisdiction over transactions, based on the transactions’
                               10

satisfaction of the Act’s jurisdictional criteria. It thus has had
no occasion to decide whether a facility as such should be
classified as jurisdictional or not.

                             * * *

     In its proposal leading to Order No. 2003 FERC had
contemplated requiring transmission providers to use
reasonable efforts, including available “eminent domain
authority, if necessary, to facilitate the interconnection” of
generators. See Order No. 2003 at 30,483 P 384. Responding
to comments suggesting that the requirement would unduly
burden transmission firms, id. at 30,484 P 391, FERC reduced
this to a provision forbidding such firms from discriminating
in the exercise of eminent domain powers to the detriment of
independent generators and to the advantage of affiliates. See,
e.g., Order No. 2003-A at 31,003 P 298. Utility Petitioners
object that these provisions of Order No. 2003 and its sequels
impermissibly “commandeer” states’ eminent domain
authority, contrary to the Supreme Court’s holdings in New
York v. United States, 505 U.S. 144 (1992), and Printz v.
United States, 521 U.S. 898 (1997). Whether FERC has
commandeered states is a question of law that we review de
novo.

     The orders here are a far cry from what the Supreme
Court found objectionable in New York and Printz. In New
York, the Court invalidated a provision of the Low-Level
Radioactive Waste Policy Amendments of 1985 that gave
states a Hobson’s choice: either take title to low-level
radioactive waste generated by third parties or regulate the
waste pursuant to Congress’s direction. Congress didn’t have
authority to impose either option on states directly and thus
could not force states to choose one or the other. The Court
emphasized that Congress may not “commandeer” states by
                              11

compelling them either to create or administer a federal
regulatory scheme. 505 U.S. at 174–77. In Printz the Court
found that New York’s anti-commandeering principle
precluded a provision of the Brady Handgun Violence
Prevention Act requiring local law enforcement officers to
help conduct background checks on individuals seeking to
purchase a firearm. 521 U.S. at 933.

      We recognize that a state’s authority to exercise the
eminent domain power, and to license public utilities to do so,
is an important state power. But FERC has done nothing
more than impose a non-discrimination provision on public
utilities. The orders explicitly leave state law untouched,
specifying that any exercise of eminent domain by a public
utility pursuant to the orders’ non-discrimination mandate be
“consistent with state law.” Order No. 2003-A at 31,144,
LGIA § 5.13; see also id. at 31,004 P 300. Thus the states
remain completely free to continue licensing public utilities to
exercise eminent domain, or to discontinue that practice. To
be sure, if hitherto a utility would not have exercised eminent
domain to enable interconnection with an independent
generator, the orders, conditionally, compel the utility either
to broaden its use of the state-provided authority for the
benefit of independents, or to drop the use for its own and its
affiliates’ power. But the modifier conditionally is critical.
Nothing in the federal rule compels either continued state
retention of the license, or public utilities’ continued
employment of eminent domain. The intrusion on state power
is surely no greater than (many would say dramatically less
than) that of a federal command that, if a state hires
employees for the performance of traditional governmental
functions, it must pay them no less than a federally
determined wage. See Garcia v. San Antonio Metropolitan
Transit Authority, 469 U.S. 528 (1985). Moreover, we
believe that our dissenting colleague’s focus on the “plain
statement” requirement that applies to purported federal
                               12

creation of state obligations is misplaced; the orders here
leave state law completely undisturbed and bind only
utilities—not state officials.

     Related to Utility Petitioners’ “commandeering” claim is
their assertion that Order No. 2003-A involves an unlawful
taking. They concede, as they must, that the Order explicitly
requires that any uses of eminent domain by transmission
providers be at the expense of the benefiting generator. Order
No. 2003-A at 31,003 P 298. But the Utility Petitioners claim
that exercising eminent domain power on behalf of
independent generators could undermine transmission
providers’ “good will” in their relation to landowners.
Assuming that that is so, we note that petitioners make no
claim that the injury to such good will is any more severe than
the one inflicted by uses of eminent domain for
interconnection to affiliated generators. Anti-discrimination
rules commonly require the incurrence of costs by the
obligated parties; their very imposition presupposes that some
such parties would, in pursuit of their self-interest, violate the
anti-discrimination norm. We cannot see that the potential
loss of good will rises above the sort of costs commonly
inflicted by such mandates.

                             * * *

     The remaining significant challenge, brought by both sets
of petitioners, is to the so-called “At or Beyond” rule. The
rule is intended to guide assignment of costs as between a
transmission facility and an interconnecting generator. Under
the rule, “the Interconnection Customer [is] solely responsible
for the costs of Interconnection Facilities, which are defined
as all facilities and equipment between the Generating Facility
and the Point of Interconnection with the Transmission
System. Network Upgrades, which are defined as all facilities
                               13

and equipment constructed at or beyond the Point of
Interconnection for the purpose of accommodating the new
Generating Facility,” are (ultimately) the responsibility of the
“Transmission Provider.” Order No. 2003 at 30,518–19 P 676
(emphasis added).

     Petitioners claim that the “At or Beyond” rule departs
from the Commission’s own precedents, is based on factual
conclusions unsupported by substantial evidence, and is
otherwise arbitrary or capricious. In our review we defer to
an agency’s reasonable application of its own precedents and
uphold factual conclusions supported by substantial evidence.
See Williams Gas Processing – Gulf Coast Co., L.P. v. FERC,
373 F.3d 1335, 1341 (D.C. Cir. 2004). We reject all of these
assertions.

     In their claim of departure from precedent, petitioners
point to our decision in Entergy Services, Inc. v. FERC, 391
F.3d 1240 (D.C. Cir. 2004). There we considered whether
FERC’s use of the “At or Beyond” rule in the decision under
review represented a departure from an earlier FERC decision,
Consumers Energy Co., 95 F.E.R.C. ¶ 61,233 (2001), in
which FERC had used a “From” test to differentiate between
Network Upgrades and Interconnection Facilities, assigning
the transmission provider only the costs for “facilities from the
point where the generator connects to the grid,” id. at 61,804
(emphasis added). In Entergy we explicitly observed that the
two tests might be fully consistent, see Entergy, 391 F.3d at
1249, 1251, but we thought that the difference in language
was potentially significant and that FERC had failed to
adequately explain its precedents, see id. at 1251.

     In its order on remand from Entergy, Nevada Power Co.,
113 F.E.R.C. ¶ 61,007 (2005), the Commission explained both
the relation between the two labels and prior anomalies in its
rulings. In essence, it said that “From” was a vague term and
                               14

that “At or Beyond” was simply “clearer terminology” that
offered “a more precise way” of explaining FERC precedent.
Id. at 61,013 P 12. And, acknowledging some past anomalies
(principally in Consumers Energy), in which it had assigned
to the interconnecting generator the cost of some facilities at
the actual point of interconnection, it explained that “the issue
was not raised, and the Commission did not discuss it or rule
on it.” Id. at 61,013 P 13; see also id. at 61,014 PP 14–15.
We note that since then the Commission has continued to
adhere to the “At or Beyond” approach. See Duke Energy
Hinds, LLC, 117 F.E.R.C. ¶ 61,210 at *5 P 23 (2006). In
short, the “At or Beyond” rule can no longer be considered an
unexplained departure from FERC precedent.

     Petitioners also contend that the “At or Beyond” rule
violates the basic “cost causation” principle, under which
costs are to be allocated to those who cause the costs to be
incurred and reap the resulting benefits. But FERC has long
taken the view that customer “but-for” causation isn’t
dispositive of this issue. “[E]ven if a customer can be said to
have caused the addition of a grid facility, the addition
represents a system expansion used by and benefitting all
users due to the integrated nature of the grid.” Public Service
Co. of Colorado, 62 F.E.R.C. ¶ 61,013 at 61,061 (1993).
(Indeed, for purposes of marginal cost pricing, all customers
cause the incurrence of the costs associated with coincident
peak load, whether by adding or merely continuing their
usage. Town of Norwood, Mass. v. FERC, 962 F.2d 20, 24
n.1 (D.C. Cir. 1992).) We have endorsed the approach of
“assign[ing] the costs of system-wide benefits to all customers
on an integrated transmission grid.” Western Massachusetts
Electric Co. v. FERC, 165 F.3d 922, 927 (D.C. Cir. 1999).

    Utility Petitioners take issue, however, with the empirical
conclusion that Network Upgrades benefit the entire network.
They point to an affidavit by James E. Howell, Jr., an
                               15

administrator with Southern Company Services, who claimed
that the addition of unnecessary new facilities causes
interruptions with power lines and decreases the network’s
reliability. Utility Petitioners object that because FERC did
not address the Howell Affidavit directly, the Commission’s
factual conclusions are unsupported by substantial evidence.
The doctrine obliging agencies to address significant
comments leaves them free to ignore insignificant ones. See
Troy Corp. v. Browner, 120 F.3d 277, 289 (D.C. Cir. 1997).
The evidence to which the petitioners point is one conclusory
paragraph that offers no specific basis for undermining the
Commission’s long-held understanding that Network
Upgrades provide system-wide benefits. FERC said as much
in Order No. 2003-B, referring to the contents of the Howell
Affidavit as “unsupported hypothetical generalizations.”
Order No. 2003-B at 31,292 P 56. Though the modifier
“hypothetical” is inaccurate (the paragraph asserts flat out, for
example, that “installation of a new substation . . . results in
the affected transmission line being less reliable”), Howell’s
generalizations are indeed unsupported, and thus insufficient
(on their own) to draw in question the factual premises
underlying the Commission’s cost assignment practice.

     Both sets of petitioners argue that the “At or Beyond”
rule is inconsistent with FERC’s obligation to ensure efficient
siting of facilities pursuant to § 212 of the Act, 16 U.S.C.
§ 824k, added by the Energy Policy Act of 1992. In pursuit of
this claim Governmental Petitioners misquote § 212(a) as
saying that the rates and terms in question must “promote the
economically efficient siting of transmission and generation of
electricity.” Governmental Petitioners’ Br. at 35 (emphasis
added). The word “siting” in fact appears nowhere in the
relevant section. In reality the statute requires that rates
“promote the economically efficient transmission and
generation of electricity.” 16 U.S.C. § 824k(a). No matter;
FERC has understandably identified efficient siting as one of
                              16

its goals in administering the statute. Pricing Policy for
Transmission Services; Policy Statement, 59 Fed. Reg.
55,031, 55,035 (Oct. 26, 1994).

     Petitioners’ argument is essentially that assignment to the
transmission owner of the costs of facilities located at or
beyond the point of interconnection creates an improper
incentive. This is in essence a variation on petitioners’
argument that the “At or Beyond” rule violates cost causation
principles. Recall that the rule sticks generator owners with
the entire cost of the link between the generator and the
transmission facility; that, presumably, is the cost most
affected by siting choices. Siting also will affect the
economic viability of the interconnection upgrades. Order
2003-B at 31,288 PP 32, 33. As to these, the orders require
the generator to supply the upfront financing; more important,
they call for a rate structure that imposes on the generator
most or all of the risk of non-recovery. Order No. 2003-A at
31,054 P 613. We see no substantial basis for petitioners’
siting incentive theory.

                            * * *

    Petitioners’ remaining objections concern the effectuation
of the larger policies we’ve already discussed. These are
questions of agency policy that we would overturn only if the
Commission’s decisions were arbitrary or capricious. 5
U.S.C. § 706(2)(A). Having carefully considered petitioners’
arguments and FERC’s explanations of its policies in the
orders under review, we see no basis for any such finding.
The issues do not merit discussion in a published opinion.
                            17

                          * * *

     For the foregoing reasons, we uphold Orders No. 2003,
2003-A, 2003-B, and 2003-C against all objections raised by
petitioners.

                                                So ordered.
     SENTELLE, Circuit Judge, dissenting in part: I concur in
most of the majority’s opinion, but I cannot join that part of the
opinion that upholds the eminent domain provisions of Order
No. 2003. See Maj. Op. 10-12. FERC is a “creature of statute,”
and the agency has “only those authorities conferred upon it by
Congress.” Cal. Indep. Sys. Operator Corp. v. FERC, 372 F.3d
395, 398 (D.C. Cir. 2004) (internal quotation marks omitted).
“[A]n agency literally has no power to act . . . unless and until
Congress confers power upon it.” Id. (quoting La. Pub. Serv.
Comm’n v. FCC, 476 U.S. 355, 374 (1986)). I do not believe
that Congress has authorized FERC to regulate the use of state-
granted eminent domain power, and thus I respectfully dissent
from that portion of the majority’s opinion.

                             * * *

     Under FERC’s new Standard Large Generator
Interconnection Agreement, transmission providers are required
to take certain steps to help generators obtain necessary land for
interconnection facilities. Transmission providers “shall at
Interconnection Customer’s expense use efforts, similar in
nature and extent to those that it typically undertakes on its own
behalf or on behalf of its Affiliates, including use of its eminent
domain authority.” Order No. 2003-A, 69 Fed. Reg. 15,932,
15,953-54, 16,033 (2004). In other words, to the extent that
transmission providers use eminent domain to interconnect with
their own generation facilities, they must now use eminent
domain on behalf of unaffiliated generators as well. The issue
before us is whether FERC has statutory authority to regulate
transmission providers’ use of state-granted eminent domain
power, and – if FERC does have such authority – whether the
provisions of Order No. 2003 that address eminent domain are
constitutional.
                                2

     Courts may not presume that Congress has intended to
regulate the “substantial sovereign powers” of states unless the
federal statute in question is unmistakably clear. The Supreme
Court has held that “if Congress intends to alter the usual
constitutional balance between the States and the Federal
Government, it must make its intention to do so unmistakably
clear in the language of the statute.” Gregory v. Ashcroft, 501
U.S. 452, 460-61 (1991) (quoting Atascadero State Hosp. v.
Scanlon, 473 U.S. 234, 242 (1985)) (internal quotation marks
omitted). “This plain statement rule is nothing more than an
acknowledgment that the States retain substantial sovereign
powers under our constitutional scheme, powers with which
Congress does not readily interfere.” Gregory, 501 U.S. at 461.
Courts have applied this clear statement rule in a variety of cases
involving federal regulation of the “substantial sovereign
powers” of the states. See, e.g., Raygor v. Regents of Univ. of
Minn., 534 U.S. 533, 543-44 (2002) (whether the federal
supplemental jurisdiction statute tolls the statutes of limitation
for state law claims in state court); Kimel v. Fla. Bd. of Regents,
528 U.S. 62, 73-74 (2000) (whether a federal statute abrogates
state sovereign immunity); Gregory, 501 U.S. at 461-67
(whether the federal Age Discrimination in Employment Act
applies to state judges); Will v. Mich. Dep’t of State Police, 491
U.S. 58, 65 (1989) (whether states are “persons” that may be
sued under 42 U.S.C. § 1983); Rice v. Santa Fe Elevator Corp.,
331 U.S. 218, 230 (1947) (whether a federal statute preempts
state law); Am. Bar Ass’n v. FTC, 430 F.3d 457, 471-72 (D.C.
Cir. 2005) (whether a federal statute should be interpreted to
regulate the practice of law, which has long been regulated at the
state level).

     I believe that eminent domain is easily classified as a
“substantial sovereign power” of the states, and thus the clear
statement rule applies to federal regulation of this power.
Courts have long recognized that eminent domain is at the very
                                  3

core of state sovereignty. As the Supreme Court has stated:

     The power of eminent domain is an attribute of sovereignty,
     and inheres in every independent state. . . . The taking of
     private property for public use upon just compensation is so
     often necessary for the proper performance of governmental
     functions that the power is deemed to be essential to the life
     of the state. It cannot be surrendered, and if attempted to be
     contracted away, it may be resumed at will.

Georgia v. City of Chattanooga, 264 U.S. 472, 480 (1924). See
also Jackson v. Metro. Edison Co., 419 U.S. 345, 353 (1974)
(noting that eminent domain “is traditionally associated with
[state] sovereignty”). Courts have also emphasized that even if
eminent domain authority has been delegated to a public utility
or a privately-owned corporation, it is still the state that is acting
whenever the eminent domain power is used:

     The right of eminent domain is an attribute of sovereignty.
     . . . It is none the less a public right, because the state
     sometimes consents that it may be exercised by a quasi
     public corporation, like a common carrier. Such license or
     permission is granted because its exertion in that form is
     thought to be for the public interest. . . . It permits them to
     proceed in their own names, but really on behalf of the state
     ....

Louisville & N.R. Co. v. W. Union Tel. Co., 268 F. 4, 8 (6th Cir.
1920). See also Baldwin v. Appalachian Power Co., 556 F.2d
241 (4th Cir. 1977) (“By exercising the delegated power of
eminent domain, a public service corporation acts as an agent of
the state . . .”); Louisiana v. Chambers Inv. Co., 595 So.2d 598,
601 (La. 1992) (“[Eminent domain] always involves the taking
or damaging of property interests by the state or some alter ego
of the state, such as a public utility, that has been delegated the
                                4

power to condemn.”); Wissler v. Yadkin River Power Co., 74
S.E. 460, 460 (N.C. 1912) (“This power of eminent domain is
conferred upon corporations affected with public use, not so
much for the benefit of the corporations themselves, but for the
use and benefit of the people at large.”). Thus, eminent domain
is properly categorized as a “substantial sovereign power” of the
states, even when that power has been delegated to a public
utility. Accordingly, we should not presume that Congress
intended to regulate the use of state eminent domain authority
unless the federal statute in question is “unmistakably clear.”

     Turning to the instant case, Order No. 2003 will require
transmission providers either to forego the use of their state-
granted eminent domain power altogether, or to use this power
to condemn property on behalf of unaffiliated generators. These
provisions of Order No. 2003 cannot possibly be lawful unless
Congress has “unmistakably” authorized FERC to regulate the
use of state-granted eminent domain power. FERC has not
identified – and I have not found – any such clear statement of
congressional intent in the relevant statutes. The federal statutes
pertaining to the “regulation and development of power” are
codified in title 16 of the U.S. Code. See 16 U.S.C. §§ 791-839.
Noticeably absent from these sections of the Code is any
provision granting FERC authority to dictate the manner in
which state eminent domain power may be used.

     Congress’s treatment of eminent domain in other provisions
of the energy statutes confirms that we should not infer from
FERC’s general grant of jurisdiction that the agency also has the
power to regulate state eminent domain. When Congress
addresses issues involving eminent domain, it tends to do so in
a clear, detailed, and specific manner. See 16 U.S.C. § 824a-
4(a) (granting the Secretary of Energy limited authority to use
eminent domain to acquire rights-of-way “through North
Dakota, South Dakota, and Nebraska for transmission facilities
                                5

for the seasonal diversity exchange of electric power to and from
Canada”); id. § 824p(e) (granting eminent domain authority to
certain licensees to build transmission facilities in “national
interest electric transmission corridor[s]”); id. § 814 (granting
eminent domain authority to certain licensees to acquire land
“necessary to the construction, maintenance, or operation of any
dam, reservoir, diversion structure, or the works appurtenant
thereto”); id. § 831c(h)-(i) (authorizing the TVA to use eminent
domain to “acquire real estate for the construction of dams,
reservoirs, transmission lines, power houses, and other
structures, and navigation projects at any point along the
Tennessee River”). Although these provisions address federal
eminent domain authority – rather than FERC’s power to
regulate state eminent domain – they nonetheless show the
specificity that Congress uses when it addresses eminent
domain. These provisions reinforce my conclusion that FERC’s
jurisdiction over interstate transmission and wholesale sales of
electric energy does not include – sub silentio – the authority to
regulate state eminent domain.

                             * * *

     Under well-established principles of statutory interpretation,
courts should not presume that Congress has intruded upon a
core area of state sovereignty unless the relevant federal statute
is clear and unambiguous. Here, FERC has not identified any
federal statute that clearly authorizes the Commission to
regulate the use of state eminent domain power. Thus, I would
hold that the provisions of Order No. 2003 that impose
restrictions on transmission providers’ use of state-granted
eminent domain power are beyond the scope of FERC’s
statutory authority. Because I would resolve this issue on
statutory grounds, I do not need to address the constitutional
issue of “commandeering.” Of course, in the future, Congress
might pass a statute that specifically authorizes FERC to
                               6

regulate how transmission providers use their eminent domain
power. Such a statute may raise constitutional issues under New
York v. United States, 505 U.S. 144 (1992), and Printz v. United
States, 521 U.S. 898 (1997), but those issues are not before us
at this time.

    For the aforementioned reasons, I respectfully dissent from
the portions of the majority opinion that address the eminent
domain provisions of Order No. 2003. I join the remainder of
the majority’s opinion.