Court Opinion

ID: 4032230
Source: CourtListenerOpinion
Date Created: 2016-09-08 17:01:20.946703+00
Date Added: 2024-06-11T14:36:26.177263
License: Public Domain

FOR PUBLICATION

  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT

MPS MERCHANT SERVICES, INC.,         No. 15-73803
                     Petitioner,

CALIFORNIA PUBLIC UTILITIES
COMMISSION,
                       Intervenor,

PACIFIC GAS & ELECTRIC COMPANY;
SOUTHERN CALIFORNIA EDISON CO.;
THE PEOPLE OF THE STATE OF
CALIFORNIA, EX REL. KAMALA D.
HARRIS, ATTORNEY GENERAL,
                      Intervenors,

                v.

FEDERAL ENERGY REGULATORY
COMMISSION,
                    Respondent.
2         MPS MERCHANT SERVICES V. FERC

ILLINOVA CORPORATION, on behalf          No. 15-73818
of Illinova Energy Partners, Inc.,
                           Petitioner,    FERC No.
                                         EL00-95-280
CALIFORNIA PUBLIC UTILITIES
COMMISSION; PACIFIC GAS &
ELECTRIC COMPANY; SOUTHERN
CALIFORNIA EDISON CO.; THE
PEOPLE OF THE STATE OF
CALIFORNIA, EX REL. KAMALA D.
HARRIS, ATTORNEY GENERAL,
                       Intervenors,

                  v.

FEDERAL ENERGY REGULATORY
COMMISSION,
Respondent.
         MPS MERCHANT SERVICES V. FERC                3

BP ENERGY COMPANY,                     No. 15-73905
                         Petitioner,

CALIFORNIA PUBLIC UTILITIES
COMMISSION; PACIFIC GAS &
ELECTRIC COMPANY; SOUTHERN
CALIFORNIA EDISON CO.; THE
PEOPLE OF THE STATE OF
CALIFORNIA, EX REL. KAMALA D.
HARRIS, ATTORNEY GENERAL,
                       Intervenors,

                v.

FEDERAL ENERGY REGULATORY
COMMISSION,
                    Respondent.
4        MPS MERCHANT SERVICES V. FERC

APX, INC.,                             No. 15-73912
                         Petitioner,

CALIFORNIA PUBLIC UTILITIES
COMMISSION; PACIFIC GAS &
ELECTRIC COMPANY; SOUTHERN
CALIFORNIA EDISON CO.; THE
PEOPLE OF THE STATE OF
CALIFORNIA, EX REL. KAMALA D.
HARRIS, ATTORNEY GENERAL,
                       Intervenors,

                v.

FEDERAL ENERGY REGULATORY
COMMISSION,
                    Respondent.
         MPS MERCHANT SERVICES V. FERC               5

SHELL ENERGY NORTH AMERICA            No. 16-70004
(US), L.P.,
                     Petitioner,

CALIFORNIA PUBLIC UTILITIES
COMMISSION; PACIFIC GAS &
ELECTRIC COMPANY; SOUTHERN
CALIFORNIA EDISON CO.; THE
PEOPLE OF THE STATE OF
CALIFORNIA, EX REL. KAMALA D.
HARRIS, ATTORNEY GENERAL,
                       Intervenors,

                v.

FEDERAL ENERGY REGULATORY
COMMISSION,
                    Respondent.
6         MPS MERCHANT SERVICES V. FERC

MPS MERCHANT SERVICES, INC.,             No. 16-70524
                     Petitioner,

CALIFORNIA PUBLIC UTILITIES
COMMISSION; PACIFIC GAS &
ELECTRIC COMPANY; SOUTHERN
CALIFORNIA EDISON COMPANY; THE
PEOPLE OF THE STATE OF
CALIFORNIA, EX REL. KAMALA D.
HARRIS, ATTORNEY GENERAL,
                       Intervenors,

                  v.

FEDERAL ENERGY REGULATORY
COMMISSION,
                    Respondent.

ILLINOVA CORPORATION, on behalf          No. 16-70525
of Illinova Energy Partners, Inc.,
                           Petitioner,

                  v.

FEDERAL ENERGY REGULATORY
COMMISSION,
                    Respondent.
         MPS MERCHANT SERVICES V. FERC                  7

SHELL ENERGY NORTH AMERICA               No. 16-70868
(US), L.P.,
                     Petitioner,          FERC No.
                                         EL00-95-287
                v.

FEDERAL ENERGY REGULATORY                 OPINION
COMMISSION,
                    Respondent.

       On Petition for Review of an Order of the
       Federal Energy Regulatory Commission

         Argued and Submitted August 1, 2016
              San Francisco, California

               Filed September 8, 2016

Before: Sidney R. Thomas, Chief Judge, and M. Margaret
   McKeown and Richard R. Clifton, Circuit Judges.

           Opinion by Chief Judge Thomas
8            MPS MERCHANT SERVICES V. FERC

                           SUMMARY*

          Federal Energy Regulatory Commission

    The panel denied in part and dismissed in part
consolidated petitions for review brought by various power
companies, and held that the Federal Energy Regulatory
Commission (“FERC”) did not arbitrarily and capriciously
determine that the energy companies committed tariff
violations in California during the summer of 2000.

    As part of deregulating its investor-owned, regulated,
vertically integrated electric utility market, California created
two non-profit entities: the California Power Exchange
Corporation (CalPX) and the California Independent System
Operator Corporation (Cal-ISO). Both entities were subject
to FERC jurisdiction, with CalPX operating pursuant to a
FERC-approved tariff and wholesale rate schedule. The tariff
incorporated a protocol, the Market Monitoring and
Information Protocol, which set forth rules for identifying and
protecting against abuses of market power.

     The panel held that FERC’s determination – that electric
sellers Shell Energy North America, LP, MPS Merchant
Services, Inc., and Illinova Corporation violated the Cal-ISO
tariff and Market Monitoring and Information Protocol – was
not arbitrary, capricious, or an abuse of discretion.
Specifically, the panel held that FERC reasonably interpreted
the Cal-ISO tariff and Market Monitoring and Information
Protocol to prohibit the practices of false export, false load

  *
    This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
            MPS MERCHANT SERVICES V. FERC                     9

scheduling, and Types II and III anomalous bidding. The
panel further held that FERC reasonably concluded that the
sellers engaged during the Summer Period (the period from
May 1, 2000, to October 1, 2000) in the practices deemed
tariff violations by the orders on review.

    The panel further held that FERC’s Summer Period
determinations regarding APX, Inc., and BP Energy Co. were
not arbitrary, capricious, or an abuse of discretion. The panel
held that FERC reasonably determined that APX engaged in
economic withholding and overscheduling, and therefore
violated the Cal-ISO tariff.

    Finally, the panel held that because FERC’s remedial
order is not final, the panel lacked appellate jurisdiction over
it.

                         COUNSEL

James P. Danley, Cheryl M. Foley, John Lee Shepherd, Jr.,
and John N. Estes III, Skadden, Arps, Slate, Meagher & Flom
LLP, Washington, D.C., for Petitioners MPS Merchant
Services, Inc., and Illinova Corporation.

Brett A. Snyder and Mark R. Haskell, Cadwalader,
Wickersham & Taft LLP, Washington, D.C., for Petitioner
BP Energy Company.

Matthew T. Rick and Douglas F. John, John & Hengerer,
Washington, D.C., for Petitioner APX, Inc.
10          MPS MERCHANT SERVICES V. FERC

Jessica L. Bayles, William M. Friedman, and Jeffrey D.
Watkiss, McDermott, Will & Emery LLP, Washington, D.C.,
for Petitioner Shell Energy North America (US), L.P.

Candace J. Morey and Arocles Aguilar, General Counsel, San
Francisco, California, as and for Intervenor California Public
Utilities Commission.

Eric Todderud and Stan Berman, Sidley Austin LLP, Seattle,
Washington; Joshua S. Levenberg and Mark D. Patrizio,
Pacific Gas and Electric Company; for Intervenor Pacific Gas
& Electric Company.

Catherine M. Giovannoni and Richard L. Roberts, Steptoe &
Johnson LLP, Washington, D.C.; Russell A. Archer, J. Eric
Isken, and Russell C. Swartz, Southern California Edison
Company; for Intervenor Southern California Edison Co.

Danette E. Valdez, Supervising Deputy Attorney General;
Martin Goyette, Senior Assistant Attorney General; Mark
Breckler, Chief Assistant Attorney General; Kamala K.
Harris, Attorney General; Office of the Attorney General, San
Francisco, California; Whitney E. Snyder, Judith D. Cassel,
and Kevin J. McKeon, Hawke McKeon & Sniscak LLP,
Harrisburg, Pennsylvania; for Intervenor People of the State
of California ex Rel. Kamala D. Harris, Attorney General.

Beth G. Pacella, Deputy Solicitor; Robert H. Solomon,
Solicitor; Max Minzner, General Counsel; Washington, D.C.;
as and for Respondent Federal Energy Regulatory
Commission.
              MPS MERCHANT SERVICES V. FERC                           11

                              OPINION

THOMAS, Chief Circuit Judge:

    In these petitions for review, we consider whether the
Federal Energy Regulatory Commission (“FERC” or
“Commission”) arbitrarily and capriciously determined that
various energy companies committed tariff violations in
California during the summer of 2000. We conclude that it
did not, and we deny the petitions for review.

                                    I

    This case is part of a long-standing series of decisions
arising out of California’s energy crisis in 2000 and 2001.
The relevant factual background was described in our prior
opinions, so we need not describe it in detail here.1 In brief,
FERC in the 1990s commenced a program of deregulating
and “unbundling” the wholesale electric power industry by
restructuring and separating electrical generation,
transmission, and distribution.2 As a result, California

 1
  See, e.g., Cal. ex. rel. Lockyer v. FERC, 383 F.3d 1006 (9th Cir. 2004);
Pub. Utils. Comm’n of State of Cal. v. FERC, 462 F.3d 1027 (9th Cir.
2006) (“CPUC”); Cal ex. rel. Harris v. FERC, 809 F.3d 491 (9th Cir.
2015) (“Harris”).
     2
       See Promoting Wholesale Competition Through Open Access
Nondiscriminatory Transmission Services by Public Utilities, 61 Fed. Reg.
21,540, 21,541 (May 10, 1996) (“FERC Order No. 888”), on reh’g,
62 Fed. Reg. 12,274 (Mar. 14, 1997), on reh’g, 62 Fed. Reg. 64,688 (Dec.
9, 1997), on reh’g, 82 FERC ¶ 61,046 (1998), aff’d Transmission Access
Policy Study Grp. v. FERC, 225 F.3d 667 (D.C. Cir.2000) (per curiam),
aff’d sub nom. New York v. FERC, 535 U.S. 1 (2002).
12           MPS MERCHANT SERVICES V. FERC

deregulated its investor-owned, regulated, vertically
integrated utility market.3

    As part of the deregulation, California created two non-
profit entities: the California Power Exchange Corporation
(“CalPX”) and the California Independent System Operator
Corporation (“Cal-ISO”). CPUC, 462 F.3d at 1037–39.
CalPX was a wholesale clearinghouse created primarily to
operate two spot markets: (1) the “day-ahead” trading market,
in which the market clearing price was derived from the
sellers’ and buyers’ price and quantity determinations for the
next day’s energy transactions, and (2) the “day of” or “hour-
ahead” trading market, in which CalPX would determine, on
an hourly basis, a single market clearing price which all
suppliers would be paid. Id. at 1038. Cal-ISO managed
California’s electricity transmission grid and was responsible
for all real-time operations, including balancing electrical
supply and demand. Id. at 1038–39. Both entities were
subject to FERC jurisdiction, with CalPX operating pursuant
to a FERC-approved tariff and wholesale rate schedule. Pac.
Gas & Elec. Co., 77 FERC ¶ 61,204 at 61,803–05 (1996),
reh’g denied, 81 FERC ¶ 61,122 (1997).

    The Cal-ISO tariff comprehensively regulated
California’s power markets. In relevant part, the tariff barred
power marketers from buying electricity in the day-ahead
market in order to resell that electricity in the real-time
market. And the tariff incorporated a protocol—the Market
Monitoring and Information Protocol (“MMIP”)—which set
forth rules for identifying and protecting against abuses of

 3
   Act of September 23, 1996, 1996 Cal. Legis. Serv. 854 (codified at
Cal. Pub. Util. Code §§ 330–398.5).
            MPS MERCHANT SERVICES V. FERC                  13

market power. See Am. Elec. Power Serv. Corp., 103 FERC
¶ 61,345 at para. 8 (2003).

    Unlike most energy markets, 80% of the California
transactions during the relevant period were conducted in the
spot markets. See CPUC, 462 F.3d at 1039. Most electricity,
by design, traded in CalPX’s day-ahead market. After a
summer 2000 spike in energy prices and a series of rolling
blackouts, San Diego Gas & Electric Company (“SDG&E”)
filed a complaint with FERC under § 206 of the Federal
Power Act, 16 U.S.C. § 824(e). See id. at 1040–41.
SDG&E’s complaint requested that the agency impose a price
cap on sales into the CalPX and Cal-ISO markets. See id. at
1041. FERC denied the request, but then commenced an
investigatory proceeding into the justness and reasonableness
of the market rates. San Diego Gas & Elec. Co., 92 FERC
¶ 61,172 (2000). FERC ultimately issued a number of orders,
which have been the subject of prior petitions for review.
This case returns to us after our decision in CPUC, in which
we directed FERC to determine whether certain sellers of
electricity in California power markets violated the rules
governing those markets in the summer of 2000, and whether
these violations could be remedied under the agency’s
authority in § 309 of the FPA. CPUC, 462 F.3d at 1048–51,
1065.

    Following our remand in CPUC, FERC instructed an
administrative law judge (“ALJ”) to determine for the period
from May 1, 2000 to October 1, 2000 (the “Summer Period”):
(1) which market practices and behaviors constituted a
violation of the then-current Cal-ISO, CalPX, and individual
seller’s tariffs and Commission orders; (2) whether any of the
respondents engaged in those tariff violations; and
(3) whether any such tariff violations affected the market
14           MPS MERCHANT SERVICES V. FERC

clearing price. San Diego Gas & Elec. Co., 135 FERC
¶ 61,183 at para. 31 (2011).

    Months of hearings followed. The California Parties,4 the
energy companies and Commission staff presented evidence,
producing a transcript more than 10,000 pages long. An
Initial Decision issued in February 2013. See San Diego Gas
& Elec. Co., 142 FERC ¶ 63,011 (2013) (“Initial Decision”).
The Initial Decision found that certain energy companies had
violated the Cal-ISO tariff via several marketing strategies,
which the ALJ dubbed “False Export,” “False Load
Scheduling” and “Anomalous Bidding.”

    A False Export violation occurred when a marketer
purchased electricity from the CalPX or other sources internal
to California, scheduled that electricity in advance for export,
and subsequently scheduled that electricity in real-time for
import. See, e.g., San Diego Gas & Elec. Co., 149 FERC
¶ 61,116 at para. 108 (2014) (“Op.536”); San Diego Gas &
Elec. Co., 153 FERC ¶ 61,144 at para. 80 (2015) (“Op.536-
A”). The twin transactions “disguised [the] energy [as]
sourced from outside,” 142 FERC ¶ 63,011 at para. 36, even
though the electricity never left California. See 149 FERC
¶ 61,116 at para. 122 (noting that electricity “scheduled from
A . . . to B . . . and from B to C . . . actually just went from A
to C.”). The False Export strategy let sellers “evade the [Cal-
ISO] real time price caps,” which did not apply to imported
power. 142 FERC ¶ 63,011 at para. 26.

     4
     Collectively, the term “California Parties” refers to the State of
California, the CPUC, Pacific Gas & Electric Company, and Southern
California Edison Company.
            MPS MERCHANT SERVICES V. FERC                   15

    False Load Scheduling—or, “overscheduling”—occurred
when sellers in California’s day-ahead market submitted
exaggerated demand schedules to Cal-ISO. See, e.g.,
142 FERC ¶ 63,011 at para. 38. The so-called “uninstructed
energy” would then flow on California’s transmission grid.
Cal-ISO would direct the energy to real-time shortages and,
in exchange, pay the seller the real-time market’s clearing
price. 142 FERC ¶ 63,011 at para. 27. As an expert for the
California Parties explained, “the objective of the transaction
[was] to earn the [market-clearing price] in the [real-time]
market on the power which was purchased from the PX at the
[day-ahead] price, thus earning the difference between the
two prices[.]” Both the False Load Scheduling and False
Export strategies “in simple terms d[id] the same thing[:]
They pull[ed] energy out of the day-ahead market . . . and
they dump[ed] it in the realtime market.” The tactics relied
on two Summer Period market realities: (1) real-time prices
generally exceeded day-ahead prices, and (2) little real-time
volume went unsold, as the demand for real-time energy is
inelastic.

    The third tariff violation at issue is what the ALJ termed
“Anomalous Bidding.” See 149 FERC ¶ 61,116 at para. 3.
The ALJ defined Anomalous Bidding as “bidding behavior
that departs from normal competitive behavior in violation of
the CAISO MMIP[.]” 142 FERC ¶ 63,011 at para. 16.

    The ALJ went on to identify three types of Anomalous
Bidding that violated the MMIP. The Initial Decision defined
“Type I Anomalous Bidding” as “[b]ids that vary in output in
ways that are unrelated to cost[.]” 142 FERC ¶ 63,011 at para.
18. This type of Anomalous Bidding forms no part of this
appeal: the California Parties, the ALJ found, did not meet
their prima facie burden of demonstrating that Type I
16         MPS MERCHANT SERVICES V. FERC

Anomalous Bidding affected market clearing prices. See
142 FERC ¶ 63,011 at para. 33.

    The Initial Decision defined “Type II Anomalous
Bidding” as “bids with prices above marginal cost in
combination with some other tariff violation[.]” 142 FERC
¶ 63,011 at para. 18 (emphasis added). And the Initial
Decision defined “Type III Anomalous Bidding,” also known
as “Economic Withholding,” as “[b]ids used to effectuate
supply withholding[.]” 142 FERC ¶ 63,011 at para. 18.
Those bids occurred whenever the bid price was greater than
market-clearing price and the seller’s marginal cost was less
than the market-clearing price. Some Type III anomalous
bids “were set so high above the market price that it was
likely that they would not be accepted, thereby either
diminishing the available supply to the Cal-ISO or increasing
the market clearing price.” 142 FERC ¶ 63,011 at para. 28.

    As relevant to these petitions, the ALJ determined that
False Export, False Load Scheduling, and Types II and III
Anomalous Bidding violated the Cal-ISO tariff. See
generally 142 FERC ¶ 63,011 at para. 1. False Load
Scheduling and False Export, the ALJ concluded, required
“the submission of false information” to Cal-ISO, see
142 FERC ¶ 63,011 at paras. 36, 42, and therefore violated
“[t]he collective import” of several tariff provisions. See
142 FERC ¶ 63,011 at paras. 36, 43. Type II Anomalous
Bidding “depart[ed] significantly” from competitive market
behavior in violation of several MMIP provisions. See
142 FERC ¶ 63,011 at para. 24. And economic withholding,
the ALJ explained, violated provisions in the MMIP that
barred withholding and manipulation. See 142 FERC
¶ 63,011 at paras. 31–32. The ALJ found 34,020 Summer
Period transactions that amounted to tariff violations. See
            MPS MERCHANT SERVICES V. FERC                   17

142 FERC ¶ 63,011 at para. 14. Of these, the ALJ found
more than 20,000 that affected the market clearing price. Id.

    Over the course of the agency proceedings, a number of
entities settled with the California Parties and were dismissed
from the case. The remaining entities in this petition for
review are:

   •   MPS Merchant Services, Inc. (“MPS”), formerly
       known as Aquila Merchant Services, Inc., a power
       marketer during the Summer Period.

   •   Illinova Corporation, on behalf of Illinova Energy
       Partners, Inc., (“Illinova”), a power marketer during
       the Summer Period.

   •   Shell Energy North America, LP (“Shell”), a
       successor-in-interest to Coral Power, LLC, which
       purchased and resold energy and capacity during the
       Summer Period.

   •   APX, Inc. (“APX”), which served as a middleman
       between electricity buyers and sellers and California’s
       energy markets during the Summer Period.

   •   BP Energy Co. (“BP”), which sold electricity into the
       Cal-ISO market through APX.

    FERC in November 2014 affirmed in part and vacated in
part the Initial Decision. See generally 149 FERC ¶ 61,116.
The Commission found that Shell, MPS, APX, and Illinova
violated the Cal-ISO tariff and that those violations
“impacted the market clearing price.” 149 FERC ¶ 61,116 at
para. 3. The Commission explained that the False Export
18          MPS MERCHANT SERVICES V. FERC

strategy contravened tariff provisions that barred “unusual
activity . . . relating to imports” and required sellers to specify
customers’ identities and power demands. See 149 FERC
¶ 61,116 at para. 120 (citing Cal-ISO Tariff §§ 2.2.11.1,
2.2.11.1.1-2 and MMIP §§ 2.1.1.5, 2.1.1.1). FERC held that
False Load Scheduling violated MMIP provisions that
required sellers to “submit balanced schedules” to Cal-ISO
and that barred “unusual trades and transactions.” See
149 FERC ¶ 61,116 at paras. 170–71 (citing Cal-ISO Tariff
§§ 2.2.7.2, 2.2.11.1 and MMIP §§ 2.1.1.3, 2.1.1.5). Finally,
the Commission held that Type II Anomalous Bidding and
economic withholding violated several MMIP provisions
proscribing anomalous market behavior. See 149 FERC
¶ 61,116 at paras. 94, 99 (citing MMIP §§ 2.1.1, 2.1.3,
2.1.1.4, 2.1.1.1). A November 2015 rehearing order largely
preserved these results. See 153 FERC ¶ 61,144.

    At the California Parties’ request, FERC in February 2016
again clarified its Summer Period determinations. See
generally San Diego Gas & Elec. Co., 154 FERC ¶ 61,063
(2016) (“Op.536-B”). The February order “clarif[ied] that the
remaining Respondents . . . are liable to disgorge overcharges
and excess payments they received for all sales during all
hours of the Summer Period during which the market prices
were inflated by tariff violations committed by any of the
Respondents.” Id. at para. 8. The Commission left “[o]ther
[pending] requests for rehearing”—notably, a request filed by
MPS in December 2015—for “a separate order.” 154 FERC
¶ 61,063 at para. 1.

   These consolidated petitions for review followed. The
Federal Power Act provides us jurisdiction to review
“order[s] issued by the Commission.” See 16 U.S.C.
§ 825l(b). We have limited that jurisdictional grant to final
            MPS MERCHANT SERVICES V. FERC                     19

orders, see Steamboaters v. FERC, 759 F.2d 1382, 1387–88
(9th Cir. 1985), and therefore lack appellate jurisdiction to
consider the sellers’ ongoing challenge to the remedy that
FERC ordered for the violations that the agency identified.
See 154 FERC ¶ 61,063 at para. 8. FERC and the sellers
agree that order is not final. The evolving scope of the
agency’s remedy supports that conclusion. Compare
149 FERC ¶ 61,116 at para. 209, with 153 FERC ¶ 61,144 at
para. 142, and 154 FERC ¶ 61,063 at para 8. Nevertheless,
we have jurisdiction to review the final agency findings on
liability. See Harris, 809 F.3d at 499–500.

    We review decisions by FERC to determine whether its
action was “arbitrary, capricious, an abuse of discretion, or
otherwise not in accordance with law.” 5 U.S.C. § 706(2);
see also Fall River Rural Elec. Coop., Inc. v. FERC, 543 F.3d
519, 525 (9th Cir. 2008). We recognize that FERC’s
discretion “is at its zenith when . . . fashioning . . . remedies
and sanctions[.]” CPUC, 462 F.3d at 1053 (internal quotation
omitted). We review FERC’s interpretation of a tariff with a
“two-step, Chevron-like analysis.” PSEG Energy Res. &
Trade LLC v. FERC, 665 F.3d 203, 208 (D.C. Cir. 2011)
(internal quotation marks omitted). We review the agency’s
findings of fact for substantial evidence and will not disturb
such findings even if “the evidence is susceptible of more
than one rational interpretation.” CPUC, 462 F.3d at 1045.
Our review “is limited to . . . the administrative record,”
Envtl. Coal. of Ojai v. Brown, 72 F.3d 1411, 1414 (9th Cir.
1995), and to those “grounds upon which . . . the record
discloses that [the agency’s] action was based.” SEC v.
Chenery Corp., 318 U.S. 80, 87 (1943).
20          MPS MERCHANT SERVICES V. FERC

                              II

    FERC’s determination that Shell, MPS, and Illinova
(“sellers”) violated the Cal-ISO tariff and MMIP during the
Summer Period was not arbitrary, capricious, or an abuse of
discretion.

                              A

    FERC reasonably interpreted the Cal-ISO tariff and
MMIP to prohibit the practices of False Export, False Load
Scheduling, and Types II and III Anomalous Bidding. FERC
interpreted Cal-ISO Tariff §§ 2.2.11.1, 2.2.11.1.1-2 and
MMIP §§ 2.1.1.1, 2.1.1.5 to prohibit False Export. The
Commission interpreted Cal-ISO Tariff §§ 2.2.7.2, 2.2.11.1
and MMIP §§ 2.1.1.3, 2.1.1.5 to prohibit False Load
Scheduling. Types II and III Anomalous Bidding, the
Commission concluded, violated MMIP §§ 2.1.1 et seq.

                              1

    The text of the tariff and MMIP provisions supports
FERC’s conclusions. Cal-ISO Tariff § 2.2.7.2 required
sellers to “submit to the ISO only Balanced Schedules,”
which the tariff defined as schedules where “Generation,
adjusted for Transmission Losses equal[ed] forecast
Demand[.]” Cal-ISO Tariff §§ 2.2.11 et seq. required the
submitted schedules to “include the name and identification
number” of electricity customers, as well as customers’
location and demand. The MMIP provisions called for
“corrective action” in response to, respectively, “withholding
of Generation capacity,” “unusual trades or transactions,” and
“unusual activity or circumstances relating to imports . . . or
exports[.]”
           MPS MERCHANT SERVICES V. FERC                  21

    FERC reasonably determined that False Export, False
Load Scheduling and Anomalous Bidding violated these
provisions. FERC explained that False Export required that
sellers “submit[] [information that] did not correspond to
actual load.” 149 FERC ¶ 61,116 at para. 120. That
falsification amounted to “unusual activity or circumstances
relating to imports . . . or exports[.]” 149 FERC ¶ 61,116 at
para. 120. Additionally, because the practice “effectively
withheld capacity from day-ahead markets,” 149 FERC
¶ 61,116 at para. 120. FERC determined that False Export
violated MMIP § 2.1.1.1. As for False Load Scheduling, the
Commission determined that sellers violated the balanced
schedule requirement by “schedul[ing] fictitious load in
anticipation of actual load.” 149 FERC ¶ 61,116 at para. 170.
Type II and III anomalous bids, the Commission concluded,
relied on the above violations or on withholding strategies
that departed from competitive market behavior. See
149 FERC ¶ 61,116 at paras. 94, 99.

    These determinations comport with the plain text of the
Cal-ISO Tariff, of which Summer Period electricity sellers
were on notice. See Cal. ex rel. Brown, 139 FERC ¶ 61,210
at para. 26 (2012); see also 142 FERC ¶ 63,011 at para. 42.
At minimum, we defer to FERC’s reasonable constructions
of ambiguous tariff language. See PSEG, 665 F.3d at 208.
The sellers’ contrary position on overscheduling—that sellers
could inflate for California’s grid operators the sellers’
forecasts of how much electricity the sellers’ customers
would draw from California’s grid—is self-refuting; renders
superfluous much of the Cal-ISO tariff; and thwarts
California’s efforts to supply electricity efficiently and
reliably through day-ahead markets. See 153 FERC ¶ 61,144
at para. 96.
22            MPS MERCHANT SERVICES V. FERC

    Contrary to the sellers’ assertions, FERC reasonably
interpreted the MMIP to provide notice that FERC could
sanction practices “subject to scrutiny.”5 See PSEG, 665 F.3d
at 208. “The MMIP was part of [Cal-ISO]’s tariff,”
153 FERC ¶ 61,144 at para. 111. See also 103 FERC
¶ 61,345 at paras. 8, 23 (2003), which the Commission could
interpret and enforce. See 142 FERC ¶ 63,011 at para. 16.
The protocols “put[] market participants on notice regarding
their rights and obligations in the marketplace,” 103 FERC
¶ 61,345 at para. 23, and contemplated “corrective action[s],”
and “sanctions or penalties,” by “the appropriate regulatory
agencies.” See also MMIP § 1.1 (providing for “[ISO
Markets’] protection from abuses of market power in both the
short term and the long term”). FERC’s legal interpretation
of the MMIP follows agency precedent, see Investigation of
Anomalous Bidding Behavior and Practices in the Western
Markets, 103 FERC ¶ 61,347 at paras. 7–11 (2003), and we
see no reason to disturb that interpretation here.

     In conclusion, FERC reasonably interpreted the Cal-ISO
tariff and the MMIP according to the plain text of those
documents. We therefore reject the sellers’ claims that the
tariff and MMIP did not proscribe the practices identified by
the agency.

 5
    We decline FERC’s invitation to uphold the agency’s several liability
findings on the theory that the sellers waived the issue of Cal-ISO Tariff
§ 2.2.11.1 (requiring that Scheduling Coordinators identify “the Location
Code of the Take-Out Point” and “[t]he aggregate quantity (in MWh) of
Demand being served at each Take-Out Point”). Waiver is inappropriate
in these unique circumstances, where the sellers’ opening briefs repeatedly
contest the liability theory for which § 2.2.11.1 provides support, even if
those briefs do not mention the section by name.
            MPS MERCHANT SERVICES V. FERC                     23

                               2

     The sellers next contest the policy foundations of FERC’s
interpretations. The agency’s interpretation of the Cal-ISO
tariff and the MMIP, the sellers argue, unreasonably
characterized permissible arbitrage as a False Export
violation. See, e.g., 153 FERC ¶ 61,144 at para. 140. The
sellers further claim that FERC’s interpretations unreasonably
punish False Load Scheduling, a practice which—the sellers
contend—arose in response to underscheduling by
California’s investor-owned utilities. The sellers also argue
that False Load Scheduling actually enhanced grid reliability.
See 149 FERC ¶ 61,116 at para. 152.

    The record evidence bears out FERC’s view of these
policy considerations. The record establishes that California
and FERC intended Cal-ISO’s real-time market as an
exchange of last resort, not as a full-fledged alternative to the
CalPX that would facilitate arbitrage and price convergence.
See, e.g., 153 FERC ¶ 61,144 at para. 149; 103 FERC
¶ 61,345 at para. 32; see also Lockyer, 383 F.3d at 1009. The
record supports FERC’s finding that False Export and False
Load Scheduling strategies forced California’s investor-
owned utilities increasingly to rely on the real-time market in
order to serve load. See, e.g., 149 FERC ¶ 61,116 at paras.
163–64, 183. The record supports FERC’s conclusion that
the False Export and False Load Scheduling strategies
threatened to compromise the reliability of California’s
electrical transmission grid. See, e.g., 149 FERC ¶ 61,116 at
para. 142; 142 FERC ¶ 63,011 at paras. 49–50. Thus,
FERC’s interpretation of the Cal-ISO tariff and the MMIP
finds support not only in text, but in policy as well.
24             MPS MERCHANT SERVICES V. FERC

                                      3

    Illinova asserts that a section of the Cal-ISO tariff
provides the company a safe harbor from overscheduling
liability.6 We disagree. The section in question, § 22.1,
carries the title, “Temporary Simplification of Schedule
Validation Tolerances,” and provides:

         Notwithstanding any other provision in the
         ISO Tariff, including the ISO Protocols, a
         Schedule shall be treated as a Balanced
         Schedule when aggregate Generation,
         adjusted for Transmission Losses, is within 20
         MW of aggregate Demand, or such lower
         amount, greater than 1 MW, as may be
         established from time to time by the ISO. The
         ISO may establish the Schedule validation
         tolerance level at any time, between a range
         from 1 MW to 20 MW, by giving seven days’
         notice published on the ISO’s “Home Page,”
         at http://www.caiso.com or such other Internet
         address as the ISO may publish from time to
         time.

     Illinova contends that this section creates a de minimis
exception for overscheduling liability. The exception shields
Illinova, the company continues, because its overscheduling
never exceeded 20 MW. Illinova claims that a definition of

 6
   Illinova styles its claim as a challenge to the agency’s liability findings.
In substance, the company contests the agency’s interpretation of the tariff
provision. Accordingly, we review Illinova’s § 22.1 arguments under the
framework of PSEG, 665 F.3d at 208.
             MPS MERCHANT SERVICES V. FERC                         25

“Demand” contained in the Cal-ISO tariff support the
company’s reading of § 22.1.

    FERC offers a competing interpretation. The agency
construes § 22.1 as an “administrative threshold for Cal-ISO
to accept a schedule from the CalPX market.” FERC rejects
the notion that § 22.1 was intended to—or did—create a de
minimis exception to overscheduling liability.

     FERC’s interpretation of § 22.1—albeit not
incontrovertible—survives this court’s review. In particular,
the agency’s interpretation squares with § 2 of the Cal-ISO
tariff, which prescribes the duties of scheduling coordinators.
That section provides that “[i]f a Scheduling Coordinator
submits a schedule that is not a Balanced Schedule, the ISO
shall reject that Schedule provided that Scheduling
Coordinators shall have an opportunity to validate their
Schedules prior to the deadline for submission to the ISO[.]”
The section treats schedule validation—the process that
§ 22.1 purports to govern—as an ex ante condition that
precedes the transmission of electricity, not as an ex post
condition whose violation results in liability. Indeed,
Illinova’s claim that “the tolerance band in § 22.1 requires
data on actual demand,” cannot be reconciled with Cal-ISO’s
design, which required schedule submission prior to real-
time.7

  7
     This claim also appears to misrepresent the Cal-ISO tariff, which
defined “Demand” as “[t]he rate at which Energy is delivered to Loads
and Scheduling Points by Generation, transmission or distribution
facilities. It is the product of voltage and the in-phase component of
alternating current measured in units of watts or standard multiples
thereof[.]”
26          MPS MERCHANT SERVICES V. FERC

    Ultimately, we need not decide which reading of § 22.1
“is the best . . . interpretation.” See Nat’l Cable &
Telecomms. Ass’n v. Brand X Internet Servs., 545 U.S. 967,
980 (2005). Instead, we defer to FERC’s construction “so
long as that construction is reasonable,” PSEG, 665 F.3d at
208, and allow the retroactive application of such a
construction unless “manifest injustice” would result, Thorpe
v. Hous. Auth. of the City of Durham, 393 U.S. 268, 282
(1969). Given the “sophistication of modern energy trading,”
CPUC, 462 F.3d at 1039, we see no such injustice or unfair
surprise here. FERC’s construction of Cal-ISO tariff § 22.1
was reasonable and foreseeable.

                              4

    In short, FERC reasonably interpreted the Cal-ISO tariff
and the MMIP to prohibit the practices of False Export, False
Load Scheduling and Anomalous Bidding. In addition, the
agency reasonably concluded that the tariff and MMIP
sufficed to put sellers on notice that such practices were not
permitted.

                              B

    FERC reasonably concluded that the sellers engaged
during the Summer Period in the practices deemed tariff
violations by the orders on review.

                              1

    FERC’s conclusion that MPS overscheduled and thereby
violated the Cal-ISO tariff, see 149 FERC ¶ 61,116 at
para. 174, was not arbitrary, capricious, or an abuse of
              MPS MERCHANT SERVICES V. FERC                              27

discretion.8 MPS contends that it did not overschedule
because the City of Azusa, California, submitted the
controverted schedules. Azusa’s actions, MPS argues, cannot
support liability for MPS.

    We must reject such artificial formalism. FERC properly
concluded in Op.536-A that “[t]he agreement with Azusa
grant[ed] MPS the ability to make uninstructed sales . . . [and]
enabled MPS to engage in False Load Scheduling.”
153 FERC ¶ 61,144 at para. 148. Specifically, the agreement
between Azusa and MPS’s predecessor-in-interest, Aquila,
gave Aquila the right to provide a pre-schedule of energy
deliveries to Azusa. The agreement then required Azusa to
release that energy into Cal-ISO. The fact that MPS
laundered its overschedules through a municipal utility does
not render arbitrary and capricious FERC’s liability
determination. See id. Thus, substantial evidence supports
FERC’s finding that MPS engaged in False Load Scheduling
in violation of the Cal-ISO tariff.

 8
   We have jurisdiction to review this determination. “In order after order,
FERC has not budged from its position,” Harris, 809 F.3d at 499, that
MPS overscheduled in violation of the Cal-ISO tariff. See, e.g.,
142 FERC ¶ 63,011 at para. 61; 149 FERC ¶ 61,116 at para. 185;
153 FERC ¶ 61,144 at para. 148. Moreover, the question whether MPS
and Azusa’s contractual status insulates one party from overscheduling
liability “presents a legal question capable of resolution by this court in a
way that does not invade the agency’s province.” Harris, 809 F.3d at 499.
Accordingly, we conclude that FERC’s overscheduling determination
satisfies the test for administrative finality and warrants this court’s
review.
28           MPS MERCHANT SERVICES V. FERC

                                   2

     Substantial evidence supports FERC’s finding that MPS
and Shell engaged in False Export. FERC determined that
the California Parties established a prima facie case of False
Export (1) by matching day-ahead transactions that exported
electricity from California to real-time transactions that
imported electricity to California,9 and (2) with evidence of
“parking”—that is, arrangements by which exporters sold
energy outside the Cal-ISO to entities who then nominally
resold the energy to the exporter for a fee. See 142 FERC
¶ 63,011 at para. 37; 149 FERC ¶ 61,116 at para. 123;
153 FERC ¶ 61,144 at para. 59. FERC relies on evidence of
at least five parking arrangements between MPS or Shell and
utilities or municipalities. See 153 FERC ¶ 61,144 at para.
64. FERC also cited MPS and Shell’s consistent patterns of
False Export behavior: specifically, the agency found that
MPS and Shell engaged in False Export during, respectively,
403 and 110 hours of the Summer Period. See 149 FERC
¶ 61,116 at para. 127.

    Shell and MPS argue—with some force—that most of the
California Parties’ evidence involved mere correlation, not
direct proof that the matched transactions were causally
related. Nevertheless, the agency’s findings are supported by
substantial evidence. Cf. Snoqualmie Indian Tribe v. FERC,
545 F.3d 1207, 1212 (9th Cir. 2008) (“Substantial evidence
means such relevant evidence as a reasonable mind might
accept as adequate to support a conclusion.”) (internal
quotation omitted). The California Parties’ screen identified

  9
    A California Parties’ expert testified that the signature of a False
Export is matching day-ahead exports and real-time imports or out-of-
market sales.
            MPS MERCHANT SERVICES V. FERC                   29

a significant, sustained pattern of bid behavior for which the
sellers produced no exculpatory evidence. See 153 FERC
¶ 61,144 at para. 60. That pattern predates and postdates the
formalization of parking arrangements by MPS and Shell,
153 FERC ¶ 61,144 at para. 65, which expressly
contemplated false export transactions. “Where, as here, ‘a
court reviews an agency action involv[ing] primarily issues
of fact, and where analysis of the relevant documents requires
a high level of technical expertise, we must defer to the
informed discretion of the responsible federal agencies.’”
Snoqualmie Indian Tribe, 545 F.3d at 1212 (quoting Sierra
Club v. EPA, 346 F.3d 955, 961 (9th Cir. 2003)). Substantial
evidence supports FERC’s False Export findings.

                              3

    Substantial evidence supports FERC’s findings that the
sellers’ tariff violations increased market-clearing prices for
electricity. See 149 FERC ¶ 61,116 at paras. 132–33;
153 FERC ¶ 61,144 at paras. 79–82. The record supports
FERC’s reliance on a model proposed by the California
Parties’ expert, Peter Fox-Penner. Under that methodology,
the actual market clearing price in each hour was compared
to what the clearing price would have been had each
individual tariff violation not occurred. The model
reasonably considered the price effects of False Export and
False Load Scheduling only in the day-ahead market.
According to the expert, False Export and False Load
Scheduling injected artificial demand into the day-ahead
market, thereby increasing day-ahead prices. The expert’s
model incorporated all bid data submitted to CalPX during
the Summer Period. That market operated simply: CalPX
generated supply and demand curves by summing supply and
demand bids at various prices. The market cleared at the
30          MPS MERCHANT SERVICES V. FERC

price where the curves crossed. As a result, the expert’s
model closely tracked the market’s operation and outcomes.

    The California Parties’ expert testimony therefore
provides substantial evidence for FERC’s finding that the
sellers’ tariff violations increased market-clearing prices for
electricity in the CalPX. Indeed, substantial evidence
supports FERC’s finding that the expert’s model understates
the price effects of sellers’ actions—even if the model does
not quantify the magnitude of that understatement. See
153 FERC ¶ 61,144 at para. 81.

    The sellers argue that the model ignores the electricity
that False Export and False Load Scheduling moved into Cal-
ISO’s real-time market. That increased supply, the sellers
continue, reduced real-time electricity prices. FERC rejected
the argument, see 153 FERC ¶ 61,144 at para. 80, and
substantial evidence supports that rejection. Because CalPX
day-ahead volumes greatly exceeded Cal-ISO real-time
volumes, the California Parties’ expert explained that “a price
change of a given magnitude in the PX market-clearing price
had a much larger impact on the buyers of electricity than that
same price change would have in the [real-time] market.”

    Finally, MPS and Illinova claim that modeled CalPX
price effects of “less than 10 cents . . . [or] less than one
dollar . . . were, in fact, smaller than the margin of error for
the analysis.” But the portions of the record cited by MPS
and Illinova provide offer no margin of error for Fox-
Penner’s day-ahead model. Instead, MPS, Illinova and Shell
erroneously have mapped the real-time model’s errors to the
day-ahead model. For this reason, we decline to discard the
California Parties’ modeling efforts on the basis of the
sellers’ arguments about “false precision.”
              MPS MERCHANT SERVICES V. FERC                           31

    In sum, substantial evidence supports FERC’s conclusion
that the violations affected the CalPX market price. The
sellers’ attacks on the methodology employed are not
persuasive.10

                                    4

    FERC’s findings on Type III Anomalous
Bidding—economic withholding—are supported by the
record, and neither Shell nor APX offers developed—let
alone persuasive —arguments for disturbing those findings.
See generally 153 FERC ¶ 61,144 at paras. 39–42, 46;
149 FERC ¶ 61,116 at paras. 84–86, 99–105. Indeed, the
record indicates that Shell’s Type III anomalous bids
exceeded real-time market-clearing prices, not just the
market’s marginal cost. See 149 FERC ¶ 61,116 at para. 51;
142 FERC ¶ 63,011 at para. 29. FERC reasonably
determined that such conduct contravened MMIP provisions
§§ 2.1.1.1 and 2.1.3, which generally barred withholding and
manipulation. See 149 FERC ¶ 61,116 at para. 99.

  10
     The analysis presented in Parts II.A through II.B.1–3 of this opinion
provides ample reason to deny review of the agency’s finding that Shell
engaged in Type II Anomalous Bidding. See 153 FERC ¶ 61,144 at
para. 45. Shell’s challenge to that finding relies exclusively on the
company’s arguments concerning False Export and False Load
Scheduling. Those arguments were unpersuasive when considering False
Export and overscheduling alone; and those arguments are still
unpersuasive when we consider False Export and overscheduling as means
of effecting Type II anomalous bids.
32          MPS MERCHANT SERVICES V. FERC

                              III

    FERC’s Summer Period determinations regarding APX
and BP were not arbitrary, capricious, or an abuse of
discretion.

                              A

     FERC reasonably determined that APX engaged in
economic withholding and overscheduling, and therefore
violated the Cal-ISO tariff. See 153 FERC ¶ 61,144 at para.
16; 149 FERC ¶ 61,116 at para. 29. FERC reasonably argues
that APX-scheduled sales required the combined actions of
APX and its customers. See Automated Power Exch., Inc. v.
FERC, 204 F.3d 1144, 1153 (D.C. Cir. 2000) (upholding
FERC jurisdiction over APX in part because the market-
maker was “an integral part of [electricity] transaction[s]” ).
Moreover, record evidence demonstrates that APX instructed
its members—albeit after the Summer Period ended—on how
to engage in tariff violations through APX’s services.

    APX disputes FERC’s determination that the market-
maker was jointly and severally liable for overscheduling and
Type III Anomalous Bidding. But FERC’s determination
followed more than a decade of agency decisions establishing
APX’s joint and several liability for participant violations
when liability cannot be apportioned to individual customers
based on specific transactions. See, e.g., San Diego Gas &
Elec. Co., 127 FERC ¶ 61,269 at para. 272 (2009); San Diego
Gas & Elec. Co., 105 FERC ¶ 61,066 at para. 170 (2003).
Those decisions acknowledge and reasonably respond to the
idiosyncrasies that APX claims the agency ignores. See San
Diego Gas & Elec. Co., 127 FERC ¶ 61,269 at para. 272
(“[T]he unique situation of the APX requires that the APX
            MPS MERCHANT SERVICES V. FERC                    33

and its sellers be held jointly and severally liable for refunds
where the refund liability cannot be apportioned[.]”). Indeed,
FERC argues that its application of the joint and several
liability standard provides “an exception from the general
rule that scheduling coordinators are individually liable for
violations related to schedules they submit.” The agency
carved out that exception in part because FERC expected that
“[APX] bid data will be sufficiently complete in nearly all
instances to permit apportionment.” San Diego Gas & Elec.
Co., 107 FERC ¶ 61,165 at paras. 45–46 (2003) (describing
APX liability when apportionment impossible as “an
equitable solution and consistent with precedent”). Given
that the agency’s discretion “is at its zenith when it is
fashioning [ ] policies, remedies and sanctions,” CPUC,
462 F.3d at 1053 (alteration in original), we decline to hold
arbitrary or capricious FERC’s application of joint and
several liability in these unusual circumstances.

     At heart, APX’s objection boils down to a question of
scienter: as a market-maker, it argues that it cannot be held
liable for violations when it did not know that schedules
reflected false load or economic withholding. However,
FERC long and repeatedly has held that “[t]he language in
Sections 205(b) and 206 does not contain any reference to
intent . . . . [T]he Commission is to be concerned with
anticompetitive effects, not motives.” In re Missouri Power
& Light Co., 5 FERC ¶ 61,086, 61,140 (1978); see also
Transcon. Gas Pipe Line Corp., 26 FERC ¶ 61,029, 61,054
n.26 (1984) (same). Consistent with controlling authority,
see Fed. Power Comm’n v. Conway Corp., 426 U.S. 271, 279
(1976) (directing FERC to consider “anticompetitive effects”
of conduct alleged to have violated § 205 of the Federal
Power Act) (emphasis added), the agency may apply such
strict liability to determinations pursuant to § 309. See
34         MPS MERCHANT SERVICES V. FERC

16 U.S.C. § 825h. Congress said nothing of scienter in that
provision, and we see nothing unreasonable about FERC’s
interpretation. See Chevron, U.S.A., Inc. v. Nat. Res. Def.
Council, Inc., 467 U.S. 837, 844 (1984).

  In sum, substantial evidence supports FERC’s finding that
APX engaged in overscheduling and economic withholding.

                             B

    APX and BP finally contend that FERC should have
found the market-maker a “net buyer” for the Summer Period.
This argument is premature. FERC made no findings on this
issue and, in fact, sought new evidence on the question.

    To the extent that APX and BP argue that FERC’s
sequencing of apportionment proceedings alone constitutes
capricious action, that argument fails. See, e.g., 153 FERC
¶ 61,144 at para. 13. The Supreme Court has long
“emphasized that the formulation of procedures [is] basically
to be left within the discretion of the agencies[.]” Vermont
Yankee Nuclear Power Corp. v. Nat. Res. Def. Council, Inc.,
435 U.S. 519, 524 (1978).

                             IV

    In sum, FERC’s interpretation of the Cal-ISO and MMIP
Tariffs was reasonable and its determination of tariff
violations was not arbitrary, capricious, or an abuse of
discretion. Because the Commission’s remedial order is not
final, we lack appellate jurisdiction over it.

   PETITIONS FOR REVIEW DENIED IN PART AND
DISMISSED IN PART.