Court Opinion

ID: 4664075
Source: CourtListenerOpinion
Date Created: 2021-03-02 16:00:57.318002+00
Date Added: 2024-06-11T08:02:33.508801
License: Public Domain

United States Court of Appeals
         FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued January 15, 2021              Decided March 2, 2021

                       No. 19-1091

       PUBLIC SERVICE ELECTRIC AND GAS COMPANY ,
                       PETITIONER

                             v.

       FEDERAL ENERGY REGULATORY COMMISSION ,
                    RESPONDENT

      NEW JERSEY BOARD OF PUBLIC UTILITIES, ET AL.,
                    INTERVENORS

                Consolidated with 20-1039

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

    John Longstreth argued the cause for petitioners. With
him on the briefs were Cara J. Lewis, Donald A. Kaplan,
Kimberly B. Frank, and Steven Nadel. William M. Keyser III
entered an appearance.

    Gurbir S. Grewal, Attorney General, Office of the
Attorney General for the State of New Jersey, Paul Youchak,
Deputy Attorney General, and Stefanie A. Brand, Director,
                              2
New Jersey Division of Rate Counsel, were on the brief for
intervenor New Jersey Board of Public Utilities and New
Jersey Division of Rate Counsel in support of petitioners. Alex
Moreau, Attorney, Office of the Attorney General for the State
of New Jersey, Stephen C. Pearson, and Scott H. Strauss
entered appearances.

    Elizabeth E. Rylander, Attorney, Federal Energy
Regulatory Commission, argued the cause for respondent.
With her on the brief were David L. Morenoff, Acting General
Counsel, and Robert H. Solomon, Solicitor.

     Robert A. Weishaar, Jr., Kenneth R. Stark, Thomas L.
Rudebusch, Bhaveeta K. Mody, Timothy G. McCormick,
William F. Fields, Joseph G. Cleaver, Michael R. Engleman,
Regina A. Iorii, Miles H. Mitchell, Adrienne E. Clair, and
Rebecca L. Shelton were on the brief for intervenor Public
Service Commission for the State of Delaware, et al. in support
of respondent. Kayla Grant entered an appearance.

    Before: SRINIVASAN, Chief Judge, ROGERS, Circuit Judge,
and EDWARDS, Senior Circuit Judge.

    Opinion for the Court by Circuit Judge ROGERS.

     ROGERS, Circuit Judge: Public Service Electric and Gas
Company and PPL Electric Utilities Corporation petition for
review of three orders of the Federal Energy Regulatory
Commission concerning cost sharing for certain upgrades to
the Mid–Atlantic electricity transmission grid. In 2016, the
Commission approved as just and reasonable cost allocations
filed by PJM Interconnection, L.L.C. (“PJM”), the Mid–
Atlantic’s regional transmission organization, for a project to
improve the reliability of three nuclear power plants in New
Jersey. In so doing, the Commission denied a complaint lodged
                                3
by Delaware and Maryland alleging a large imbalance between
the costs imposed on the Delmarva transmission zone and the
benefits that zone would accrue from the project. On rehearing
in 2018, however, the Commission reversed course,
concluding that, upon reexamination of the evidence,
application of PJM’s cost–allocation method to the project
violated cost–causation principles and was therefore unjust and
unreasonable in violation of section 206 of the Federal Power
Act, 16 U.S.C. § 824e. The Commission’s replacement cost–
allocation method shifted primary cost responsibility for the
project from the Delmarva zone to utilities in New Jersey.

     Petitioners, PJM transmission owners, and intervenors
New Jersey Board of Public Utilities and New Jersey Division
of Rate Counsel (“New Jersey Agencies”) contest the
rationality of the Commission’s volte–face. They contend the
Commission departed from precedent without adequate
explanation, made findings that are unsupported by substantial
evidence, and failed to respond meaningfully to objections
raised during the proceedings. For its part, the Commission,
with support from a coalition of Delaware and Maryland
stakeholders, maintains that it engaged in reasoned
decisionmaking. We conclude the Commission reasonably
decided to adopt a different cost–allocation method for the type
of project at issue here and adequately explained its departure
from the cost allocations it had approved in 2016. Accordingly,
we deny the petitions for review.

                                I.

     The Federal Power Act requires that the Commission
ensure the rates charged by public utilities to provide electricity
are “just and reasonable.” 16 U.S.C. § 824d(a). Pursuant to
section 206 of the Federal Power Act, the Commission may
investigate — on its own initiative or based on a third–party
                               4
complaint — whether an existing rate is “unjust, unreasonable,
unduly discriminatory or preferential.” Id. § 824e(a). The
proponent of the rate change bears the burden of proof, and, if
the Commission determines that the rate is unlawful, it must
establish a just and reasonable replacement rate. Id. § 824e(a),
(b). Section 206 therefore “mandates a two–step procedure”
whereby the Commission must “make an explicit finding that
the existing rate is unlawful before setting a new rate.” Emera
Me. v. FERC, 854 F.3d 9, 24 (D.C. Cir. 2017). Thus,
“[w]ithout a showing that the existing rate is unlawful,” the
Commission “has no authority to impose a new rate.” Id. at 25.

     The Commission has long viewed the just–and–reasonable
requirement to “incorporate a ‘cost–causation principle.’” Old
Dominion Elec. Coop. v. FERC, 898 F.3d 1254, 1255 (D.C.
Cir. 2018). That “principle requires costs ‘to be allocated to
those who cause the costs to be incurred and reap the resulting
benefits.’” S.C. Pub. Serv. Auth. v. FERC, 762 F.3d 41, 87
(D.C. Cir. 2014) (quoting Nat’l Ass’n of Regul. Util. Comm’rs
v. FERC, 475 F.3d 1277, 1285 (D.C. Cir. 2007)). So, although
the Commission need not “allocate costs with exacting
precision,” the costs assessed against a party must bear some
resemblance “to the burdens imposed or benefits drawn by that
party.” Midwest ISO Transmission Owners v. FERC, 373 F.3d
1361, 1368–69 (D.C. Cir. 2004). In practice, this means “the
Commission generally may not single out a party for the full
cost of a project, or even most of it, when the benefits of the
project are diffuse.” BNP Paribas Energy Trading GP v.
FERC, 743 F.3d 264, 268 (D.C. Cir. 2014).

     Consistent with the cost–causation principle, the
Commission issued “Order No. 1000” in 2011 to foster the
efficient development of the transmission grid. Transmission
Planning and Cost Allocation by Transmission Owning and
Operating Public Utilities, F.E.R.C. Stats. & Regs. ¶ 31,323,
                                5
76 Fed. Reg. 49,842 (Aug. 11, 2011), petitions for review
denied, S.C. Pub. Serv. Auth., 762 F.3d 41. Among other
things, Order No. 1000 requires utilities to participate in
regional transmission planning and to include in their tariffs a
formula “for allocating the costs of new transmission facilities
selected in the regional transmission plan.” Id. at P 558, 76
Fed. Reg. at 49,929. To comply with Order No. 1000, a
utility’s cost–allocation method must satisfy six criteria, the
first of which embodies the cost–causation principle by
requiring that costs be “allocated in a way that is roughly
commensurate with benefits.” Id. at P 622, 76 Fed. Reg. at
49,937.

                               A.

     PJM is an independent entity that coordinates the
transmission of wholesale electricity in the Mid–Atlantic
region. In accordance with Order No. 1000, Schedule 12 of
PJM’s Open Access Transmission Tariff outlines its cost–
sharing requirements, which the Commission accepted in 2013.
PJM Interconnection, L.L.C., 142 F.E.R.C. ¶ 61,214 at PP
411–12 (Mar. 22, 2013), order on reh’g & compliance, 147
F.E.R.C. ¶ 61,128 (May 15, 2014). As relevant here, PJM uses
a combination of two methods to assign the costs of high–
voltage transmission facilities built to improve grid reliability.
Id. at P 412. Half of the cost is allocated under the “postage–
stamp method,” which assigns costs pro rata based on the level
of customer demand within each zone. Id. The other half is
apportioned using the “Solution–Based DFAX method.” Id.
Relying on “power flow analysis,” that method assigns costs
according to the relative use of the new facility as measured by
the amount of power flowing over the new facility to each
transmission zone. Id. at P 416. Solution–based DFAX
replaced PJM’s “violation–based DFAX” method, which
assigned costs retrospectively to the zones that contributed to
                               6
the reliability violation. In approving the new method, the
Commission touted the advantages of assigning costs
prospectively to the zones that will benefit from the project,
noting that the violation–based DFAX method “does not
account for multiple constraints in multiple areas, and cannot
account for changes in usage and flow direction over time.” Id.
at P 427.

     Located on the New Jersey side of the Delaware River,
Artificial Island is home to three nuclear power plants owned
by a subsidiary of petitioner Public Service Electric and Gas
Company. These generating units have long been plagued by
operational issues stemming from an insufficient number of
transmission lines connecting Artificial Island to the grid.
Generation is constrained when one of the lines is out of
service, and various components of the transmission system
require careful management to prevent the power plants from
becoming unstable and losing synchronism with the grid. Such
losses of synchronism are referred to as “stability” problems.

                               B.

     In July 2013, PJM solicited proposals to improve the
reliability of Artificial Island. See PJM, Artificial Island
Project Recommendation White Paper 1 (July 29, 2015). After
two years of study, PJM selected the “Artificial Island Project,”
which primarily entails the construction of a high–voltage line
under the Delaware River to connect the power plants to a new
substation in Delaware. Letter from Terry Boston, PJM, to
PJM Members Committee (July 29, 2015); PJM 2015 White
Paper 35–37. Under PJM’s hybrid cost–allocation method,
nearly 90 percent of the Artificial Island Project’s $275.4
million cost was assigned to the Delmarva transmission zone.
PJM 2015 White Paper 38.
                                7
     On August 28, 2015, PJM filed with the Commission
proposed cost allocations for the Artificial Island Project. PJM,
Tariff Filing (Aug. 28, 2015). The same day, the Delaware and
Maryland Public Service Commissions filed a complaint with
the Commission pursuant to section 206 of the Federal Power
Act protesting PJM’s cost assignments as unjust and
unreasonable. Applying the solution–based DFAX method to
the Artificial Island Project was unjust, they argued, because
when used to allocate the costs of a facility that addresses
“inadequate outlets for generation output, the solution–based
DFAX methodology invariably will link cost responsibility
with the zone that just happens to be the end–point for the new
or expanded generation output.” Compl. ¶ 32 (Aug. 28, 2015).
A group of PJM transmission owners intervened in support of
PJM’s proposed tariff.

     Following a technical conference, the Commission
accepted PJM’s cost allocations and denied the complaint in
April 2016. Del. Pub. Serv. Comm’n, 155 F.E.R.C. ¶ 61,090 at
PP 65–76 (Apr. 22, 2016) (“2016 Order”). The Commission
rejected the argument that use of the solution–based DFAX
method was inappropriate, observing that “even if a stability
violation is the primary driver of a transmission project,” the
method “allocates costs . . . based on use of the facilities.” Id.
at P 68. The Commission similarly found unpersuasive the
argument that PJM’s cost assignments were unjust because the
Delmarva zone did not contribute to the need for the Artificial
Island Project. That argument misunderstood the solution–
based DFAX method, which focuses on “the identification of
beneficiaries,” “not the initial nature of the reliability
problem.” Id. at P 69. One Commissioner dissented,
explaining that, in her view, the record established that PJM’s
flow–based cost–allocation methodology fails to align costs
with benefits when the project addresses reliability violations
                               8
unrelated to power flows.          See id. (LaFleur, Comm’r,
dissenting).

     Delaware and Maryland requested rehearing, but before
the Commission acted, PJM suspended the Artificial Island
Project. Letter from Pauline Foley, PJM, to FERC Secretary
Kimberly D. Bose (Aug. 5, 2016). When PJM lifted the
suspension in April 2017, it acknowledged that “the DFAX
Methodology can result in cost allocations that seem
anomalous where the engineering rationale or need for a
project is not one driven by power flow.” Letter from Andrew
Ott, PJM, to PJM Members (Apr. 6, 2017). To that end, PJM
released a white paper assessing two alternative approaches to
identify the beneficiaries of the Artificial Island Project. See
PJM, Alternative Approaches to Identification of Artificial
Island Beneficiaries (June 9, 2017). Soon after, Delaware and
Maryland renewed their request for rehearing and also moved
to reopen the record. See Mot. to Reopen the Record (Sept. 6,
2017).

     In July 2018, the Commission granted rehearing of the
2016 Order, concluding that using the solution–based DFAX
method to assign the cost of the Artificial Island Project
violated the cost–causation principle and was therefore unjust
and unreasonable. Del. Pub. Serv. Comm’n, 164 F.E.R.C.
¶ 61,035 at PP 36–41 (July 19, 2018) (“2018 Order”). The
Commission observed that the solution–based DFAX method
“is a reasonable method for identifying beneficiaries of thermal
overload and voltage related reliability issues” because when a
facility resolves a flow–based reliability issue, “the
beneficiaries of that solution are readily identified based upon
those power flows.” Id. at P 39. However, “stability–related
reliability issues” are “analytically unique,” the Commission
explained, because they “result from an imbalance of
generation and load” and, “depend[ing] on the nature of the
                               9
problem,” can “be either a very local event or spread into a
more substantial problem.” Id. at P 40. As a result, the
Commission found that the benefits of a facility built to
stabilize a specific generating unit are “not necessarily
captured” by measuring power flows. Id. P 41. The
Commission thus determined that the solution–based DFAX
method “does not allocate the costs of such transmission
projects in a manner that is at least roughly commensurate with
their benefits.” Id. at P 38. Having so ruled, the Commission
established paper hearing procedures to select a new cost–
allocation method. Id. at P 42.

     This time, the PJM transmission owners and New Jersey
Agencies filed a request for rehearing. See Req. for Reh’g of
PJM Transmission Owners (Aug. 20, 2018); Req. for Reh’g of
N.J. Bd. of Pub. Util. Pub. Utilities & N.J. Div. of Rate Counsel
(Aug. 20, 2018). They argued the Commission’s reversal of
the 2016 Order was arbitrary and capricious because it was
inadequately explained, lacked substantial evidence, and
improperly focused on assigning costs to violators rather than
beneficiaries. They also maintained that the 2018 Order was
inconsistent with Order 1000 and that the Commission failed
to respond meaningfully to their arguments against rehearing.

     The Commission denied the requests for rehearing in
February 2019. Del. Pub. Serv. Comm’n, 166 F.E.R.C.
¶ 61,161 at PP 38–42 (Feb. 28, 2019) (“2019 Order”). The
Commission first affirmed its conclusion that the solution–
based DFAX method does not allocate the cost of the Artificial
Island Project in a just and reasonable manner. Id. at PP 37–
40. Next, the Commission responded to the argument that it
acted arbitrarily because it offered no new evidence to overturn
the 2016 Order, stating that its decision was “based on further
consideration of th[e] existing record” and the parties’
arguments.” Id. at P 41. Finally, the Commission rejected the
                               10
argument that it erred in reopening the record.             The
Commission explained that it “did not rely on the PJM White
Paper in granting rehearing” but instead considered that
evidence only “to determine the just and reasonable alternative
rate.” Id. at P 42. The Commission then selected a replacement
method, which was one of two methods advanced in the White
Paper, and directed PJM to file a revised tariff implementing
its order. Id. at P 43. Not challenged here, the Commission’s
new method shifted primary cost responsibility for the
Artificial Island Project from the Delmarva zone to utilities in
New Jersey.

     Following minor modifications by the Commission to
PJM’s compliance filing, see Del. Pub. Serv. Comm’n, 169
F.E.R.C. ¶ 61,234 (Dec. 19, 2019), Petitioners timely sought
judicial review.

                               II.

     The court’s review of the Commission’s orders is limited
to determining whether they are “arbitrary, capricious, an abuse
of discretion, or otherwise not in accordance with law.”
5 U.S.C. § 706(2)(A); see FERC v. Elec. Power Supply Ass’n,
136 S. Ct. 760, 782 (2016). The court will affirm the
Commission’s orders so long as it “examined the relevant
considerations and articulated a satisfactory explanation for its
action, including a rational connection between the facts found
and the choice made.” Elec. Power Supply Ass’n, 136 S. Ct. at
782 (alterations adopted) (quoting Motor Vehicle Mfrs. Assn.
of U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43
(1983)). Further, where, as here, the dispute centers on the
Commission’s exercise of its rate–setting authority, the court is
“particularly deferential” to the Commission’s determinations
“because such matters are either fairly technical or ‘involve
policy judgments that lie at the core of the regulatory
                                 11
mission.’” S.C. Pub. Serv. Auth., 762 F.3d at 55 (quoting Alcoa
Inc. v. FERC, 564 F.3d 1342, 1347 (D.C. Cir. 2009)). All that
said, the court will vacate the Commission’s orders if the
“allocation of costs [is] either unreasonable or inadequately
explained.” Old Dominion, 898 F.3d at 1260 (internal citations
omitted). And, like other agencies, the Commission “cannot
depart from [its] rulings without ‘provid[ing] a reasoned
analysis indicating that prior policies and standards are being
deliberately changed.’” W. Deptford Energy, LLC v. FERC,
766 F.3d 10, 17 (D.C. Cir. 2014) (second alteration in original)
(quoting Alcoa, 564 F.3d at 1347).

     Petitioners and New Jersey Agencies challenge the
Commission’s decision to grant rehearing of the 2016 Order on
three grounds.       Their principal contention is that the
Commission failed to adequately justify its finding that the
solution–based DFAX method is unjust and unreasonable as
applied to the Artificial Island Project. Petitioners additionally
contend the Commission’s decision is contrary to Order No.
1000. Finally, Petitioners and New Jersey Agencies submit the
Commission failed to meaningfully respond to their arguments
in support of the solution–based DFAX method and in
opposition to reopening the record. None of these challenges
has merit.

                            A.

    In the main, Petitioners and New Jersey Agencies contend
the Commission failed to carry its burden under section 206
and acted arbitrarily by changing its position from approving
the use of the solution–based DFAX method to assign the cost
of the Artificial Island Project to finding those cost allocations
unjust and unreasonable. The Commission, they maintain,
failed to address its initial findings in either the 2018 or 2019
Order. They further maintain the Commission’s decision to
                               12
grant rehearing rests on insufficient evidence because it pointed
to no new evidence or change in circumstances that undercut
its prior conclusions that the solution–based DFAX method
identifies the beneficiaries of stability–related reliability
projects and that the Delmarva zone will benefit from Artificial
Island Project.

     The Commission’s decision to grant rehearing of the 2016
Order is neither arbitrary nor capricious and is consistent with
its statutory obligations under section 206. As an initial matter,
the Commission did not, as Petitioners suggest, “swerve[]”
from the 2016 Order “without any acknowledgment.” Pet’rs’
Br. 54.       To the contrary, the Commission expressly
acknowledged its change of position in the 2018 Order. There,
the Commission stated that, “based on the arguments presented
in the rehearing requests,” it was “grant[ing] rehearing of the
April 22, 2016 Order” and therefore would “reopen the record
and seek additional information . . . to establish the just and
reasonable rate.” 2018 Order, 164 F.E.R.C. ¶ 61,035 at P 36.
The Commission then proceeded to explain in detail why it was
unjust and unreasonable to rely on the solution–based DFAX
method to distribute the costs of stability–related reliability
projects — the exact opposite conclusion it reached in 2016.
This analysis demonstrates that the Commission was
consciously changing its position.

    That change of position is also adequately explained and
supported by substantial evidence. In 2016, the Commission
approved PJM’s cost allocations for the Artificial Island
Project based on its conclusion that the solution–based DFAX
method accurately identifies the beneficiaries of transmission
facilities addressing stability–related reliability issues. See
2016 Order, 155 F.E.R.C. ¶ 61,090 at PP 67–68. On rehearing,
the Commission recognized that this conclusion was erroneous
because flow–based reliability issues and stability–related
                               13
reliability issues are “analytically unique.” 2018 Order, 164
F.E.R.C. ¶ 61,035 at P 38. For example, reliability issues
caused by thermal overload are solved by increasing the
amount of power flowing to the constrained region. In these
circumstances, “the beneficiaries of that solution are readily
identified based upon those power flows” because “change[s]
in power flows are consistent with the intended solution.” Id.
at P 39. By contrast, stability issues arise from the inability of
a particular generating unit to maintain synchronism with the
grid, which in turn can result in constrained generation as well
as facility outages. Id. at P 40. And whereas flow–based issues
are solved by bringing power to a constrained area, stability–
related issues are solved by providing additional transmission
pathways from the generator to the grid. Thus, because “the
flows on a transmission project to resolve a stability–related
reliability issue do not necessarily resolve a constraint by
bringing power to load,” id., the Commission found that the
beneficiaries of such a project “are not necessarily captured”
by following the electrons to their end–point, id. at P 41.

     Applying this new framework, the Commission reasonably
found that the solution–based DFAX method was unjust and
unreasonable as applied to the Artificial Island Project. As the
Commission explained in the 2019 Order, because the need for
the Artificial Island Project stems from the inability of
transmission zones in New Jersey to fully absorb the power
plants’ generation, those zones “both contribute to the need for,
and will benefit from, a transmission project that will increase
stability performance.” 2019 Order, 166 F.E.R.C. ¶ 61,161 at
P 39. The Delmarva zone, however, “neither caused the need
for the line nor does it benefit from those flows sufficiently
because its transmission system already was adequate to serve
its load without the Artificial Island Project.” Id. at P 40.
Instead, the Delmarva zone was the “unlucky zone that
happen[ed] to end up as the sink point for the project.” Id. at P
                               14
39 n.40. Given these findings, the Commission concluded that
assigning nearly 90 percent of the Artificial Island Project’s
cost to the Delmarva zone “would not be at least roughly
commensurate with the benefits received” as Order No. 1000
required and violated section 206. Id. at P 40. Because this
explanation is reasonable and supported by the record, we defer
to the Commission’s technical judgments.

    Petitioners nonetheless insist that the Commission’s orders
are defective because it never disavowed the finding in the
2016 Order that the Delmarva zone will benefit from the
Artificial Island Project. Pet’rs’ Reply Br. 14; Oral Arg.
Recording 7:00–7:30. Initially, the Commission found that the
Delmarva zone would “receive significant benefits” from the
Artificial Island Project.” 2016 Order, 155 F.E.R.C. ¶ 61,090
at P 72. But Petitioners overlook the context of this finding,
specifically that these benefits were based on “the results of the
solution–based DFAX analysis.” Id.           Subsequently, the
Commission determined this method does not accurately
measure the benefits of the Artificial Island Project. As the
Commission explained in the 2019 Order, although the
Delmarva zone “will use the Artificial Island Project as
measured by the solution–based DFAX method,” it would not
actually derive any “benefit from those flows . . . because its
transmission system already was adequate to serve its load.”
2019 Order, 166 F.E.R.C. ¶ 61,161 at P 40. Petitioners’
contentions therefore provide no basis to set aside the
Commission’s decision to grant rehearing of the 2016 Order.

                               B.

     Petitioners additionally maintain that the Commission’s
decision to grant rehearing is contrary to Order No. 1000’s
directive that cost–allocation rules be set ex ante so as to
                               15
prevent ad hoc decisionmaking and internecine conflicts
among utilities. This contention is not persuasive.

     To begin, Order No. 1000 does not concern the
Commission; it requires transmission owners to have in place
cost–allocation methods for certain transmission facilities. Nor
does Order No. 1000 purport to constrain the Commission’s
ability to comply with its statutory obligation under section
206, which provides that the Commission “shall” reform “any
rate” that is “unjust, unreasonable, unduly discriminatory or
preferential.” 16 U.S.C. § 824e(a). Insofar as any tension may
exist between Order No. 1000’s goals and the Commission’s
exercise of its section 206 authority, “a regulation can never
‘trump the plain meaning of a statute.’” Texas v. EPA, 726 F.3d
180, 195 (D.C. Cir. 2013) (quoting Atl. City Elec. Co. v. FERC,
295 F.3d 1, 11 (D.C. Cir. 2002)).

     The Commission’s decision to grant rehearing of the 2016
Order comports with Order No. 1000. As noted, the animating
purpose of Order No. 1000 is to promote the efficient and cost–
effective construction of new transmission facilities that
provide region–wide benefits. See S.C. Pub. Auth., 762 F.3d at
52. Order No. 1000’s cost–allocation provisions, which codify
the cost–causation principle, “further that goal” by requiring
transmission owners to agree ex ante to rate–distribution
methods “that avoid free rider problems, that improve
transparency with respect to the costs of interregional projects,
and that otherwise align regional and interregional planning
processes.” Ameren Servs. Co. v. FERC, 893 F.3d 786, 789
(D.C. Cir. 2018). Here, the Commission determined in the
2018 Order that, when applied to stability–related reliability
projects such as the Artificial Island Project, the solution–based
DFAX method does not assign costs “in a manner that is at least
roughly commensurate with their benefits.” 2018 Order, 164
F.E.R.C. ¶ 61,035 at P 38. In other words, the Commission
                              16
found that PJM’s proposed cost allocations “would violate
Order 1000’s core cost–allocation principle.” Ameren Servs.,
893 F.3d at 794. The Commission’s decision to grant rehearing
and identify a replacement cost–allocation method was
therefore not inconsistent with Order No. 1000.

                              C.

    Finally, Petitioners and New Jersey Agencies contend the
Commission’s failure to meaningfully respond to their
arguments against reopening the record and in favor of
rehearing the 2018 Order renders its orders arbitrary and
capricious. “It is well established that the Commission must
‘respond meaningfully to the arguments raised before it.’” New
England Power Generators Ass’n, Inc. v. FERC, 881 F.3d 202,
210 (D.C. Cir. 2018) (quoting TransCanada Power Mktg. Ltd.
v. FERC, 811 F.3d 1, 12 (D.C. Cir. 2015)). The Commission,
however, must respond only to “significant comments”; it is
“free to ignore insignificant ones.” Nat’l Ass’n of Regul. Util.
Comm’rs, 475 F.3d at 1285. That is all the Commission did
here.

    Petitioners raised a single argument in opposing Delaware
and Maryland’s request for rehearing of the 2016 Order: that
the existence of superior alternative cost–allocation
methodologies did not provide a basis to discard the solution–
based DFAX method. See Answer in Opp’n of the PJM
Transmission Owners to Mot. to Reopen the Record & Lodge
6–11 (Sept. 21, 2017). This argument was not ignored. The
Commission expressly acknowledged the argument in the 2018
Order. 2018 Order, 164 F.E.R.C. ¶ 61,035 at P 26 n.35. And
it necessarily rejected the premise of Petitioners’ argument by
finding that, as applied to the Artificial Island Project, the
solution–based DFAX method was not inferior to other
methods but, in fact, unjust and unreasonable. Id. at P 41.
                              17

    Nor did the Commission disregard Petitioners’ objections
in their request for rehearing. In pursuit of rehearing,
Petitioners argued the 2018 Order was defective because the
Commission (1) changed its position without substantial
evidence or adequate explanation; (2) improperly focused on
aligning costs to causes rather than beneficiaries; (3) acted
inconsistent with Order No. 1000; and (4) failed to address
their arguments in the 2018 Order. See Req. for Reh’g of the
PJM Transmission Owners 7–17. Here too, the Commission
summarized Petitioners’ arguments in the 2019 Order and
meaningfully responded to them by defending its finding that
the cost allocations for the Artificial Island Project generated
by the solution–based DFAX method failed Order No. 1000’s
cost–causation requirement. 2019 Order, 166 F.E.R.C.
¶ 61,161 at PP 33–34, 38–41. To the extent the Commission
did not expressly address Petitioners’ contention that its
decision clashed with Order No. 1000, this objection was of no
significance for the reasons explained, and the Commission did
not err by ignoring it.

    New Jersey Agencies’ contention that the Commission
ignored their objections to reopening the record is likewise
unavailing. They are correct that despite acknowledging their
opposition to reopening the record in the 2018 Order, see 2018
Order, 164 F.E.R.C. ¶ 61,035 at P 11, the Commission did not
address their arguments. Nonetheless, the 2019 Order makes
clear that these comments were not significant. As the
Commission explained there, it decided to grant rehearing of
the 2016 Order based on reconsideration of the existing record
and the parties’ arguments. 2019 Order, 166 F.E.R.C. ¶ 61,161
at P 41. Although the Commission granted the motion to
reopen the record, no basis is offered for the court to question
the Commission’s statement that it “did not rely on the PJM
White Paper in granting rehearing of the April 2016 Order,” id.
                            18
at P 42, which is the only decision New Jersey Agencies
challenge.

   Accordingly, we deny the petitions for review.