Court Opinion

ID: 4022702
Source: CourtListenerOpinion
Date Created: 2016-08-09 00:00:55.909809+00
Date Added: 2024-06-11T14:35:27.414878
License: Public Domain

Case: 14-60822      Document: 00513628688         Page: 1    Date Filed: 08/08/2016

           IN THE UNITED STATES COURT OF APPEALS
                    FOR THE FIFTH CIRCUIT
                                                                           United States Court of Appeals
                                                                                    Fifth Circuit
                                      No. 14-60822                                FILED
                                                                             August 8, 2016

EL PASO ELECTRIC COMPANY,
                                                                             Lyle W. Cayce
                                                                                  Clerk

              Petitioner

v.

FEDERAL ENERGY REGULATORY COMMISSION,

              Respondent

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

Before REAVLEY, HAYNES, and HIGGINSON, Circuit Judges.
HAYNES, Circuit Judge:
       El Paso Electric Co. (“EP Electric”) appeals from three decisions 1 in
which the Federal Energy Regulatory Commission (“FERC” or the
“Commission”) reviewed and required revisions to certain compliance filings
that EP Electric and other utilities filed with FERC pursuant to Order No.

       1   Collectively, we refer to the decisions being challenged as FERC’s “Compliance
Orders,” unless we specify a particular order. The Compliance Orders include: Pub. Serv. Co.
of Colo., “Order on Compliance Filings,” 142 FERC 61,206 (Mar. 22, 2013) (hereinafter “First
Compliance Order”); Pub. Serv. Co. of Colo., “Order on Rehearing and Compliance,” 148
FERC 61,213 (Sept. 18, 2014) (hereinafter, “First Order on Rehearing”); and Pub. Serv. Co.
of Colo., “Order on Rehearing and Compliance,” 151 FERC 61,128 (May 14, 2015) (hereinafter
“Second Order on Rehearing”).
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1000.       Order No. 1000 is FERC’s rule regulating regional transmission
planning and cost allocation by public utilities, also known as “jurisdictional
utilities.” See Transmission Planning and Cost Allocation by Transmission
Owning and Operating Public Utilities, Order No. 1000, 136 FERC 61,051, 76
Fed. Reg. 49,842 (2011) (hereinafter “Order No. 1000”), order on reh’g, Order
No. 1000-A, 139 FERC 61,132, 77 Fed. Reg. 32,184 (2012) (hereinafter “Order
No. 1000-A”), order on reh’g, Order No. 1000-B, 141 FERC 61,044, 77 Fed. Reg.
64,890 (2012) (hereinafter “Order No. 1000-B”). 2 The vast majority of EP
Electric’s challenges to FERC’s actions through these compliance orders fail.
However, we conclude that FERC has acted arbitrarily and capriciously in its
mandates regarding the role of non-jurisdictional utilities in cost allocation
and regional planning in the WestConnect region. We therefore GRANT the
petitions for review in part, VACATE FERC’s Compliance Orders on these
issues for further explanation and proceedings, and DENY review or DISMISS
the petitions in all other respects.
                                       I. Background
A. Factual Background
        This case concerns a scheme of planning, cost allocation, and regulation
imposed by FERC on EP Electric and the Intervenor electricity providers. 3
This regulatory scheme relates to FERC’s attempts to encourage regional
planning and construction of facilities to transmit electricity. In the Federal
Power Act (“FPA”), Congress gave FERC jurisdiction “over all facilities” for
“the transmission of electric energy in interstate commerce and . . . the sale of

        2   We refer collectively to these rules as “Order No. 1000” unless otherwise specified.
        3 We granted leave for the following entities to intervene in this appeal: Arizona
Public Service Company, Black Hills Power, Inc., Black Hills Colorado Electric Utility
Company, LP, Cheyenne Light, Fuel, and Power Company, NV Energy, Inc., Public Service
Company of New Mexico, Tucson Electric Power Company, UNS Electric, Inc., Xcel Energy
Services Inc., and Public Service Company of Colorado.
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electric energy at wholesale in interstate commerce.” 16 U.S.C. § 824(b)(1).
Section 205 of the FPA prohibited “unreasonable rates and undue
discrimination ‘with respect to any transmission or sale subject to the
jurisdiction of the Commission,’” New York v. FERC, 535 U.S. 1, 7 (2002)
(quoting 16 U.S.C. § 824d(a)–(b)), and Section 206 of the FPA gave FERC’s
predecessor “the power to correct such unlawful practices,” id. (citing 16 U.S.C.
§ 824e(a)), including on its own motion, S.C. Pub. Serv. Auth. v. FERC (South
Carolina), 762 F.3d 41, 49 (D.C. Cir. 2014).
      In 2011, FERC enacted Order No. 1000 to address changes in the electric
power industry and to keep rates just and reasonable. Id. at 52. As relevant
to the challenges we address in this appeal, Order No. 1000 requires:
      Each transmission provider must participate in a regional
      transmission planning process that complies with the planning
      principles in [a previous order,] Order No. 890, produces a regional
      transmission plan for development of new regional transmission
      facilities, and includes procedures to identify transmission needs
      driven by public policy requirements established by federal, state,
      or local laws or regulations and evaluate potential solutions to
      those needs.
South Carolina, 762 F.3d at 52 (citing Order No. 1000 ¶¶ 2, 146, 203–05, 76
Fed. Reg. at 49,845, 49,867, 49,876–77).
      Order No. 1000 mandated cost allocation reforms designed to incentivize
the development of cost-efficient transmission facilities in the regional
planning process. It did so, in part, by encouraging transparency and certainty
about the costs and benefits of such projects, and about which parties would be
eligible to fund and develop each project. See Order No. 1000 ¶ 11, 76 Fed.
Reg. at 49,846.    These cost allocation reforms require each transmission
provider subject to FERC’s jurisdiction to incorporate in their open access
transmission tariff (“OAT Tariff”) “a method (or set of methods) for allocating
ex ante the costs of new regional transmission facilities that complies with six

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regional cost allocation principles.” South Carolina, 762 F.3d at 53 (citing
Order No. 1000 ¶ 558, 76 Fed. Reg. at 49,929).
       OAT Tariffs must comply with certain cost allocation principles, the most
pertinent of which is cost causation. 4 Under cost causation, “[t]he cost of
transmission facilities must be allocated to those within the transmission
planning region that benefit from those facilities in a manner that is at least
roughly commensurate with estimated benefits.” Id. at 53 (alteration in
original) (quoting Order No. 1000 ¶ 586, 76 Fed. Reg. at 49,932). This cost
causation principle targets something called the “‘free rider’ problem,” which
FERC acknowledged that it sought to “address through its cost allocation
reforms” in Order No. 1000. Order No. 1000-A ¶ 562, 77 Fed. Reg. at 32,271.
A free rider is an entity that is subsidized by other entities because it refuses
to invest in transmission development, allows other entities to pay for that
development, and reaps the benefits. 5 The free rider problem adversely affects
the development of transmission facilities because “[a]ny individual
beneficiary [of a new transmission facility] has an incentive to defer
investment in the hopes that other beneficiaries [in the region] will value the
project enough to fund its development.” Order No. 1000 ¶ 486, 76 Fed. Reg.
at 49,919.     With the stated purpose of helping to alleviate the free rider

       4 OAT Tariffs originated before Order No. 1000. Transmission providers must file an
OAT Tariff “containing minimum terms of non-discriminatory transmission service.” South
Carolina, 762 F.3d at 50 (citation omitted). Under Order No. 1000, OAT Tariffs now must
incorporate the regional planning and cost allocation processes in which a utility will
participate. Id. at 53, 56.
       5  As Order No. 1000 stated: “[F]ree riders by definition are entities who are being
subsidized by those who pay the costs of the benefits that free riders receive for nothing.”
Order No. 1000-A ¶ 578, 77 Fed. Reg. at 32,274; see also id. ¶ 576, 77 Fed. Reg. at 32,273
(“[F]ree riders for purposes of Order No. 1000 are entities who do not bear cost responsibility
for benefits that they receive in their use of the transmission grid, specifically benefits they
receive from new transmission facilities selected in a regional transmission plan for purposes
of cost allocation.”).
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problem, FERC mandated binding cost allocation, meaning that entities would
not be allowed to opt out of their share of the costs of transmission facilities
selected in regional transmission planning. 6 Id. ¶¶ 723–25, 76 Fed. Reg. at
49,949–50.
       Another important principle for this appeal is that Sections 205 and 206
of the FPA only give FERC the authority to directly regulate “jurisdictional”
utilities, a specified category of public utilities that transmit power in
interstate commerce. See generally South Carolina, 762 F.3d at 93. The
regional planning and cost allocation requirements of Order No. 1000 therefore
only directly apply to jurisdictional utilities. See Order No. 1000-A ¶ 275, 77
Fed. Reg. at 32,337. FERC has thus far declined to exercise any authority it
may or may not have under Section 211A of the FPA to require participation
in these processes by non-jurisdictional utilities. 7 See South Carolina, 762
F.3d at 92–94; see also 16 U.S.C. § 824j-1(b) (stating that FERC
“may . . . require an unregulated transmitting utility to provide transmission
services . . . at rates that are comparable to those” the utility charges itself,
and on terms and conditions “that are not unduly discriminatory or
preferential”).
B. Procedural History
       Together, EP Electric and Intervenors are members of a regional
planning organization called WestConnect.                 EP Electric and Intervenors
emphasize the unique nature of their geographic and transmission planning

       6 This binding cost allocation process only applies to projects selected in the regional
transmission plan for the purposes of cost allocation, meaning these projects are approved as
more efficient or cost-effective solutions to regional needs. See Order No. 1000 ¶ 5, 76 Fed.
Reg. at 49,845.
       7  We express no opinion about whether (if at all) or in what manner FERC may
exercise authority over non-jurisdictional utilities under Section 211A of the FPA, since
FERC has not attempted to exercise any authority it may or may not have under this
provision.
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arrangement. The WestConnect region is geographically comprised of ten non-
jurisdictional utilities and eleven jurisdictional utilities. This sets it apart
from other regions in the Eastern and Western United States, which the
parties claim are overwhelmingly owned by public utilities and run by
jurisdictional regional organizations that have long-established transmission
planning processes that impose binding cost allocation. Since the jurisdictional
utilities in WestConnect are dispersed “like Swiss cheese” throughout the
region, the region has long relied on voluntary coordination and planning for
regional transmission development. This situation has resulted in shared
costs and many jointly owned projects, even given the different regulatory
framework in this region than other regions with more jurisdictional utilities.
The parties contend that regional planning that included only public utilities
would not work for the WestConnect region. Transmission projects generally
require cooperation between both types of utilities.
      EP Electric and the WestConnect jurisdictional utilities coordinated
with each other to file tariff revisions in attempts to comply with Order No.
1000. FERC addressed each of these revisions in its Compliance Orders.
      1. FERC’s First Compliance Order
      The first WestConnect compliance filing noted that jurisdictional and
non-jurisdictional utilities alike tentatively intended to enroll in the
WestConnect region. EP Electric proposed that costs be allocated depending
on the agreement of beneficiaries identified through the regional planning
process, and its compliance filing specified that no entity was obligated to
implement cost allocation.     Of note here, FERC’s First Compliance Order
required revision of the proposed cost allocation process to provide for “binding”
cost allocations “upon identified beneficiaries.” Pub. Serv. Co. of Colo., “Order
on Compliance Filings,” 142 FERC 61,206, 62,164–65 ¶ 257 (Mar. 22, 2013)
(hereinafter “First Compliance Order”). It also required that the jurisdictional
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utilities enroll in the WestConnect region and provide a list of enrolled utilities
in their tariffs. First Compliance Order ¶¶ 25–26, 142 FERC at 62,123.
        2. FERC’s First Order on Rehearing
        WestConnect jurisdictional utilities responded in the second compliance
filing by seeking a rehearing. They also proposed to include non-jurisdictional
utilities in the regional planning as “Coordinating Transmission Owners” who
would have all the rights of an enrolled jurisdictional utility, except that they
would not be subject to binding cost allocation. The WestConnect utilities
proposed to exclude any project from regional cost allocation that “electrically
interconnects with, or that is demonstrated to provide quantifiable benefits” to
a non-enrolled transmission owner in the WestConnect region. The utilities
proposed to study and identify projects that met regional needs, including
those of the non-jurisdictional utilities, but to obtain funding from participants
in a voluntary manner rather than through a binding cost allocation that could
not include the non-jurisdictional utilities. The non-jurisdictional utilities
supported this approach.
        In FERC’s First Order on Rehearing, FERC accepted the inclusion of
non-jurisdictional utilities as Coordinating Transmission Owners for regional
planning and the ability of the regional planning process to account for the
Coordinating Transmission Owners’ needs. Pub. Serv. Co. of Colo., “Order on
Rehearing and Compliance,” 148 FERC 61,213, 62,289–90 ¶¶ 54–55 (Sept. 18,
2014) (hereinafter, “First Order on Rehearing”). Again, FERC rejected the idea
that     projects   benefitting   Coordinating    Transmission    Owners     (non-
jurisdictional utilities) could be excluded from binding cost allocation. Id. ¶ 56,
148 FERC at 62,290.        FERC reasoned that excluding such projects from
regional planning “would unduly restrict consideration of transmission
facilities that nonetheless may have regional benefits and are determined to
be more efficient or cost-effective transmission solutions to regional
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transmission needs.” Id. FERC ordered the WestConnect utilities to revise
their proposals accordingly.
      3. FERC’s Second Order on Rehearing
      The WestConnect utilities again sought a rehearing and filed proposed
revisions, objecting that the First Order on Rehearing would create free
ridership and violate cost causation. Specifically, the WestConnect utilities
objected that FERC’s First Order on Rehearing mandated that jurisdictional
utilities pay the costs to develop new transmission facilities and exempted non-
jurisdictional utilities from those costs. The WestConnect utilities argued that
this structure violated cost causation, which requires allocating costs in at
least a roughly commensurate fashion to those who receive the benefits of
transmission development. Additionally, if non-jurisdictional utilities could
benefit from transmission development without paying for it, they would
become the subsidized free riders that Order No. 1000 sought to reduce or
eliminate. In the alternative, the WestConnect utilities also proposed to make
a project ineligible for cost allocation if a non-jurisdictional utility opted out of
benefits allocated to it and the re-allocation of costs to jurisdictional utilities
increased their original costs more than 10%. The non-jurisdictional utilities
supported this proposal.
      FERC rejected this proposal and the request for rehearing, noting that

      [w]hile [the situation] may create the potential for free ridership if
      a non-public utility transmission provider elects to not enroll in a
      region and benefits from a transmission project selected in the
      regional transmission plan for purposes of cost allocation, that
      potential exists because the transmission project has benefits for
      entities that are not required to enroll, and have not enrolled, in
      the region.
Pub. Serv. Co. of Colo., “Order on Rehearing and Compliance,” 151 FERC
61,128, 61,785 ¶ 29 (May 14, 2015) (hereinafter “Second Order on Rehearing”).
FERC stated that “Order No. 1000 did not seek to eliminate all instances of
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free ridership.” Id. ¶ 30, 151 FERC at 61,785. FERC asserted that it could
choose to balance competing goals, enact reforms on an incremental basis, that
it need not ensure perfect cost causation, and that these reforms were not
inconsistent with Order No. 1000. Id. FERC noted that the parties had worked
cooperatively together in the past and encouraged them to minimize free rider
concerns themselves by working with each other to accept their respective
shares of costs associated with the benefits of transmission planning. Id. ¶ 32,
151 FERC at 61,785–86.
      Finally, FERC declined to accept WestConnect’s 10% cap proposal for
cost allocation “because the proposal might lead to the transmission planning
process rejecting regional cost allocation for a proposed transmission solution
that continues to be a more efficient or cost-effective solution for the remaining
beneficiaries compared to other alternatives even after a cost shift.” Id. ¶ 57,
151 FERC at 61,791. EP Electric and the Intervenors timely petitioned for
review of FERC’s First Order on Rehearing, which was held in abeyance on
FERC’s motion until a petition was filed from FERC’s Second Order on
Rehearing. All of FERC’s Compliance Orders are now before us.
                           II. Standard of Review
      We review FERC’s orders under the “arbitrary and capricious” standard
of the Administrative Procedure Act (“APA”). See La. Pub. Serv. Comm’n v.
FERC (La. II), 771 F.3d 903, 909 (5th Cir. 2014) (citing 5 U.S.C. § 706(2)(A)),
cert. denied, 135 S. Ct. 2072 (2015). FERC acts reasonably and permissibly
under this standard when it “examine[s] the relevant data and articulate[s] a
satisfactory explanation for its action including a rational connection between
the facts found and the choice made.” Id. (quoting Motor Vehicle Mfrs. Ass’n of
U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983)). FERC’s
factual findings are conclusive if supported by substantial evidence, which is
“such relevant evidence as a reasonable mind might accept as adequate to
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support a conclusion.” South Carolina, 762 F.3d at 54 (citation omitted); see
also 16 U.S.C. § 825l(b).
       FERC’s choices in regulating rates, tariffs, and related practices involve
technical issues within its purview that are entitled to great deference. La. II,
771 F.3d at 909–10; South Carolina, 762 F.3d at 54–55. Therefore, when FERC
designs rates, we give deference to those designs and defer to FERC’s
construction of any ambiguous language in agreements setting rates, “so long
as [FERC’s construction] is reasonable.” See La. II, 771 F.3d at 910 (emphasis
added). However, the deference we give to FERC is not unlimited. We do not
defer to FERC’s constructions of tariffs unless FERC “relied on its factual or
technical expertise in arriving at its interpretation.” Id. Additionally, we do
not owe FERC deference if it “has not substantiated the application of its
policy, either through the development of specific facts or by making a reasoned
explanation.” Fla. Gas Transmission Co. v. FERC, 876 F.2d 42, 45 (5th Cir.
1989).     When FERC fails to rely on its technical expertise, or fails to
substantiate the application of its policy, we may conclude that FERC’s actions
are arbitrary and capricious and vacate and remand FERC’s orders for further
consideration. 8 See id.; see also Mich. Pub. Power Agency v. FERC, 405 F.3d 8,
16 (D.C. Cir. 2005) (remanding for further explanation where FERC failed to
adequately explain a new policy).
                                        III. Discussion
       EP Electric and the Intervenors challenge multiple facets of FERC’s

       8    The Supreme Court has emphasized the deference courts must give to FERC, but
that deference only applies when FERC has “articulate[d] a satisfactory explanation for its
action.” FERC v. Elec. Power Supply Ass’n, 136 S. Ct. 760, 782, 784 (2016) (citation omitted).
That explanation is lacking here. Therefore, we exercise our “important but limited
role . . . to ensure that the Commission engaged in reasoned decisionmaking” by remanding
for a satisfactory explanation of FERC’s decision in the Compliance Orders. Id. at 784.
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decisions in the Compliance Orders. We address each challenge in turn. 9
A. FERC’s Mandates Regarding the Non-Jurisdictional Utilities
       In this appeal, the Utilities argue that FERC’s mandate of binding cost
allocation was arbitrary and capricious because it applies only to the
jurisdictional utilities and thus forces the jurisdictional utilities to subsidize
projects benefitting the non-jurisdictional utilities. This creates a “free rider”
problem that Order No. 1000 sought to reduce or eliminate. The Utilities
therefore assert that this marks a departure from Order No. 1000 and
unlawfully violates the principle of cost causation that FERC follows to ensure
just and reasonable rates.
       As a threshold issue, we conclude that this challenge is not a collateral
attack on Order No. 1000. Although Order No. 1000’s failure to require the
participation of non-jurisdictional utilities in binding cost allocation has been
generally challenged, see South Carolina, 762 F.3d at 92–97, the Utilities’
challenge differs in this case because of the circumstances of the WestConnect
region. Before the D.C. Circuit, FERC argued that non-jurisdictional utilities
were likely to voluntarily participate, but it is clear now that non-jurisdictional
utilities in WestConnect do not intend to subject themselves to binding cost
allocation. The Utilities point out that not a single non-jurisdictional utility
has enrolled in the WestConnect planning region—instead, all have chosen to
participate as Coordinating Transmission Owners and avoid binding cost
allocation. The Utilities’ attack on FERC’s treatment of non-jurisdictional
utilities also stems from a discrepancy between how FERC described its goals
in Order No. 1000—namely, to ensure just and reasonable rates by reducing

       9 EP Electric and Intervenors briefed these issues separately. Intervenors “adopt and
incorporate the list of issues identified by El Paso in its brief,” but “focus their briefing” only
on certain arguments. Therefore, we refer to arguments made only in EP Electric’s brief as
EP Electric’s arguments. When discussing arguments made fully by both EP Electric and
the Intervenors, we refer to the parties collectively as the “Utilities.”
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free ridership and following cost causation principles—and how those
principles were applied in the WestConnect region. Cf. City of Redding v.
FERC, 693 F.3d 828, 837 (9th Cir. 2012) (“The relevant question is ‘whether a
reasonable party in the petitioner’s position would have perceived a very
substantial risk that the order meant what the Commission now says it
meant.’” (citation omitted)). Therefore, we conclude this challenge does not
constitute a collateral attack, and we consider it on the merits. See generally
Dominion Res., Inc. v. FERC, 286 F.3d 586, 589–90 (D.C. Cir. 2002).
      We conclude that FERC’s Compliance Orders fail to adequately explain
how the mandates in those orders do not ensure unjust and unreasonable rates
as between jurisdictional and non-jurisdictional utilities (and their customers)
in the WestConnect region. We therefore grant the petition for review and
remand this issue to FERC for further proceedings consistent with this
opinion.
      FERC argues that it need not account for the non-jurisdictional utilities
or more forcefully incentivize their participation in binding cost allocation for
three primary reasons. First, FERC argues that the FPA only requires it to
regulate jurisdictional utilities.   Accordingly, it need not account for the
benefits to the non-jurisdictional utilities in any analysis of whether the
regional planning process requires paying costs roughly commensurate with
the benefits received. FERC chose not to regulate non-jurisdictional utilities
through Order No. 1000.       Thus, FERC contends that any free ridership
resulting from its Compliance Orders for the WestConnect region does not
contravene Order No. 1000’s purpose of reducing free ridership. Second, FERC
argues that it may regulate incrementally, relying at first on the voluntary
participation of non-jurisdictional utilities before attempting to more forcefully
incentivize participation. Third, FERC argues that cost causation need not be
perfect, and that this imprecise form of cost causation will still result in more
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efficient regional transmission planning, such that FERC claims it is acting
within its discretion to balance competing objectives.
       It is true that Order No. 1000 declined to regulate non-jurisdictional
utilities and therefore does not address free ridership by those utilities. It is
also certainly within FERC’s discretion to balance competing objectives, and
FERC’s regulations need only roughly correlate costs to benefits. Yet, FERC
has a statutory duty to ensure just and reasonable rates, and Order No. 1000
emphasized the cost causation principle in service of that goal. See Order No.
1000-A ¶ 592, 77 Fed. Reg. at 32,276; 16 U.S.C. § 824d(a) (giving FERC
regulatory authority to ensure “just and reasonable” rates and practices and
declaring that “any such rate or charge that is not just and reasonable
is . . . unlawful”); see also Morgan Stanley Capital Grp. Inc. v. Pub. Util. Dist.
No. 1 of Snohomish Cty., 554 U.S. 527, 545 (2008) (“There is only one statutory
standard for assessing wholesale-electricity rates, whether set by contract or
tariff—the just-and-reasonable standard.”).            As the Seventh Circuit held,
utilities and FERC should not approve rates for transmission or electric
services that do not “reflect to some degree the costs actually caused by” the
person or entity paying them. Ill. Commerce Comm’n v. FERC, 576 F.3d 470,
476 (7th Cir. 2009) (quoting KN Energy, Inc. v. FERC, 968 F.2d 1295, 1300
(D.C. Cir. 1992)).
       As they stand, the Compliance Orders do not apply that foundational
principle of cost causation for about half of the utilities in the WestConnect
region. 10 FERC’s Compliance Orders nowhere provide a reasoned explanation

       10 Order No. 1000 clearly linked cost causation, the elimination or reduction of free
ridership, just and reasonable rates, and more efficient transmission planning and
development. Order No. 1000-A states:
       The requirements of Order No. 1000 are based on the principle of cost
       causation, which requires that costs be allocated in a way that is roughly
       commensurate with benefits. The principle of cost causation is intended to
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for why the non-jurisdictional utilities have incentive or obligation to
participate in binding cost allocation when they can get many of the same
benefits at the jurisdictional utilities’ expense. 11 Cf. Fla. Gas, 876 F.2d at 45
(vacating and remanding FERC orders for failing to provide a reasoned
explanation supporting FERC’s policies); State Farm, 463 U.S. at 50, 57
(explaining that “the courts may not accept appellate counsel’s post hoc
rationalizations for agency action” and remanding where an agency “failed to
supply the requisite ‘reasoned analysis’”).            Furthermore, FERC does not
explain how it can meet its obligation to ensure just and reasonable rates by
effectively assuring that many of the costs of new development will be imposed
on only half of the utilities in the WestConnect region. See Order No. 1000
¶ 640, 76 Fed. Reg. at 49,939 (stating that parties cannot opt out of cost
allocation for a transmission project if they disagree that they will benefit from
it, since “[p]ermitting each entity to opt out would not minimize the regional
free rider problem that [FERC sought] to minimize in [Order No. 1000]”).
       Before this court, FERC argues that the Compliance Orders may not
result in unjust and unreasonable rates because it may be able to use the
“reciprocity condition” to incentivize participation of non-jurisdictional utilities
in binding cost causation.         See generally South Carolina, 762 F.3d at 92

       prevent subsidization by ensuring that costs and benefits correspond to each
       other. Indeed, in seeking to eliminate free riders on the transmission grid,
       Order No. 1000 seeks to eliminate a form of subsidization, as free riders by
       definition are entities who are being subsidized by those who pay the costs of
       the benefits that free riders receive for nothing.
Order No. 1000-A ¶ 578, 77 Fed. Reg. at 32,274; see also Order No. 1000 ¶ 487, 76 Fed. Reg.
at 49,919 (associating benefits-based cost allocation with more just and reasonable rates).
       11  See, e.g., First Order on Reh’g ¶¶ 54–57, 148 FERC at 62,289–91 (describing how
non-jurisdictional utilities may participate in WestConnect’s regional planning process as
Coordinating Transmission Owners without being bound to cost allocation and should be able
to reject any cost allocation that attempts to assign a Coordinating Transmission Owner costs
in proportion to the benefits that the Coordinating Transmission Owner would receive from
the project).
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(explaining that the “reciprocity condition,” as applied by Order No. 1000,
requires that non-jurisdictional utilities that choose to access the transmission
lines of jurisdictional utilities provide transmission service to those
jurisdictional utilities on comparable terms). According to FERC, under the
reciprocity condition, “if a non-jurisdictional utility takes transmission service
from a jurisdictional utility, it must participate in regional planning and cost
allocation processes.” FERC Br. 8; see also Order No. 1000 ¶¶ 818–19, 76 Fed.
Reg. at 49,961; Order No. 1000-A ¶¶ 771–75, 77 Fed. Reg. at 32,300–01. Yet,
as FERC explained in Order No. 1000-A:
      A non-public utility transmission provider may continue to satisfy
      the reciprocity condition in one of three ways. First, it may provide
      service under a tariff that has been approved by the Commission
      under the voluntary “safe harbor” provision of the pro forma [Open
      Access Transmission Tariff (“OATT”)]. A non-public utility
      transmission provider using this alternative submits a reciprocity
      tariff to the Commission seeking a declaratory order that the
      proposed reciprocity tariff substantially conforms to, or is superior
      to, the pro forma OATT. The non-public utility transmission
      provider then must offer service under its reciprocity tariff to any
      public utility transmission provider whose transmission service
      the non-public utility transmission provider seeks to use. Second,
      the non-public utility transmission provider may provide service
      to a public utility transmission provider under a bilateral
      agreement that satisfies its reciprocity obligation. Finally, the non-
      public utility transmission provider may seek a waiver of the
      reciprocity condition from the public utility transmission provider.
Order No. 1000-A ¶ 771, 77 Fed. Reg. at 32,300 (emphasis added).
      How the reciprocity condition might operate in the WestConnect region
is a question the parties have raised, which has been left unanswered by the
Compliance Orders and FERC’s arguments on appeal. For example, although
FERC has stated that the reciprocity condition may be satisfied in three ways,
see id., in the Compliance Orders, FERC only addressed one method of
satisfying the reciprocity condition. See First Order on Reh’g ¶ 55 n.101, 148

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FERC at 62,290 n.101 (discussing only the ability “to maintain a reciprocity
tariff under the voluntary ‘safe harbor’ provision”). In fact, FERC only vaguely
mentioned the reciprocity condition one time in the Compliance Orders, in a
footnote, and utterly failed to explain how it would effectively operate to
incentivize participation in the unique WestConnect region.                See id.
Intervenors argue before us that the reciprocity condition would not work to
incentivize participation by the non-jurisdictional utilities in the WestConnect
region. Intervenors assert that only the public utility from which the non-
jurisdictional utility seeks service can enforce reciprocity and that geography
or pre-existing agreements might often prevent non-jurisdictional utilities
from having to seek service from the same jurisdictional utilities that demand
participation in binding cost allocation for specific development projects. See
generally Intervenors’ Reply Br. 9–12. We do not address the validity of EP
Electric and Intervenors’ arguments on this point. We can only say that the
agency record lacks the information we need to properly evaluate this issue.
      It is well settled that we “must disregard any post hoc rationalizations of
[an agency’s] action and evaluate it solely on the basis of the agency’s stated
rationale at the time of its decision.” Luminant Generation Co. v. U.S. EPA,
675 F.3d 917, 925 (5th Cir. 2012) (citing Burlington Truck Lines, Inc. v. United
States, 371 U.S. 156, 168–69 (1962)).        We cannot determine whether the
reciprocity condition as applied by Order No. 1000 would sufficiently
incentivize participation and lead to just and reasonable rates in the
WestConnect region due to FERC’s failure to address the reciprocity
condition’s effect during agency proceedings. See United States v. Garner, 767
F.2d 104, 117 (5th Cir. 1985) (noting that appellate courts must rely on the
agency’s stated rationale at the time of its decision “[p]artly in order to provide
courts with a foundation for judicial review”). We therefore do not rely on the
use of the reciprocity condition as a rationale for upholding the Compliance
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Orders. 12    If FERC views the operation of the reciprocity condition as a
reasonable justification for its actions, it must more fully explain that logic on
remand.
       Absent a more reasoned explanation for why the non-jurisdictional
utilities will participate in the binding cost allocation process, or why their lack
of participation will not result in unjust and unreasonable rates, we conclude
that the Compliance Orders are arbitrary and capricious and cannot be
approved in their current form. 13 See, e.g., Fla. Gas, 876 F.2d at 45; Ill.

       12  The dissenting opinion argues we should consider the reciprocity condition and
trust FERC’s judgment that the condition will incentivize the non-jurisdictional utilities’
participation. Deference to FERC on this issue is not possible because FERC has not made
clear how the reciprocity condition will operate in this unique region to incentivize
participation. Due to that lack of explanation in the face of the Utilities’ objections below,
the Utilities were not given the opportunity to challenge FERC’s terse reasoning, except in
equally terse form on appeal and without a properly developed agency record. To avoid this
scenario, our precedent prevents us from considering post hoc rationalizations, and we
decline to do so here. See Luminant, 675 F.3d at 925; Garner, 767 F.2d at 117. We respect
FERC’s expertise, but when FERC does not use that expertise to explain its mandates, we
cannot fill the vacuum with hopeful speculation. See Fla. Gas, 876 F.2d at 45; Ill. Commerce
Comm’n, 576 F.3d at 475–76, 478; Mich. Pub. Power Agency, 405 F.3d at 16.
       13   The dissenting opinion relies on FERC’s reasoning for rejecting a 10% cost cap in
the Second Order on Rehearing. In that Order, FERC specified that if a Coordinating
Transmission Owner rejects binding cost allocation for a project that would provide benefits
to that Owner, the transmission planning process removes the benefits that Owner would
reap and recalculates future cost allocation determinations such that they only account for
the benefits accorded to the entities that have agreed to binding cost allocation. See Second
Order on Reh’g ¶ 57, 151 FERC at 61,791. The dissenting opinion argues this sufficiently
satisfies FERC’s mandate of ensuring just and reasonable rates because the new cost
allocation would allocate costs “commensurate with the benefits considered.” Id. (emphasis
added). We respectfully disagree that this language provides a sufficient explanation of how
this scheme will result in just and reasonable rates. It is merely a reworded version of
FERC’s argument that, because it need not regulate non-jurisdictional utilities, the process
need not account for the benefits that accrue to those utilities. Even if those benefits are
excluded from cost allocation calculations after the non-jurisdictional utilities opt out of
paying for their share of a specific project, FERC has suggested that the jurisdictional
utilities involved would still be left to pay the entire cost of that project—including the cost
associated with the benefits received by the non-paying, non-jurisdictional utilities. See
Second Order on Reh’g ¶ 57, 151 FERC at 61,791 (rejecting the proposal to make a project
ineligible for binding cost allocation if “the cost shift to remaining beneficiaries would exceed
10 percent of their prior cost allocation” because it might exclude too many projects from
regional planning and cost allocation); id. at ¶ 31, 151 FERC at 61,785 (admitting that “this
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Commerce Comm’n, 576 F.3d at 475–76, 478 (remanding when FERC failed to
adequately explain the approval of a pricing scheme and failed to measure the
correlation between benefits and costs, inquiring why “a different method . . . ,
based more closely on cost-causation principles, [would] jeopardize” FERC’s
policy “or be infeasible”). We therefore GRANT the petition for review and
REMAND this case to FERC for further explanation and fact finding.
B. EP Electric’s Other Challenges
       EP Electric also separately challenges whether FERC violated the APA
by requiring binding cost allocation at the regional planning stage and by
requiring the regional planning process to select a particular developer,
entitling that developer to rely on cost allocation for a given project. EP
Electric argues that FERC unlawfully sub-delegated its ratemaking duties
under the FPA by giving the WestConnect Planning Management Committee
(“WestConnect Committee”) the power to select projects with binding cost
allocation. Binding cost allocation also violates the Mobile-Sierra doctrine, 14

situation may create the potential for free ridership”). The non-jurisdictional utilities thus
may receive benefits for free, while the jurisdictional utilities and their customers may pay
more than their share of the costs associated with the benefits they receive. FERC admitted
in the Compliance Orders that this scheme has the potential to result in free ridership by the
non-jurisdictional utilities, see id. at ¶ 31, 151 FERC at 61,785, but has failed to explain how
the current orders satisfy its statutory mandate—except by ignoring the benefits the non-
jurisdictional utilities would receive. This does not suffice. It may be that the reciprocity
condition provides sufficient incentive, or that FERC has some other reason to think that
costs will be allocated in a manner that is commensurate with the benefits received by
jurisdictional and non-jurisdictional utilities. On this record, we do not discern such an
explanation, and it is our duty as the reviewing court to ensure that we receive a sufficient
explanation. See Fla. Gas, 876 F.2d at 45; Ill. Commerce Comm’n, 576 F.3d at 475–76, 478;
Mich. Pub. Power Agency, 405 F.3d at 16.
       14  The Mobile-Sierra doctrine “address[es] the Commission’s authority ‘to modify
rates set bilaterally by contract rather than unilaterally by tariff.’” South Carolina, 762 F.3d
at 85–86 (quoting Morgan Stanley, 554 U.S. at 532) (citing United Gas Pipe Line Co. v. Mobile
Gas Serv. Corp. (Mobile), 350 U.S. 332 (1956), and Fed. Power Comm’n v. Sierra Pac. Power
Co. (Sierra), 350 U.S. 348 (1956)). “Under the Mobile-Sierra doctrine, [FERC] must presume
that the [electricity] rate set out in a freely negotiated wholesale-energy contract meets the
‘just and reasonable’ requirement imposed by law. The presumption may be overcome only
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according to EP Electric. Finally, EP Electric claims that in mandating that
the WestConnect Committee select a developer for each project in the regional
planning process, FERC has improperly infringed on states’ exclusive
authority over the siting and construction of transmission facilities.
       We conclude that all of these challenges are barred as impermissible
collateral attacks, save the argument regarding improper sub-delegation, and
we find that challenge lacks merit. We have previously declined to “entertain
a petition for review that collaterally attacks a prior FERC order.” City of
Redding, 693 F.3d at 837 (citation omitted); see, e.g., La. Pub. Serv. Comm’n v.
FERC, 761 F.3d 540, 556–57, 560 (5th Cir. 2014). “[A]n objection is a collateral
attack on an earlier order ‘only if a reasonable firm in [petitioners’] position
would have perceived a very substantial risk that the [order] meant what the
Commission now says it meant.’” Cent. Hudson Gas & Elec. Corp. v. FERC,
783 F.3d 92, 105 (2d Cir. 2015) (alterations in original) (quoting Dynegy
Midwest Generation, Inc. v. FERC, 633 F.3d 1122, 1126 (D.C. Cir. 2011)).
       To distinguish between collateral attacks and permissible challenges, we
ask whether the FERC order the petition challenges was a clarification or a
modification of a prior FERC order. 15 See generally Dominion, 286 F.3d at 589.
FERC’s Compliance Orders on the issues challenged by EP Electric did little
more than clarify Order No. 1000’s directives. See Pac. Gas & Elec. Co. v.

if FERC concludes that the contract seriously harms the public interest.” Morgan Stanley,
554 U.S. at 530.
       15 The inquiry into whether FERC violated the APA by changing its interpretation of
Order No. 1000 through the Compliance Orders is similar to the collateral attack inquiry.
Compare Pac. Gas & Elec. Co. v. FERC, 464 F.3d 861, 868–69 (9th Cir. 2006), with City of
Idaho Falls v. FERC, 629 F.3d 222, 227, 230–31 (D.C. Cir. 2011). In this context, both
inquiries require us to discern whether FERC clarified or modified Order No. 1000 through
the Compliance Orders. Since we find that most of EP Electric’s challenges are collateral
attacks because they challenge mere clarifications of Order No. 1000, we do not review these
challenges on their merits, and we do not separately address EP Electric’s procedural
arguments.
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FERC, 464 F.3d 861, 868–69 (9th Cir. 2006) (holding a challenge was an
impermissible collateral attack on an order that “simply clarified and
implemented its previous order,” but did not “substantively alter the [order’s]
meaning or scope”). The fact that the D.C. Circuit disposed of many similar
arguments in South Carolina buttresses this conclusion.
      First, the Compliance Orders merely clarified that Order No. 1000 meant
to impose binding cost allocation, which Order No. 1000 clearly signaled and
the D.C. Circuit has already recognized. See, e.g., Order No. 1000-A ¶¶ 567–
68, 77 Fed. Reg. at 32,272; Order No. 1000 ¶ 558,76 Fed. Reg. at 49,929; South
Carolina, 762 F.3d at 56. EP Electric may not bring this collateral attack on
binding cost allocation, and we DISMISS its petition as to this issue. See La.
Pub. Serv. Comm’n, 761 F.3d at 558, 560.
      Second, the selection of one developer that will be eligible for cost
allocation in the regional planning process is a predictable clarification of
Order No. 1000’s reforms, and we DISMISS the petition for review as to this
issue. Order No. 1000 explicitly declined to grant developers rights to build
projects, but noted that its “framework” allowed “the developer” of a facility
selected in a regional transmission plan for the purposes of cost allocation “to
rely on the relevant cost allocation method or methods within the region should
it desire to move forward with its transmission project.” Order No. 1000 ¶ 339,
76 Fed. Reg. at 49,900 (emphasis added). This suggests that Order No. 1000
contemplated that one developer could rely on the cost allocation for its
proposed project, even if that was not made explicit. Granting one developer
eligibility to rely on binding cost allocation may also serve FERC’s goals of
comparably evaluating all potential transmission solutions and promoting the
more efficient or cost-effective solutions. See, e.g., Order No. 1000 ¶¶ 255, 332,
339, 76 Fed. Reg. at 49,885–86, 49,900.
      EP Electric’s related attack on the single-developer requirement as an
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improper usurpation of state authority over siting and construction fails for
similar reasons. We conclude that neither Order No. 1000 nor the Compliance
Orders “require facility construction nor allow a party to build without
securing necessary state approvals.” South Carolina, 762 F.3d at 62–64. We
DISMISS EP Electric’s petition as to this issue, as it constitutes a collateral
attack. See La. Pub. Serv. Comm’n, 761 F.3d at 558, 560.
      Finally, we DENY review as to EP Electric’s argument that the
Compliance Orders violate the Mobile-Sierra doctrine.         The Mobile-Sierra
doctrine prevents FERC from abrogating a valid contract setting rates unless
that contract seriously harms the public interest. See Morgan Stanley, 554
U.S. at 548.    EP Electric argues that, conversely, FERC cannot create a
contract and impose it on unwilling parties through its mandate of binding cost
allocation and other regional planning reforms. We agree with the D.C. Circuit
that the Mobile-Sierra doctrine is inapposite here, and we DISMISS the
petition insofar as it brings this collateral attack. See South Carolina, 762 F.3d
at 85–86.
      The sole remaining challenge that is not barred as a collateral attack is
EP Electric’s argument that FERC improperly delegated its authority to
review rates under FPA Section 205 by giving the WestConnect Committee the
power to impose binding cost allocation. According to EP Electric, Order No.
1000 indicated that FERC would review proposed tariffs of developers selected
in the regional planning processes through its Section 205 authority. We agree
that there is some inconsistency between the Compliance Orders and Order
No. 1000 on this issue. Compare Order No. 1000 ¶ 543, 76 Fed. Reg. at 49,927,
and Order No. 1000-A ¶ 568, 77 Fed. Reg. at 32,272, with First Order on Reh’g
¶ 341, 148 FERC at 62,353. We therefore reach the merits of this challenge.
See generally City of Redding, 693 F.3d at 836–38 (holding a challenge was not

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a collateral attack in part because FERC had given inconsistent guidance on
its policy).
       Nevertheless, we cannot agree with EP Electric that FERC has
“abdicate[d] its role as a rational decision-maker” through the Compliance
Orders. See La. Pub. Serv. Comm’n, 761 F.3d at 551–52 (citation omitted).
Even if FERC has abandoned its practice of evaluating tariffs and cost
allocations de novo through Section 205 proceedings, it has extensively
reviewed the procedures that will produce cost allocations through these
Compliance Orders. Additionally, FERC has retained the authority to review
transmission planning and cost allocations pursuant to FPA Section 206,
through which FERC may review challenges on its own motion or through
complaints about rates and practices. 16 U.S.C. § 824e(a). FERC “exercised
its role when it initially reviewed” WestConnect’s regional planning and cost
allocation processes, and “FERC has clarified that it will continue to exercise
oversight . . . in a Section 206 complaint proceeding.” La. Pub. Serv. Comm’n,
761 F.3d at 552.     We DENY EP Electric’s petition for review of FERC’s
delegation of authority to the WestConnect Committee.
                                IV. Conclusion
       For the reasons stated, we GRANT the petitions for review in part, as to
the challenge to the role of non-jurisdictional utilities in the regional planning
and cost allocation processes of the WestConnect region. We VACATE FERC’s
Compliance Orders on this issue and REMAND for further explanation and
fact finding consistent with this opinion. We DENY review as to EP Electric’s
argument that FERC improperly sub-delegated its authority to the
WestConnect Committee. We DISMISS the petitions as to the remaining
challenges, as we conclude those challenges constitute impermissible collateral
attacks.

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REAVLEY, Circuit Judge, dissenting:
      There is no justification to remand for “a more reasoned explanation for
why the non-jurisdictional utilities will participate in the binding cost
allocation process, or why their lack of participation will not result in unjust
and unreasonable rates.” The Majority errs by labelling Order No. 1000’s
reciprocity condition a post hoc rationalization and errs more deeply still by
failing to accord FERC’s policy decision appropriate deference.
      FERC, Order No. 1000 includes the “reciprocity condition” that requires
non-jurisdictional utilities to “participate in transmission planning and cost
allocation in exchange for open access.”       S. Carolina Pub. Serv. Auth. v.
F.E.R.C., 762 F.3d 41, 92 (D.C. Cir. 2014) (citing Order No. 1000 ¶¶ 818–19,
76 Fed.Reg. at 49,961). “By conditioning non-public utilities’ access to the open
systems of public utilities on the former’s adherence to the planning and cost
allocation requirements, [Order No. 1000] encourages non-public utilities to
participate in planning and cost allocation.” Id. at 93; see also id. at 94–95
(explaining that the reciprocity condition requires “both transmission planning
and cost allocation” from “utilities that choose to seek Commission-
jurisdictional transmission service”).
      The court here disregards the reciprocity condition because only one
mention is made in the Compliance Orders. However, in the Second Order on
Rehearing, FERC reminds that “if a coordinating transmission owner does not
accept the cost allocation, the transmission planning process removes the
benefits of those coordinating transmission owners that do not accept the cost
allocation”   and    cost   allocation   determinations      therefore    remain
“commensurate with the estimated benefits considered.” Second Order on

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Rehearing at ¶ 57. In any event, the reciprocity condition is a rule found within
Order No. 1000 and cannot be written off as a mere post hoc rationalization.
      FERC has the responsibility of deciding how to achieve its statutory
mandate of ensuring just and reasonable rates, and we must trust its judgment
that the reciprocity condition adequately incentivizes participation of the non-
jurisdictional utilities. We are not “to ask whether [the] decision is the best
one possible or even whether it is better than the alternatives,” including the
Utilities’ alternative suggestions. F.E.R.C. v. Elec. Power Supply Ass’n, 136 S.
Ct. 760, 782 (2016). “[N]owhere is that more true than in a technical area like
electricity rate design.” Id.
      Thus, FERC does not have to convince us that its approach is sounder
than the Utilities’ approach.    “The disputed question here involves both
technical understanding and policy judgment,” and the record establishes that
FERC “engaged in reasoned decisionmaking” by weighing competing views,
selecting an approach based on the methods and goals of Order No. 1000, and
“intelligibly” articulating “the reason for making that choice.” Id. at 784. This
is sufficient. Id. For but one example of FERC’s reasoned decisionmaking,
consider Paragraph 31 of the Second Order on Rehearing.           There, FERC
explained why it would permit the non-jurisdictional utilities to participate in
the WestConnect region as Coordinating Transmission Owners without
imposing binding cost allocation upon them:
             The Commission has accepted Filing Parties’ proposal to
      plan for non-public utility transmission providers, as coordinating
      transmission owners, without requiring that those non-public
      utility transmission providers enroll in the WestConnect
      transmission planning region and, thus, be subject to binding cost
      allocation. The Commission explained that doing so “will increase
      transparency, support the building of a record with respect to
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      transmission planning, and allow regional transmission planning
      to be conducted inclusive of nonpublic utility transmission
      providers, so as to expand opportunities for identifying and
      proposing more efficient or cost-effective regional transmission
      projects.” Allowing a non-public utility transmission provider to
      determine, consistent with its statutes, whether to accept the cost
      allocation may further expand open, transparent planning. By not
      enrolling, the non-public utility transmission providers are not full
      members of the WestConnect transmission planning region and,
      therefore, cannot be involuntarily allocated the costs of new
      transmission facilities that are selected in the regional
      transmission plan for purposes of cost allocation. While this
      situation may create the potential for free ridership, as it does
      when any entity not enrolled in the transmission planning region
      benefits from a new transmission facility, it is not inconsistent
      with Order No. 1000.
      (Second Opinion on Rehearing at ¶ 31.)
      This is precisely the reasoned decision-making to which we must defer.
FERC has decided that, even accounting for the Utilities’ free rider objection,
other considerations support its determination.       The Majority perceives a
major concession in this paragraph: that under the Compliance Orders, there
may be free riders. Majority Op. at 17–18 n.13. It is no such thing for three
reasons. First, as has been already explained, the statement regarding free
riders merely shows that, even when considering “the potential for free
ridership,” FERC’s policy decision best serves its goals. This conclusion merits
our deference.
      Second, the statement demonstrates that the sort of free rider problem
the Utilities complain of is not unique but rather is the same free rider problem
that arises “when any entity not enrolled in the transmission planning region
benefits from a new transmission facility.” In other words, this particular free
rider problem is indistinguishable from the free rider problem acknowledged

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in Order No. 1000.       (Order No. 1000 ¶ 660, 76 Fed.Reg. at 49,942, (“We
acknowledge that this Final Rule’s approach may lead to some beneficiaries of
transmission facilities escaping cost responsibility because they are not located
in the same transmission planning region as the transmission facility.
Nonetheless, the Commission finds this approach to be appropriate.”).
      Third, there is simply no support for the conclusion that a “potential for
free ridership” is fatal to FERC’s regulatory scheme. See South Carolina, 762
F.3d at 88 (“[N]othing requires the Commission to ensure full or perfect cost
causation”). All plans have drawbacks. FERC’s “balancing of the competing
goals” and incremental approach to reform demand our deference. Id.
      At bottom, the Majority errs by treating the required “satisfactory
explanation” as one that actually persuades the court as to the wisdom of
FERC’s decision or that actually rebuts the Utilities’ speculative contentions
regarding unintended consequences. 1 Across three compliance orders, FERC
has “addressed th[is] issue seriously and carefully, providing reasons in
support of its position and responding to the principal alternative advanced.”
Electric Power Supply Association, 136 S. Ct. at 784. We must defer.

      1  See Majority Op. at 13–14, 17 (“FERC’s Compliance Orders nowhere provide
a reasoned explanation for why the non-jurisdictional utilities have incentive or
obligation to participate in binding cost allocation when they can get many of the
same benefits at the jurisdictional utilities’ expense. . . . FERC does not explain how
it can meet its obligation to ensure just and reasonable rates by effectively assuring
that many of the costs of new development will be imposed on only half of the utilities
in the WestConnect region. . . . Absent a more reasoned explanation for why the non-
jurisdictional utilities will participate in the binding cost allocation process, or why
their lack of participation will not result in unjust and unreasonable rates, we
conclude that the Compliance Orders are arbitrary and capricious and cannot be
approved in their current form.”).
                                             26