Protesting entities separately petitioned for review of the Federal Energy Regulatory Commission’s (FERC) orders that approved regional transmission organization’s cost allocations for upgrades to transmission owner’s facilities.
After consolidation, the Court of Appeals held that:
- The FERC failed to reasonably explain why a “flow-based” method called the “solution-based distribution-factor analysis” (DFAX), which assigned costs based on how much each utility used a facility over time, was permissible to be used to allocate the costs of the upgrades;
- The “de minimis” threshold used in the DFAX violated the Federal Power Act’s cost-causation principle and caused undue discrimination;
- The FERC reasonably explained its decision that netting the flows to each delivery point in a zone to calculate total flow in a zone did not violate the Federal Power Act’s cost-causation principle and did not cause undue discrimination;
- It was reasonable to use a model of the flow of electricity that assumed that each zone was at peak demand;
- The FERC reasonably read the tariff as requiring an appropriate substitute proxy for the DFAX method;
- Responsibility of public utility outside of transmission organization’s region to pay costs associated with the upgrades ended upon termination of its power exchange transmission service, or “wheeling,” agreement with transmission owner; and
- The FERC reasonably came to and adequately explained conclusion that the overall cost allocation for entities outside the transmission organization’s region was not unjust or unreasonable.