By Rich Heidorn Jr.

FERC said last week that a proposed revision to the Federal Power Act that would increase the right to appeal rate changes may have only limited effectiveness.

General Counsel James Danly told the Senate Energy and Natural Resources Committee’s Energy Subcommittee on Tuesday that S. 186, which would allow parties to seek judicial review of rate changes in the case of commission inaction, “only partially advances the interests of an exceedingly narrow category of aggrieved parties in very rare occasions of commission inaction.”

The bill, sponsored by Sen. Ed Markey (D-Mass.), was prompted by the commission’s 2-2 deadlock in September 2014 over whether it should reject the results of ISO-NE’s eighth Forward Capacity Auction because of unchecked market power. The 2017-18 auction results became “effective by operation of law” (ER14-1409). Under the FPA, rates take effect 60 days after they are filed with FERC, absent a commission order to the contrary. (See FERC Commissioners at Odds over ISO-NE Capacity Auction.)

Catch-22

Under Section 313 of the FPA, parties must seek rehearing of FERC orders before filing an appeal in federal court. But in the case of FCA 8, because the commission never issued an order, challengers were blocked from seeking rehearing or challenging the auction results in court — a catch-22 that the legislation intends to address.

Last October, the D.C. Circuit Court of Appeals rejected an effort by Public Citizen and Connecticut officials to force FERC to rule on the legality of the auction. It agreed with the commission that there can be no rehearing or appellate review when there is no order in a Section 205 proceeding. (See Court Asked to Force FERC Action on Disputed ISO-NE Capacity Auction.)

Danly told the subcommittee he knew of only five other instances in which a utility’s filing has taken effect by operation of law under the FPA or the Natural Gas Act without a commission order.

Under S. 186, the absence of commission action that results in a filing taking effect would be considered an order, allowing rehearings and appeals.

“The proposed legislation offers the possibility for aggrieved parties to pursue further administrative and judicial process when a disputed rate goes into effect even though half of the seated commission would not have accepted the rate in an order,” Danly observed. “Oddly, under the current statutory framework, a party who manages to persuade only one of four commissioners, and loses on a 3-1 vote, may request rehearing at the commission and seek redress at a court of appeals. However, a party that is perhaps more persuasive and manages to convince two of four commissioners, resulting in a 2-2 split — and thus no commission order — is currently barred from seeking rehearing and appellate review.”

Danly noted that any party can file a Section 206 challenge alleging rates are unjust and unreasonable — albeit at increased cost and a higher burden of proof than Section 205 filings.

But he said the legislation may not provide the relief its sponsors intend.

“Should the commission’s inaction be the result, as in the ISO-NE case, of a 2-2 split, a similar result could obtain for a later order on rehearing,” Danly said. “In that case, there would be another 2-2 split and no order on rehearing would issue. In such a case, it would be exceedingly unlikely that a court of appeals would entertain a petition for review.

“Moreover, even if a court of appeals accepted the petition, the court would almost certainly remand the case back to the commission for further adjudication. When sitting in review of agency action, courts of appeals review the evidentiary record compiled below and the reasoning the agency employed — as reflected in its orders — to support its decision based on that record. In the case of a serial 2-2 split, no orders would issue and such a review would be impossible. Remand would appear to be the court’s only option.”

FERC Supports $10M Threshold on Merger Approvals

Danly told the committee FERC supports two other bills that would modify FPA Section 203 to set a minimum value threshold of $10 million for mergers of jurisdictional facilities subject to commission approval (H.R. 1109 and S. 1860).

The change would align this provision of the FPA, which currently has a $50,000 threshold, with other sections of the act that already set $10 million as the trigger, he said.

It would also “ease the regulatory burden on industry without impeding the commission’s regulatory responsibilities,” Danly said. “Transactions below the proposed threshold are unlikely to impose a significant negative impact on competition or the rates of utility customers.”

He said the commission has other tools to address market power concerns that could arise from mergers. “For example, if an entity with market-based rates obtained the opportunity to exercise market power as a result of such transactions, the commission could limit or eliminate its ability to engage in transactions at market-based rates. Additionally, the commission has a range of market power mitigation measures that limit market power within the organized wholesale electric markets. Finally, if the exercise of market power involves market manipulation or violation of a commission rule, regulation, order or tariff provision, the commission can bring an enforcement action.”