By Wayne Barber

A three-judge panel for the D.C. Circuit Court of Appeals on Friday reversed a 2015 decision by FERC that prevented a Washington state generating plant from recouping funds from the Bonneville Power Administration even though the commission had ruled that it was entitled to the money.

In 2008, FERC had invoked Section 205 of the Federal Power Act to order TNA Merchant Projects, owner of the 520-MW Chehalis natural gas-fired generator, to refund a portion of the rates it had charged BPA for providing reactive power service. FERC had concluded that Chehalis’ rates were not just and reasonable.

“Several years later, FERC had second thoughts,” Senior Judge Harry Edwards said in the opinion (TNA Merchant Projects vs. FERC, No. 13-1008). “It determined that Chehalis should not, after all, have been required to pay these funds and held that Chehalis ought to recover funds with interest.”

But BPA, the customer to whom Chehalis had paid the refund, had no interest in voluntarily returning the money. Chehalis sought relief from FERC, seeking an order requiring repayment.

“FERC, however, in a perplexing decision, held that it could not order recoupment because the commission’s refund authority does not extend to exempt public utilities such as the intervenor Bonneville,” Edwards wrote, in an opinion joined by Senior Judge David Sentelle and Judge Nina Pillard.

“We hold that FERC erred when it held that it lacked the authority to grant the order requiring recoupment,” the court said. Section 309 of the Federal Power Act permits FERC to “perform any and all acts … [as may be] necessary or appropriate to carry out [the act’s] provisions,” the court said.

The FPA “clearly affords FERC the authority necessary to make Chehalis whole,” the court said. FERC has considerable latitude “when it is prescribing remedies for violations of the FPA and attempting to undo harms caused by its own mistaken or unlawful acts,” the court said.

The court remanded the case back to FERC to determine whether it should “apportion” its recoupment order. “FERC amply explained why recoupment is justified in this case, but in assessing the equities, the commission did not consider whether something less than full recoupment might be warranted,” the court explained.

TNA sold the Chehalis plant to PacifiCorp in 2008 but retained the right to litigate the case.

2005 Rate Filing

The case had its genesis in 2005, when Chehalis filed a proposed rate schedule for providing BPA with reactive power service. In April 2008, FERC concluded that Chehalis’ rates were excessive and ordered it to make refunds to BPA for billings from August 2005 through September 2006, approximately $2 million.

FERC changed course in October 2013, saying that “its precedents on this point had not been entirely clear and thus stated that its determination … was a prospective policy, inapplicable to Chehalis,” the D.C. Circuit said.

In a July 2015 rehearing order, FERC said it believed that recoupment would be appropriate because “Chehalis should not be penalized given the need for clarification” of its policies on reactive power. FERC went on to conclude — incorrectly, the court held — that while it would be “appropriate” for Chehalis to recoup the funds, FERC lacked authority to order BPA to pay.

A BPA spokesman said it was reviewing the order to determine whether to seek rehearing.

“In the meantime, it is worth noting that FERC’s original ruling that the charged rate was unjust and unreasonable was never challenged and has not been overturned,” spokesman Mike Hansen said. “BPA estimates that the rate in question was over 250% of what a just and reasonable rate should have been. If the court’s ruling stands, the matter returns to FERC to ‘balance the equities’ between Bonneville’s rate payers … and TNA Merchant.”