|December 13, 2013|
Previously published on December 9, 2013
On December 3, 2013, the United States Court of Appeals for the District of Columbia Circuit (“D.C. Circuit”) vacated and remanded FERC’s 2011 order regarding certain aspects of the Joint Operating Agreement (“JOA”) between the Midcontinent Independent System Operator, Inc. (“MISO”) and the Southwest Power Pool (“SPP”). The case involves the impact on SPP of integrating Entergy Arkansas into MISO.
Specifically, the FERC order at issue confirmed MISO’s interpretation of the JOA, contending that it allows for the use of available transmission capacity across SPP between MISO and Entergy Arkansas as a result of Entergy Arkansas becoming a transmission-owning member of MISO. The D.C. Circuit found FERC had failed to provide a reasoned explanation for its decision, and explained that FERC had chosen one interpretation of select evidence without explaining why it had disregarded other potential interpretations. Further, the D.C. Circuit found FERC neglected to explain why it had disregarded additional relevant evidence that ran counter to FERC’s ultimate decision.
In April 2011, Entergy Corporation (“Entergy”), the parent corporation of Entergy Arkansas, announced that it intended to join MISO. SPP opposed Entergy’s plans, citing concerns about the economic consequences of changing flows resulting from Entergy’s decision to join MISO, and sharing of costs for SPP grid upgrades. On April 8, 2011, MISO filed a Petition for Declaratory Order asking FERC to confirm that the terms of Section 5.2 of the JOA regarding the sharing of transmission capacity on a common path will remain in effect and applicable to Entergy Arkansas if it becomes a transmission owner of MISO, affirming MISO’s position that it has the right to rely on SPP’s transmission facilities to move power between MISO’s existing footprint and Entergy Arkansas, even after Entergy Arkansas becomes a part of MISO.
Section 5.2 of the JOA provides that where MISO and SPP “have contract paths to the same entity, the combined contract path capacity will be made available for use by both Parties.” MISO argued that Section 5.2 of the JOA provides for the sharing of available transmission capacity on common paths when the entities using that capacity are transmission owners of either MISO or SPP. SPP argued that capacity sharing is available to Entergy Arkansas only so long as it operates on a stand-alone basis, but not if it transfers its transmission facilities to either SPP or MISO’s control. In its initial order and subsequent rehearing order, FERC confirmed MISO’s interpretation of the JOA with respect to transmission sharing among MISO, SPP, and Entergy Arkansas (see April 18, 2011 edition of the WER).
The D.C. Circuit found that FERC’s decisions in the case were arbitrary and capricious, and that FERC failed to both examine the relevant data and to articulate a satisfactory explanation for its decision. The court determined that in siding with MISO, FERC gave weight to MISO’s interpretation of the provision without giving equal weight to SPP’s contrasting understanding of the provision during contract negotiations in creating the JOA. The court vacated the orders and remanded back to FERC for further consideration.