United States Court of Appeals, District of Columbia Circuit
Argued: March 20, 2014
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On Petitions for Review of Orders of the Federal Energy Regulatory Commission.
Harvey L. Reiter and Andrew W. Tunnell argued the causes for petitioners and supporting intervenors South Carolina Public Service Authority, et al. concerning Threshold Issues. With them on the joint briefs were Ed R. Haden, Scott B. Grover, Jonathan D. Schneider, Jonathan Peter Trotta, Kenneth G. Jaffe, Michael E. Ward, Randall Bruce Palmer, George Scott Morris, Luther Daniel Bentley IV, Sue Deliane Sheridan, Kenneth B. Driver, William H. Weaver, John Lee Shepherd Jr., William Rainey Barksdale, Tamara L. Linde, Jodi L. Moskowitz, Daniel M. Malabonga, Stephen G. Kozey, Matthew R. Dorsett, Wendy N. Reed, Matthew J. Binette, David S. Berman, Clare E. Kindall, Assistant Attorney General, Office of the Attorney General for the State of Connecticut, James Bradford Ramsay, Holly Rachel Smith, Cynthia Brown Miller, Daniel E. Frank, and Jennifer J.K. Herbert. Dennis Lane, Samantha M. Cibula, John A. Garner, and Glen L. Ortman entered appearances.
Randolph Lee Elliott argued the cause for petitioners and supporting intervenors American Public Power Association, et al. concerning Transmission Planning and Public Policy. With him on the joint briefs were John Lee Shepherd Jr., William Rainey Barksdale, Tamara L. Linde, Jodi L. Moskowitz, Cynthia Brown Miller, Andrew W. Tunnell, Ed R. Haden, Scott B. Grover, George Scott Morris, Luther Daniel Bentley, IV, Harvey L. Reiter, Jonathan D. Schneider, Jonathan Peter Trotta, James Bradford Ramsay, Holly Rachel Smith, Cynthia S. Bogorad, and William S. Huang. Delia D. Patterson, Jesse S. Unkenholz, Lyle D. Larson, and Daniel H. Silverman entered appearances.
Luther Daniel Bentley, IV argued the cause for state petitioner and intervenors Alabama Public Service Commission, et al. With him on the joint briefs were George Scott Morris, Clare E. Kindall, Assistant Attorney General, Office of the Attorney General for the State of Connecticut, James Bradford Ramsay, Holly Rachel Smith, and Cynthia Brown Miller.
Jonathan D. Schneider argued the cause for petitioners and supporting intervenors South Carolina Public Service Authority, et al. concerning Cost Allocation. With him on the joint briefs were Harvey L. Reiter, Jonathan Peter Trotta, Andrew W. Tunnell, Ed R. Haden, Scott B. Grover, Sue Deliane Sheridan, Randolph Lee Elliott, Elias G. Farrah, Kenneth G. Jaffe, Michael E. Ward, Randall Bruce Palmer, Howard Haswell Shafferman, Jack Nadim Semrani, George Scott Morris, Luther Daniel Bentley, IV, Holly Rachel Smith, John Lee Shepherd, Jr., William Rainey Barksdale, Tamara L. Linde, and Jodi L. Moskowitz.
John Lee Shepherd, Jr. argued the cause for petitioners and supporting intervenors Public Service Electric and Gas Company, et al. concerning Rights of First Refusal. With him on the joint briefs were William Rainey Barksdale, Tamara L. Linde, Jodi L. Moskowitz, Kenneth G. Jaffe, Michael E. Ward, Randall Bruce Palmer, Andrew W. Tunnell, Ed R. Haden, Scott B. Grover, Kenneth B. Driver, William H. Weaver, John Longstreth, Donald A. Kaplan, William M. Keyser, Stephen M. Spina, John D. McGrane, J. Daniel Skees, Edward Comer, Henri D. Bartholomot, Gary E. Guy, Jeanne Jackson Dworetzky, Barry S. Spector, Matthew J. Binette, N. Beth Emery, Daniel E. Frank, Jennifer J.K. Herbert, Wendy N. Reed, David S. Berman, Daniel M. Malabonga, Stephen G. Kozey, and Matthew R. Dorsett.
Linda G. Stuntz, James W. Moeller, and Andrew M. Jamieson were on the briefs for petitioners International Transmission Company d/b/a ITC Trasmission, et al.
Randolph Lee Elliott, Jonathan D. Schneider, Harvey L. Reiter, and Jonathan Peter Trotta were on the joint briefs for petitioners and supporting intervenors concerning Reciprocity Condition. Marie D. Zosa entered an appearance.
Andrew W. Tunnell, Ed R. Haden, Scott B. Grover, Harvey L. Reiter, Jonathan D. Schneider, Jonathan Peter Trotta, Randolph Lee Elliott, Stephen Matthew Spina, John D. McGrane, George Scott Morris, Luther Daniel Bentley, IV, Sue Deliane Sheridan, Kenneth G. Jaffe, Michael E. Ward, Randall Bruce Palmer, Wendy N. Reed, Matthew J. Binette, David S. Berman, Howard Haswell Shafferman, Jack Nadim Semrani, Elias G. Farrah, John Lee Shepherd, Jr., William Rainey Barksdale, Tamara L. Linde, Jodi L. Moskowitz, Kenneth B. Driver, Clare E. Kindall, Assistant Attorney General, Office of the Attorney General for the State of Connecticut, Gary E. Guy, Jeanne Jackson Dworetzky, Barry S. Spector, Cynthia Brown Miller, Daniel M. Malabonga, Stephen G. Kozey, and Matthew R. Dorsett, N. Beth Emery, James Bradford Ramsay, Holly Rachel Smith, Daniel E. Frank, and Jennifer J.K. Herbert were on the joint brief for petitioners and supporting intervenors concerning Statement of the Case, Statement of Facts, and Standards of Review.
Edward H. Comer, Henri D. Bartholomot, John D. McGrane, Stephen M. Spina, and John Daniel Skees were on the briefs for petitioner Edison Electric Institute concerning FPA § 211A.
Beth G. Pacella and Lona T. Perry, Senior Attorneys, and Robert M. Kennedy, Attorney, Federal Energy Regulatory Commission, argued the causes for respondent. With them on the briefs were David L. Morenoff, Acting General Counsel, Robert H. Solomon, Solicitor, and Jennifer S. Amerkhail, Attorney.
Michael R. Engleman argued the cause for intervenors LS Power Transmission, LLC, et al. concerning Rights of First Refusal. With him on the brief were Neil L. Levy and Ashley C. Parrish. David G. Tewksbury entered an appearance.
Dimple Chaudhary, Jill Tauber, Abigail Dillen, and Gene Grace were on the brief for intervenors Conservation Law Foundation, et al. in support of respondents concerning Threshold Issues, Cost Allocation, Transmission Planning and Public Policy, and State Sovereignty. Hannah Chang and Benjamin H. Longstreth entered appearances.
Randall V. Griffin, Gary E. Guy, Jodi Moskowitz, John Longstreth, Donald A. Kaplan, and William M. Keyser were on the brief for intervenors The Dayton Power and Light Company, et al. concerning Scope of Cost Allocation. Megan E. Vetula entered an appearance.
Jonathan D. Schneider, Harvey L. Reiter, Jonathan Peter Trotta, and Randolph Lee Elliott were on the joint brief for intervenors American Public Power Association, et al. concerning FPA § 211A. Delia D. Patterson entered an appearance.
Before: ROGERS, GRIFFITH and PILLARD, Circuit Judges.
This case involves challenges to the most recent reforms of electric transmission planning and cost allocation adopted by the Federal Energy Regulatory Commission pursuant to the Federal Power Act, 16 U.S.C. § 791a et seq. In Order No. 1000, 136 F.E.R.C. P61,051, as reaffirmed and clarified in Order Nos. 1000-A and 1000-B (together, " the Final Rule" ), the Commission required each transmission owning and operating public utility to participate in regional transmission planning that satisfies specific planning principles designed to prevent undue discrimination and preference in transmission service, and that produces a regional transmission plan. The local and regional transmission planning processes must consider transmission needs that are driven by public policy requirements. Transmission providers in neighboring planning regions must collectively determine if there are more efficient or cost-effective solutions to their mutual transmission needs. The Final Rule also requires each planning process to have a method for allocating ex ante among beneficiaries the costs of new transmission facilities in the regional transmission plan, and the method must satisfy six regional cost allocation principles. Neighboring transmission planning regions also must have a common interregional cost allocation method for new interregional transmission facilities that satisfies six similar allocation principles. Additionally transmission providers are required to remove from their jurisdictional tariffs and agreements any provisions that establish a federal right of first refusal to develop transmission facilities in a regional transmission plan, subject to individualized compliance review.Forty-five petitioners and sixteen intervenors (hereinafter " petitioners" ) include state regulatory agencies, electric transmission providers, regional transmission organizations, and electric industry trade associations. They challenge the Commission's authority to adopt these reforms, and they contend that the Final Rule is arbitrary and capricious and unsupported by substantial evidence. For the following reasons, we conclude their contentions are unpersuasive. We hold in Part II, that the Commission had authority under Section 206 of the Federal Power Act to require transmission providers to participate in a regional planning process. In Part III, we conclude that there was substantial evidence of a theoretical threat to support adoption of the reforms in the Final Rule. In Part IV, we hold that the Commission had authority under Section 206 to require removal of federal rights of first refusal provisions upon determining they were unjust and unreasonable practices affecting
rates, and that determination was supported by substantial evidence and was not arbitrary or capricious; we further hold that the Mobile-Sierra objection to the removal is not ripe. In Part V, we hold that the Commission had authority under Section 206 to require the ex ante allocation of the costs of new transmission facilities among beneficiaries, and that its decision regarding scope was not arbitrary or capricious. In Part VI, we hold that the Commission reasonably determined that regional planning must include consideration of transmission needs driven by public policy requirements. In Part VII, we hold that the Commission reasonably relied upon the reciprocity condition to encourage non-public utility transmission providers to participate in a regional planning process. Accordingly, we deny the petitions for review of the Final Rule.
A brief overview of the Federal Power Act (" FPA" ) and subsequent changes to the electric industry sets the background for petitioners' challenges to the Final Rule. Upon enacting the FPA, Congress determined that federal regulation of interstate electric energy transmission and its sale at wholesale is " necessary in the public interest," FPA § 201(a), 16 U.S.C. § 824(a), and vested the Commission with " jurisdiction over all facilities for such transmission or sale," id. § 201(b)(1), 16 U.S.C. § 824(b)(1). The States would retain authority over " any other sale of electric energy" and facilities used for " generation of electric energy," " local distribution," or " transmission of electric energy in intrastate commerce." Id. The Commission was directed " to divide the country into regional districts for the voluntary interconnection and coordination of facilities for the generation, transmission, and sale of electric energy," and assigned the " duty" to " promote and encourage such interconnection and coordination." FPA § 202(a), 16 U.S.C. § 824a(a). Such public utilities, in turn, were required to file new rates for Commission approval, and Congress directed that " [a]ll rates and charges made, demanded, or received by any public utility for or in connection with the [jurisdictional] transmission or sale of electric energy . . . shall be just and reasonable," and that " [n]o public utility shall, with respect to any [jurisdictional] transmission or sale . . . subject any person to any undue prejudice or disadvantage" or " maintain any unreasonable difference in rates, charges, service, facilities, or in any other respect, either as between localities or as between classes of service." FPA § 205(a)-(b), 16 U.S.C. § 824d(a)-(b). Additionally, Congress empowered the Commission to take action on its own motion in order to ensure that such rates, charges, and classifications, as well as " any rule, regulation, practice, or contract affecting such rate, charge, or classification," are not " unjust, unreasonable, unduly discriminatory or preferential." FPA § 206(a), 16 U.S.C. § 824e(a).
When Congress enacted the FPA in 1935, electric utilities were mostly vertically integrated firms that constructed and operated their own generation, transmission, and distribution facilities. See New York v. FERC, 535 U.S. 1, 5, 122 S.Ct. 1012, 152 L.Ed.2d 47 (2002). The firms acted as separate, local monopolies, and consumers paid a single " bundled" rate for delivered electricity. Id. Sixty years later, the electric industry had experienced fundamental changes: Electric systems had
become increasingly interconnected, long-distance transmission had become increasingly economical, and smaller, lower-cost power plants had begun to emerge as competitors to the vertically integrated utilities. See Order No. 888, Promoting Wholesale Competition Through Open Access Non-Discriminatory Transmission Services by Public Utilities, F.E.R.C. Stats. & Regs. ¶ 31,036 at pp. 31,639-44, 61 Fed. Reg. 21,540, 21,543-46 (1996).
The Commission responded to these changes and market conditions by adopting reforms to the electric industry that were modeled after those it had adopted for the natural gas industry pursuant to the Natural Gas Act, 15 U.S.C. § 717 et seq. See generally Associated Gas Distribs. v. FERC, 824 F.2d 981, 263 U.S.App.D.C. 1 (D.C. Cir. 1987) (reviewing Order No. 436). The Commission concluded that the economic self-interest of electric transmission monopolists lay in denying transmission or offering it only on inferior terms to emerging competitors. See Order No. 888 at p. 31,682, 61 Fed. Reg. at 21,567. Given this intrinsic defect in how the market was shaping the electric industry, the Commission acted to foster " a successful transition to competitive wholesale electricity markets." Id. at p. 31,652, 61 Fed. Reg. at 21,550. In Order No. 888, the Commission required each jurisdictional electric public transmission provider to " functional[ly] unbundl[e]" its wholesale generation and transmission services and file an open-access transmission tariff (" OATT" ) containing minimum terms of non-discriminatory transmission service. Id. at pp. 31,635-36, 31,653-54, 61 Fed. Reg. at 21,541, 21,551-52. Through these structural changes, the Commission sought to open the electric grid to all sources of electric power and thereby " ensure that customers have the benefits of competitively priced generation." Id. at p. 31,652, 61 Fed. Reg. at 21,550. To promote development of competitive markets, the Commission encouraged the formation of regional transmission organizations (" RTOs" ) and independent system operators (" ISOs" ) to coordinate transmission planning, operation, and use on a regional and interregional basis. Id. at pp. 31,655, 31,854-55, 61 Fed. Reg. at 21,552, 21,666-67. This court in Transmission Access Policy Study Group v. FERC, 225 F.3d 667, 343 U.S.App.D.C. 151 (D.C. Cir. 2000) (" TAPS" ), aff'd sub nom. New York, 535 U.S. 1, 122 S.Ct. 1012, 152 L.Ed.2d 47, upheld Order No. 888 in nearly all respects, concluding that the Commission had authority under FPA Section 206 to require open access as a generic remedy for systemic anti-competitive behavior, see id. at 685-87.
Congress also acted to spur investment in the electric transmission grid. Under the Electricity Modernization Act of 2005, enacted as Title XII of the Energy Policy Act of 2005, Pub. L. No. 109-58, 119 Stat. 594, 941, the Commission was authorized: to grant permits for construction of interstate transmission facilities in " national interest electric transmission corridors," id. § 1221(b) (codified at FPA § 216(b), 16 U.S.C. § 824p(b)); to subsidize the development of technology that would increase the capacity, efficiency, or reliability of transmission facilities, id. § § 1223-24 (codified at 42 U.S.C. § § 16422-23); to provide incentive-based rates for investments in transmission infrastructure, id. § 1241 (codified at FPA § 219, 16 U.S.C. § 824s); and to require each " unregulated transmitting utility" to provide transmission services on terms and conditions " comparable to those under which [it] provides transmission services to itself and that are not unduly discriminatory or preferential," id. § 1231, (codified at FPA § 211A(b), 16 U.S.C. § 824j-1(b)). Further, the Commission was instructed to exercise its authority under the FPA " in a manner that
facilitates the planning and expansion of transmission facilities to meet the reasonable needs of load-serving entities." Id. § 1233 (codified at FPA § 217(b)(4), 16 U.S.C. § 824q(b)(4)). The Commission was to establish mandatory reliability standards for " bulk power system" operators in conjunction with the North American Electric Reliability Corporation (" NERC" ), the industry's self-regulatory organization. Id. § 1211(a) (codified at FPA § 215, 16 U.S.C. § 824o); see N. Am. Elec. Reliability Corp., 116 F.E.R.C. ¶ 61,062 at ¶ 240 (July 20, 2006).
In 2007, the Commission issued Order No. 890, Preventing Undue Discrimination and Preference in Transmission Service, F.E.R.C. Stats. & Regs. ¶ 31,241, 72 Fed. Reg. 12,266 (2007). Noting that the United States had " witnessed a decline in transmission investment relative to load growth," the Commission found that the resulting grid congestion " can have significant cost impacts on consumers." Id. ¶ ¶ 60, 421, 72 Fed. Reg. at 12,276, 12,318. Concluding that transmission providers lacked incentives to plan and develop new transmission facilities in a manner consistent with the public interest, the Commission found that the " lack of coordination, openness, and transparency" in transmission planning had " result[ed] in opportunities for undue discrimination" because " participants ha[d] no means to determine whether the plan developed by the transmission provider in isolation is unduly discriminatory." Id. ¶ ¶ 57-61, 421-425, 72 Fed. Reg. at 12,275-76, 12,318. To " remedy these transmission planning deficiencies" and " prevent undue discrimination in the rates, terms and conditions of public utility transmission service," Order No. 890 required each transmission provider to establish an open, transparent, and coordinated transmission planning process that complied with nine planning principles. Id. ¶ 425 & app. C, attachment K, 72 Fed. Reg. at 12,318, 12,531. Transmission providers were also required " to open their transmission planning process to customers, coordinate with customers regarding future system plans, and share necessary planning information with customers." Id. ¶ 3, 72 Fed. Reg. at 12,267.
By late 2008, the electric industry was reporting that an estimated $298 billion of investment in new electric transmission facilities would be needed between 2010 and 2030 to maintain current levels of reliable electric service across the United States. See Marc W. Chupka et al., Transforming America's Power Industry: The Investment Challenge 2010-2030, at 37 (Nov. 2008). NERC, the electric industry's self-regulator, projected that in the next decade a 9.5% to 15% increase in circuit miles of transmission would be needed to maintain reliability and to " unlock" and integrate renewable resources like wind generation that are likely to be remote from demand centers. NERC, 2009 Long-Term Reliability Assessment 26 (Oct. 2009); NERC, 2008 Long-Term Reliability Assessment 15 (Oct. 2008). The Energy Department had similarly determined that " under any future electric industry scenario," a " [s]ignificant expansion of the transmission grid will be required" to " increase reliability, reduce costly congestion and line losses, and supply access to low-cost remote resources, including renewables." Dep't of Energy, 20% Wind Energy by 2030: Increasing Wind Energy's Contribution to U.S. Electricity Supply 93 (July 2008).
In September 2009, the Commission convened three regional technical conferences to " examine whether existing transmission planning processes adequately consider needs and solutions on a regional or interconnection-wide basis to ensure adequate and reliable supplies at just and reasonable rates." FERC, Notice of Technical
Conferences, Docket No. AD09-8-000, at 2 (June 30, 2009). The conferences were also to " explore whether existing processes are sufficient to meet emerging challenges to the transmission system, such as the development of interregional transmission facilities, the integration of large amounts of location-constrained generation, and the interconnection of distributed energy resources." Id. While the Commission was evaluating the adequacy of Order No. 890's reforms, Congress provided $80 million to the Department of Energy " for the purpose of facilitating the development of regional transmission plans," through analysis of future demand and transmission requirements and technical assistance to transmission providers in developing interconnection-based transmission plans for the Eastern, Western, and Texas Interconnections. American Recovery and Reinvestment Act of 2009, Pub. L. No. 111-5, div. A, 123 Stat. 115, 139.
In June 2010, the Commission published a Notice of Proposed Rulemaking. Transmission Planning and Cost Allocation by Transmission Owning and Operating Public Utilities, 131 F.E.R.C. ¶ 61,253, 75 Fed. Reg. 37,884 (2010) (" NPRM" ). The Commission explained that although substantial improvements in the transmission planning process had occurred as a result of compliance with Order No. 890, " significant changes in the nation's electric power industry" since then required consideration of additional reforms. See id. ¶ 33, 75 Fed. Reg. at 37,889. Among other things, the Commission identified " a trend of increased investment in the country's transmission infrastructure" due principally to investment in transmission of renewable energy sources. Id. ¶ 33 & n.41, 75 Fed. Reg. at 37,889. Although governmental reforms and market forces had resulted in expansion of the transmission grid, the Commission concluded that this positive trend highlighted deficiencies in existing transmission planning and cost allocation processes that would inhibit the construction of new transmission facilities and adversely affect rates if left unremedied. See id. ¶ ¶ 32-42, 75 Fed. Reg. at 37,889-90. The Commission identified five general deficiencies in Order No. 890, see id. ¶ ¶ 35-41, 75 Fed. Reg. at 37,889-90, and proposed additional reforms " to correct [those] deficiencies . . . so that the transmission grid can better support wholesale power markets and thereby ensure that Commission-jurisdictional services are provided at rates, terms and conditions that are just and reasonable and not unduly discriminatory or preferential," id. ¶ 1, 75 Fed. Reg. at 37,885.
In August 2011, the Commission issued Order No. 1000, which adopted the proposed reforms. Transmission Planning and Cost Allocation by Transmission Owning and Operating Public Utilities, F.E.R.C. Stats. & Regs. ¶ 31,323, 76 Fed. Reg. 49,842 (2011). Under Order No. 1000:
(1) Each transmission provider must participate in a regional transmission planning process that complies with the planning principles in 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. Id. ¶ ¶ 2, 146, 203-05, 76 Fed. Reg. at 49,845, 49,867, 49,876-77.
(2) Neighboring transmission planning regions must establish interregional coordination procedures that provide for sharing information and planning data as well as the identification and joint evaluation of interregional transmission
facilities that could address transmission needs more efficiently or cost-effectively than separate regional transmission facilities. Id. ¶ ¶ 393, 396, 76 Fed. Reg. at 49,907.
(3) Transmission providers must remove from jurisdictional tariffs and agreements any provisions that establish a federal right of first refusal for an incumbent transmission developer to construct new regional transmission facilities included in a regional transmission plan. Id. ¶ 313, 76 Fed. Reg. at 49,895-96. An " incumbent" transmission provider refers to a public utility transmission provider that develops a transmission project within its own retail distribution service territory, while a " non-incumbent" transmission provider refers to either a transmission developer without a retail distribution service territory or a public utility transmission provider that proposes a transmission project outside its existing retail distribution service territory. Id. ¶ 225, 76 Fed. Reg. at 49,880.
(4) Each transmission provider must demonstrate that the regional planning process in which it participates has established appropriate qualification criteria for transmission developers, identified the information that a transmission developer must submit in proposing a regional transmission project, and has a selection process for transmission projects that is transparent and not unduly discriminatory. Id. ¶ ¶ 323-31, 76 Fed. Reg. at 49,897-99.
The cost-allocation reforms in Order No. 1000 require each transmission provider to include in its OATT a method (or set of methods) for allocating ex ante the costs of new regional transmission facilities that complies with six regional cost allocation principles. Id. ¶ 558, 76 Fed. Reg. at 49,929. Those principles include cost causation, under which " [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. ¶ 586, 76 Fed. Reg. at 49,932. Transmission providers in neighboring transmission planning regions are similarly required to establish a common method (or set of methods) for allocating ex ante the costs of a new transmission facility to be located in both planning regions that complies with interregional cost allocation principles closely tracking the regional cost allocation principles. Id. ¶ ¶ 578, 611, 76 Fed. Reg. at 49,931, 49,936. Participant funding of new transmission facilities ( i.e., allocating the costs of a transmission facility only to entities that volunteer to bear those costs) is not permitted as a regional or interregional cost allocation method. Id. ¶ ¶ 723-25, 76 Fed. Reg. at 49,949-50.
Upon rehearing, the Commission clarified and reaffirmed the reforms in Order No. 1000. See Order No. 1000-A, 139 F.E.R.C. ¶ 61,132, 77 Fed. Reg. 32,184 (2012) ; Order No. 1000-B, 141 F.E.R.C. ¶ 61,044, 77 Fed. Reg. 64,890 (2012). The Commission rejected requests to eliminate or substantially modify Order No. 1000 and provided clarifications relating to scope, terminology, and underlying reasons for certain reforms. See, e.g., Order No. 1000-A ¶ ¶ 3, 190, 204, 216, 77 Fed. Reg. at 32,187, 32,215, 32,217, 32,219. Notably, the Commission stated that it was " not requiring . . . providers to eliminate a federal right of first refusal before the Commission makes a determination regarding whether an agreement is protected
by a Mobile-Sierra  provision." Id. ¶ 389, 77 Fed. Reg. at 32,245. In Order No. 1000-B the Commission provided clarifications and restated that the obligation to remove federal rights of first refusal would arise only after an individualized determination. See Order No. 1000-B ¶ ¶ 8, 11, 40, 72, 77 Fed. Reg. at 64,892, 64,897, 64,902.
Petitioners challenge the Final Rule on the grounds that the Commission lacked statutory authority, made factual findings that were unsupported by substantial evidence, and acted in a manner that was arbitrary or capricious or contrary to law. In addressing these contentions, the court is bound to apply the following standards of review.
The court reviews challenges to the Commission's interpretation of the FPA under the familiar two-step framework of Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984). If the court determines " Congress has directly spoken to the precise question at issue," and " the intent of Congress is clear, that is the end of the matter." Id. at 842. If, however, " the statute is silent or ambiguous with respect to the specific issue," then the court must determine " whether the agency's answer is based on a permissible construction of the statute." Id. at 843. " No matter how it is framed, the question a court faces when confronted with an agency's interpretation of a statute it administers is always, simply, whether the agency has stayed within the bounds of its statutory authority," City of Arlington v. FCC, 133 S.Ct. 1863, 1868, 185 L.Ed.2d 941 (2013) (emphasis omitted), and the court will defer to the Commission's reasonable interpretation of statutory ambiguities concerning both the scope of its statutory authority and the application of that authority, see id.
The court must uphold the Final Rule unless it is arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law. See Midwest ISO Transm. Owners v. FERC, 373 F.3d 1361, 1368, 362 U.S.App.D.C. 314 (D.C. Cir. 2004) (citing 5 U.S.C. § 706(2)(A)). The Commission must " examine the relevant data and articulate a satisfactory explanation for its action including a rational connection between the facts found and the choice made." Motor Vehicle Mfrs. Ass'n of U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43, 103 S.Ct. 2856, 77 L.Ed.2d 443 (1983) (internal quotation marks omitted). The Commission's factual findings are conclusive if supported by substantial evidence. 16 U.S.C. § 825l(b). Substantial evidence " is such relevant evidence as a reasonable mind might accept as adequate to support a conclusion," Murray Energy Corp. v. FERC, 629 F.3d 231, 235, 393 U.S.App.D.C. 433 (D.C. Cir. 2011) (internal quotation marks omitted), and requires " more than a scintilla" but " less than a preponderance" of evidence, Fla. Gas Transm. Co. v. FERC, 604 F.3d 636, 645, 390 U.S.App.D.C. 328 (D.C. Cir. 2010) (quoting FPL Energy Me. Hydro LLC v. FERC, 287 F.3d 1151, 1160, 351 U.S.App.D.C. 148 (D.C. Cir. 2002)). When applied to rulemaking proceedings, the substantial evidence test " is identical to the familiar arbitrary and capricious standard," which " requires the Commission to specify the evidence on which it relied and to explain how that evidence supports the conclusion it reached." Wis. Gas Co. v. FERC, 770 F.2d 1144, 1156, 248 U.S.App.D.C. 231 (D.C. Cir. 1985) (internal quotation marks omitted).
Furthermore, in rate-related matters, the court's review of the Commission's
determinations is particularly deferential because such matters are either fairly technical or " involve policy judgments that lie at the core of the regulatory mission." Alcoa Inc. v. FERC, 564 F.3d 1342, 1347, 385 U.S.App.D.C. 386 (D.C. Cir. 2009) (internal quotation mark omitted). The court owes the Commission " great deference" in this realm because " [t]he statutory requirement that rates be 'just and reasonable' is obviously incapable of precise judicial definition," Morgan Stanley Capital Grp. Inc. v. Pub. Util. Dist. No. 1, 554 U.S. 527, 532, 128 S.Ct. 2733, 171 L.Ed.2d 607 (2008), and " the Commission must have considerable latitude in developing a methodology responsive to its regulatory challenge," Am. Pub. Gas Ass'n v. FPC, 567 F.2d 1016, 1037, 186 U.S.App.D.C. 23 (D.C. Cir. 1977) (citing Permian Basin Area Rate Cases, 390 U.S. 747, 790, 88 S.Ct. 1344, 20 L.Ed.2d 312 (1968)).
Mandatory Regional Planning: Statutory Authority.
In adopting the transmission planning reforms in the Final Rule, the Commission relied on FPA Section 206. See Order No. 1000 ¶ 99, 76 Fed. Reg. at 49,860. Petitioners contend that although " [FPA] Sections 205 and 206 empower [the Commission] to ensure that transactions involving voluntary planning arrangements are just, reasonable, and nondiscriminatory," the Commission lacks authority " to mandate transmission planning in the first instance" because the FPA " only allows [the Commission] to regulate existing voluntary commercial relationships." Pet'rs' Threshold Br. 3. Petitioners also contend that Sections 201 and 202(a) preclude the Commission's planning mandate.
In addressing issues of statutory interpretation, the court must begin with the text, turning as need be to the structure, purpose, and context of the statute. See Caraco Pharm. Labs., Ltd. v. Novo Nordisk A/S, 132 S.Ct. 1670, 1680-81, 182 L.Ed.2d 678 (2012); N.Y. State Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 655, 115 S.Ct. 1671, 131 L.Ed.2d 695 (1995); Petit v. U.S. Dep't of Educ., 675 F.3d 769, 781-82, 400 U.S.App.D.C. 108 (D.C. Cir. 2012).
Section 206(a) provides, in relevant part:
Whenever the Commission, after a hearing held upon its own motion or upon complaint, shall find that any rate, charge, or classification, demanded, observed, charged, or collected by any public utility for any transmission or sale subject to the jurisdiction of the Commission, or that any rule, regulation, practice, or contract affecting such rate, charge, or classification is unjust, unreasonable, unduly discriminatory or preferential, the Commission shall determine the just and reasonable rate, charge, classification, rule, regulation, practice, or contract to be thereafter observed and in force, and shall fix the same by order.
16 U.S.C. § 824e(a)(emphasis added). By its plain terms, Section 206 instructs the Commission to remedy " any . . . practice" that " affect[s]" a rate for interstate electricity transmission services " demanded" or " charged" by " any public utility" if such practice " is unjust, unreasonable, unduly discriminatory or preferential." Id. The text does not define " practice," although use of the word " any" amplifies the breadth of the delegation to the Commission. See United States v. Gonzales, 520 U.S. 1, 5, 117 S.Ct. 1032, 137 L.Ed.2d 132 (1997).
In the Final Rule, the Commission identified underlying problems with " existing
transmission planning processes" and found that those processes " have a direct and discernable affect [sic] on rates," explaining that " [i]t is through the transmission planning process that . . . providers determine which transmission facilities will more efficiently or cost-effectively meet the needs of the region, the development of which directly impacts the rates, terms and conditions of jurisdictional service." Order No. 1000 ¶ ¶ 112, 116, 76 Fed. Reg. at 49,862. The Commission concluded that " for the pro forma OATT (and, consequently, public utility transmission providers' OATTs) to be just and reasonable and not unduly discriminatory or preferential, it must be revised." Id. ¶ 116, 76 Fed. Reg. at 49,862. To remedy the identified systemic problems, the Commission mandated that all transmission providers not only participate in a planning process that is open and transparent as Order No. 890 requires, but also one that is regional in scope and produces a transmission plan whereby providers have the information needed to determine which projects satisfy local and regional needs more efficiently and effectively. Also, the plan must consider transmission needs driven by public policy requirements, not be impeded by federal rights of first refusal allowing preferences in favor of incumbents, and allocate ex ante among beneficiaries the costs of new transmission facilities. See id. ¶ ¶ 146-48, 151, 203, 313, 499, 76 Fed. Reg. at 49,867-68, 49,876, 49,895-96, 49,921.
Petitioners challenge neither the Commission's conclusion that the current transmission planning processes are " practices" under Section 206, see, e.g., id. ¶ 58, 76 Fed. Reg. at 49,853, nor its conclusion that such transmission planning practices directly affect rates, see id. ¶ 112, 76 Fed. Reg. at 49,862; see also Oral Arg. Tr. at 10:5-19. Neither can they dispute that the Commission is obligated by the plain text of Section 206 to ensure that such practices are just and reasonable and not unduly discriminatory or preferential. Instead petitioners maintain essentially that a lack of regional transmission planning was not an existing practice subject to the Commission's authority under Section 206, and that " the decision whether to coordinate planning is left, in the first instance, to utilities." Pet'rs' Threshold Br. 8. Petitioners rely on Atlantic City Electric Co. v. FERC, 295 F.3d 1, 10, 353 U.S.App.D.C. 1 (D.C. Cir. 2002), for the proposition that the Commission is " limited under section 206 to investigat[ing] the reasonableness of the terms of existing utility-customer relationships." Pet'rs' Threshold Br. 8. But in Atlantic City the court stated that Section 206 permits the Commission " to initiate changes to existing utility rates and practices," 295 F.3d at 10, which is what the Commission claims to have done in the Final Rule. Petitioners' reliance on Atlantic City is misplaced because it begs the question of what " practice" means.
The authority and obligation that Congress vested in the Commission to remedy certain practices is broadly stated and the only question is what limits are fairly implied. On the one hand, Section 206 cannot be fairly viewed as the type of " subtle device" at issue in MCI Telecommunications Corp. v. AT& T Co., 512 U.S. 218, 224, 231, 114 S.Ct. 2223, 129 L.Ed.2d 182 (1994), on which petitioners rely. There, the Supreme Court rejected the agency's attempt to interpret its statutory authority to " modify any requirement" to extend to a fundamental change to a tariff-filing requirement of " enormous importance to the statutory scheme." Id. On the other hand, in California Independent System Operator Corp. v. FERC, 372 F.3d 395, 398, 362 U.S.App.D.C. 28 (D.C. Cir. 2004) (" CAISO" ), this court held that the Commission had exceeded its authority under Section 206 by calling for the replacement of a public utility's board of
directors. The court explained that " [t]he word 'practices' is a word of sufficiently diverse definitions that the only realistic approach to determining Congress's 'plain meaning,' if any, is to regard the word in its context." Understood in the context of Section 206's transactional terms, the court observed, " [i]t is quite a leap" to move from the authority to regulate rates, charges, classifications and closely related matters to " an implication that by the word 'practice,' Congress empowered the Commission . . . to reform completely the governing structure of [an ISO]." Id. Significantly for present purposes, the court distinguished such an expansive interpretation of the word " practices" from Commission action to " effect a reformation of some 'practice' in a more traditional sense of actions habitually being taken by a utility in connection with a rate found to be unjust or unreasonable." Id.
Reforming the practices of failing to engage in regional planning and ex ante cost allocation for development of new regional transmission facilities is not the kind of interpretive " leap" that concerned the court in CAISO but rather involves a core reason underlying Congress' instruction in Section 206. This is illustrated by the court's decision in TAPS, 225 F.3d 667. There, the court upheld Order No. 888 mandating the unbundling of generation and transmission services and the filing of OATTs as a remedy for the refusal of transmission-owning facilities to offer transmission to emerging competitors on non-discriminatory terms. The Commission found that these facilities " c[ould] be expected to act in their own interest to maintain their monopoly" by either " denying transmission access outright" or " by providing transmission services to competitors only at comparatively unfavorable rates, terms, and conditions." Id. at 683-84. Although some facilities had voluntarily opened their transmission facilities to third parties, the Commission concluded that " relying upon voluntary arrangements . . . would not remedy the fundamentally anti-competitive structure of the transmission industry." Id. at 684. The court deferred to the Commission's reasonable interpretation that it had " authority under FPA § § 205 and 206 to require open access as a generic remedy to prevent undue discrimination." Id. at 687. Notably, then, in TAPS, the court agreed with the Commission's interpretation here that a failure to act qualifies as a " practice" under Section 206 that it must remedy when the failure to act is " unjust, unreasonable, unduly discriminatory or preferential," 16 U.S.C. § 824e(a), and directly affects or is closely related to jurisdictional rates, see CAISO, 372 F.3d at 403.
Petitioners attempt to distinguish TAPS by characterizing regional transmission plans as " regional planning agreements" and " [a]greements to coordinate transmission planning" that require transmission providers to take on " binding" commercial obligations. See Oral Arg. Tr. at 3:19-21, 11:6-13; Pet'rs' Threshold Br. 13. They rely on Otter Tail Power Co. v. United States, 410 U.S. 366, 93 S.Ct. 1022, 35 L.Ed.2d 359 (1973), for the proposition that Congress intended the formation of such agreements to be " voluntary" and " governed in the first instance by business judgment," id. at 374; see Oral Arg. Tr. at 3, 11:6-13; Pet'rs' Threshold Br. 8, 13. This misperceives what the Commission has required in the Final Rule. In Order No. 1000, the Commission expressly " decline[d] to impose obligations to build or mandatory processes to obtain commitments to construct transmission facilities in the regional transmission plan." Order No. 1000 ¶ 159, 76 Fed. Reg. at 49,870. More generally, the Commission disavowed that it was purporting to " determine what needs to be built, where it
needs to be built, and who needs to build it." Id. ¶ 49, 76 Fed. Reg. at 49,852. As the Commission explained on rehearing, " Order No. 1000's transmission planning reforms are concerned with process" and " are not intended to dictate substantive outcomes." Order No. 1000-A ¶ 188, 77 Fed. Reg. at 32,215. The substance of a regional transmission plan and any subsequent formation of agreements to construct or operate regional transmission facilities remain within the discretion of the decision-makers in each planning region.
In TAPS, the court rejected petitioners' interpretation of Otter Tail. That was an antitrust enforcement action in which the Supreme Court held that an electric power company was not, by reason of the Commission's authority under the FPA to compel involuntary interconnections of power, immune from antitrust regulation for its refusals to sell at wholesale or to transfer power to municipalities. 410 U.S. at 373. The Court noted that, as originally proposed, the FPA would have made public utilities common carriers and empowered the Commission to order the wheeling of power if it was " necessary or desirable in the public interest," but these provisions were eliminated and replaced by involuntary wheeling authority " subject to limitations unrelated to antitrust considerations" in order to " preserve the voluntary action of the utilities." Id. at 373-74 (internal quotation marks omitted). Based on this legislative history, the Court explained that " Congress rejected a pervasive regulatory scheme for controlling the interstate distribution of power in favor of voluntary commercial relationships," and that " [w]hen these relationships are governed in the first instance by business judgment and not regulatory coercion, courts must be hesitant to conclude that Congress intended to override the fundamental national policies embodied in the antitrust laws." Id. at 374 (emphasis added). In TAPS, this court concluded that " while Otter Tail may represent a general rule that [the Commission]'s authority to order open access is limited, the FPA, like the [Natural Gas Act], makes an exception to that rule where [the Commission] finds undue discrimination." 225 F.3d at 686-87 (citing Associated Gas Distributors, 824 F.2d at 998). The court thus recognized that Otter Tail did not purport to limit the Commission's Section 206 authority to remedy practices affecting rates that are unduly discriminatory. Rather, the Supreme Court in Otter Tail concluded that the FPA does not preempt the field of electric utility regulation.
In their Reply Brief, petitioners attempt to inject another reason the Commission lacked authority under Section 206, maintaining that the Commission's regional planning mandate " is not requiring a change to existing practices," but is instead " a directive to engage in new practices by unlawfully compelling formation of new commercial relationships," i.e., " coordinated planning arrangements." Pet'rs' Threshold Reply Br. 11. The court ordinarily refuses to address arguments first presented in a reply brief, see Domtar Me. Corp. v. FERC, 347 F.3d 304, 309-10, 358 U.S.App.D.C. 193 (D.C. Cir. 2003), because the opposing party has no opportunity to respond. We note, however, that to the extent this is not a reiteration of petitioners' Otter Tail argument, it is based on a false premise. Commission-mandated transmission planning is not new. See Order No. 890 ¶ 3, 72 Fed. Reg. at 12,267. The Final Rule builds on Order No. 890's requirements in light of changed circumstances and is simply the next step in a series of related reforms that began no later than Order No. 888. See Order No. 1000 ¶ 99, 76 Fed. Reg. at 49,860. For the reasons discussed, we conclude, consistent with the deferential
standard in step two of the Chevron analysis, 467 U.S. at 843, that the Commission reasonably interpreted Section 206 to authorize the Final Rule's planning mandate. See TAPS, 225 F.3d at 687, aff'd sub nom. New York, 535 U.S. 1, 122 S.Ct. 1012, 152 L.Ed.2d 47.
Petitioners' principal objection, in any event, is that Section 202(a) bars the Commission from mandating transmission planning.
Section 202(a) provides, in relevant part:
For the purpose of assuring an abundant supply of electric energy throughout the United States with the greatest possible economy and with regard to the proper utilization and conservation of natural resources, the Commission is empowered and directed to divide the country into regional districts for the voluntary interconnection and coordination of facilities for the generation, transmission, and sale of electric energy. . . . It shall be the duty of the Commission to promote and encourage such interconnection and coordination within each such district and between such districts.
16 U.S.C. § 824a(a) (emphasis added). The Commission concluded Section 202(a) posed no bar to adoption of the challenged transmission planning reforms because " coordination" refers to the coordinated operation of existing transmission facilities, not to the planning of future facilities. See Order No. 1000 ¶ 100, 76 Fed. Reg. at 49,860; Order No. 1000-A ¶ 123, 77 Fed. Reg. at 32,206. The Commission explained that the coordinated operation contemplated by Section 202(a), as a practical matter, " can occur only after the facilities are interconnected." Order No. 1000-A ¶ 124, 77 Fed. Reg. at 32,206. By contrast, " [t]he planning of new transmission facilities occurs before they can be interconnected," and thus " any transmission planning relevant to [new transmission] facilities occurs prior to those matters that [Section 202(a)] mandates be voluntary." Id. ¶ 125, 77 Fed. Reg. at 32,206.
In petitioners' view, the meaning of " coordination" is " self-evident," Pet'rs' Threshold Br. 11, and Central Iowa Power Cooperative v. FERC, 606 F.2d 1156, 196 U.S.App.D.C. 249 (D.C. Cir. 1979), confirms that Section 202(a) precludes the Commission from requiring planning arrangements. Petitioners contend that " coordination" plainly encompasses transmission planning because " the coordination of transmission facilities is exactly what is done in transmission planning." Pet'rs' Threshold Br. 11. The statutory text, however, does not unambiguously establish the meaning of " coordination" that petitioners advance. As the Supreme Court has observed, " context matters," Caraco Pharm., 132 S.Ct. at 1681, and " '[a] word is known by the company it keeps'--a rule that 'is often wisely applied where a word is capable of many meanings in order to avoid the giving of unintended breadth to the Acts of Congress,'" Dolan v. U.S. Postal Serv., 546 U.S. 481, 486, 126 S.Ct. 1252, 163 L.Ed.2d 1079 (2006) (quoting Jarecki v. G.D. Searle & Co., 367 U.S. 303, 307, 81 S.Ct. 1579, 6 L.Ed.2d 859, 1961-2 C.B. 254 (1961)). The " coordination" addressed in Section 202(a) is textually limited to coordination for purposes of generation, transmission and sale, all activities that require operating facilities. Section 202(a) is silent regarding the Commission's authority with respect to pre-operational planning designed as a remedy to practices affecting rates that are unjust, unreasonable, or unduly discriminatory or preferential; that authority is addressed in Section 206. Petitioners' suggestion that " [r]eading 'coordination' to exclude coordinated transmission planning
undermines the [FPA]'s purpose to preserve the voluntary nature of [commercial] relationships," Pet'rs' Threshold Br. 13, misperceives the nature of the Final Rule, which, as discussed, addresses process. By characterizing mandated transmission planning as mandating binding commercial relationships, petitioners' approach fails for the same reasons their reliance on Otter Tail is unavailing.
Central Iowa, 606 F.2d 1156, 196 U.S.App.D.C. 249, is not dispositive of the meaning of " coordination" in the context of planning for new transmission facilities. There, the court rejected challenges to the Commission's approval, pursuant to Section 205, of a power-pooling agreement that " provide[d] a mechanism for coordinated daily operation of generation facilities" but did not establish a fully integrated electric system with central dispatch of generating units. Id. at 1161. In addressing objections on antitrust grounds, the court observed that " Congress has decided, as a matter of general policy, that power pooling arrangements, rather than unrestrained competition between electric facilities, are in the public interest," id. at 1162, and that in enacting Section 202(a) " Congress was 'confident that enlightened self-interest will lead the utilities to cooperate . . . in bringing about the economies which can alone be secured through . . . planned coordination.'" Id. (quoting S. Rep. No. 74-621, at 49 (1935)). Although " Section 202(a) recognizes that power pooling can yield benefits of efficiency and economy," nonetheless " Congress decided to make such coordination voluntary, with limited exceptions." Id. at 1167 (emphasis added). Because of the " expressly voluntary nature of coordination under section 202(a)," the court held that " the Commission could not have mandated adoption of the [power pooling] Agreement, and failure . . . to establish a fully integrated electric system could not justify rejection of the Agreement filed." Id. at 1168 (footnote omitted). The court acknowledged, however, that the Commission had authority under Section 206 " to order changes in the limited scope of the Agreement . . . if, in the absence of such modifications, the Agreement presented 'any rule, regulation, practice or contract [that was] unjust, unreasonable, unduly discriminatory or preferential." Id. (alteration in original) (quoting 16 U.S.C. § 824e(a)). The court cautioned that " a pooling plan is [not] unlawful under section 206 merely because a more comprehensive arrangement might better achieve the purposes of section 202(a)." Id.
Petitioners maintain that Central Iowa " left no doubt that 'coordination' encompassed joint transmission planning" because the court " quot[ed] approvingly the definition found in [the Commission's] own 1970 National Power Survey." Pet'rs' Threshold Br. 9. That definition stated that " [a]s used in this chapter, [c]oordination is joint planning and operation of bulk power facilities by two or more electric systems for improved reliability and increased efficiency which would not be attainable if each system acted independently." Central Iowa, 606 F.2d at 1168 n.36 (emphasis in original) (quoting FPC, The 1970 National Power Survey I-17-1 to I-17-2 (1971)). The survey describes different degrees of power pooling among operating facilities, noting variables, including " managerial views with respect to planning, marketing, competition, and retention of prerogatives." Id. Neither the definition nor the description is inconsistent with the Commission's interpretation of Section 202(a) in the Final Rule. The court, in any event, did not present the quotation as a definitive interpretation of the meaning of " coordination" as would bar the Commission's adoption of planning reforms under Section 206. To the extent the
court in Central Iowa interpreted Section 202(a) to mean that " Congress intended coordination and interconnection arrangements be left to the 'voluntary' action of the utilities," Atlantic City, 295 F.3d at 12, there is nothing to suggest that the court purported to interpret the meaning of " coordination" in regard to the planning of future facilities. Petitioners' view of Central Iowa thus fails to " trump [the Commission's permissible] construction" of " coordination." Nat'l Cable & Telecomms. Ass'n v. Brand X Internet Servs., 545 U.S. 967, 982, 125 S.Ct. 2688, 162 L.Ed.2d 820 (2005).
Similarly, petitioners' several grammatical objections to the Commission's interpretation of Section 202(a) fail to demonstrate it is impermissible. Although the Commission acknowledged that " coordination," viewed in isolation, might be read to include regional transmission planning, the Commission relied on other textual cues to conclude that " coordination" instead referred only to coordinated operation. Section 202(a) identified two activities that the Commission was to encourage -- the " interconnection and coordination of facilities." From the sequence of these terms, the Commission concluded that " coordination" referred to the coordination of operations that could occur only after facilities were interconnected. See Order No. 1000-A ¶ ¶ 123-25, 77 Fed. Reg. at 32,206. Petitioners suggest the Commission's " artificial reliance on the sequence of the terms 'interconnection' and 'coordination' . . . creates an unnatural reading." Pet'rs' Threshold Br. 13. Because " interconnection and coordination" are " phrased in the conjunctive," petitioners conclude that there " is no logical or grammatical reason why the term coordination should be qualified by the term interconnection." Id. at 14. But reliance on the text and its structure to discern congressional intent is a well-recognized method of statutory interpretation. See, e.g., U.S. Nat'l Bank of Or. v. Indep. Ins. Agents of Am., Inc., 508 U.S. 439, 455, 113 S.Ct. 2173, 124 L.Ed.2d 402 (1993); see also Antonin Scalia & Bryan A. Garner, Reading Law: The Interpretation of Legal Texts 167 (2012). It is neither ungrammatical nor unnatural to read " and" to suggest a chronological sequence. See David Crystal, The Cambridge Encyclopedia of the English Language 213 (1995); 2 George O. Curme, A Grammar of the English Language: Syntax 162 (1980). " Nouns joined by coordinating conjunctions are usually treated as a single, compounded unit, and a postmodifying prepositional phrase is most naturally read to modify that single unit." ConocoPhillips Co. v. EPA, 612 F.3d 822, 839 (5th Cir. 2010) (footnotes omitted) (citing Sidney Greenbaum, Oxford English Grammar 233 (1996)). Petitioners so fail to demonstrate that the Commission impermissibly construed " interconnection and coordination" as a single, sequential unit modified by the clause " of facilities for the generation, transmission, and sale of electric energy." Petitioners likewise fail to show that the Commission impermissibly construed Section 202(a) to refer only to currently operating facilities; the post-modifying prepositional phrase contains only operational nouns (" generation, transmission, and sale" ), as opposed to pre-operational nouns ( e.g., " planning," " development," or " construction" ).
Neither do petitioners demonstrate that the Commission's interpretation of Section 202(a) was arbitrary and capricious because it departed from a prior interpretation without explanation. Pointing to the Commission's references to " coordination" in other contexts, they show no " flip flop," Pet'rs' Threshold Br. 16, requiring further ...