Docket Nos. ER21-1111-006, et al.
The United States Court of Appeals for the D.C. Circuit has found that the Commission’s previous decisionmaking in effectuating the Southeast Energy Exchange Market (SEEM) tariff was arbitrary and capricious, remanding the case to the Commission to reconsider in light of the court’s decision. The only reasonable conclusion to this matter given the text of Order No. 888 and the court’s reasoning in Advanced Energy United[1] is to determine that SEEM is a loose power pool that violates Order No. 888’s open membership requirements for such pools. While I seldom disagree with a briefing order, in this case, the D.C. Circuit’s clear conclusions and directives obviate further record development. When SEEM walks like a duck and quacks like a duck, additional briefing is unnecessary to confirm that it is, in fact, a duck. The majority’s refusal to call SEEM a loose power pool in this order only forestalls the inevitable end of SEEM. It wastes the valuable time of stakeholders we ask to engage in the proceedings and allows SEEM’s construct for pooling transmission service to operate despite its illegality under the Federal Power Act.
SEEM is a loose power pool
Order No. 888-A defines a loose power pool as “any multilateral arrangement, other than a tight power pool or a holding company arrangement, that explicitly or implicitly contains discounted and/or special transmission arrangements, that is rates, terms, or conditions.”[2] Further, Order No. 888 explicitly contemplates non-pancaked rates as an example of a discounted rate,[3] as noted by the D.C. Circuit.[4]
The D.C. Circuit explicitly directed the Commission to provide “a more cogent explanation for its interpretation of ‘discounted’ given Order No. 888’s explicit reference to non-pancaked as an example of a discounted rate.”[5] In light of the D.C. Circuit’s reasoning, however, the prior interpretation that SEEM was not a discounted rate is untenable. By Filing Parties’ own admission, SEEM features non-pancaked rates.[6] Since Order No. 888’s promulgation, the Commission has not issued any regulations redefining discounted rates, and the logic underlying Order No. 888 still holds. Therefore, as a non-pancaked rate, SEEM is a discounted rate under Order No. 888 and the D.C. Circuit’s decision. That makes it a loose power pool under Order No. 888 because SEEM is unquestionably a multilateral arrangement between utilities.
SEEM violates Order No. 888’s requirements for loose power pools
Order No. 888 requires that a loose power pool must (1) have on file a “joint pool-wide tariff” that allows members and non-members alike to access the discounted and/or special transmission at a comparable rate and (2) include “open, non-discriminatory membership provisions” that “allow any bulk power market participant to join, regardless of the type of entity, affiliation, or geographic location.”[7]
SEEM fails both these requirements. Most relevant to today’s Remand Order,[8] SEEM’s membership requirements are neither open nor non-discriminatory because they restrict access to entities that own or otherwise control a source or sink within the SEEM footprint. As the D.C. Circuit found, “the record reflects 65 existing bilateral trading partners who cannot participate in this new service due to the geographic requirement.”[9] The court directed this Commission, on remand, to “provide a more fulsome explanation for why the ‘market design decisions made by the filing parties’ . . . are actually superior to the status quo in light of Order No. 888’s open access principles,”[10] or else “change course.”[11]
In my view, the Federal Power Act requires a course correction. No further briefing is necessary to reach the simple conclusion that SEEM’s discriminatory membership provisions are not superior to a non-discriminatory approach, as explicitly required by Order No. 888. Customers in the Southeast deserve better, and the Commission should do better.
The Commission now asks, among other questions, “whether the geographic requirement reflected in the SEEM Agreement is necessary for the SEEM platform to be technically feasible.”[12] But this question was already addressed in the initial proceeding. Filing Parties stated that the geographic requirement was necessary for the SEEM platform to be technically feasible,[13] and the Commission based its acceptance of SEEM’s tariff on this assertion.[14] In response, the D.C. Circuit stated that “the Commission fails to grapple with the objection that any exclusionary ‘technical requirement’ is one of the Intervenors’ own making.”[15] The court found unavailing the Commission’s finding that the restriction was technically necessary, concluding that alleged technical necessity does not render the construct permissible under Order No. 888.[16] By doubling down on whether the geographic restriction was technically necessary for SEEM’s design, this order ignores the court’s explicit conclusion on this question. Further briefing on this issue serves no practical purpose.
Filing Parties could clearly design a loose power pool with open, non-discriminatory access. That they may have been unable to provide such access in SEEM given the particular pool design choices they made is hardly evidence that these unduly discriminatory choices are superior to the open and not unduly discriminatory membership conditions required by Order No. 888. In prior orders and statements, Commissioners supporting SEEM have constructed a straw man, attempting to dismiss my and Petitioner’s concerns as stemming from a desire for a full Southeastern RTO, of which SEEM falls short. But my concerns have been and remain focused only on the question in front of us. Far from examining the RTO hypothetical, I have examined only whether SEEM as proposed is legal under the requirements of the Federal Power Act, Order No. 888, and Order No. 888-A. The court rightfully found arbitrary and capricious the Commission’s prior reasoning that the filed tariffs met these requirements. I have enthusiastically supported other non-RTO tariff mechanisms that further integrate utilities where those mechanisms meet the Federal Power Act’s requirements.[17] But the SEEM construct, unlike other such constructs, fails to meet the requirements of the Federal Power Act and Order No. 888. As such, it harms existing Southeast market participants by establishing a discriminatory, preferential pool that favors its members. The briefing called for by the Commission is a dead end.
Conclusion
While my statement today focuses on the unnecessary questions asked in the Remand Order, I also stress that, in remanding this case, the court not only directed the Commission to address the issues on which the Commission now requests briefing, but also found that the requests for rehearing were timely and directed the Commission to consider them on the merits. The majority’s order fails to accomplish either task.
For these reasons, I respectfully dissent.
[1] Advanced Energy United v. FERC, 82 F.4th 1095 (D.C. Cir. 2023).
[2] Reaffirming & Clarifying Terms of Order 888 in regards to Open Access Transmission Services & Recovery of Stranded Costs, Order No. 888-A, FERC Stats. & Regs. ¶ 31,048, at 30,241 (1997).
[3] The relevant language provides that “the pool could make available a transmission rate that is structured the same as the discounted rate (e.g., non-pancaked).” Order No. 888, FERC Stats. & Regs. ¶ 31,036 at 31,727.
[4] Advanced Energy United, Inc. v. FERC, 82 F.4th at 1115.
[5] Id.
[6] Alabama Power Company, Tariff Filing, Docket No. ER21-1111-000, Transmittal, at 38 (filed Feb. 12, 2021) (SEEM Agreement Transmittal) (SEEM “will eliminate rate pancakes”); see also SEEM Agreement Transmittal, Attach. D at 3, 8, 19 (Affidavit of Susan Pope) (describing SEEM as “zero-cost, non-pancaked transmission service”).
[7] Promoting Wholesale Competition Through Open Access Non-Discriminatory Transmission Servs. by Pub. Utils.; Recovery of Stranded Costs by Pub. Utils. & Transmitting Utils., Order No. 888, FERC Stats. & Regs. ¶ 31,036, at 31,728 (1996).
[8] Al. Power Co., [XX] FERC ¶ [XX,XXX] (2024) (Remand Order).
[9] Advanced Energy United, 82 F.4th at 1112 (emphasis in original).
[10] Id. at 1113 (emphasis in original).
[11] Id. at 1115.
[12] Remand Order, [XX] FERC ¶ [XX,XXX] at P 27.
[13] See Duke Energy Progress, LLC, 177 FERC ¶ 61,080 (2021) (Clements, Comm’r, dissenting at P 13) (“The Filing Parties rationalize the proposed geographic restriction as permissible because it ‘is not currently technically feasible to allow entities outside the Territory to participation in the Southeast EEM.”) (quoting Filing Parties March 30 Answer at 44).
[14] Id. at P 65 (concluding that “the Southeast EEM’s participation requirements” do not “erect[] an unduly discriminatory barrier to accessing NFEETS” because they “are consistent with the need to ensure the technical feasibility of the Southeast EEM”).
[15] Advanced Energy United, 82 F.4th at 1112-13.
[16] See id. at 1113 (“[T]he Commission fails to offer an adequate explanation for how the requested tariff revisions are [non-discriminatory] when the only explanation . . . is that it was simply designed that way.”).
[17] See, for example, the Commission’s orders accepting the Western Resource Adequacy Program (“WRAP”), Northwest Power Pool, 182 FERC ¶ 61,063 (2023), and the California ISO’s Extended Day-Ahead Market (“EDAM”), California Independent System Operator Corporation, 185 FERC ¶ 61,210 (2023).