September 30, 2020
Docket No. ER20-966-000
I dissent from the Commission’s order granting Montana-Dakota Utilities Co.’s (Montana-Dakota) request for a one-time, limited waiver of the one-year rollover notice requirement in section 2.2 of the Southwest Power Pool, Inc. (SPP) Open Access Transmission Tariff (OATT)[1] to allow Montana-Dakota to roll over its existing Network Integration Transmission Service (NITS). As I explain below, we are without the legal authority to grant such a waiver. Even if we were to put that infirmity aside, Montana-Dakota’s request fails our four-factor test.
Montana-Dakota filed on February 7, 2020, requesting waiver of the October 1, 2019 deadline under section 2.2 of the SPP tariff for submitting its rollover request. This is a request for a retroactive waiver. Yet nowhere does our order acknowledge this fact.
As the Commission well knows, there are two legal doctrines that limit our ability to grant retroactive waivers: the filed rate doctrine and the rule against retroactive ratemaking.[2] The filed rate doctrine provides that a public utility may not charge any rate other than that which has been filed with the Commission and allowed to go into effect.[3] Further, under the rule against retroactive ratemaking, “[n]ot only do the courts lack authority to impose a different rate than the one approved by the Commission, but the Commission itself has no power to alter a rate retroactively.”[4]
Although these doctrines developed in cases where utility rates were at issue, the logic of these decisions applies equally to non-rate tariff terms and conditions on file with the Commission.[5] Because a waiver request is in essence a request that the Commission permit a one-time change to a tariff provision, the Commission is legally barred by the filed rate doctrine and the rule against retroactive ratemaking from granting a retroactive waiver request unless one of two judicially-recognized exceptions applies: (1) the parties had notice that the tariff provision could be waived retroactively;[6] or (2) the tariff provision is embodied in a private contract between the parties, who have agreed in that contract to make the agreed-upon rate effective prior to filing that contract with the Commission.[7] Neither of these exceptions apply here.
The Commission may enjoy some latitude to interpret this precedent. But in order to grant a retroactive waiver in this case, the Commission must at least acknowledge that its authority to grant such a waiver is at issue and then identify the source of its legal authority to approve the request. The Commission has made no attempt to present such an explanation in its order, and I am aware of no legal theory by which it could justify its actions. Simply put: clear, long-held judicial doctrine would hold this waiver illegal and the Commission has failed to argue otherwise.
Even if the Commission had the power to grant this waiver, Montana-Dakota’s request cannot pass the four-factor test the Commission applies to those waiver requests it does have the authority to grant. This test requires the Commission to consider whether: (1) the underlying error was made in good faith; (2) the waiver is of limited scope; (3) the waiver addresses a concrete problem; and (4) the waiver does not have undesirable consequences, such as harming third parties.[8]
With respect to the fourth factor—no harm to third parties—Montana-Dakota asserts that “the requested waiver will maintain the status quo by allowing [Montana-Dakota] to continue to take SPP service to serve its Network Load and will preserve the long-term benefits of the Partial Settlement for [Montana-Dakota] and SPP members.”[9] But the fact that granting the waiver preserves the status quo is exactly why the waiver harms third parties. The entire purpose of rollover rights is to allow customers with existing transmission service agreements to retain their rights to transmission capacity that otherwise might go to other entities that have requested service.
Preserving the status quo for Montana-Dakota when application of SPP’s tariff would cause it to lose its rollover rights will cause entities that have submitted requests for service to incur substantial network upgrade costs to obtain service to which they would otherwise be entitled absent the waiver, or else be denied service. The record does not inform us as to the number of requests that would be affected by granting this waiver. Nevertheless, even in the absence of that evidence we know, based on Montana-Dakota’s own submission, that the request must run afoul of the no-harm-to-third-parties factor. Montana-Dakota refers to the resulting “substantial network upgrade costs” that Montana-Dakota could incur in obtaining new SPP NITS to serve its load if its request is denied.[10] The ineluctable conclusion is that granting the waiver request will relieve Montana-Dakota of those “substantial network upgrade costs” to be borne instead by other utilities.[11] This is the very definition of harm to third parties.
The Commission attempts to overcome the record evidence in applying the four-factor test, but that attempt fails as a matter of reasoned decision making. First, the Commission notes that there are “no claims” of harm in the record.[12] While it is literally true that there are no claims of harm, it does not matter that the evidence of harm does not appear in the record in the specific form of a party raising a claim. Montana-Dakota itself informed us, by way of supposed justification for the waiver, that absent the waiver, they faced harm in the form of network upgrade costs. This is the harm that the Commission now foists upon other utilities. The Commission cannot so easily dismiss unrebutted record evidence of harm to third parties.
Second, the Commission determines that granting the waiver will prevent harm to some third parties, namely Western Area Power Administration and Basin Electric Power Cooperative, who are Montana-Dakota’s transmission customers. I acknowledge this effect, but it is necessarily irrelevant if the fourth factor is to have any meaning. I cannot envision an occasion in which a utility would seek a waiver that does not allow some third parties to be spared harm. After all, utilities typically have customers (or investors) and these customers and investors would enjoy the benefits conferred by any waiver the utility receives. If all that need be shown is that granting a waiver will cause some third party to benefit by avoiding harms, then the no-harm-to-third-parties factor will be effectively written out of our waiver analysis. The inquiry under the fourth factor should solely be to determine whether third parties are harmed by the waiver, as it is a given that some parties will benefit.
I recognize that denying the waiver could have serious consequences for Montana-Dakota, as it relies on its NITS to serve its load, and Montana-Dakota could incur substantial network-upgrade costs, which will be passed on to its customers, if required to apply for new service. Those consequences would only have been exacerbated by our own inexcusable delay in acting on the waiver request. The order is being issued almost eight months after the request was filed. This means that Montana-Dakota now has missed the May deadline required by SPP’s OATT to enter the transmission open season. I suspect this is why the Commission has decided to grant the waiver request despite the order’s obvious legal infirmities and the request’s failure to satisfy our four-part test. Though Montana-Dakota and its customers may be due sympathy, to ignore the consequences of the waiver to other utilities is to take a one-sided view of the equities.
The concurrence suggests that I advance an approach that “denies the Commission a modicum of regulatory flexibility.”[13] To be clear, I believe that rejection of this waiver request is required by the law. It is the law that denies us that regulatory flexibility, inadvertency and circumstance-specific challenges notwithstanding. To deny a waiver under circumstances such as these might appear inflexible. But the doctrines that constrain us make no allowance for such considerations. The Supreme Court has spoken in unmistakable terms on this very subject: “strict adherence to the filed rate . . . , despite its harsh consequences in some cases, is necessary to enforcement of the Act.”[14] The U.S. Court of Appeals for the District of Columbia Circuit has been similarly unambiguous, stating in Old Dominion Electric Cooperative v. FERC (ODEC) that, “[t]he filed rate doctrine and the rule against retroactive ratemaking leave the Commission no discretion to waive the operation of a filed rate or to retroactively change or adjust a rate for good cause or for any other equitable considerations.”[15] And unlike the case in ODEC, Montana-Dakota bears primary responsibility for the position it is in due to its own failure to meet a tariff deadline plainly stated in SPP’s OATT.
For these reasons, I respectfully dissent.
[1] SPP, OATT, Sixth Revised Volume No. 1.
[2] See Waiver of Tariff Requirements, 171 FERC ¶ 61,156, at P 5 (2020).
[3] See Ark. La. Gas Co. v. Hall, 453 U.S. 571, 577 (1981) (Arkla); Mont.-Dakota Utils. Co. v. Nw. Pub. Serv. Co., 341 U.S. 246, 251-52 (1951).
[4] Arkla, 453 U.S. at 578.
[5] See, e.g., Seminole Elec. Coop., Inc. v. Fla. Power & Light Co., 139 FERC ¶ 61,254, at P 44 (2012), reh’g denied, 153 FERC ¶ 61,037, at P 27 (2015), aff’d sub nom. Seminole Elec. Coop., Inc. v. FERC, 861 F.3d 230, 234-35 (D.C. Cir. 2017).
[6] See Nat. Gas Clearinghouse v. FERC, 965 F.2d 1066, 1075 (D.C. Cir. 1992).
[7] See Consol. Edison Co. of N.Y., Inc. v. FERC, 347 F.3d 964, 969 (D.C. Cir. 2003); Columbia Gas Transmission Corp. v. FERC, 895 F.2d 791, 795-97 (D.C. Cir. 1990).
[8] See, e.g., New Brunswick Energy Mktg. Corp., 167 FERC ¶ 61,252, at P 12 (2019); Midcontinent Indep. Sys. Operator, Inc., 154 FERC ¶ 61,059, at P 13 (2016).
[9] Waiver Request at 8-9.
[10] Id. at 7-8.
[11] Id. at 7.
[12] Mont.-Dakota Utils. Co., 172 FERC ¶ 61,278, at P 18 (2020).
[13] Id. (Chatterjee, Chairman, concurring at P 2).
[14] Maislin Indus., U.S., Inc. v. Primary Steel, Inc., 497 U.S. 116, 132 (1990); accord Am. Tel. & Tel. Co. v. Cent. Office Tel., Inc., 524 U.S. 214, 223 (1998) (explaining the applicability of the filed rate doctrine). These cases involved application of the filed rate doctrine to an industry outside of the Commission’s jurisdiction, but the requirement of strict adherence to the doctrine applies equally here.
[15] 892 F.3d 1223, 1230 (D.C. Cir. 2018) (citing Columbia Gas Transmission Corp., 895 F.2d at 794-97).