Commissioner James Danly Statement
March 18, 2021
Docket No. ER20-1892-000
Order: E-13
“The 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.”[1] This D.C. Circuit holding is unambiguous. Yet in today’s order the Commission grants MISO’s request for a retroactive waiver based “on equitable grounds.”[2]
I can understand why the Commission may want to provide the equitable relief requested here by the Midcontinent Independent System Operator, Inc. (MISO). The complex provisions of MISO’s Open Access Transmission, Energy and Operating Reserve Markets Tariff (Tariff), regarding requirements for the payment of shutdown costs of online Demand Response Resources conflict to some extent. Some provisions suggest that payment is required and others suggest that such payment is not permitted.[3] MISO, however, interprets the Tariff as preventing the payment of shutdown costs to these resources. Consequently, when Voltus, Inc. (Voltus) offered its unit into MISO’s spinning reserves market, it lost over $200,000 in shutdown costs. It appears Voltus would not have offered had it correctly interpreted what are admittedly conflicting tariff provisions. But this is no more sympathetic than the waiver request in ODEC, where tariff provisions prevented generation owners from recovering the unexpectedly high costs of natural gas they purchased to generate electricity during a cold snap. As the court held in ODEC, the Commission simply has no discretion to grant the retroactive relief requested by Voltus based on equitable considerations.
I cannot imagine why the Commission believes that ODEC is inapplicable here, and the majority has not taken it upon itself to explain. As has been the Commission’s recent practice, its order does not even acknowledge that MISO’s requested waiver is retroactive, much less provide any explanation for why the Commission has the authority to issue the waiver in light of the requirements of the Federal Power Act, the holding in ODEC, or any other precedent. This failure to address the material issue of the Commission’s authority to grant the requested waiver constitutes a violation of the Administrative Procedure Act that requires the Commission provide a reasoned explanation for its actions.[4]
More importantly, the Commission has acted outside of its legal authority by granting a retroactive rate increase. The Commission attempts to hide this fact by describing MISO’s request as a waiver of the tariff provisions preventing MISO from paying Voltus for its shutdown costs.[5] However, MISO’s waiver filing makes clear that MISO intends to pay Voltus by imposing a retroactive charge on MISO’s customers:
The ADR relief will be implemented through the issuance of a Miscellaneous Adjustment on an upcoming market settlement statement. The total amount to be paid to Voltus (i.e., $200,400) will be allocated to Market Participants based on their Load Ratio Share during the dates and periods for which Voltus is granted relief.[6]
In other words, MISO is imposing a retroactive rate increase that covers the past time period during which Voltus sold spinning reserves but was not entitled to shutdown costs under MISO’s Service Tariff.
Putting aside the fact that granting this request violates the filed rate doctrine, the request also violates the fourth prong of our four factor test for granting waivers, i.e. that the waiver does not have undesirable consequences, such as harming third parties.[7] Requiring customers to make payments they would not have to pay under the Tariff would seem to be the very definition of harm to third parties. However, the Commission avoids having to address this question by ignoring the payments customers will be required to make. Instead, the Commission states that there is no harm to third parties because:
[T]he ADR relief to be paid to Voltus involves the payment of shutdown costs Voltus included in its offers, and pursuant to which Voltus’s DRR-Type I resources provided Spinning Reserve. We further note that no parties have protested the instant filing.[8]
Curiously, this statement focuses on the impact of the waiver on Voltus and cannot satisfy the inquiry required by the fourth prong of our analysis which requires consideration of the effects of a waiver on third parties. It represents yet another example of the recent trend of orders in which the Commission avoids examining the harm to third parties caused by a proposed waiver by ignoring or assuming away the harm caused by the proposed waiver.[9]
I am concerned that the basis for the Commission’s findings of no harm in these cases is that in each instance no one protested the waiver request. If so, that would be troubling. Parties harmed by a requested waiver might choose not to protest for any number of reasons: perhaps they are afraid of retribution for rocking the boat, perhaps the harmed parties are unaware of the potential for harm created by the waiver request because they do not have the resources to monitor every retroactive waiver request presented to the Commission, or perhaps they believe that it is pointless to protest given the Commission’s recent trend of granting almost every retroactive waiver request presented. Whatever the reason, harm is harm, and the Commission should not factor the failure to protest into its analysis of whether a requested waiver causes harm to third parties.
I also find it somewhat puzzling that the Commission would so blithely approve a retroactive rate increase with no consideration whatsoever of the effect of the increase on MISO’s customers. Less than three months ago, two of my colleagues asserted that “[t]he Federal Power Act is consumer protective,” and that any assertion that the Federal Power Act should be interpreted in a way that prevents protection of consumers “would be nonsensical.”[10] One would think that these colleagues and the customers who will ultimately bear the costs would want the Commission to exercise the authority it clearly possesses to prevent an unlawful retroactive rate increase.
For these reasons, I respectfully dissent.
[1] Old Dominion Elec. Coop., Inc. v. FERC, 892 F.3d 1223, 1230 (D.C. Cir. 2018) (ODEC) (citing Columbia Gas Transmission Corp., 895 F.2d 791, 794-97) (emphasis added).
[2] Midcontinent Indep. Sys. Operator, Inc., 174 FERC ¶ 61,202, at P 9 (2021) (MISO) (emphasis added).
[3] The Commission’s discussion of the relevant Tariff provisions is somewhat confusing. On the one hand, the Commission cites to “Tariff provisions allowing inclusion of shutdown costs in DRR-Type I resource offers and obligating MISO to ensure recovery of such costs.” MISO, 174 FERC ¶ 61,202 at P 22. If in fact the Tariff obligates MISO to ensure recovery of such costs, then there would be no problem in permitting MISO to pay Voltus, Inc. the shutdown costs required by the Tariff. In that event there would be no need for a waiver of the Tariff. But the Commission goes on to point to “certain payment provisions in the Tariff that might otherwise prevent MISO from compensating Voltus.” Id. Apparently, the Commission believes these latter provisions control, because it goes on to grant the requested retroactive waiver which is necessary only if the Tariff were to prevent the payments.
[4] See ODEC, 892 F.3d at 1230 (explaining that the Administrative Procedure Act requires “reasonably explained decisions.”) (citing Alcoa Inc. v. FERC, 564 F.3d 1342, 1347 (D.C. Cir. 2009)).
[5] MISO, 174 FERC ¶ 61,202 at P 1.
[6] MISO May 22, 2020 Limited Waiver Request at 10 (emphasis added).
[7] See, e.g., Citizens Sunrise Transmission LLC, 171 FERC ¶ 61,106, at P 10 (2020); Midcontinent Indep. Sys. Operator, Inc., 154 FERC ¶ 61,059, at P 13 (2016).
[8] MISO, 174 FERC ¶ 61,202 at P 22.
[9] For example in Lightsource Renewable Energy Dev., LLC, 172 FERC ¶ 61,294, at P 14 (2020), the Commission found no undesirable consequences where interconnection customers in lower queue positions and any third-party interests would be in the same position as they would have been had the interconnection customer not missed its tariff deadline required to remain in the queue. This ignores the fact that the interconnection customer did miss its deadline and that third parties with lower queue positions were harmed by the grant of the waiver and reinsertion of the customer in the queue with a higher position than it would have been entitled to absent the waiver. The Commission applied similar faulty reasoning in a number of other cases, including Glidepath Ventures, LLC, 173 FERC ¶ 61,085, at P 17 (2020); Stoney Creek Solar LLC, 174 FERC ¶ 61,054, at P 15 (2021); and RRE Power LLC, 174 FERC ¶ 61,052, at P 13 (2021).
[10] Duke Energy Carolinas, LLC, 173 FERC ¶ 61,294 (2020) (Glick and Chatterjee, Comm’rs, concurring at P 3).