On July 19, 2024, the United States Court of Appeals for the District of Columbia Circuit (“D.C. Circuit”) issued an Order denying Tenaska Clear Creek Wind, LLC’s (“Clear Creek”) challenges to FERC’s orders allowing the allocation of costs for network upgrades. Southwest Power Pool, Inc. (“SPP”) assigned costs of more than $100 million to Clear Creek to pay for upgrades required on SPP’s system to accommodate the interconnection of Clear Creek’s wind turbine-powered electrical generation project (the “Project”).
The Project is a 242-megawatt facility in northwest Missouri, comprised of 111 Vestas turbines across approximately 31,000 acres. Prior to beginning operation, Clear Creek submitted a Network Resource Interconnection Service (“NRIS”) interconnection request to Associated Electric Cooperative, Inc. (“AECI”), an electric generation and transmission cooperative based in Springfield, Missouri. While conducting its interconnection study, AECI identified that SPP and Midcontinent Independent System Operator, Inc. (“MISO”) could potentially be affected by Clear Creek’s interconnection. Subsequently, AECI directed Clear Creek to conduct affected system studies with SPP and MISO.
On October 5, 2018, SPP issued its first affected system impact study which identified $31.2 million required upgrades on its system using 2017 integrated transmission planning (“ITP”) models. On November 5, 2018, SPP issued a revised study, and, thereafter, issued affected system studies on February 12, 2019 ($16.3 million in upgrades), March 21, 2019 ($33.017 million in upgrades), and April 8, 2019 ($33.545 million in upgrades).
In Spring 2019, Clear Creek began construction of the Project. On November 1, 2019, SPP notified Clear Creek that it would restudy the Project using 2019 ITP models because of the withdrawal of several higher-queued projects in the cluster. On November 2, 2020, SPP provided the initial results of the restudy, which reflected network upgrade costs of $763 million. On December 18, 2020, SPP provided an updated study lowering the cost of upgrades to $106.8 million and continued to adjust the upgrade amount, ultimately lowering it to $93 million on January 9, 2021 then to $91 million on February26, 2021, and then raising it to $99 million on March 25, 2021.
On May 5, 2021, Clear Creek filed a complaint with the Commission to end SPP’s system study process and to direct it to “respect the results of the initial studies” of the Project, which FERC granted in-part and denied in-part. Clear Creek’s request for rehearing was later denied by FERC. In March 2022, SPP submitted compliance filings with the results of the restudy (“2022 Restudy”) which stated that necessary upgrades assigned to Clear Creek were reduced to $88 million.
In April 2022, Clear Creek filed an amended complaint with FERC and, thereafter, filed its first petition in the D.C. Circuit seeking review of FERC’s initial Complaint Order and Denial Order 1. Subsequently, on May 13, 2022, SPP filed an amended restudy, which reduced network upgrade costs to $79 million, and on August 16, 2022, SPP issued a notice raising costs to $102 million. In September 2022, FERC issued an order finding that SPP complied with the Commission’s directive to restudy the Project and that the assignment of network cost, relative to the 2022 Restudy, was just and reasonable, and consistent with FERC’s “but for” cost allocation method. After FERC denied its second request for rehearing, Clear Creek filed its second petition seeking rehearing in the D.C. Circuit seeking review of the Compliance Order and Denial Order 2.
In February 2022, FERC again determined that SPP’s assignment of network upgrade costs to Clear Creek was just and reasonable and consistent with the “but for” cost allocation method. Subsequently, Clear Creek filed a third petition for review of the Compliance Order, Denial Order 2, and the Rehearing Order.
In its petition to the D.C. Circuit, Clear Creek raised three challenges to FERC’s orders. First, Clear Creek argues that FERC’s orders violate the cost causation principle and are inconsistent with cost causation. However, the D.C. Circuit found that Clear Creek is, in fact, the “but for” cause of the system upgrades. Second, Clear Creek asserts that SPP’s allocation of costs is inconsistent with FERC’s “but for” policy. There, the D.C. Circuit found that substantial evidence supports FERC’s determination that Clear Creek was assigned costs only for overloads that have “significant impacts on the transmission system” and that the upgrades were not intended to address regional transmission planning needs. As such, the D.C. Circuit found FERC’s conclusion that SPP’s methodology is valid under the “but for” principle. Third, Clear Creek asserts that FERC failed to address the fact that SPP’s interconnection study and cost allocation practices used an NRIS when Clear Creek is neither taking service nor seeking deliverability on the SPP system. Clear Creek further contends that FERC’s failure has allowed SPP to artificially inflate upgrade costs. However, the D.C. Circuit found that because SPP’s focus is on how to avoid undermining reliability, FERC’s support for SPP’s NRIS standard is supported by substantial evidence and is consistent with reasoned decision-making.
Ultimately, the D.C. Circuit held that Clear Creek failed to adequately demonstrate that FERC’s decision regarding the assignment of costs to Clear Creek was arbitrary, capricious, or contrary to precedent. As such, Clear Creek’s consolidated petitions were denied.
The D.C. Circuit’s Opinion, issued in Case No. 22-1059, can be found here.
