On January 19, 2023, FERC issued an order upholding its decision to exercise primary jurisdiction over emergency energy sales between Southwest Power Pool, Inc. (“SPP”) and Associated Electric Cooperative, Inc. (“AECI”) during Winter Storm Uri and FERC’s decision that SPP properly compensated AECI pursuant to its Open Access Transmission Tariff (“Tariff”).
Winter Storm Uri, which took place in February 2021, brought unusually cold winter weather, and resulted in record-high electricity use in the SPP Balancing Authority Area (“BAA”) and other areas of the country. During the event, SPP invoked assistance from its neighbors including AECI, a rural electric cooperative adjacent to the SPP BAA, under its emergency operating plan. From February 15 through February 21, 2021, AECI provided emergency assistance by selling power into the SPP real-time balancing market. SPP settled each of AECI’s transactions based on the prevailing market price (locational marginal price, or “LMP”) at the applicable settlement location. Subsequently, on February 11, 2022, AECI filed a lawsuit in the United States District Court for the Western District of Missouri seeking additional compensation for the emergency energy it provided to SPP during Winter Storm Uri. AECI’s lawsuit prompted SPP to file a petition for declaratory order at FERC. SPP’s petition requested that FERC assert exclusive or primary jurisdiction over AECI’s emergency sales to SPP during the storm and find that SPP properly compensated AECI in accordance with SPP’s Tariff.
On August 22, 2022, FERC issued an order asserting primary jurisdiction over the rate to be paid to AECI for the emergency energy and concluding that SPP had properly compensated AECI according to the terms of SPP’s Tariff governing such emergency transactions. As FERC explained, even though AECI is a non-public utility that is not generally subject to FERC’s Federal Power Act (“FPA”) ratemaking authority, FERC-jurisdiction over AECI’s transactions in SPP’s real-time balancing market was appropriate because: AECI had signed the SPP Market Participant Services Agreement (“MP Agreement”) and had made the emergency transactions as an SPP market participant; that the emergency transactions were made pursuant to SPP’s Tariff; and that the Tariff was the filed rate for purposes of pricing and settling the transactions.
In particular, FERC relied on its 1979 decision in Arkansas Louisiana Gas Co. v. Hall, commonly referred to as “Arkla,” in which FERC first articulated a three-factor test for asserting primary jurisdiction over contractual disputes. Those factors are: (1) whether FERC possesses some special expertise which makes the case peculiarly appropriate for a FERC decision; (2) whether there is a need for uniformity of interpretation of the type of question raised in the dispute; and (3) whether the case is important in relation to FERC’s regulatory responsibilities. FERC held that the dispute satisfied each of the three Arkla factors, rendering the matter appropriate for FERC jurisdiction and review. First, FERC found that it has special expertise in interpreting jurisdictional wholesale rates like SPP’s Tariff, the SPP-AECI Joint Operating Agreement (“JOA”), and the MP Agreement. Second, FERC found that there was a need for uniformity both in SPP and in the industry on interpreting the question raised by the dispute. Lastly, FERC explained that the case was important to its regulatory responsibilities under the FPA, specifically, FERC’s obligation to ensure that rates are just and reasonable and consistent with the rate on file.
On September 19, 2022, AECI filed a Request for Rehearing of FERC’s August 2022 order arguing that: (1) FERC erred in using AECI’s execution of the MP Agreement as a hook for purposes of finding that SPP’s Tariff applied to the emergency energy transactions; (2) FERC ignored evidence of oral agreements between AECI and SPP that precipitated ACEI sending emergency energy to SPP during Winter Storm Uri; and (3) FERC erred when it asserted primary jurisdiction over the rate to be paid to AECI after finding SPP’s Petition satisfied the Arkla factors.
FERC’s January 19, 2023, order denied AECI’s Request for Rehearing, reaching the same results as in the August 2022 order while modifying the discussion of that order. First, FERC continued to find that the emergency transactions at issue here constituted energy sold under SPP’s filed rate. FERC explained that the MP Agreement binds AECI to follow the terms of SPP’s Tariff, which itself contains default pricing provisions that dictate that imported energy should be settled at the relevant LMP. And while FERC recognized that the Tariff provides for the possibility of additional compensation for emergency energy if agreed to by the parties in a separate agreement (specifically, the SPP-AECI JOA), FERC found SPP and AECI had not agreed to any such additional compensation.
Second, FERC rejected AECI’s argument that FERC failed to consider oral agreements between AECI and SPP as evidence that the emergency energy was sold as an out-of-market transaction. Relying on its previous holding that the emergency energy was sold pursuant to the filed rate (consisting of SPP’s Tariff, the MP Agreement, and the AECI-SPP JOA), FERC explained that charging any other rate aside from the filed rate would violate the filed rate doctrine. Thus, FERC determined it did not need to consider evidence of potential oral agreements.
Lastly, FERC was not persuaded by AECI’s arguments that it erroneously asserted primary jurisdiction over the emergency energy transactions. FERC explained that exercising primary jurisdiction over AECI was proper under the Arkla factors, to ensure that rates remain just and reasonable, and to ensure that their effect is not undermined by litigation in another forum.
FERC’s order on AECI’s Request for Rehearing, issued in Docket No. EL22-54-001, can be found here.
