[00:00:00] Speaker 04:
Based under 23-1024, Nextera Energy Resources LLC and Nextera Energy Seaboard LLC petitioners versus Federal Energy Regulatory Commission.

[00:00:12] Speaker 04:
Mr. Estes for the petitioners, Mr. Kennedy for the respondents, Mr. Konopka for the interveners.

[00:00:29] Speaker 03:
May it please the court, I'd like to reserve three minutes for rebuttal.

[00:00:37] Speaker 03:
FERC claims the text of the LGIA in this case, mainly section 9.7.5, creates ongoing obligation for Seabrook to upgrade the breaker at significant uncompensated cost for the benefit of future competitors.

[00:00:55] Speaker 03:
Avangrid never mentioned 9.7.5 below.

[00:00:58] Speaker 03:
When FERC never mentioned it until the re-hearing order, the only mention comes from Issa New England, a party who says it didn't apply, that it did not create any obligation on Seabrook to upgrade the breaker for future competitors.

[00:01:11] Speaker 03:
And we look at the text of the document, Issa New England was correct.

[00:01:16] Speaker 03:
You can find it at J325, 326, and the whole case turns on it.

[00:01:21] Speaker 03:
The first thing we see when we look at the text is we're given a couple of interpretive A's.

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The parties intended us to read the text in accordance with the IS and New England operating documents.

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FERC tells us in footnote one of its briefs that the tariff is one of those documents and that figures in when we look at the specific obligations the agreement creates.

[00:01:43] Speaker 06:
I do want to hear what you have to say, but I just need some table setting here.

[00:01:46] Speaker 06:
I just want to make sure I understand what's in dispute in this case, because I thought I saw in your brief

[00:01:55] Speaker 06:
that you don't have any problem, you don't oppose, you don't deny the ability of, if I'm saying it right, Avangard to, or Avangard, I guess, to connect.

[00:02:09] Speaker 06:
This is all really a dispute about, and you'll get your construction cause.

[00:02:15] Speaker 06:
It's all really a dispute about whether you will get some of the other costs that you have referenced in your brief, the opportunity costs and things like that.

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Am I right that that's really what's at issue here?

[00:02:30] Speaker 06:
Because it sounds like you're about to get into things about

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you know, the authority to have the connection.

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But it sounded to me from your brief that you're not vetoing.

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You're not saying they can't connect.

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It's just that you don't feel like FERC's decision about the type of compensation you get is sufficient.

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Am I right or am I misunderstanding things?

[00:02:52] Speaker 03:
You're exactly right, Judge Mallette.

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If FERC had said, you have to do this, and we're going to make you completely whole,

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We wouldn't be here.

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We would be concerned about the policy implications of that ruling because this agreement is all over the country.

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There are many, many, many situations where it exists.

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But we wouldn't exist.

[00:03:11] Speaker 03:
We've agreed to make the upgrade.

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But FERC leverages a misreading of the contract into claiming it can force us to make the upgrade and dictate that we get half a loaf of compensation.

[00:03:24] Speaker 03:
So we need to take this.

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Bit by bit, because they claim the parties agreed in the LGIA, despite the no third party beneficiary language, that Seabrook has some open ended obligation.

[00:03:36] Speaker 03:
We need to cut that off and then get it.

[00:03:38] Speaker 03:
I'm sorry.

[00:03:39] Speaker 02:
I understood your argument to be the opposite, which was you were arguing that you did have a right to veto

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the connection by Avangrad and then in the alternative and only as a fallback that if you were wrong about that point, you were at least entitled to opportunity costs.

[00:04:05] Speaker 02:
Am I wrong about the first piece?

[00:04:08] Speaker 02:
But that was the whole point.

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We interpret the contract to not force us to upgrade the breaker.

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We agreed to upgrade the breaker, nonetheless, as a matter of commercial negotiation if we're made whole.

[00:04:20] Speaker 05:
But you're still challenging the first part of that.

[00:04:24] Speaker 03:
We are, because that's a very big concession otherwise.

[00:04:27] Speaker 03:
Yes, no, we're challenging the first part.

[00:04:29] Speaker 03:
We're just saying that doesn't mean we're refusing to upgrade the breaker.

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We just want to be made whole when we do it.

[00:04:35] Speaker 02:
But your position

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Your position is that you can refuse to allow Avent Grid to connect.

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even if they compensate you for opportunity costs and lawyer costs or not.

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If you want to give that up, that's great.

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That'll narrow the case.

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I thought you were pressing that point.

[00:04:57] Speaker 03:
Our position is that the LGIA does not obligate us to upgrade the breaker.

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Period, full stop.

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If we're not saying FERC doesn't have other tools in other contexts, if we imagine

[00:05:11] Speaker 03:
someone just saying we're not doing it, we're never upgrading this breaker, go pound sand.

[00:05:17] Speaker 06:
I just want to clarify because it sounds like two very different answers.

[00:05:21] Speaker 06:
I thought your argument was that FERC doesn't have the authority to order the circuit breaker replacement without full compensation payment, I'm not sure, without full payment of lost costs.

[00:05:41] Speaker 03:
Our position is that the LGIA does not give FERC any basis for ordering Seabrook to upgrade the breaker.

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No matter what.

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No matter what FERC would have other tools in that situation it can employ, which I'll talk about.

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But the LGIA does better because you said you're happy to replace a circuit breaker as long as you get full costs.

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Which means if we just come down to the question of what cost do you get or not, then we're fine.

[00:06:20] Speaker 06:
We're happy to replace it.

[00:06:22] Speaker 03:
Our position is that the contract doesn't obligate us to replace the breaker.

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Commercial negotiations between the parties can yield terms under which we're made whole and we do so.

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And we've always agreed to go down that road.

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That's not what happened because Avangrid complained that we were a transmission owner and we were blocking their entry.

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We were not a transmission owner, but nonetheless ordered us to upgrade the breaker and did not provide for full compensation.

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We fight the basis for the finding that we have to upgrade the breaker.

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We fight jurisdiction and we fight compensation.

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You don't have to reach the compensation issue if you rule for us on the first two issues.

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Which brings us to the contract.

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I'm sorry, Your Honor, if you're fine.

[00:07:09] Speaker 06:
No, no.

[00:07:10] Speaker 06:
So you have no intention of replacing the circuit break with Avangrad paying construction costs.

[00:07:20] Speaker 03:
Did you say we have no intention?

[00:07:21] Speaker 06:
Right, you're not willing to replace the circuit breaker.

[00:07:23] Speaker 06:
If you went on the first ruling, or even the second, if you went on the contract or FERC doesn't have power, that's it.

[00:07:31] Speaker 06:
You're not replacing the circuit breaker.

[00:07:34] Speaker 03:
That's not correct, Your Honor.

[00:07:35] Speaker 03:
We've said repeatedly that we are willing, as a matter of just commercial negotiation, to do this.

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We're not trying to block a competitor

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We're not trying to create a catch-22.

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We just want to be made whole.

[00:07:49] Speaker 06:
And FERC's tool... That makes me feel like what you just said was your third question is your first one.

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If you get the cost that you want, we don't have to fight about the contract means because you're willing to do it as long as you get full costs.

[00:08:04] Speaker 06:
We don't have to fight about FERC authority because you yourselves are willing to get it, do it if you get full costs.

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Is that understanding correct?

[00:08:11] Speaker 03:
If we were made whole, we would replace the breaker.

[00:08:14] Speaker 03:
But that's not what the FERC order says.

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On your own, without, regardless of.

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As a matter of commercial negotiation with Avingrid, which is the way most of the power business does business, actually.

[00:08:23] Speaker 03:
Commercial negotiation between the parties without regulatory compulsion.

[00:08:27] Speaker 06:
So you, okay.

[00:08:29] Speaker 05:
All right, I think I understand where you're coming from.

[00:08:32] Speaker 05:
I'm sorry if.

[00:08:32] Speaker 07:
Yes.

[00:08:33] Speaker 05:
Let me maybe switch gears a little bit.

[00:08:35] Speaker 05:
I'm wondering, what remedial authority in your view did FERC

[00:08:40] Speaker 05:
exercise here.

[00:08:44] Speaker 05:
Because it doesn't suggest that it's operating under Section 206, right?

[00:08:51] Speaker 05:
Are they operating under Section 309, their general grant of remedial authority?

[00:08:56] Speaker 05:
Where does their remedial authority come from in this case?

[00:09:01] Speaker 03:
Well, they granted a complaint filed under 206.

[00:09:07] Speaker 03:
But they didn't really say, Your Honor, and we don't think they have a basis for authority.

[00:09:11] Speaker 03:
That's one of the problems here.

[00:09:13] Speaker 03:
They've interpreted a contract and inserted their own point of view about what the words should mean, though the words don't say that.

[00:09:22] Speaker 03:
And so they are claiming authority is given to them by the parties in the LGIA when the parties did not give them anything like that.

[00:09:32] Speaker 05:
To make a determination under 206, FERC has to

[00:09:36] Speaker 05:
first find that the existing rate or term is unjust or unreasonable.

[00:09:42] Speaker 05:
But did they make that finding here?

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I mean, if they had made that finding, then they could have amended the tariff.

[00:09:50] Speaker 05:
Do you think that would be within FERC's authority?

[00:09:53] Speaker 03:
Your Honor, I agree completely with that.

[00:09:56] Speaker 03:
And we said this on brief.

[00:09:59] Speaker 03:
The ALGIA is a dog that doesn't hunt.

[00:10:02] Speaker 03:
But FERC has other tools.

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One of them was

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create a 206 proceeding to examine whether the ISO New England tariff should be changed.

[00:10:10] Speaker 03:
They did that and abandoned it.

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They could have interpreted, they could have changed their whole fabric of interconnection facilities under 206.

[00:10:18] Speaker 05:
Where does Seabrook challenge this remedial authority?

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Do you raise this challenge that they didn't have remedial authority?

[00:10:24] Speaker 05:
I mean, you challenge their jurisdiction, but do you challenge

[00:10:29] Speaker 05:
their remedial authority?

[00:10:31] Speaker 03:
We challenge their interpretation of the LGIA, which is where they claim the parties gave them authority.

[00:10:36] Speaker 03:
So that's really what they're saying.

[00:10:38] Speaker 06:
You filed in the 206 proceeding as well.

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You asked them to say that the compensation you were getting would be unreasonable.

[00:10:47] Speaker 03:
We filed for a declaratory order, and they ended up dismissing it.

[00:10:50] Speaker 06:
Under 206?

[00:10:52] Speaker 03:
No, a different provision of the Federal Power Act, actually.

[00:10:54] Speaker 03:
But they didn't go down.

[00:10:55] Speaker 06:
What did you file under?

[00:10:57] Speaker 03:
Your Honor, I can't tell you right now.

[00:10:59] Speaker 06:
We're in the power act.

[00:11:00] Speaker 06:
I thought two parties came with a single dispute to FERC.

[00:11:05] Speaker 06:
He said one complaint was under 206, and I had thought yours was in that same proceeding.

[00:11:09] Speaker 03:
It was.

[00:11:10] Speaker 03:
We filed first.

[00:11:11] Speaker 03:
We filed for a declaratory order.

[00:11:13] Speaker 05:
What did you file under?

[00:11:14] Speaker 03:
We filed for a declaratory order.

[00:11:15] Speaker 05:
The declaratory order is under a pursuant to FERC regulation that allows parties to seek declaratory orders.

[00:11:21] Speaker 03:
Are you asking if there's a regulation?

[00:11:23] Speaker 05:
I mean, isn't there a regulation that allows parties to seek?

[00:11:27] Speaker 03:
And there's a part in the statute where this is envisioned, I do believe.

[00:11:31] Speaker 03:
Then Avangrid filed a week later a complaint.

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This was in 2020.

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FERC ended up granting the complaint in part, basing its decision solely on the LGIA.

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So they're claiming they can interpret a private contract and find the obligations they seek to impose on us from the text of that agreement.

[00:11:50] Speaker 03:
It's not in the words, however.

[00:11:52] Speaker 03:
That doesn't mean FERC didn't have other options.

[00:11:55] Speaker 03:
You're exactly right, Judge Rao.

[00:11:56] Speaker 03:
They could reopen the rules governing interconnection.

[00:12:01] Speaker 03:
They could change the way ISU England does things.

[00:12:05] Speaker 03:
They also, by the way, if you really want a rifle shot to deal with competitive blockades, if somebody was saying some other part of the country,

[00:12:14] Speaker 03:
You can't make me do this.

[00:12:15] Speaker 03:
It's 23 cents to fix it.

[00:12:16] Speaker 03:
We want $23 million.

[00:12:19] Speaker 03:
FERC has a provision in its regs, because generators sell at market-based rates, that you have to tell them every few years, we're not erecting barriers to new entry.

[00:12:28] Speaker 03:
They never went down that road.

[00:12:29] Speaker 03:
That's not what we're doing.

[00:12:30] Speaker 03:
They looked to the contract.

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And when you look at the contract, it does not carry the weight prescribed to it.

[00:12:36] Speaker 05:
So FERC suggests that because Seabrook is required to follow

[00:12:43] Speaker 05:
good utility practices that they are required to do this upgrade before Avangrid connects.

[00:12:52] Speaker 05:
And they repeatedly point to good utility practices as being found within the contract itself.

[00:13:01] Speaker 05:
And so I'm wondering what you think about that argument, right?

[00:13:04] Speaker 05:
So their argument seems to turn, their contractual argument places a lot of weight on this general term good utility practices.

[00:13:12] Speaker 05:
And then it says the contract is highly relevant, understanding what a good utility practice is.

[00:13:19] Speaker 05:
So why shouldn't we defer to FERC on its determination about what a good utility practice is?

[00:13:26] Speaker 03:
Well, if you look at the text of the contract, you find it doesn't support FERC's reading because 975 does incorporate good utility practice.

[00:13:35] Speaker 03:
If you turn to the text, you find the answers to a lot of what we're discussing.

[00:13:42] Speaker 03:
We're told at the very beginning of this provision, we're supposed to look, the parties wanted us to look in two places for just general guidance in accordance with the ISO New England operating documents.

[00:13:53] Speaker 03:
The tariff is one of those for... Okay, we'll need that in a moment.

[00:13:58] Speaker 03:
And in compliance with good utility practice.

[00:14:01] Speaker 03:
If you look at J283, that is defined.

[00:14:05] Speaker 03:
But it sets out means to an end.

[00:14:07] Speaker 03:
It doesn't set out the end.

[00:14:08] Speaker 03:
It says you have a desired result.

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You're supposed to take one of maybe several different measures.

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It doesn't have to be the optimum one, but things utilities generally do to accomplish that result.

[00:14:19] Speaker 03:
And you're supposed to do so at a reasonable cost, consistent with, among other things, reliability and safety

[00:14:24] Speaker 05:
Isn't a utility practice, though, I mean, the way that it's defined suggests to me, at least, some type of industry standards.

[00:14:33] Speaker 05:
Right.

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And so FERC is saying an industry standard here is requiring Seabrook to do the upgrade.

[00:14:41] Speaker 05:
So why is that?

[00:14:43] Speaker 05:
I mean, I assume you think that's wrong.

[00:14:44] Speaker 05:
Why do you think that's wrong?

[00:14:47] Speaker 03:
There are several reasons it's wrong.

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One is they've never done anything like this before, so no one's ever been in this posture.

[00:14:52] Speaker 03:
But if you look at the language, good utility practice is an interpretive aid.

[00:14:57] Speaker 03:
We have duties under the provision that FERC cites.

[00:15:00] Speaker 03:
We are supposed to accomplish those duties using means consistent with good utility practice.

[00:15:05] Speaker 03:
But it doesn't tell us what the duties are.

[00:15:08] Speaker 03:
So we still have to look at the language as FERC does, but not very

[00:15:12] Speaker 03:
fairly to the words to see what we're supposed to do.

[00:15:15] Speaker 03:
Whatever is we're supposed to do, we have to do in accordance with good utility practice.

[00:15:19] Speaker 03:
And we wholeheartedly agree.

[00:15:21] Speaker 03:
We need to watch out for reliability and safety.

[00:15:25] Speaker 03:
Absolutely.

[00:15:26] Speaker 03:
But that does not mean the words say what for actual obligation.

[00:15:30] Speaker 03:
We have a contractual obligation, but Your Honor, we're also NRC licensees, and we're talking about working side by side with the department.

[00:15:36] Speaker 06:
I'm not talking about that, but I'm talking about you have a contractual obligation even as to the, because the ISO is a party to the good utility practice clause.

[00:15:44] Speaker 06:
Yes, it obligates us.

[00:15:46] Speaker 06:
And to maintain safety and reliability of the grid.

[00:15:48] Speaker 06:
Well, you have to disrupt our operations as they connect to and affect the grid.

[00:15:53] Speaker 03:
It doesn't give us a freestanding obligation to do things.

[00:15:58] Speaker 03:
It tells us when you're-

[00:16:00] Speaker 06:
To borrow JoJo's question, that part of good utility practice is to operate consistent with industry standards.

[00:16:08] Speaker 06:
And if, I didn't think you'd speak to that.

[00:16:11] Speaker 03:
We are doing that right now.

[00:16:13] Speaker 06:
Well, but if industry standards are that circuit breakers are supposed to have a four to 5% margin of error and you have a 0.4% margin of error, how is that?

[00:16:26] Speaker 06:
I mean, your circuit breaker is hanging by a thread.

[00:16:29] Speaker 06:
Your Honor, I just- There's nothing, there's nothing, I don't think there's anything that can connect to the entire grid now that won't require replacement of your circuit breaker.

[00:16:37] Speaker 06:
Is that right?

[00:16:38] Speaker 03:
We don't know about anything.

[00:16:39] Speaker 03:
Avon grid can't connect.

[00:16:41] Speaker 06:
But the circuit breaker- Okay, but if you're at, you're at, you're virtually at capacity on the circuit breaker.

[00:16:46] Speaker 06:
Is that correct?

[00:16:49] Speaker 03:
There is enough room for the circuit breaker to operate reliably without an additional interconnection, which is key.

[00:16:59] Speaker 06:
No, no, stop.

[00:17:00] Speaker 06:
Come out.

[00:17:01] Speaker 06:
Come out.

[00:17:05] Speaker 06:
And any other entity come on the grid, any other source of energy, come on, because anyone, a reliability repair, any increase in generation occur without you replacing your circuit breaker.

[00:17:26] Speaker 06:
That it's right at the cusp.

[00:17:28] Speaker 03:
Almost certainly so, but the record doesn't really tell us.

[00:17:32] Speaker 06:
No, but really?

[00:17:33] Speaker 03:
You're at 0.4%.

[00:17:35] Speaker 03:
The way this tolerance works, and we put in expert evidence, Avingrid has its experts, we put in ours to say, this percentage is not a problem.

[00:17:47] Speaker 03:
There's headroom.

[00:17:48] Speaker 06:
You said this is not a problem on the grid now.

[00:17:52] Speaker 03:
That's right.

[00:17:52] Speaker 06:
And my question is, because you joined an ISO, and ISOs have all kinds of rules about allowing new energy in, new producers in.

[00:18:03] Speaker 06:
I think the workers spend a lot of time coming up with the non-discriminatory rules for that.

[00:18:08] Speaker 06:
You're on a grid.

[00:18:08] Speaker 06:
You're not a solo operation here.

[00:18:13] Speaker 06:
And did your expert witness say,

[00:18:17] Speaker 06:
that anyone, Hurt mentions all these other people in line to connect, can any single one of them connect without you changing the circuit breaker?

[00:18:29] Speaker 03:
Your honor, let me go back to what actually happened.

[00:18:33] Speaker 03:
No, no, no.

[00:18:34] Speaker 06:
You can do that after you answer my question.

[00:18:36] Speaker 06:
Can any other generation at all, or even an increase by someone already on the system,

[00:18:45] Speaker 06:
without the circuit breaker being replaced?

[00:18:47] Speaker 03:
Your Honor, I don't know the answer to that question.

[00:18:50] Speaker 06:
Okay, so the expert didn't say in response to Ferg saying all these other folks want to join.

[00:18:56] Speaker 06:
They can all join, it's just something about Appenford.

[00:18:59] Speaker 03:
No, it's a question of IS&W doing really complicated engineering studies about power flows.

[00:19:06] Speaker 03:
Avangard's line hooks up 100 miles from Seabrook, which sounds like a long way away.

[00:19:11] Speaker 03:
But there's a B line of a transmission line that goes straight to the substation outside of Seabrook station.

[00:19:19] Speaker 03:
So Avangard's also 1,200 megawatts.

[00:19:22] Speaker 03:
That's a lot.

[00:19:23] Speaker 03:
That's a big change to power flows in the system.

[00:19:25] Speaker 03:
If you had other people doing other things in a less electrically proximate place on the grid, probably it would be fine.

[00:19:32] Speaker 03:
But I don't know the answer to that.

[00:19:34] Speaker 03:
And I certainly never.

[00:19:36] Speaker 06:
The standard is.

[00:19:38] Speaker 06:
4 to 5 percent margin of error, and you're at 0.4.

[00:19:41] Speaker 03:
We disagree with that standard, Your Honor.

[00:19:44] Speaker 06:
What evidence do you have that there's a different industry practice or industry standard of error?

[00:19:49] Speaker 03:
We put on an expert who explained that Avangrid's math is wrong.

[00:19:53] Speaker 06:
The NRC said... That's not telling me what the industry standard is.

[00:19:59] Speaker 03:
A little 100 percent.

[00:20:00] Speaker 03:
You're fine.

[00:20:01] Speaker 06:
The industry standard is... So if you were at 99.9, that would be hunky dory with the industry.

[00:20:06] Speaker 06:
That would be consistent with safety and reliability.

[00:20:08] Speaker 03:
Yes, your honor.

[00:20:09] Speaker 06:
And you're an expert.

[00:20:10] Speaker 03:
Well, I mean, we would we would have to ask the experts potentially.

[00:20:13] Speaker 03:
But yes, the headroom issue is a false issue.

[00:20:17] Speaker 06:
I don't know.

[00:20:18] Speaker 06:
I'm just asking about these questions.

[00:20:22] Speaker 06:
So you have expert testimony in this record that says it's industry standard to have a circuit breaker be perfectly fine even at 99.9%.

[00:20:32] Speaker 03:
It doesn't say that, Your Honor.

[00:20:35] Speaker 03:
It says that the percent.

[00:20:37] Speaker 06:
You said under 100.

[00:20:39] Speaker 03:
I think that, well, I don't think the expert affidavit says that.

[00:20:42] Speaker 03:
It says we're fine where we are.

[00:20:43] Speaker 03:
It explains.

[00:20:44] Speaker 06:
No more power comes out of the grid.

[00:20:47] Speaker 03:
Other interconnections can change that.

[00:20:49] Speaker 03:
We don't know which ones.

[00:20:51] Speaker 03:
The reason why there's a bit of a lacuna here, Your Honor, if I may explain, is that a big project was in the queue.

[00:21:01] Speaker 03:
1,200 megawatts.

[00:21:02] Speaker 03:
It was a straw that broke the camel's back.

[00:21:05] Speaker 03:
So I asked New England, told immigrant, you have to fix this.

[00:21:08] Speaker 03:
Go figure it out.

[00:21:11] Speaker 03:
every subsequent interconnection was modeled with the assumption that the breaker would be replaced for Avangrid.

[00:21:18] Speaker 03:
So we do not know the answer as to what else would happen.

[00:21:22] Speaker 03:
It is true that if Avangrid pulled the plug on his project, there probably is some other project that would then trigger this need.

[00:21:31] Speaker 03:
That is true.

[00:21:33] Speaker 03:
But the electrical sequence of studies, the sequence of electrical studies

[00:21:38] Speaker 03:
doesn't work the way that to allow me to answer the question.

[00:21:42] Speaker 03:
I'm sorry, Your Honor.

[00:21:44] Speaker 03:
We don't have that information.

[00:21:45] Speaker 03:
We do know Abingrid's project creates a problem.

[00:21:48] Speaker 03:
We know that our breaker is fully reliable now.

[00:21:50] Speaker 03:
The NRC said so, and FERC doesn't disagree.

[00:21:55] Speaker 02:
Can I just get back to the tariff?

[00:21:58] Speaker 02:
I'm sorry, the interconnection agreement.

[00:22:02] Speaker 02:
There is a specific duty with respect to circuit breakers.

[00:22:09] Speaker 02:
references incorporates good utility practice.

[00:22:13] Speaker 02:
But it says that customers like Seabrook shall provide, install, own, and maintain circuit breakers, plural, and all other devices necessary to remove any fault contribution of that facility to any short circuit.

[00:22:33] Speaker 02:
Doesn't that

[00:22:34] Speaker 02:
seem to contemplate not just a duty at the moment of Seabrook's entry on the grid to have an adequate circuit breaker, but an ongoing duty to upgrade it as necessary for the grid?

[00:22:54] Speaker 02:
No, Your Honor.

[00:22:55] Speaker 03:
Let's take the words.

[00:22:58] Speaker 03:
The first part of what you read says that Seabrook's supposed to provide, install and own, own and maintain a circuit breaker.

[00:23:05] Speaker 03:
The first three, it's already done.

[00:23:07] Speaker 03:
It maintains the circuit breaker right now every 18 months.

[00:23:10] Speaker 03:
The record says that at JA 491.

[00:23:14] Speaker 03:
The circuit breaker is supposed to be necessary to remove any fault contribution to any short circuit occurring.

[00:23:20] Speaker 03:
It's not otherwise isolated by basically New Hampshire transmissions.

[00:23:26] Speaker 03:
That happens right now, too.

[00:23:28] Speaker 03:
The circuit breaker is fine for existing conditions.

[00:23:32] Speaker 03:
The question is, for sure, what about the future?

[00:23:36] Speaker 03:
And when you read this language in light of good utility practice, it does not create a contractual duty.

[00:23:42] Speaker 03:
And it's implausible to imagine that the party is intended to create one.

[00:23:46] Speaker 03:
For us to upgrade the breaker now, when it's reliable for the benefit of a third party, there's a clause against third party beneficiaries.

[00:23:54] Speaker 02:
And it will be inadequate if some other generators, including have a grid, are allowed onto the grid.

[00:24:10] Speaker 03:
Well, remember the first phrases when I said in a corporate, I mean, it seems to me like this.

[00:24:16] Speaker 02:
This provision cinches up Merck's case unless you can point to something else which prevents other generators from seeking access to the grid.

[00:24:31] Speaker 03:
And I can.

[00:24:32] Speaker 02:
And I'll let you, but I just, for framing purposes, I'll just tell you that seems pretty unlikely in a system, a regulatory system whose whole point was to encourage independent generators to be able to have access to transmission facilities.

[00:24:50] Speaker 02:
But go ahead.

[00:24:51] Speaker 03:
Well, I'll start with the words and then I'll get to the policy.

[00:24:53] Speaker 03:
They're both really important.

[00:24:56] Speaker 03:
The first phrase of this

[00:24:58] Speaker 03:
a provision says we're supposed to read it in accord with the tariff.

[00:25:03] Speaker 03:
And as we said in our brief, the tariff makes it legally impossible for Seabrook to interconnect without the breaker being upgraded.

[00:25:10] Speaker 03:
So the idea that there's a- Based on what provision?

[00:25:15] Speaker 03:
Is it- JA724I.3.10 puts the onus on

[00:25:21] Speaker 02:
avangrid if they impose a significant adverse effect on transmission facilities of another market right so our position is your honor that the whatever there are a couple of problems with that one is if we're really fussy about reading the words literally this provision only applies to transmission facilities and focus on this is a generator facility

[00:25:49] Speaker 02:
It seems a little artificial to me, but even if I give you transmission equals generator for purposes of this clause just says unless avangrid takes action or constructs at its expense facilities necessary to mitigate the problem.

[00:26:09] Speaker 02:
And that sounds more like they have to pay for the upgrade than they have to pay for lost profits and attorney's fees.

[00:26:21] Speaker 03:
Your honor, the tariff says that if there's an adverse effect determined by the ISO on the system of one or more market participants, Seabrook is a market participant, goes on to say the market participant or transmission owner

[00:26:35] Speaker 03:
who's impacted.

[00:26:36] Speaker 03:
And it says that the new interconnectee must take such action at its expense.

[00:26:42] Speaker 03:
So it's not just building, it's fixing it.

[00:26:45] Speaker 03:
And this is also the fabric, Judge Katz's, of the way interconnections work the last 20-something years.

[00:26:52] Speaker 03:
You have a decision up front.

[00:26:54] Speaker 03:
Sorry, I'm just trying to... Sorry, bear with me.

[00:26:57] Speaker 02:
I'm just trying to...

[00:26:58] Speaker 03:
Where are we?

[00:27:00] Speaker 03:
Well, we're at JA 724.

[00:27:01] Speaker 03:
724, right.

[00:27:03] Speaker 03:
In the middle of the phrase, it says adverse effect on a transmission owner or the system of one or more market participants.

[00:27:14] Speaker 03:
OK.

[00:27:14] Speaker 03:
So Seabrook qualifies.

[00:27:16] Speaker 03:
There was a big fight about that, Your Honor.

[00:27:18] Speaker 02:
And this is part of the- Shall not to proceed to implement, unless the new party imposing the cost, which is Avangrid,

[00:27:28] Speaker 02:
take such action or construct constructs at its expense facilities necessary to avoid the adverse effect that to me to my ear that could reasonably be read to say they have to pay the cost of upgrading the circuit breaker.

[00:27:51] Speaker 02:
That's their obligation constructing such facilities to avoid the adverse effect.

[00:27:55] Speaker 03:
The way it's been read since the words existed is that the interconnecting company has to work things out with the system it's affecting.

[00:28:07] Speaker 03:
And that's a question of commercial negotiation.

[00:28:12] Speaker 03:
There's no regulatory oversight to check and see what the payment stream should be.

[00:28:16] Speaker 03:
They just have to go work it out.

[00:28:18] Speaker 03:
But if you go look back at the language and see what the obligation actually is, you see that

[00:28:26] Speaker 03:
This is not a situation where existing resources on the grid have an ongoing duty to pay tens of millions of dollars perhaps to upgrade their facilities for the benefit of a new entrant.

[00:28:42] Speaker 05:
Is it your contention that that is the good utility practice, that good utility practice ordinarily involves this being through a commercial negotiation?

[00:28:56] Speaker 05:
Do you have evidence of that as being the industry standard or the industry practice?

[00:29:02] Speaker 03:
That's what ISO New England said below, that people work these things out.

[00:29:07] Speaker 03:
And most of the utility business is worked out, particularly under good utility practice, through coordination and negotiation.

[00:29:14] Speaker 03:
That's the way almost everything is done.

[00:29:17] Speaker 03:
It rarely is the case, this regulatory compulsion.

[00:29:20] Speaker 03:
But if you go back, Your Honor.

[00:29:22] Speaker 02:
The negotiation is going to be completely different if you start with a veto power.

[00:29:30] Speaker 03:
We don't think we have a veto power, Your Honor.

[00:29:32] Speaker 03:
We tell FERC every three years we're not erect barriers to do entry.

[00:29:37] Speaker 03:
We think we have the ability to be compensated reasonably and made whole.

[00:29:42] Speaker 06:
Back to where we started this whole argument, I don't think you disagree with anything Judge Kansas has read to you.

[00:29:49] Speaker 06:
It's just you have a dispute about what, you don't have any dispute that Avon Grid can come in.

[00:29:56] Speaker 06:
as long as it pays construction costs and you have a different definition of construction costs.

[00:30:02] Speaker 06:
Isn't that what this is about?

[00:30:04] Speaker 06:
You say the costs of putting this circuit breaker in need to encompass all your costs, your money loss.

[00:30:15] Speaker 06:
not just whatever it takes, I'm sure this is a big operation to get this big thing in there, but it's also opportunity costs.

[00:30:26] Speaker 06:
I don't know what else you're including in here.

[00:30:28] Speaker 06:
I don't know where the attorney's, I guess, if there's litigation, the attorney's fees.

[00:30:32] Speaker 06:
I just want to make sure, I keep coming back to thinking that that's what the fight is over is

[00:30:39] Speaker 06:
You're not saying you can do a straight up veto.

[00:30:43] Speaker 06:
You're saying that what that contract means is they got to come in and pay the cost of this change.

[00:30:52] Speaker 06:
And your position is the way those costs should be figured out is not FERC's interpretation, but between contractual negotiation.

[00:31:02] Speaker 06:
Is that your position?

[00:31:05] Speaker 03:
We don't think the contract

[00:31:08] Speaker 03:
authorizes FERC to order us to upgrade the breaker.

[00:31:11] Speaker 03:
We're willing to do it if we're made whole.

[00:31:15] Speaker 03:
FERC is refusing to make us whole based on the contract.

[00:31:18] Speaker 06:
You disagree then with Judge Katz's at least proposing one reading of this language as

[00:31:26] Speaker 06:
You have an obligation to let Avingrad do it as long as they pay.

[00:31:31] Speaker 06:
You signed up and you have your arguments, you've made your arguments about that, but one possible reading is you've signed up for this as long as they pay what's referred to as construction costs.

[00:31:43] Speaker 06:
And I don't understand how you can say you don't have a veto and saying, we can stand here with our arms crossed and say, we are not doing it.

[00:31:53] Speaker 06:
FERC has no authority.

[00:31:56] Speaker 06:
And you won't give us everything we want.

[00:31:58] Speaker 03:
We have a veto under the contract.

[00:32:01] Speaker 02:
Your answer to Judge Millett's question is you have a veto.

[00:32:06] Speaker 02:
but you have chosen not to exercise.

[00:32:09] Speaker 02:
That's a much better way to put it, Judge Katz.

[00:32:11] Speaker 03:
But I do think that first, I do think, though.

[00:32:14] Speaker 06:
Isn't it clear the contract gives you the veto, or is there something else?

[00:32:16] Speaker 03:
I think the contract allows us to say no.

[00:32:21] Speaker 03:
That's true, because it doesn't dictate that we do anything to hook up a new resource.

[00:32:28] Speaker 03:
There's a no third party beneficiaries clause, and it deals with a three parties contract.

[00:32:32] Speaker 06:
Well, what if?

[00:32:35] Speaker 06:
I'm going to say this is a group activity.

[00:32:38] Speaker 06:
This is the ISO.

[00:32:41] Speaker 06:
It's a group activity.

[00:32:43] Speaker 06:
You get the benefit of all different transmission lines and all their reliability.

[00:32:47] Speaker 06:
If one goes down from a storm, you've got others.

[00:32:50] Speaker 06:
The customers get the benefit of many, many different sources of generation.

[00:32:53] Speaker 06:
If one goes down, for example, you're planning to go down for your own maintenance, whatever it is, in the fall.

[00:33:00] Speaker 06:
But customers will be OK because there's other generation.

[00:33:04] Speaker 06:
on the lines, correct?

[00:33:05] Speaker 06:
But that's how the system works.

[00:33:07] Speaker 06:
It benefits you.

[00:33:08] Speaker 06:
It benefits customers.

[00:33:10] Speaker 06:
You benefit others by being there.

[00:33:11] Speaker 06:
But it's a group activity.

[00:33:14] Speaker 03:
It's a tight power pool run by an RTO.

[00:33:17] Speaker 06:
A group activity.

[00:33:19] Speaker 06:
You're not the only generator, and there's lots of transmers.

[00:33:23] Speaker 03:
OK.

[00:33:23] Speaker 06:
So if everybody else on the grid says, we need more electricity,

[00:33:30] Speaker 06:
Electric cars are coming, also fuels are going down.

[00:33:34] Speaker 06:
The demand for electricity is expected to increase astronomically in the next 10 years.

[00:33:41] Speaker 06:
If they said that, then allowing someone to interconnect wouldn't be just a benefit for Avancred.

[00:33:51] Speaker 06:
It would be a benefit for the system of which you are a part.

[00:33:56] Speaker 06:
Correct?

[00:33:57] Speaker 06:
Under my hypothetical?

[00:34:00] Speaker 03:
I guess, Your Honor.

[00:34:03] Speaker 06:
And if FERC says the way the country benefits, the way our electrical system benefits in this country is to have ISOs that allow new power in without discrimination, conditioned on them paying the costs of entry.

[00:34:22] Speaker 06:
And that's what's best

[00:34:24] Speaker 06:
for each grid individually and FERC said that's what's best for ISO New England here and that's what's best for our electrical system and for keeping the lights on and for allowing America to function.

[00:34:37] Speaker 06:
Then it's not a third party beneficiary issue, right?

[00:34:40] Speaker 06:
It's the system that's been set up.

[00:34:43] Speaker 06:
The benefit is to the system of which you are a part, correct?

[00:34:49] Speaker 03:
There are many things about what you said that I disagree with, so I can't just say that's correct, but let me- The benefit is to, not just to Avangrid, but to the system.

[00:34:58] Speaker 06:
I think you already agreed with that.

[00:35:01] Speaker 03:
A benefit to having green interconnecting is to the system as a whole.

[00:35:04] Speaker 03:
I don't know that I would stipulate to that, Your Honor.

[00:35:07] Speaker 03:
But I really do have an answer to your question.

[00:35:10] Speaker 03:
And I'm afraid I don't know why I haven't been able to get it out.

[00:35:14] Speaker 03:
Let me try one more time.

[00:35:17] Speaker 03:
There are lots of tools in FERC's tool chest.

[00:35:19] Speaker 03:
This is a big activity, and it's very carefully coordinated.

[00:35:23] Speaker 03:
There is the ISA New England tariff.

[00:35:25] Speaker 03:
There are rules about interconnection.

[00:35:28] Speaker 03:
They get revisited a lot.

[00:35:30] Speaker 03:
They were revisited in 2003 and they were revisited in 2013.

[00:35:33] Speaker 03:
They say nothing about the issue we're talking about here, the FERC is free to change that.

[00:35:41] Speaker 03:
There also is an interconnection agreement that's a form contract customized for this situation that's been in place for a long time.

[00:35:49] Speaker 03:
That's what FERC relies on.

[00:35:50] Speaker 03:
What we're saying is it doesn't carry the order of judgment that you want to put there.

[00:35:54] Speaker 03:
Other things could carry the order.

[00:35:56] Speaker 06:
The system can be... What else?

[00:35:58] Speaker 06:
Is there something else that FERC missed that would take away your veto power?

[00:36:05] Speaker 03:
Well, if they wanted to change the way interconnections worked,

[00:36:10] Speaker 03:
They could say, and in fact proposed, they asked, they ordered ISO New England to show cause why we shouldn't change the tariff to say in New England, we're not even going to study generators like CBO.

[00:36:23] Speaker 03:
Whatever happens to you happens, it's up to you to fix it.

[00:36:26] Speaker 03:
That would have changed this supposed veto.

[00:36:28] Speaker 06:
How about they did this?

[00:36:31] Speaker 06:
Burke says,

[00:36:33] Speaker 06:
This contract, good utility practice plus 9.7.5, means no veto power if the interconnecting entity is willing, per the language, to pay full construction costs.

[00:36:50] Speaker 06:
Would Perk say that?

[00:36:52] Speaker 03:
There's no planning meeting basis for it, Your Honor.

[00:36:55] Speaker 06:
I'm not saying, I'm saying could FERC and whatever this pertaining is, you want them to do a 206 or whatever.

[00:37:00] Speaker 06:
Could FERC say that?

[00:37:01] Speaker 03:
Yes, they could have a rulemaking.

[00:37:03] Speaker 06:
And it could apply to you and to Avingrad?

[00:37:04] Speaker 06:
Or are you saying it wouldn't be retrograde?

[00:37:05] Speaker 03:
There would be a file rate doctrine problem.

[00:37:09] Speaker 03:
But they could change the rule set anytime they wanted.

[00:37:11] Speaker 03:
They proposed to do... It would apply to you going forward?

[00:37:15] Speaker 03:
They changed the rules.

[00:37:16] Speaker 05:
But you didn't challenge them here.

[00:37:19] Speaker 05:
Did you, you didn't challenge that they lacked the remedial authority or that they didn't exercise the correct remedial authority here?

[00:37:26] Speaker 03:
Well, Your Honor, no, I disagree with that.

[00:37:28] Speaker 03:
We challenged the authority they offered.

[00:37:31] Speaker 03:
The only thing they said they were relying on was this agreement.

[00:37:34] Speaker 03:
We then pointed out, being accused of trying to strangle competition, which is wrong, that there were many other tools FERC had available they chose not to use.

[00:37:43] Speaker 03:
The problem you're posing, Judge Mallett, of what about all the different demands on the system?

[00:37:49] Speaker 03:
That's a really important question.

[00:37:51] Speaker 03:
It should be addressed generically, and FERC has plenty of room to address it.

[00:37:54] Speaker 03:
But they chose not to go down that road.

[00:37:57] Speaker 03:
There's a big problem, though, embedded here, Judge Bullett, when you imagine the future.

[00:38:03] Speaker 03:
If FERC wants to change the rules to require incumbent resources to pay

[00:38:11] Speaker 03:
half the tab for new interconnections.

[00:38:14] Speaker 03:
That's a big change.

[00:38:15] Speaker 03:
That's not what the rules currently are, and it will introduce cost uncertainty.

[00:38:19] Speaker 03:
We talked about this below and FERC just never answered us.

[00:38:22] Speaker 03:
Projects are financed all around the country right now.

[00:38:25] Speaker 03:
Here are your interconnection costs.

[00:38:26] Speaker 03:
It's in a box.

[00:38:27] Speaker 03:
The banks come in.

[00:38:28] Speaker 03:
The lawyers look at it.

[00:38:29] Speaker 03:
Okay, we know what this is.

[00:38:31] Speaker 03:
You're financed.

[00:38:31] Speaker 03:
You're good to go.

[00:38:32] Speaker 03:
There's no

[00:38:33] Speaker 03:
situation where the grid can say, oh, guess what, somebody new came in, you got to pay their costs, half of their admission, their admission fee.

[00:38:42] Speaker 03:
That's not how it's worked for 20 years.

[00:38:44] Speaker 03:
The background rules are completely different, though, for could change.

[00:38:47] Speaker 06:
So you're half the admission fee, everything I read in your books, your brief said

[00:38:54] Speaker 06:
There might be lost opportunity costs.

[00:38:58] Speaker 06:
There might be litigation.

[00:39:01] Speaker 06:
Of course, you're in that now.

[00:39:02] Speaker 06:
There might be other expenses, but everything was hypothetical.

[00:39:09] Speaker 03:
I disagree, Your Honor.

[00:39:10] Speaker 06:
Okay.

[00:39:10] Speaker 06:
Where did you show concretely that you will, since you're already taking yourself online and yourself down, right?

[00:39:18] Speaker 06:
They're doing this at a time when you're already offline.

[00:39:21] Speaker 06:
And is this 23 days like the other one?

[00:39:24] Speaker 06:
How long are you going to be off this fall?

[00:39:29] Speaker 03:
We don't know exactly what the costs will be.

[00:39:31] Speaker 06:
Do you know how long you're going to be down this fall?

[00:39:34] Speaker 03:
The outage was scheduled for 10 days.

[00:39:35] Speaker 03:
We expect it to be another 10.

[00:39:37] Speaker 06:
20 days?

[00:39:39] Speaker 03:
We expect 20 days full stop.

[00:39:42] Speaker 03:
We will be off an extra 10 days.

[00:39:45] Speaker 03:
When we calculated these numbers before, that looked like about five million.

[00:39:49] Speaker 03:
It might be 20 now, but it's a lot of money either way.

[00:39:52] Speaker 03:
There are other sorts of costs that might come to roost other problems, other, that there could be accidents in the installation.

[00:40:00] Speaker 03:
We asked to be made whole for all of that.

[00:40:02] Speaker 03:
And we filed a formula rate to do this because Avondrim was saying we were a transmission company.

[00:40:08] Speaker 03:
And so this would be regulated.

[00:40:10] Speaker 03:
FERC has formula rates all the time.

[00:40:11] Speaker 03:
So we laid out the components of our costs.

[00:40:15] Speaker 03:
We always said there was money here that we think we should be able to collect.

[00:40:24] Speaker 03:
And we've been consistent about that the whole time.

[00:40:26] Speaker 03:
FERC acts like the outage might not need to be extended.

[00:40:29] Speaker 03:
And they claim, after they've assumed contractual authority, groundlessly to order us, and after they've assumed jurisdiction, groundlessly to order us, they say, we get to control your compensation.

[00:40:39] Speaker 03:
And ah, we need to put the incentive on you to shorten your outage.

[00:40:44] Speaker 03:
We're going to just say, you have to eat whatever bad things happen as a result.

[00:40:52] Speaker 03:
Judge Miller, you wrote a decision a year ago called Citadel.

[00:40:56] Speaker 03:
And Judge Katz, you were on the Belmont case about incentives.

[00:40:59] Speaker 03:
And those were about situations where FERC's handing out rate payer money.

[00:41:04] Speaker 03:
And the rate payers say, wait a second.

[00:41:08] Speaker 03:
These people can't respond to the incentive.

[00:41:09] Speaker 03:
This is money for nothing.

[00:41:10] Speaker 03:
And you send these cases back saying, that seems to make sense.

[00:41:13] Speaker 03:
FERC wants to put the onus on us to cut corners doing delicate surgery inside of a nuclear power plant.

[00:41:20] Speaker 03:
We can't respond to that incident.

[00:41:22] Speaker 03:
We have to do what we have to do.

[00:41:24] Speaker 06:
FERC said it's just not going to upfront license anything.

[00:41:28] Speaker 06:
Costs that may come along later, because then you don't have the incentives.

[00:41:34] Speaker 06:
But as of now, we don't know.

[00:41:37] Speaker 06:
For all we know, the circuit breaker could go in.

[00:41:41] Speaker 06:
be fine.

[00:41:41] Speaker 06:
It would be within your 20 day window.

[00:41:44] Speaker 06:
And there wouldn't be these.

[00:41:45] Speaker 06:
It's possible.

[00:41:46] Speaker 03:
No, the the possible.

[00:41:48] Speaker 03:
The windows 10 days.

[00:41:49] Speaker 03:
We're saying we need another 10.

[00:41:51] Speaker 03:
That's going to happen in September.

[00:41:53] Speaker 06:
I'm sorry.

[00:41:54] Speaker 06:
You need another 10 for what?

[00:41:55] Speaker 03:
To put breaker in.

[00:41:57] Speaker 03:
We can't fit in our existing outage window.

[00:42:01] Speaker 03:
And I don't think the federal government should be trying to tell us, make it happen to save your own money.

[00:42:07] Speaker 03:
Why is protecting AvidGrid's purse more important than protecting super- Has AvidGrid said they can put it in in this fall window?

[00:42:17] Speaker 03:
There was a debate about that, but it's impossible.

[00:42:20] Speaker 06:
Has AvidGrid said they can put it in?

[00:42:24] Speaker 03:
They did say that.

[00:42:25] Speaker 06:
Okay.

[00:42:25] Speaker 06:
They thought- The factual dispute.

[00:42:28] Speaker 06:
about things that we don't know are going to happen in the future or not happen in the future.

[00:42:33] Speaker 03:
Your Honor, when we were in a regulated utility world proposing our formula rate, we took care of the uncertainty by definition because we said, we'll look backwards as formula rates do.

[00:42:47] Speaker 03:
If the outage really didn't need to be extended, then Avery Grid doesn't pay a dime.

[00:42:50] Speaker 03:
If it does, we'll calculate the different charges consistent with the formula rate.

[00:42:55] Speaker 03:
It's all under FERC's rate regulation at that point.

[00:42:59] Speaker 03:
And we'll work it out.

[00:43:01] Speaker 03:
And there could be a fight.

[00:43:03] Speaker 03:
We won't ask for anything imprudent.

[00:43:05] Speaker 03:
But FERC now says, you're not providing any electric service to Avingrid.

[00:43:10] Speaker 03:
So we say, this is a matter for commercial negotiation.

[00:43:13] Speaker 03:
We'll have a contract.

[00:43:14] Speaker 03:
You pay us what the price is.

[00:43:16] Speaker 03:
We can have a retroactive look back.

[00:43:18] Speaker 03:
We can have arbitration to fight about if there are disputes.

[00:43:21] Speaker 03:
And that would take care of it, too.

[00:43:23] Speaker 03:
Either way, you could deal with the uncertainty.

[00:43:26] Speaker 03:
But why is it fair to have an existing generator pay substantial uncompensated costs?

[00:43:35] Speaker 05:
We're not talking about fairness.

[00:43:37] Speaker 05:
I mean, I've asked several times, but what is your evidence that good utility practice in this circumstance where you have a generator and you have a new transmission line connecting?

[00:43:46] Speaker 05:
You said these contracts have been around for 20 years.

[00:43:50] Speaker 05:
What's your evidence that good utility practice doesn't require this type of upgrade?

[00:43:56] Speaker 05:
There are no generating companies coming in here in support of NextEra saying,

[00:44:02] Speaker 05:
You know, this is like, you know, we're worried that this is gonna happen in the future under our interconnection agreements that we're gonna be required to do this.

[00:44:12] Speaker 07:
Your honor.

[00:44:13] Speaker 05:
I mean, it seems to me that you need to have a contrary, you need to have some sort of evidence that FERC is wrong about what good utility practices require in general.

[00:44:23] Speaker 03:
Your honor, everybody's been boiling with Fagotians for a while here.

[00:44:28] Speaker 03:
No one's come up with a single prior case where an existing generator anywhere around the country under the terms of the LGIA has been required to reach into its pocket and pay money to interconnect.

[00:44:41] Speaker 05:
You say there are no examples of this.

[00:44:43] Speaker 03:
There are no examples of this.

[00:44:44] Speaker 03:
This is the first time it's ever happened.

[00:44:46] Speaker 03:
My real evidence, Your Honor, is on the page of the LGA.

[00:44:49] Speaker 03:
It doesn't create that obligation for third parties.

[00:44:53] Speaker 03:
There might be other ways FERC could create this obligation, for sure.

[00:44:57] Speaker 03:
Now, I haven't gotten into jurisdiction.

[00:44:59] Speaker 03:
There's been no prior case where FERC has ordered a change in generation equipment prior.

[00:45:03] Speaker 02:
Just one last question from me.

[00:45:09] Speaker 02:
You have a tariff governing your sales.

[00:45:12] Speaker 02:
With that tariff, if you get saddled with losing profits, would your tariff allow you to pass that loss on to your utility customers, or could you amend your tariff to allow that?

[00:45:32] Speaker 03:
No, we sell under market-based rates.

[00:45:34] Speaker 03:
We sell at the price that the market will bear.

[00:45:37] Speaker 03:
This is a fight between two very large power companies.

[00:45:41] Speaker 03:
Nobody else pays for it.

[00:45:42] Speaker 03:
It's one or the other.

[00:45:44] Speaker 06:
Thank you very much.

[00:45:45] Speaker 06:
We'll give you a couple minutes.

[00:45:46] Speaker 07:
Thank you.

[00:46:08] Speaker 01:
Good morning, Your Honors.

[00:46:09] Speaker 01:
Robert Kennedy on behalf of the Commission.

[00:46:12] Speaker 01:
Before getting into 9.75, I just want to touch on some of the questions that Your Honors raised with Seabrook's counsel.

[00:46:20] Speaker 01:
Judge Mullett, you asked, essentially, the question is, if it's not average, it's going to be someone else who's going to come up and push this breaker into over-duty status.

[00:46:28] Speaker 01:
If you look at JA 537, which is ISO New England's brief in response to the Commission's briefing orders, it indicates that there are a number of

[00:46:38] Speaker 01:
projects in the interconnection queue and all of them sort of are dependent upon the circuit breaker.

[00:46:45] Speaker 01:
All of them assume that the circuit breaker will be replaced to have sufficient headroom to allow these new projects to interconnect.

[00:46:54] Speaker 05:
Mr. County, even if that's true, what does that have to do with their contractual obligation to upgrade?

[00:47:01] Speaker 05:
like it might be that there are other people looking to interconnect.

[00:47:04] Speaker 05:
But what is that?

[00:47:05] Speaker 05:
I mean, first argument is that the contract required an upgrade in these circumstances.

[00:47:10] Speaker 05:
So I'm not sure what those what those other facts in the world even have to do with that contract.

[00:47:15] Speaker 01:
I'm just answering the question.

[00:47:18] Speaker 01:
No, absolutely.

[00:47:18] Speaker 01:
The commission's determination here was based on the fact that under both

[00:47:22] Speaker 01:
Section 1.32 of the tariff, Section 43 of the interconnection agreement.

[00:47:28] Speaker 01:
There's a broad obligation for Seabrook to operate, maintain, and protect its facility in connection with good utility practice.

[00:47:36] Speaker 01:
The commission then looked at Section Appendix C, Section B3, and provision 9.75 of the interconnection agreement to glean what that means.

[00:47:46] Speaker 01:
Essentially, does good utility practice require you

[00:47:50] Speaker 01:
to make a change to your facility in response to the changing topography of the grid.

[00:47:57] Speaker 05:
So Seabrooks Council says there are no examples of this.

[00:48:02] Speaker 05:
Where, you know, they have these interconnection agreements, they've been around for a long time and FERC has never interpreted these agreements in this way.

[00:48:09] Speaker 05:
What is your response to that?

[00:48:10] Speaker 01:
I agree, and the commission notes this in the orders, this is a unique circumstance because in the typical case, you have changes to transmission facility.

[00:48:20] Speaker 01:
A generator wants to interconnect, a new project wants to interconnect, and it necessitates changes to the transmission facilities.

[00:48:27] Speaker 01:
There's a large body of case law on that that the commission draws upon in its orders here.

[00:48:32] Speaker 01:
It is rare that

[00:48:34] Speaker 01:
in the study process that generators be identified as parties that are affected by an incoming project.

[00:48:42] Speaker 01:
And there was some discussion.

[00:48:44] Speaker 01:
in a sort of the two or six pieces of this case as to the practices of other RTOs and the like.

[00:48:49] Speaker 01:
So I think for that reason, my understanding is that ISO New England is somewhat unique in that it identifies, it studies impacts on generators in its interconnection process.

[00:49:02] Speaker 01:
So I think that's why this is sort of a rare case.

[00:49:05] Speaker 01:
It's also a rare case because this

[00:49:07] Speaker 01:
You know, most generators, this is an old facility.

[00:49:09] Speaker 01:
It's hooked up in 1990.

[00:49:12] Speaker 01:
Most generators are somewhat newer and they, as a result, have more headroom in their circuit breakers.

[00:49:17] Speaker 01:
So most times an interconnection wouldn't impact.

[00:49:19] Speaker 05:
But the first rule here, you know, first order here would seem to have general applicability to any parties that have a smaller type of interconnection agreement.

[00:49:29] Speaker 05:
A generator in these circumstances where there's a new transmission line would be required to upgrade.

[00:49:34] Speaker 01:
Correct.

[00:49:34] Speaker 01:
I mean, that is the commission's position, that intersection.

[00:49:38] Speaker 05:
So it's not just for these parties.

[00:49:40] Speaker 05:
I mean, where the interconnection agreement has similar language.

[00:49:43] Speaker 01:
Correct.

[00:49:44] Speaker 05:
FERC's view is good utility practices requires this type of upgrade.

[00:49:47] Speaker 01:
Correct.

[00:49:47] Speaker 01:
Correct.

[00:49:48] Speaker 01:
As to why this hasn't come up before, I think it's a unique situation given the way the interconnection studies are run and just the nature of this very facility, that it is impacted because it's already almost at capacity.

[00:50:02] Speaker 02:
It seems like there are various provisions in both the tariff and the interconnection agreement, which they don't squarely apply by their terms.

[00:50:17] Speaker 02:
But one way or another, they illustrate the principle that

[00:50:21] Speaker 02:
When a new entrant comes in and the connection will impose costs on others, the new entrant has to pay those costs.

[00:50:33] Speaker 02:
So what's the rationale?

[00:50:37] Speaker 02:
That's the basic principle.

[00:50:40] Speaker 02:
What's the rationale for excluding opportunity costs, which seem like they're real?

[00:50:48] Speaker 01:
Well, the commission looked at first kind of getting back.

[00:50:53] Speaker 01:
It could possibly be real, but getting back to what we ended on with Seabrook's council, there is a dispute in the record as your position is categorical.

[00:51:02] Speaker 02:
No opportunity costs can be subject to this obligation.

[00:51:07] Speaker 02:
You know that imposed on new entrant to come.

[00:51:10] Speaker 01:
Correct.

[00:51:11] Speaker 01:
And that's kind of the baseline rule that the commission staff established in the generator interconnection rule.

[00:51:17] Speaker 01:
The rule is that that a it's difficult for interconnecting parties to project what those costs may be that the party doing the upgrade is in control of the

[00:51:30] Speaker 01:
of the schedule and whatnot in the engineering when they're working on their own facility.

[00:51:35] Speaker 01:
The commission did have a carve out that if parties come to an agreement on it, that's fine.

[00:51:41] Speaker 01:
But the pro forma rule is that lost profits and opportunity costs are not generally recoverable.

[00:51:51] Speaker 01:
And in this case, the commission looked to maybe start the interconnecting agreement because the obligation to upgrade is grounded

[00:51:58] Speaker 01:
in that section 9.71 of the interconnection agreement says, with respect to compensation for outages, look to the tariff for any compensation that is due.

[00:52:10] Speaker 01:
So the commission did that.

[00:52:12] Speaker 01:
It looked to section 1.3.10, which we were speaking about earlier.

[00:52:18] Speaker 01:
And it looked at the language there.

[00:52:20] Speaker 01:
And it poses upon the incoming party, the interconnection customer, the obligation pay for the cost to construct the necessary upgrades.

[00:52:30] Speaker 01:
And the commission viewed that as the cost to engineer, procure, and install.

[00:52:36] Speaker 01:
And I think that's sort of consistent with this court's decision in the Southern

[00:52:40] Speaker 01:
companies case that cited in a brief where the commission interpreted language saying.

[00:52:44] Speaker 01:
The interconnecting customers responsible for all costs the commission interpret that as direct costs given sort of the backdrop and similarly for attorneys fees background rule is the American rule.

[00:52:58] Speaker 01:
each one bears their own cost.

[00:53:02] Speaker 01:
Yes.

[00:53:03] Speaker 01:
Yes.

[00:53:03] Speaker 01:
That's really limited to what the tariff says the cost to construct.

[00:53:08] Speaker 01:
And that's certainly, I mean, that's if you look at sort of parallelism, you look at Seabrook's interconnection agreement, Section 18.2 of that, obviously, which dealt with the upgrades necessary for their interconnection, it excludes lost profits and the like as well.

[00:53:26] Speaker 06:
OK.

[00:53:26] Speaker 06:
I just wanted to pick on one word you said.

[00:53:28] Speaker 06:
Generally, they're excluded.

[00:53:31] Speaker 06:
when you were answering, Judge.

[00:53:33] Speaker 01:
I'm sorry, generally.

[00:53:33] Speaker 06:
You said there generally, things like opportunity costs are generally excluded.

[00:53:38] Speaker 06:
What I'm wondering is if, why you had that qualifier and if, for example, you know, this were to take place and then through no fault whatsoever, in fact, back through every best effort by Seabrook, something happened, weather or something, that caused it to take longer than expected.

[00:54:01] Speaker 06:
I get why FERC upfront doesn't want to license all this because of its incentive concerns, but is there any mechanism after the fact if there ended up being significant costs through no one's fault and everyone's best efforts?

[00:54:18] Speaker 06:
Does Seabourg have any capacity to go back to the commission and say, look, it's just unreasonable to have them pay for this?

[00:54:26] Speaker 06:
It would be unreasonable not to let them have this or to have us split the cost of, you know, not right for New England, but a hurricane that came along.

[00:54:35] Speaker 06:
So there are post-hoc capacity, but for average reason doesn't want to.

[00:54:40] Speaker 01:
So I want, just to get to the first part of your question, why I said generally it's because in rule 2000,

[00:54:45] Speaker 01:
the commission left open the possibility if the parties agree to loss profits and the like.

[00:54:50] Speaker 01:
That's fine.

[00:54:51] Speaker 01:
As to your question, I mean, if you look at, and I think it's paragraph 104 of the initial order and the like, the commission does note that at this point, it's speculative whether there will be any costs and the like.

[00:55:05] Speaker 01:
And it's only does hint at maybe that, you know, we don't know what's going to happen.

[00:55:11] Speaker 06:
But but I will say at the end of the day, was there anything that would bar them from coming back?

[00:55:15] Speaker 01:
And well, I will I will say, you know,

[00:55:20] Speaker 01:
I will say at the end of the day, what the commission is doing here, it's interpreting Avangard's responsibilities under the tariff.

[00:55:26] Speaker 01:
I think it's interpreting tariff language that limits to the cost to construct regardless of the circumstance.

[00:55:32] Speaker 01:
So while there is a little bit of ambiguity and the commission does note the speculative nature of the cost at this point based on the facts that we know now, I think logically the commission's ruling is grounded in the tariff language, which is not dependent on

[00:55:49] Speaker 05:
you know, the future and the commission says haven't great isn't a party to the tariff though, is it?

[00:55:53] Speaker 05:
I mean, it's not what's not a party to the contract, not a party to the contract.

[00:55:57] Speaker 01:
But the commission's interpreting their obligations under section 1.3.10 of the tariff and the schedule for elected transmission upgrades says when you're coming on, this is your responsibility that the cost to construct.

[00:56:11] Speaker 01:
So that's that's what it's interpreting with respect to why the extent of average cost responsibilities.

[00:56:18] Speaker 02:
How do you square, oh sorry, strike that.

[00:56:24] Speaker 06:
It seems odd that if really the rub here is they want protection against these unknown indirect costs that might actually never happen.

[00:56:42] Speaker 06:
But either FERC or we are supposed to decide that.

[00:56:46] Speaker 06:
right now.

[00:56:47] Speaker 06:
It doesn't seem right because they're just entirely speculating whether they're going to have access costs.

[00:56:54] Speaker 06:
It's just not known on this record whether they will or not.

[00:56:59] Speaker 06:
But if they have no opportunity, if they have to get them up front because FERC would not entertain, and after the fact, yikes, look what happened.

[00:57:10] Speaker 06:
We need to have compensation for this on a record that

[00:57:16] Speaker 06:
full good faith, full every reasonable effort, and sometimes things just go wrong, then they do have to litigate it now.

[00:57:26] Speaker 06:
But if they could go to FERC afterwards, then it would seem like this question about whether they can, under the contract, get these extra costs as part of the construction process that triggered the problem.

[00:57:43] Speaker 06:
then it could be decided later with the real record as to what they incurred and why, and whether it fits within FERC's conception of what the construction project entails.

[00:57:56] Speaker 01:
Again, I obviously see your concern with ripeness and the like and the speculative nature of these.

[00:58:04] Speaker 01:
And again, the commission did point to it, which

[00:58:08] Speaker 01:
Obviously, you can see the appeal of coming back later with a complaint in the same circumstances have changed.

[00:58:13] Speaker 06:
But again, I'm not- They can't do that then.

[00:58:16] Speaker 01:
Well, yeah, I'm not sure logically how that would, how the subsequent facts would change the commission's core decision here that Avangrid's obligation is limited to the cost to construct the necessary facilities, which the commission has interpreted here as the direct costs.

[00:58:34] Speaker 06:
Procedural bar to them coming back.

[00:58:36] Speaker 06:
I don't think there's a procedural bar and, and they would have to say, and you count, this should count as construction costs.

[00:58:43] Speaker 06:
X, Y, and Z happen perfectly reasonable.

[00:58:46] Speaker 06:
And we have to say, right.

[00:58:47] Speaker 01:
Or this wasn't, I'm sorry.

[00:58:49] Speaker 06:
Oh, you please.

[00:58:51] Speaker 06:
You've got more instances than I do.

[00:58:53] Speaker 01:
No, no, no, no, no.

[00:58:53] Speaker 01:
I'm just saying, the argument was made, look, this is confiscatory, potentially, at the end.

[00:58:59] Speaker 01:
If we're out of service for a year or whatever it may be.

[00:59:04] Speaker 01:
And the commission said, well, no, that's speculative.

[00:59:07] Speaker 01:
Whether they could bring that back, I don't think there's a procedural bar.

[00:59:11] Speaker 01:
I'm just saying, given the logic of, obviously, I'd like to say, yes, they can bring it back.

[00:59:16] Speaker 01:
Maybe this will all go away.

[00:59:19] Speaker 01:
you know, the logic, again, the logic of the commission decision here is that we're talking about Avangrid's tariff, what the tariff obligates Avangrid to pay.

[00:59:31] Speaker 01:
And that seems disconnected from whatever the facts may show.

[00:59:35] Speaker 05:
Mr. Kennedy, if you could clarify for me, what remedial authority is FERC exercising?

[00:59:42] Speaker 05:
Because FERC brought us to a sponte 206 proceeding, which had been abandoned.

[00:59:46] Speaker 01:
Correct.

[00:59:49] Speaker 01:
So as you know, so what authority is so I think in the I think it's in its general authority in the complaint order in the sorry in the complaint, um, average grid did, um, say the commission's general authority under section three.

[01:00:04] Speaker 01:
Yeah.

[01:00:05] Speaker 01:
And I think that's what it's doing here because it's just, um, and again, there hasn't been any challenge this, but it's just interpreting

[01:00:11] Speaker 01:
It's not finding that a provision is unjust and unreasonable and needs to be changed.

[01:00:14] Speaker 01:
It's just interpreting the scope of the party at the present day.

[01:00:17] Speaker 05:
So I assume I disagree with FERC's interpretation of the contract.

[01:00:25] Speaker 05:
Then to reach this result, wouldn't FERC have to do a 206 proceeding?

[01:00:32] Speaker 01:
Yes, if there's no

[01:00:35] Speaker 01:
If Your Honor believes there's no existing obligation and the Commission wants to impose a different obligation, they would have to find that the existing arrangement was unjust and unreasonable and then impose a new one.

[01:00:50] Speaker 01:
Correct, correct.

[01:00:52] Speaker 01:
And as you were discussing with Seabrook's Council, obviously there's filed rate issues there and

[01:01:00] Speaker 01:
We dealt with this in the PJM context and I'm forgetting the name of the projects at issue there, but it becomes difficult when you're trying to figure out what rules should apply to a project that's working its way through the queue.

[01:01:12] Speaker 01:
But yes, if there was no obligation here and the commission wanted to impose one, it would have to do so through section 206.

[01:01:21] Speaker 05:
Okay, and so in FERC's contract interpretation, it seems to me that the commission is placing a lot of weight on good utility practices, that good utility practices require an upgrade in these circumstances.

[01:01:34] Speaker 05:
And I'm wondering what good utility practice the commission can point to that suggests if an upgrade is required here, which I'm a bit doubtful, but if one is required,

[01:01:47] Speaker 05:
Why doesn't it include the payment of indirect costs?

[01:01:51] Speaker 05:
Because it seems like there should be some parallelism there.

[01:01:55] Speaker 01:
Well, the commission talks about this in

[01:01:59] Speaker 01:
the rehearing order.

[01:02:01] Speaker 01:
So I guess getting into the second part first about the costs.

[01:02:06] Speaker 01:
The definition of good utility practice discusses things widely done in the industry.

[01:02:13] Speaker 01:
The commission's point with respect to that is outage costs, lost opportunity costs, are generally not permitted in the recoverable in the interconnection process for parties that have to go through it either.

[01:02:23] Speaker 01:
I mean, you see it in the tariff for generators that are affected by

[01:02:29] Speaker 01:
outages see for trend in the commission's case law regarding transmission.

[01:02:34] Speaker 01:
Owners that are affected by the interconnection need to go down.

[01:02:37] Speaker 01:
that lost profits and the like, lost opportunity costs aren't generally coverable.

[01:02:41] Speaker 01:
So what the commission said in the rehearing order, that demonstrates that the industry goes through with these projects without the assurance that, without the opportunity to recover these lost profits and the like.

[01:02:55] Speaker 02:
So what happens in Judge Mollett's nightmare scenario?

[01:03:02] Speaker 02:
They're offline for,

[01:03:04] Speaker 02:
six months for nobody's fault.

[01:03:07] Speaker 02:
They're just crushed, getting crushed.

[01:03:10] Speaker 02:
They charge market rates so they can't pass on these costs because competitors aren't getting crushed in this way.

[01:03:17] Speaker 02:
Is that just

[01:03:19] Speaker 02:
a risk of doing business?

[01:03:21] Speaker 01:
Well, again, I think the commission does base some of its rulings on the speculative nature of these costs.

[01:03:28] Speaker 01:
I'm repeating myself at the end of the day.

[01:03:30] Speaker 02:
You're also saying when they come back with this ex post as applied challenge, the answer is going to be the same.

[01:03:37] Speaker 01:
Well, I mean, I think that's the logic of the commission's orders here, which are based on the language of the tariff itself.

[01:03:45] Speaker 01:
It's not saying

[01:03:48] Speaker 01:
It does raise some issues with the speculative nature of the damages, but I think at the end of the day, what the commission is saying here is the having grid's cost responsibility is limited to what it says in the tariff.

[01:03:58] Speaker 01:
And that is the cost of construction, which is what it is.

[01:04:02] Speaker 01:
Yes.

[01:04:03] Speaker 06:
Right.

[01:04:03] Speaker 06:
But there's a force majeure clause in the contract.

[01:04:07] Speaker 06:
And so if that were the cause,

[01:04:10] Speaker 06:
But I assume FERC has not answered this question of extraordinary costs due to circumstances beyond everyone's control, how the force majeure clause would play into that application.

[01:04:27] Speaker 06:
Or I assume someone could argue that this actually, when the common law or whatever counts as construction costs, then FERC would have to address that.

[01:04:40] Speaker 06:
once they had something concrete.

[01:04:42] Speaker 06:
The answer might be no for the reasons I've said in the past, but if they haven't addressed this type of extraordinary problem before, or the implications of force majeure clause, then it will be preferred to answer later, and then courts could review the reasonableness of its decision.

[01:05:01] Speaker 01:
I think that's correct, Your Honor.

[01:05:03] Speaker 01:
There is no procedural bar.

[01:05:05] Speaker 01:
Just in my discussion today, I didn't want to suggest that it's just a completely open playing field.

[01:05:09] Speaker 01:
I completely appreciate your candor.

[01:05:12] Speaker 01:
But yes, I'm not aware of any procedural bar if they were to come back with sort of the what's called the nightmare scenario.

[01:05:22] Speaker 05:
So if Burke had an issue with this order here and Seabrook didn't upgrade its generator,

[01:05:31] Speaker 05:
When Avangrad was ready to connect, would Seabrook be in violation of the tariff?

[01:05:41] Speaker 05:
I don't see how they would be in violation of the tariff in that situation.

[01:05:44] Speaker 01:
Of the tariff?

[01:05:48] Speaker 05:
Or the interconnection agreement.

[01:05:50] Speaker 01:
Well, under the commission's interpretation, they're obligated under section 9.75 undertake this, this upgrade because the grid is going to change when they.

[01:06:02] Speaker 05:
But where in the words of 9.75 is that obligation exists?

[01:06:07] Speaker 01:
So I think it's in, obviously they need the general thrust of, and I'll get to the specific language, but the general thrust of 9.75 is you need to have circuit breakers in place and you need to maintain and operate them.

[01:06:20] Speaker 01:
in accordance with good utility practice.

[01:06:24] Speaker 01:
Now sort of the question is, does that mean I need a circuit breaker in place sufficient to protect my facility and my contribution to faults on the system based on the specifications when I hooked up?

[01:06:36] Speaker 01:
or what the commission found.

[01:06:38] Speaker 01:
No, it's it's a ongoing obligation, and you may need under these unique circumstances here to upgrade in response to the grid as it exists.

[01:06:45] Speaker 01:
Now you have an obligation to operate your facility and maintaining in accordance with good utility practice.

[01:06:50] Speaker 05:
The route contract is a bilateral contract.

[01:06:53] Speaker 05:
It's not a contract with

[01:06:55] Speaker 05:
the world.

[01:06:56] Speaker 05:
Anyone who may want to hook in.

[01:06:58] Speaker 01:
It is with ISO New England, the operator of the grid.

[01:07:01] Speaker 01:
And the facts here are that ISO New England undertook its study process and said, once this, once the admin grid project hooks up, the breaker will be overdue.

[01:07:14] Speaker 05:
Once it hooks up, then they would be in breach if they didn't upgrade.

[01:07:18] Speaker 01:
Correct, and the commission's interpretation of section 9.75 is you have an ongoing, you have an obligation to, obviously, you don't wanna go through the scenario and say, okay, yes, you have to respond to the grid as it exists.

[01:07:33] Speaker 01:
We're gonna let this project hook up and then you have to upgrade.

[01:07:35] Speaker 01:
I mean, you want it beforehand, logically, because the idea is to protect it.

[01:07:38] Speaker 05:
You might want that, but then maybe that is just left to ordinary commercial negotiations.

[01:07:45] Speaker 05:
It's not an obligation.

[01:07:47] Speaker 05:
You know, because there's no breach, right?

[01:07:49] Speaker 05:
When does the breach occur?

[01:07:50] Speaker 05:
Like, when is Seabrook in breach?

[01:07:53] Speaker 05:
If Avangard says, like, hey, we're interested in connecting, you know, why are they, why is Seabrook in breach?

[01:07:59] Speaker 01:
Because they are refusing to operate their, you know, protect their system in accordance with good utility practice when they're... So it's really all about the good utility practice.

[01:08:09] Speaker 05:
And it's kind of, it's essentially... I mean, at the end of the day, that is like FERC's primary argument.

[01:08:15] Speaker 01:
Well, yes, and the language of section 9.75, which requires them to protect against any short circuit occurring on the system.

[01:08:24] Speaker 05:
And you can't point to any case, any situation or any case or order where FERC has required a generator.

[01:08:31] Speaker 05:
to do this?

[01:08:32] Speaker 01:
No, as I said, I think it's rare that generators are identified as affected parties.

[01:08:39] Speaker 05:
So does FERC just sort of have a free-floating ability to identify new good utility practices?

[01:08:44] Speaker 05:
It seems like good utility practice refers to something in the world, like industry standards that are established, that Seabrook would be unnoticed, that they have to do because it's something that occurs.

[01:08:55] Speaker 05:
And if FERC wants to make a change, then they can go for 206.

[01:08:59] Speaker 05:
They can amend the tariff.

[01:09:01] Speaker 05:
But they didn't do that here.

[01:09:02] Speaker 01:
Well, because I think the commission did look at, did take that into consideration.

[01:09:09] Speaker 01:
Was there notice here that you may have to upgrade your facility in response to the changing conditions on the grid?

[01:09:14] Speaker 01:
And it looked at Section, Appendix C, Section B3, which talks about this very circumstance.

[01:09:19] Speaker 01:
Now, granted,

[01:09:20] Speaker 01:
That only deals with changes by New Hampshire transmission or it's only between the two.

[01:09:28] Speaker 01:
But the language in interpreting what the commission found a highly relevant in interpreting what is required by good utility practice.

[01:09:36] Speaker 05:
And if you look at what that section's bootstrapping to say we're going to take a good utility practice and

[01:09:44] Speaker 05:
with reference to what two parties agree to in a bilateral contract.

[01:09:48] Speaker 05:
It's sort of bootstrapping a bilateral contract into a general good utility practice.

[01:09:52] Speaker 01:
I don't think so, Your Honor.

[01:09:53] Speaker 01:
The way the Commission looked at it is Section B3 is evidence of what good utility practice is.

[01:09:59] Speaker 01:
That there could be changes outside your fence line.

[01:10:01] Speaker 01:
And just a quote from Section B3, that could require you in accordance with good utility practice to make your own upgrades.

[01:10:09] Speaker 01:
And the Commission is saying that that same concept that you may have to

[01:10:13] Speaker 01:
to respond to changes on the grid is inherent in good utility practice as evidenced by the agreement between these very parties, ISO New England, New Hampshire transmission, and Seabrook.

[01:10:23] Speaker 01:
So I don't think it's bootstrapping or imposing an unforeseen obligation.

[01:10:28] Speaker 01:
It's the notion that you may have to do something.

[01:10:32] Speaker 05:
Well, it's an unforeseen obligation as to often grid, not as to New Hampshire transmission.

[01:10:41] Speaker 05:
Yes, I mean, again, this is but the commission's point in here is it does seem unforeseen if you can't point to any example where someone where generators been required to do this.

[01:10:53] Speaker 01:
But the I would push back that it's not unforeseen because the parties foresaw it here and the commission respect to each other.

[01:11:00] Speaker 01:
Right.

[01:11:00] Speaker 01:
And what the commission said in the initial order was

[01:11:04] Speaker 01:
Under what conception would good utility practice require you to upgrade your system in response to change this party made, but not somewhere else in the grid, when the undisputed consequences

[01:11:16] Speaker 01:
But if the Avangrid project hooks up, it exposes them to significant risks.

[01:11:20] Speaker 05:
That could be a nice policy argument.

[01:11:22] Speaker 05:
And FERC could have made that if it found that it was unjust and unreasonable to not let Avangrid connect.

[01:11:30] Speaker 05:
But it didn't do that.

[01:11:32] Speaker 05:
It had an opportunity to.

[01:11:33] Speaker 05:
It actually, Sue has spontaneously initiated 206 proceeding.

[01:11:36] Speaker 05:
206 was brought up by the parties.

[01:11:41] Speaker 01:
Correct, but the commission found that there was sufficient language in the agreement that evidence this obligation.

[01:11:48] Speaker 01:
Again, it looked at section B3 to illuminate what good utility practice requires with respect to changes on the grid.

[01:11:58] Speaker 06:
I understood, maybe I'm wrong, that good utility practice wasn't against the world's standards, but was good utility practice within the context of a grid.

[01:12:09] Speaker 06:
Because that's the, because it's a trilateral contract, right?

[01:12:14] Speaker 06:
And so the good utility practice has to be within the framework of a grid and all the obligations that the grid itself, ISO New England has to bring new generation on.

[01:12:25] Speaker 01:
I think that's fair.

[01:12:26] Speaker 01:
And just fundamentally, at the end of the day here, you have a direction from the system operator saying, hey, when this hooks up, your facilities can be subject to extreme risk.

[01:12:37] Speaker 01:
And what the commission is saying is that good utility practice requires you to follow the system operator's directive in that regard.

[01:12:45] Speaker 06:
Everyone's reading here that, well, they can't go up.

[01:12:47] Speaker 06:
They can't.

[01:12:48] Speaker 06:
So is the theory that, I just don't know how this works, could have and could actually hook up.

[01:12:55] Speaker 06:
and be connected and do everything but flip the switch for the power to come.

[01:13:01] Speaker 06:
And then ISO New England says, they are not connected.

[01:13:09] Speaker 06:
And your circuit breaker is no good.

[01:13:11] Speaker 06:
They're flipping the switch Tuesday.

[01:13:14] Speaker 06:
We better get a new circuit breaker in now.

[01:13:18] Speaker 01:
I mean, there is, I think the ultimate.

[01:13:21] Speaker 06:
It just says connected.

[01:13:22] Speaker 01:
Right.

[01:13:22] Speaker 06:
Can't connect.

[01:13:23] Speaker 01:
Right.

[01:13:24] Speaker 06:
I mean, they need to be connected.

[01:13:26] Speaker 06:
When someone's connected, if it creates that problem, they have to replace it.

[01:13:29] Speaker 06:
Well, they can connect the wires, I assume, without actually turning the power on, at which point, clearly, the obligation under 9.7.5 would kick in.

[01:13:41] Speaker 01:
Yeah, I think you're right.

[01:13:42] Speaker 01:
There is a construction phase.

[01:13:43] Speaker 01:
And then I think there's a phase, energization, where

[01:13:48] Speaker 01:
switches flip.

[01:13:49] Speaker 06:
I mean, I don't know where they are since this has been postponed so many times, but they must be close to that point.

[01:13:58] Speaker 01:
I'm not certain this data can, obviously the intervener's counsel can speak to that.

[01:14:02] Speaker 01:
I know the record reflects obviously that's been pushed back a ways and that it is scheduled to go to be, the work needed here is scheduled to take place in the fall, but as to the overall state of the project, I'm not certain.

[01:14:18] Speaker 06:
Thank you very much.

[01:14:21] Speaker 01:
Thank you.

[01:14:27] Speaker 06:
Let me know if I said your name wrong.

[01:14:43] Speaker 00:
Good morning, Your Honours, and may it please the floor, Eric and Abhgar, for the interveners.

[01:14:47] Speaker 00:
I want to start where I think we were going.

[01:14:51] Speaker 00:
There is a little bit of a misconception here that this project is being built for Avangrid.

[01:14:56] Speaker 00:
The reality is, if you look at JA 536 to 537, ISO New England was responding to a question from FERC where basically it asked if there were alternatives to this.

[01:15:06] Speaker 00:
And it said, yes, there are actually alternatives to upgrading or replacing the breaker, building a series of reactors,

[01:15:11] Speaker 00:
like that, they didn't want to do that because that would cause side effects that they wanted to avoid.

[01:15:17] Speaker 00:
It would impede transfer from northern to southern ISO, New England.

[01:15:21] Speaker 00:
And ultimately, it said it would just kick the can down the road because the problem would just pop up somewhere else, right?

[01:15:28] Speaker 00:
All it would do is add back some headroom on the breaker that would get used up by other projects.

[01:15:33] Speaker 00:
So to pick up where my friend was saying, the reality is this is a directive from ISO New England both to us

[01:15:39] Speaker 00:
and to NextEra to upgrade the breaker.

[01:15:42] Speaker 00:
And I think where he was essentially going is, clearly, good utility practice requires you to respond to directives from your RTO about what is required in light of changes to the grid.

[01:15:53] Speaker 00:
And the reality is, the other thing that my friend on the other side is ignoring is that NextEra, in fact, did two paper upgrades of this breaker in the past.

[01:16:02] Speaker 00:
And presumably, that was in response to changes on the grid.

[01:16:06] Speaker 00:
It was built originally with 150,000 amp

[01:16:09] Speaker 00:
limit, and then they upgraded it to 160, and I think 2010, and then again into 2016 to 165.

[01:16:16] Speaker 00:
And if it wasn't for changes on the system, I don't know why they did that.

[01:16:21] Speaker 05:
So if, assuming that's right, that good utility practices require this, because the ISO says there's an interest in it, what do the good utility practices say about costs?

[01:16:32] Speaker 05:
Well, I think- Good utility practices, I'm sure, are connected in part with costs, right?

[01:16:36] Speaker 05:
You have an obligation, but who has to pay?

[01:16:38] Speaker 00:
So good utility practice does incorporate sort of a reasonable cost standard.

[01:16:43] Speaker 00:
And ultimately, one of the issues with their position, I think, is that

[01:16:48] Speaker 00:
It doesn't require an interconnection for them to need to upgrade the breaker.

[01:16:51] Speaker 00:
There could be lots of other things that take over the 100% mark.

[01:16:55] Speaker 00:
And many of those, they would actually have to pay 100% of the cost.

[01:16:58] Speaker 00:
That's not the situation.

[01:17:00] Speaker 00:
Well, right.

[01:17:01] Speaker 00:
But the reality is, at this particular point, they have an opportunity to upgrade the breaker when somebody else is actually footing the $18.5 million bill for all of the direct costs.

[01:17:11] Speaker 00:
Whereas tomorrow, ISO New England could come out and say, actually, you need to have a 5% margin on your breaker.

[01:17:17] Speaker 00:
And by the way, under your own LGIA, you have an obligation to pay 100% of that cost, right?

[01:17:22] Speaker 00:
All your direct costs, all your indirect costs, and everything else.

[01:17:25] Speaker 00:
Here, they're actually in an advantageous position because we have to pay all of the direct costs of that, including about a million dollars to NextEra for their engineering and other personnel supporting the

[01:17:42] Speaker 00:
One factual question I wanted to mention is, I think I heard my friend on the other side say that the outage is 10 days, and this is going to extend it by 10 days.

[01:17:52] Speaker 00:
JA 270, the average outage is actually three and a half weeks.

[01:17:56] Speaker 00:
Our expert came in and said we thought we could do that within a week or two.

[01:17:59] Speaker 00:
The latest schedule outside the record is it's supposed to happen in about 10 days.

[01:18:05] Speaker 00:
And this idea that it's somehow going to necessarily increase it by 10 days is just not supported.

[01:18:10] Speaker 00:
estimate that was their projection, but it's not necessarily going to happen.

[01:18:15] Speaker 00:
And that makes all of their costs speculative.

[01:18:17] Speaker 06:
Where is Avangrid in the ready-to-connect process?

[01:18:21] Speaker 00:
So right now, the last I've seen is that we are scheduled to interconnect sometime in 2025.

[01:18:28] Speaker 00:
Construction is underway.

[01:18:29] Speaker 00:
I think we've built about 25% of the poles.

[01:18:32] Speaker 00:
Most of this goes kind of above ground.

[01:18:34] Speaker 00:
There's some maybe below ground.

[01:18:36] Speaker 00:
We're sort of in the process of erecting the poles and creating the lines of doing the construction of all of the wires and ultimately the converter facility as well.

[01:18:46] Speaker 06:
Can you physically connect without turning the power on?

[01:18:48] Speaker 06:
Get the physical connections all in place and then that's the new grid.

[01:18:57] Speaker 00:
Right.

[01:18:57] Speaker 00:
I mean, I think so in response to some questions from FERC again, ISO New England had sort of

[01:19:03] Speaker 00:
suggested that there may be alternative ways for us to interconnect without replacing breaker.

[01:19:08] Speaker 00:
And ISO New England basically said, yeah, there might be ways for us to sort of monitor the system, turn it on when we're not at risk of a high short circuit, turn it off when we are at a high risk of a short circuit, but we don't really want to do that.

[01:19:21] Speaker 00:
It creates a lot of complications.

[01:19:22] Speaker 00:
and other things like that.

[01:19:23] Speaker 06:
So I think I was asking a much more elementary question.

[01:19:26] Speaker 06:
And that is, can you get all the physical structures in place so that you are connected to this grid?

[01:19:35] Speaker 06:
I assume that's what happens.

[01:19:37] Speaker 06:
And then when all the screws are tightened or whatever they are, wires connected, twisted together, there's a turn the power on.

[01:19:47] Speaker 00:
Is that right?

[01:19:48] Speaker 00:
As far as I know, that's correct.

[01:19:50] Speaker 00:
We're in the process of constructing all of the necessary facilities.

[01:19:53] Speaker 00:
That will ultimately include an interconnection to a substation in Maine.

[01:19:58] Speaker 00:
And then ultimately, we would turn the power on and start supplying hydroelectric power to ISO New England.

[01:20:05] Speaker 00:
Obviously, ISO New England won't let us do that until the breaker is in place, because that's the upgrade that they've done.

[01:20:11] Speaker 00:
It won't let us turn the power on, right?

[01:20:13] Speaker 00:
or they let us turn it on and then require us to turn it off, and it's at high risk of a short circuit.

[01:20:21] Speaker 07:
Thank you.

[01:20:21] Speaker 00:
Thank you.

[01:20:26] Speaker 06:
I think you asked for three minutes, so we will give you that, but we'll try to hold to that.

[01:20:29] Speaker 03:
I did misspeak about the timing of the outage.

[01:20:34] Speaker 03:
It was expected to be 23 days, and the installation of the breaker adds another 10.

[01:20:39] Speaker 03:
I apologize.

[01:20:40] Speaker 06:
Sorry, can you say that again?

[01:20:42] Speaker 03:
The outage is expected to be 23 days, and the breaker replacement adds another 10, the way that the schedule.

[01:20:50] Speaker 06:
So you are planning to already do 23 days.

[01:20:53] Speaker 03:
We already were planning to do that.

[01:20:54] Speaker 03:
I was wrong when I said it was 10 plus 10.

[01:20:56] Speaker 03:
That's actually the money.

[01:20:58] Speaker 03:
We did upgrade the breaker to get a little extra headroom.

[01:21:01] Speaker 03:
We did it because we upgraded, we increased the capacity slightly of Seabrook Station, all internal.

[01:21:08] Speaker 03:
We did have to do that.

[01:21:09] Speaker 03:
We wouldn't have had a breaker that would have performed its duties that would have been up to the task.

[01:21:16] Speaker 03:
But that does not mean we have to replace it for Avingrad.

[01:21:19] Speaker 05:
So can I just, Council for Intervener said that ISO New England could order Seabrook to have like a 5% margin and that you would bear the full cost of that.

[01:21:28] Speaker 05:
Is that, can the ISO do that?

[01:21:32] Speaker 05:
No.

[01:21:34] Speaker 03:
No, they can't dictate changes in the composition of a nuclear power plant.

[01:21:40] Speaker 03:
If an ISO's authority to run the grid and a duty to watch reliability and a good utility practice got furred as far as it claims today, then your honor, in your Belmont case, they should just have said every generator in New England has to change their plant to have dual fuel capability and fuel on site.

[01:21:59] Speaker 03:
They can't do that.

[01:22:02] Speaker 03:
If you look at ISO New England's brief.

[01:22:05] Speaker 03:
Why not?

[01:22:06] Speaker 02:
Because that's regulating generation.

[01:22:10] Speaker 02:
Yes.

[01:22:11] Speaker 02:
Is this a jurisdictional point or is this something about contracts?

[01:22:17] Speaker 03:
There's no jurisdiction to prove that and there's no tariff or contract infrastructure to allow that.

[01:22:27] Speaker 03:
ISN New England followed a brief below in a J534.

[01:22:30] Speaker 03:
They say, Article 9.7.5 does not require Seabrook upgrade the Seabrook breaker for the benefit of another entity's interconnection to the system.

[01:22:40] Speaker 03:
As discussed above, it is the obligation of the interconnection customer to work with the affected party to effectuate an upgrade required for interconnection.

[01:22:50] Speaker 02:
Negotiate.

[01:22:51] Speaker 02:
Sorry, why couldn't they try to do that through a 206 proceeding?

[01:22:58] Speaker 02:
to give a 5% margin?

[01:23:05] Speaker 03:
Well, I think they would have no record evidence to support that being a reliability requirement.

[01:23:09] Speaker 03:
But they wouldn't have jurisdiction to order us under 206 to change a piece of generating equipment.

[01:23:16] Speaker 03:
Nor have they ever done that in the history of the Federal Power Act.

[01:23:21] Speaker 06:
The ISO determined a good utility practice.

[01:23:28] Speaker 06:
required a 4% margin.

[01:23:33] Speaker 06:
And good utility practices, reliable grid, necessary for a reliable grid.

[01:23:39] Speaker 06:
You're saying they couldn't say to all generators on the grid, make sure your circuit breaker has a 4% margin on it because that's necessary for the reliability of our grid.

[01:23:55] Speaker 06:
They can't do that?

[01:23:57] Speaker 03:
No, I don't think they can, but they would be saying it's necessary for future parties.

[01:24:01] Speaker 03:
ISO New England doesn't have the power to dictate the equipment inside of a generating station.

[01:24:07] Speaker 03:
They have the power to say you can hook up only three quarters of your capacity.

[01:24:11] Speaker 03:
They don't have the power to dictate your fuel supply.

[01:24:14] Speaker 06:
So they could say to you, if you've got this on the cusp circuit breaker, you now need to go down for this reliability of the grid, because we like a 4% margin.

[01:24:27] Speaker 06:
That's the industry standard.

[01:24:29] Speaker 06:
So you're going to have to reduce.

[01:24:30] Speaker 06:
They could say, I think you just said, require you to reduce your power outage, so that you have that 4% margin.

[01:24:38] Speaker 03:
No, no.

[01:24:38] Speaker 03:
I was just making a general comment, that ISO New England does

[01:24:42] Speaker 03:
have the ability to limit how much power a generator can put into the grid, but that has nothing to do with the breaker.

[01:24:47] Speaker 06:
They thought your circuit, I'm asking the question, that they thought the way to maintain the reliability of the grid, because you or some other company refused to replace their circuit breaker.

[01:25:02] Speaker 06:
And the only way to keep the grid functioning reliably would be to say,

[01:25:10] Speaker 06:
either replace the circuit breaker or reduce your output by, do the math, whatever it is, 75, so down to 75%.

[01:25:16] Speaker 06:
Otherwise the grid's gonna blow.

[01:25:19] Speaker 06:
They can do that, right?

[01:25:22] Speaker 03:
No, they could tell us we have to disconnect because there's a reliability problem.

[01:25:25] Speaker 06:
They only can do disconnect?

[01:25:27] Speaker 06:
I thought you said that they can say reduce your output.

[01:25:30] Speaker 03:
I said they can tell you as a capacity resource, you can only inject X amount of capacity overbuilt your plant for some reason.

[01:25:41] Speaker 03:
So they can dictate how much power you flow onto the system, but they can't dictate internal protective equipment within a nuclear power plant.

[01:25:49] Speaker 03:
That's the NRC's job.

[01:25:50] Speaker 06:
Any other questions?

[01:25:53] Speaker 06:
All right.

[01:25:53] Speaker 06:
Thank you very much.