[00:00:00] Speaker 05:
Case number 23-1282 ED-OUT, Advanced Energy United ED-OUT, petitioners versus Federal Energy Regulatory Commission.

[00:00:10] Speaker 05:
Good morning.

[00:00:11] Speaker 05:
Good morning to everybody.

[00:00:12] Speaker 05:
Mr. Sheppard?

[00:00:15] Speaker 08:
Good morning, Judge Mallette, Judge Walker, Judge Childs.

[00:00:17] Speaker 08:
My name is John Sheppard.

[00:00:18] Speaker 08:
I'm speaking to issues one, two, and four on behalf of the transmission provider petitioners.

[00:00:22] Speaker 08:
I've requested two minutes

[00:00:25] Speaker 08:
May it please the court.

[00:00:27] Speaker 08:
Order 2023 imposes an unlawful regime of financial penalties to punish transmission providers regardless of fault for any failure to comply with extremely aggressive and arbitrary interconnection study deadlines.

[00:00:39] Speaker 08:
These penalties are significant.

[00:00:41] Speaker 08:
They amount to thousands of dollars of penalties per study per day in situations where clusters often exceed hundreds of studies on a regional basis and sometimes even in individual transmission zones.

[00:00:53] Speaker 08:
FERC's zero tolerance penalty scheme of automatic penalties is unlawful and requires vacator for many reasons, which I'll divide into two sets.

[00:01:00] Speaker 08:
First, the penalty scheme exceeds FERC's jurisdiction under Federal Power Section 206.

[00:01:05] Speaker 08:
It violates several normal principles that do process under the statutes that actually provide FERC with authority to oppose penalties and is unconstitutionally confiscatory.

[00:01:15] Speaker 08:
Second, Burke's penalty scheme falls far short of reason decision-making standards under the Administrative Procedure Act.

[00:01:21] Speaker 08:
It fails to meet the standard necessary to impose a nationwide rule and fails both steps under FPA Section 206, Step 1 and Step 2.

[00:01:29] Speaker 08:
The penalty scheme is worse than ineffective.

[00:01:32] Speaker 08:
It is unfairly punitive, it is unduly discriminatory, and it is counterproductive to an efficient transmission plan.

[00:01:38] Speaker 08:
I'd like to begin by establishing- The penalty scheme is not in effect yet, is that correct?

[00:01:43] Speaker 05:
I'm sorry, ma'am.

[00:01:44] Speaker 05:
The penalty scheme is not yet in effect?

[00:01:47] Speaker 08:
The rule is in effect, of course, but the penalties will go into effect in the third cycle.

[00:01:53] Speaker 05:
Yeah, how long is the cycle?

[00:01:54] Speaker 08:
I don't know what a cluster study cycle is.

[00:01:56] Speaker 08:
Think of it as basically three.

[00:01:57] Speaker 08:
You get three tries.

[00:01:59] Speaker 08:
That's one of the safeguards that FERC likes to say makes this not really a penalty.

[00:02:03] Speaker 08:
It doesn't change the fact that it's a penalty.

[00:02:04] Speaker 05:
What it does is... Just asking a question about timing right now.

[00:02:07] Speaker 05:
Just a year.

[00:02:07] Speaker 05:
So this cluster cycle is a year?

[00:02:08] Speaker 05:
About, yeah.

[00:02:09] Speaker 05:
Roughly.

[00:02:10] Speaker 05:
Yeah.

[00:02:10] Speaker 05:
So...

[00:02:11] Speaker 05:
I'm really asking you for the information, so if you want to qualify.

[00:02:15] Speaker 08:
So there are slight differences in the amount of time in each place.

[00:02:19] Speaker 08:
FERC is generally not allowed for independent entity variations, but there are some tweaks about intermediate study amounts.

[00:02:25] Speaker 08:
But I think it's fair to say, think of them as having the annual cycles.

[00:02:28] Speaker 08:
PGM, for example, will have our TEP cycle 2025, our TEP cycle 2026.

[00:02:33] Speaker 08:
They may not get finished within a year, which is the whole reason that we're here.

[00:02:37] Speaker 08:
But if you look at, for example, when they're keeping this distance.

[00:02:39] Speaker 05:
When they say a cluster study cycle, does that mean when they sort of tend to start or when they finish?

[00:02:44] Speaker 08:
Yes, ma'am.

[00:02:46] Speaker 08:
You begin the cycle, and then you go through a bunch of intermediate gate steps.

[00:02:50] Speaker 08:
Each one of those intermediate gate steps has intermediate sets of penalties.

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And then there's also a potential for penalty at the end.

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So that's how long they last.

[00:02:58] Speaker 04:
You kind of challenge that 100% threshold for the penalty, but is there a lower amount?

[00:03:04] Speaker 04:
You know, because that's going to be at the end of the cycle anyway.

[00:03:11] Speaker 08:
What I would like to say about the penalties in terms of the amounts that they represent is I'd like to emphasize that they are confiscatory for us.

[00:03:18] Speaker 08:
But would you mind if I would like to get to confiscation second in terms of the amounts?

[00:03:24] Speaker 08:
Because I want to first establish whether or not Burke has the authority to do this in the first place.

[00:03:28] Speaker 08:
So I want to begin with the punitive nature of these penalties, which Burke has always called penalties, continues to call penalties, and have all the hallmarks of a penalty.

[00:03:42] Speaker 08:
Order 2023 sets out an explanation about why it is that FERC is adopting these penalties.

[00:03:46] Speaker 08:
And they say that it's necessary to impose penalties and dispense with the reasonable apperance standard because it hasn't been a sufficient incentive in order to drive people to meet study deadlines in the time that FERC requires.

[00:03:58] Speaker 08:
However, it leaves little doubt that these are, in fact, penalties, because it not only describes them in the manner their penalty is described, but also imposes a regime that disallows recovery of the cost precisely because they're penalties.

[00:04:12] Speaker 08:
So there are many places they talk about it.

[00:04:14] Speaker 08:
I just direct your attention to order 2023 at paragraphs 873 to 874, which really lay out their sort of grand theory, and in particular, the statement that consistent with other penalties the commission proposed, such penalties will not be recoupable in rates.

[00:04:27] Speaker 08:
So it's very difficult to try to characterize this as anything other than a penalty.

[00:04:32] Speaker 08:
The rule, when they found new religion on rehearing or 2023, they tried to recast it suddenly as some sort of purely compensatory scheme, which plainly is not.

[00:04:42] Speaker 08:
They never recanted any of their original rationale.

[00:04:45] Speaker 05:
Oh, wait, wait.

[00:04:46] Speaker 05:
Slow down there.

[00:04:47] Speaker 05:
OK.

[00:04:49] Speaker 05:
Do these payments, when made, go to the US Treasury?

[00:04:54] Speaker 05:
No, no, do they go into first pockets?

[00:04:58] Speaker 05:
No, no, they go to private parties.

[00:05:01] Speaker 08:
Yes.

[00:05:02] Speaker 08:
Okay.

[00:05:02] Speaker 08:
All right.

[00:05:02] Speaker 08:
Just like the discouragement penalties and co cash did.

[00:05:05] Speaker 05:
Well, no, those only went there with pursuant to a court order.

[00:05:09] Speaker 08:
the money goes to the court, and then the court does its best as far as it feasibly can to get it back.

[00:05:15] Speaker 08:
But I don't think that's definitive.

[00:05:18] Speaker 05:
Well, I'm just saying that there are things, you point to some things that look like penalties to you, but there are other things that don't look

[00:05:25] Speaker 08:
OK, well, let's start with the ones that hurt.

[00:05:27] Speaker 05:
Excuse me, may I finish my sentence?

[00:05:28] Speaker 05:
Yes, ma'am.

[00:05:29] Speaker 05:
There are other things that do not look so much like penalties here.

[00:05:33] Speaker 05:
And we're in an unusual area here.

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And the rationale is that folks paid for an on time study and didn't get one.

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And so they're getting their money back.

[00:05:49] Speaker 05:
in some percentage for not having got what they paid for, which isn't normally how one thinks of.

[00:05:56] Speaker 08:
Well, I certainly agree that we're not, Your Honor, in an unusual space.

[00:06:00] Speaker 08:
There is nothing in the FERC world that looks like this, where you get a penalty first and a few seconds.

[00:06:07] Speaker 05:
Again, it's not just, you said this was sort of signature penalty, and I'm just telling you that it's sort of

[00:06:12] Speaker 08:
I think that the fact that the money goes back to the people who paid the original study deposits is maybe the only feature that makes this look anything like the penalties in co-cash.

[00:06:27] Speaker 08:
And even then, I think that that is a bit of a quibble because the task of the district court is to try to get the money back to the plaintiffs so they can find them.

[00:06:35] Speaker 05:
I'm not quite sure.

[00:06:39] Speaker 05:
how FERC would have the authority to impose something that is in fact a civil penalty, but FERC rather than Congress would decide.

[00:06:52] Speaker 05:
where that money goes.

[00:06:54] Speaker 08:
I certainly agree that they don't have any statutory authority to do what they're going to do.

[00:06:58] Speaker 08:
I just want to establish that.

[00:07:01] Speaker 05:
The point I just raised was in deciding where this is a penalty, we certainly would look at whether agencies are treating this like civil penalties that are the property of the US.

[00:07:12] Speaker 05:
I think they are.

[00:07:13] Speaker 05:
But here, they said people have paid you money.

[00:07:16] Speaker 05:
They didn't get their pizza on time.

[00:07:19] Speaker 05:
And so they're getting some partial remittance.

[00:07:21] Speaker 08:
And their remedy for that, Your Honor, is to take all of the money that we were paid that we already expended to provide a mandatory service that FERC has directed us to do and shift all of that money back to them.

[00:07:31] Speaker 08:
Which is why it's confiscatory, because that never happens anywhere in the FERC world, except in the context of imprudence finding, which we are absolutely nowhere near here.

[00:07:39] Speaker 08:
We are at best in the area of inadvertent error.

[00:07:42] Speaker 05:
Tell me what your legal test for confiscatory is.

[00:07:50] Speaker 08:
A rape is confiscatory if it fails two different gates.

[00:07:55] Speaker 08:
First, it actually takes away your actual out-of-pocket costs.

[00:08:00] Speaker 08:
And second, still unconstitutional, if in addition to not paying your actual out-of-pocket costs, it also fails to give you a rate of return.

[00:08:06] Speaker 08:
This has been true since Bluefield.

[00:08:08] Speaker 05:
But this isn't your money.

[00:08:09] Speaker 05:
The theory is that this is the money that these folks have paid to have this study on time.

[00:08:14] Speaker 05:
And having not given to them on time, you need to give it back to them.

[00:08:19] Speaker 08:
We pass through the money, transition providers pass through the money.

[00:08:21] Speaker 08:
We get their deposit from them.

[00:08:23] Speaker 08:
We pay it to employees if we have them on staff.

[00:08:28] Speaker 08:
Many of the larger entities have enough people on staff to begin to do the studies, but virtually everyone has to hire contractors.

[00:08:34] Speaker 08:
There are really only two contractors in the country that actually do this.

[00:08:36] Speaker 08:
They have a great deal of power.

[00:08:38] Speaker 08:
There is a great shortage of people who are capable of doing this very highly skilled work.

[00:08:43] Speaker 08:
And we have to pay a significant amount of money out of pocket.

[00:08:46] Speaker 08:
So when we give them the money back, we're at a loss.

[00:08:49] Speaker 08:
which is why one of the chief hallmarks of the fact is- Because they had a loss too, having not gotten what they paid for.

[00:08:53] Speaker 08:
No, because they got a penalty, they got a study that was later than they expected, but they got a study.

[00:09:02] Speaker 05:
When I build an addition on my house- The scheme they're supposed to get, the scheme is to require you to give them the study and give it on time.

[00:09:11] Speaker 05:
Or if you have a story about you couldn't find the contractors, you couldn't get them, something bad happened,

[00:09:18] Speaker 05:
then take it to FERC and let them make a case-by-case decision, but they're not going to have an across-the-board paradigm like they did before, where there was nothing to enforce timeliness.

[00:09:31] Speaker 08:
Sure there was.

[00:09:31] Speaker 08:
890 had the ability to always seek penalties under the order of 890.

[00:09:36] Speaker 08:
Why did it never happen?

[00:09:38] Speaker 08:
The behavior wasn't unreasonable enough.

[00:09:40] Speaker 05:
Well, then I guess you have nothing to worry about in the file reviews with FERC.

[00:09:43] Speaker 08:
But you don't think that's right, because now it's become an absolute deadlock.

[00:09:46] Speaker 05:
How many times are you aware of that reasonable efforts were not found under the skin?

[00:09:52] Speaker 05:
Zero.

[00:09:53] Speaker 05:
That was always found as reasonable.

[00:09:54] Speaker 05:
Zero.

[00:09:55] Speaker 08:
But is the presumption one straw should drop in that, like if there are no penalties?

[00:09:57] Speaker 05:
Not much bite to that test.

[00:09:58] Speaker 05:
I mean, FERC could decide there's not much bite to that test, because reasonable efforts was always met, and yet studies were coming in once and months and months and years and years after.

[00:10:06] Speaker 08:
I'm not sure that if

[00:10:08] Speaker 08:
No one got a traffic ticket on a particular road for a year that the proper inference would be we must raise the penalties in some way because clearly people were doing bad things.

[00:10:19] Speaker 05:
And things were coming, if everyone was driving 90 miles an hour in a 35-mile zone in over decades, there were no tickets.

[00:10:30] Speaker 05:
Nothing was done to slow down the speeding.

[00:10:32] Speaker 05:
Then I think if an agency said we need to do something,

[00:10:36] Speaker 05:
different from what we've been doing before, that would be reasonable.

[00:10:40] Speaker 08:
Well, we were already beginning to do voluntarily many things that FERC had not been allowed to do before.

[00:10:45] Speaker 05:
That's a different argument.

[00:10:46] Speaker 05:
So first you were denying the problem, but now if you, I think it's a problem because you then said, now you guys recognize there was a problem too.

[00:10:54] Speaker 05:
Yeah, before they did.

[00:10:55] Speaker 05:
The problem, Your Honor, was the agency chose a different approach.

[00:11:00] Speaker 08:
It did for very irrational and ill-supported reasons.

[00:11:04] Speaker 08:
So I would like to go through quickly why it is that these are penalties, because Your Honor seems to be focusing only on one thing that makes it look something not like a penalty.

[00:11:14] Speaker 05:
I asked a question about one thing.

[00:11:15] Speaker 05:
I'm going to tell you what I'm focused on.

[00:11:17] Speaker 08:
I'm asking about one thing.

[00:11:18] Speaker 08:
Your question seemed on the table.

[00:11:19] Speaker 05:
I promise to ask about all the factors.

[00:11:21] Speaker 05:
All right.

[00:11:22] Speaker 05:
Or to think about all the factors.

[00:11:28] Speaker 08:
holding in Kokesh is completely clear.

[00:11:32] Speaker 08:
If a civil sanction is not solely for the purpose of remediation, but can only be explained with reference to retributive or deterrent purposes, which Burke has never, ever walked away from, then under binding Supreme Court precedent, it is punishment.

[00:11:49] Speaker 08:
And that's not even a new idea.

[00:11:51] Speaker 08:
That core holding in Kokesh dates all the way back to Austin in 1993.

[00:11:56] Speaker 08:
It's an old idea.

[00:11:57] Speaker 08:
It's not a new one.

[00:11:58] Speaker 08:
There's nothing strange about this conclusion.

[00:12:01] Speaker 08:
When we march through the factors of what makes this look like a penalty, the only thing at first point that's different is the money goes straight and only back to the people who paid it.

[00:12:09] Speaker 08:
What makes it different is that, for example, we're in a worse off position than we were originally because we've given them a service and we've gotten paid nothing for it.

[00:12:17] Speaker 08:
That is not going to happen in any other context.

[00:12:19] Speaker 08:
If I build an addition on my house, I don't get to say, you know what, you're a month late.

[00:12:23] Speaker 08:
So I'm also going to pay you nothing.

[00:12:26] Speaker 08:
You're going to give me all these materials for free, all the labor was free.

[00:12:29] Speaker 08:
That's not the way it works.

[00:12:30] Speaker 08:
And FERC has recognized this since forever.

[00:12:32] Speaker 08:
At the same time, Austin was being decided in 1993, FERC was issuing its prior notice rulemaking.

[00:12:37] Speaker 08:
Very big deal, landmark decision.

[00:12:39] Speaker 08:
It deals with the worst thing you can do in the FERC world, which is charge a rate that is not on file, but it's just made up.

[00:12:46] Speaker 08:
You're giving us an unauthorized charge.

[00:12:48] Speaker 08:
We talk about this extensively in our reply brief.

[00:12:51] Speaker 08:
Even in that situation, FERC would never deny your actual out-of-pocket costs.

[00:12:55] Speaker 08:
And they say that they won't do it because it's a confiscatory rate.

[00:12:58] Speaker 08:
And serious constitutional problems arise from trying to do that.

[00:13:02] Speaker 08:
That has always been the rule at FERC until now.

[00:13:05] Speaker 08:
This is the first time they're trying to take money actually out of a pocket after you provide a service that they require you to perform, Your Honor.

[00:13:13] Speaker 08:
Oh, good Lord.

[00:13:14] Speaker 04:
We're on issue one.

[00:13:14] Speaker 08:
And I think we have 10 seconds left.

[00:13:16] Speaker 04:
Well, it's all about the questions that we have.

[00:13:18] Speaker 04:
And so we'll keep you as long as we need.

[00:13:21] Speaker 04:
All right.

[00:13:21] Speaker 04:
So the FDA does provide that FERC can impose these civil penalties.

[00:13:25] Speaker 04:
So I'm trying to figure out what you think is constitutionally required before the imposition of the fees.

[00:13:32] Speaker 08:
Well, I'm glad you asked the question, Your Honor, because FERC is saying this rule was only imposed under FPA section.

[00:13:38] Speaker 08:
I'm trying to establish the penalty because I want to get to the point that you're getting to, which is FERC has, Congress knows precisely how to give FERC civil penalty authority.

[00:13:46] Speaker 08:
It does it in six places in the Federal Power Act, and none of those places is Federal Power Act section 206.

[00:13:51] Speaker 08:
There is no penalty authority there.

[00:13:53] Speaker 08:
This is where FERC's civil penalty authority resides.

[00:13:56] Speaker 08:
It resides in two sections of the original part one of the Federal Power Act,

[00:13:59] Speaker 08:
the original one enacted in 1918 that only applies to hydroelectric facilities.

[00:14:04] Speaker 08:
Boom.

[00:14:05] Speaker 08:
Then we have part two enacted in 1935 that gives forgets jurisdiction over transmission wholesale sales.

[00:14:11] Speaker 08:
The administrative pieces that go with part two are in part three.

[00:14:14] Speaker 08:
So that will lead forward to part three.

[00:14:16] Speaker 08:
FPA section 315, FPA section 316, FPA section 316A.

[00:14:21] Speaker 08:
That pay section 315, not really applicable.

[00:14:24] Speaker 08:
It at least mentions the word deadline, but it's only in the context of are you sending in a report on time?

[00:14:29] Speaker 08:
Did you respond to your discovery request on time?

[00:14:31] Speaker 08:
It requires willfulness and it's a thousand dollars.

[00:14:34] Speaker 08:
Not really applicable here.

[00:14:36] Speaker 08:
316, criminal referrals.

[00:14:37] Speaker 08:
No one's coming anywhere near criminal referrals.

[00:14:39] Speaker 08:
The catch all is 316A and 316A not only

[00:14:43] Speaker 08:
gives FERC the ability to impose a penalty, but Congress also knows how to make the process for imposing a penalty fair, because 316A has many common due process protections that are utterly absent from this rule-less, weird thing that FERC has made up that has no other analog of FERC practice than the best of my knowledge anywhere else, where you first get assessed a penalty, and then you get a hearing later, and it's not even really an appeal, as they choose to call it.

[00:15:08] Speaker 08:
It's nothing more than a request for a stretch.

[00:15:12] Speaker 08:
hear the factors first.

[00:15:15] Speaker 04:
Is there a cap on the penalties in 316A?

[00:15:18] Speaker 08:
Yes, it's very high.

[00:15:20] Speaker 08:
It's $1 million per day per violation.

[00:15:26] Speaker 08:
They modified that from what used to be 5,000 in 2005 when they were reacting to the California energy crisis.

[00:15:31] Speaker 08:
And they decided that they needed to up the penalties to if you're going to go after Enron.

[00:15:35] Speaker 04:
So they can do penalties.

[00:15:36] Speaker 04:
You just think they're under the wrong statute.

[00:15:37] Speaker 08:
No, the thing that changed in 2005 was that they increased the penalties from a very small amount, 5,000, which hadn't been changed for a very long time, and increased it to a million.

[00:15:44] Speaker 08:
And that was in response to the California energy crisis.

[00:15:45] Speaker 04:
So they can do penalties.

[00:15:46] Speaker 04:
You just think they're under the wrong statute.

[00:15:48] Speaker 08:
Absolutely, Your Honor.

[00:15:49] Speaker 08:
Dead on.

[00:15:50] Speaker 08:
That's exactly what we're saying.

[00:15:52] Speaker 08:
FERC says that it is operating.

[00:15:53] Speaker 04:
But those penalties under 316A covered this situation.

[00:15:56] Speaker 08:
No, because they didn't invoke 316, and it doesn't have any of the projections that go with 316.

[00:16:00] Speaker 08:
Let's enumerate what those are.

[00:16:02] Speaker 08:
First, squarely in the text of the statute, you must have a hearing, you must have notice, and an opportunity to be heard before a penalty is even assessed, much less before you actually have to pay it.

[00:16:11] Speaker 08:
Item one.

[00:16:15] Speaker 05:
What does assessed mean?

[00:16:17] Speaker 08:
Assess means they name what they think it's supposed to be.

[00:16:20] Speaker 08:
So, FERC will issue an order to show cause first and say, we think you should have to pay this penalty, and then you get an opportunity to respond.

[00:16:26] Speaker 05:
What's your best authority that's what the meaning of assess is?

[00:16:28] Speaker 05:
I'm sorry?

[00:16:29] Speaker 05:
What's your best authority that's the meaning of assess?

[00:16:33] Speaker 08:
That every single assessment that FERC has ever done, assess doesn't mean you pay yet.

[00:16:37] Speaker 08:
It just means this is what you're going to be liable for, because I can march through the steps.

[00:16:43] Speaker 05:
Do you have a court case that has said that's the meaning of assess under the federal power act?

[00:16:48] Speaker 08:
I have a bunch of court cases on appeal from first penalty assessments and you can't.

[00:16:55] Speaker 08:
You cannot you're not required to pay until you lose there.

[00:16:59] Speaker 08:
So the assessment just means and I will be happy to provide you as many citations as you wish and a subsequent briefing if you would like me to do it that way.

[00:17:08] Speaker 05:
It's in every case your honor the assessment means normally assess means like you said, they sort of.

[00:17:16] Speaker 05:
Here's what we think you owe, but then also, at least when Congress uses the term, and that's what we're talking about here.

[00:17:22] Speaker 05:
And legal consequences attach and legal consequences do not attach here.

[00:17:29] Speaker 05:
until we either file appeal and the appeal is resolved or you choose not to appeal.

[00:17:34] Speaker 08:
Let's we'll we'll go to the one in December this past December for the largest civil penalty ever.

[00:17:39] Speaker 08:
Just about 1 billion dollars straight out cash not counting interest in other things.

[00:17:43] Speaker 08:
That case is being fought about in the in North Carolina District Court this next week.

[00:17:48] Speaker 08:
They're not asking them to pay them a billion dollars right now.

[00:17:52] Speaker 08:
There's going to be a whole process of review in federal district court.

[00:17:54] Speaker 08:
This is actually the only time federal district courts get you, this court, or the court of appeals, gets review of FERC orders in every other context, but not in the context of penalties.

[00:18:03] Speaker 08:
Because district courts have the unique ability to review FERC's penalty orders de novo on the law and the facts both.

[00:18:13] Speaker 08:
And when you are there, you get the federal rules of evidence, you get the federal rules of civil procedure.

[00:18:18] Speaker 08:
with nothing like that here.

[00:18:20] Speaker 05:
I'm sorry, I'm trying to understand this.

[00:18:23] Speaker 05:
Does the statutory provision that lets you go to district court say after it's assessed, you go to district court?

[00:18:29] Speaker 05:
I'm just trying to understand.

[00:18:30] Speaker 08:
Once for a case, she's the assessment, you have the choice.

[00:18:33] Speaker 08:
You can pay.

[00:18:34] Speaker 05:
Does it use the word assess?

[00:18:35] Speaker 08:
Yes, ma'am.

[00:18:36] Speaker 08:
It uses the word assess.

[00:18:37] Speaker 08:
It seems like it must.

[00:18:38] Speaker 08:
I mean, you have the benefit of being more generally exposed to other areas of the law.

[00:18:41] Speaker 08:
I'm afraid I'm a bit of a furt nerd.

[00:18:43] Speaker 08:
So for me, it is just very apparent that assess always means this is your liability.

[00:18:49] Speaker 08:
You can choose to pay it or you can choose to fight it.

[00:18:52] Speaker 08:
And if you choose to fight it, you can go to federal district court and you get all these procedural protections.

[00:18:57] Speaker 08:
But that's not the only one.

[00:18:58] Speaker 08:
It's actually the last one that I wanted to get to.

[00:19:00] Speaker 05:
If you choose to hear, if you choose to fight it, you go get a hearing and you haven't challenged the procedural protections in the hearing.

[00:19:06] Speaker 08:
No, Your Honor, you don't get a hearing the same way because these are the distinct features first.

[00:19:09] Speaker 08:
It may not be identical.

[00:19:11] Speaker 08:
It's not even close to identical.

[00:19:13] Speaker 05:
I understand, but you got...

[00:19:16] Speaker 05:
You get plenty of due process by getting to go before FERC, have a hearing, and then have judicial review of that decision.

[00:19:24] Speaker 05:
That's unconstitutional?

[00:19:25] Speaker 05:
That's shortfall and due process?

[00:19:27] Speaker 08:
I'm trying to say that they have no authority to impose civil penalties for things that are activities under FPA Part 2, unless they're operating under 315, 316, or 316A.

[00:19:39] Speaker 08:
That's what I'm trying to say.

[00:19:40] Speaker 08:
316A, these are distinctive features of 316A, which are wholly absent here.

[00:19:47] Speaker 08:
First, FERC has an investigation.

[00:19:51] Speaker 08:
You have the opportunity to ask them during the investigation.

[00:19:53] Speaker 08:
They decide that they're not convinced by your defenses during the investigative phase.

[00:19:57] Speaker 08:
They issue an order to show cause.

[00:19:58] Speaker 08:
You get an order to show cause, then you get your opportunity to say, hey, I don't think that we're guilty of this thing.

[00:20:02] Speaker 08:
Then FERC issues an assessment order.

[00:20:03] Speaker 08:
They issue the assessment order.

[00:20:05] Speaker 08:
That's when you decide, all right, am I going to pay this penalty?

[00:20:07] Speaker 08:
Or am I going to try to fight this further?

[00:20:09] Speaker 08:
So the statute says point blank that it requires notice and opportunity hearing before assessing any penalties.

[00:20:15] Speaker 08:
That is item one.

[00:20:17] Speaker 08:
Item number two, every one of the other penalty statutes that FERC has has a mens rea requirement.

[00:20:22] Speaker 08:
None of them are strict liability.

[00:20:24] Speaker 08:
Almost all of them are willful.

[00:20:26] Speaker 08:
In fact, in terms of statutory text, they're always willful or purposeful conduct.

[00:20:29] Speaker 08:
But FERC issued order 640.

[00:20:31] Speaker 08:
And 640 says in the specific context of market manipulation, it can be something less.

[00:20:35] Speaker 08:
It can be recklessness.

[00:20:36] Speaker 08:
We are not anywhere near the realm of recklessness here.

[00:20:39] Speaker 08:
We are talking about inadvertent errors and things that we cannot control.

[00:20:42] Speaker 08:
That's item two.

[00:20:43] Speaker 08:
Item three, in all of these cases, the burden of show is on FERC.

[00:20:47] Speaker 08:
It is not on the civil penalty target.

[00:20:48] Speaker 08:
And as we were just discussing, if you think that FERC has screwed up and you think you've got a good case for appeal, you go to a federal district court and you have a de novo trial on the facts, on the law, in federal district court with federal rules of evidence and federal rules of civil procedure.

[00:21:01] Speaker 08:
None of that is present here.

[00:21:03] Speaker 08:
Do you think it's a civil penalty?

[00:21:05] Speaker 07:
Does FERC think it's a civil penalty?

[00:21:06] Speaker 07:
No, they spent a lot of time trying to save it in.

[00:21:08] Speaker 07:
That's what I thought.

[00:21:09] Speaker 07:
So imagine that FERC had done this instead, said the deadline is 150 days.

[00:21:17] Speaker 07:
And if you miss that deadline, you owe the interconnection customer whatever they've lost from your delay.

[00:21:25] Speaker 07:
Would that be a civil penalty?

[00:21:32] Speaker 08:
I think if we had to, I think that you would need a hearing to figure out these things.

[00:21:38] Speaker 08:
Are we responsible or are they?

[00:21:40] Speaker 08:
That's a big deal here because for squarely says that even if we were to show in their beautiful new appeal process that the transmission first customer was at fault, they would still make us pay.

[00:21:50] Speaker 07:
What you're saying is necessary to answering whether it's a civil penalty.

[00:21:54] Speaker 07:
Don't forget the question was this thing I described, is it a civil penalty?

[00:22:00] Speaker 08:
I'm working through it.

[00:22:02] Speaker 08:
I think that it

[00:22:10] Speaker 08:
Yes, because we're going to have to fork over the money.

[00:22:15] Speaker 07:
And it seems awfully compensatory, what I describe.

[00:22:20] Speaker 08:
Yeah, but I think without a limit to me, if I'm pausing because that's exactly why I'm not willing to concede that that would not be a civil penalty, because it would still be confiscatory.

[00:22:31] Speaker 08:
And I'm working through your, this is an excellent question.

[00:22:36] Speaker 08:
I'm glad you've asked it.

[00:22:37] Speaker 08:
I think it's important to your decision to pursue it.

[00:22:44] Speaker 08:
I think that that might not be a civil penalty.

[00:22:47] Speaker 07:
Okay.

[00:22:48] Speaker 08:
But I feel some misgivings about that, but I'm having trouble identifying what they are.

[00:22:53] Speaker 08:
So if you would not treat it as a concession now, in the event that I have something better to answer, but I think we can proceed that way.

[00:22:59] Speaker 07:
I appreciate being cautious about making concessions.

[00:23:01] Speaker 07:
So my next question is not, I'm not asking it for the sake of tricking you.

[00:23:09] Speaker 07:
I'm trying to think through whether what actually happened here is a civil penalty or not.

[00:23:15] Speaker 07:
I know you very much believe that it is.

[00:23:17] Speaker 07:
What would make this system a civil penalty that would make this system I described possibly not a civil penalty?

[00:23:30] Speaker 08:
We kind of omitted a bunch of fact-finding in what you've described.

[00:23:37] Speaker 08:
Here's a similarity.

[00:23:38] Speaker 08:
There's a deadline.

[00:23:40] Speaker 08:
We've got a penalty associated with missing the deadline, and we've got money going back.

[00:23:45] Speaker 08:
Those are the things that are in common.

[00:23:48] Speaker 08:
What I don't know from your scheme, which is not having trouble trying to figure out how to classify it is, did I ever get a chance to say whether or not, I mean, did I ever get a chance to say that is a strict liability thing or not?

[00:24:00] Speaker 08:
Because even when you structured that, you said you'll have to pay based on

[00:24:05] Speaker 08:
how much damage that they get suffered?

[00:24:07] Speaker 07:
The hypothetical probably hold everything constant except the amount of money that you owe.

[00:24:13] Speaker 07:
And I understand in the current system, you owe a somewhat fixed amount for each day of the delay.

[00:24:21] Speaker 07:
But in the system I'm suggesting, a fact finder would inquire into how much money would the interconnection customer have

[00:24:33] Speaker 07:
if you had been on time, they lose because you were late.

[00:24:38] Speaker 08:
So then it begins to look much more like a traditional rate case because let's take, for example, but winners from LA happened in 2022.

[00:24:45] Speaker 08:
PJM systems go down, well actually PJM systems stayed in line, but there was a massive capacity shortfall.

[00:24:51] Speaker 08:
And we spent a year trying to figure out who's going to pay $2 billion in penalties.

[00:24:56] Speaker 08:
And the tariff there says, okay, if you have a capacity commitment and then you fail to perform, then you're going to owe this much money.

[00:25:04] Speaker 08:
And the amount was drafted into the tariff.

[00:25:06] Speaker 08:
But we then had to litigate for a year and ultimately reached a global settlement between 108 parties to figure out what people were going to pay because we had very different perspectives about who was really at fault in each individual case.

[00:25:17] Speaker 08:
So there are tariffs that have exchanges of money going back and forth depending on different circumstances.

[00:25:25] Speaker 08:
Like if I

[00:25:28] Speaker 08:
put in my bid before a certain time and I don't change it before the clock runs out, I really can't change it and I might be stuck with having just made an offer that was double the capacity of my plant.

[00:25:39] Speaker 07:
Would my hypothetical cost you more or less money than

[00:25:45] Speaker 08:
What your hypothetical would certainly cost less.

[00:25:47] Speaker 08:
And I think it's important to submit.

[00:25:49] Speaker 07:
Yes, my hypothetical would include all the lost profits that the interconnection is not making.

[00:25:55] Speaker 08:
Yeah.

[00:25:55] Speaker 08:
So and this is why this is why I'm quite confident that it will worse off because in my situation, this is what we got here.

[00:26:02] Speaker 08:
I'm having to give them back money I've already spent and paid experts to go to do something.

[00:26:06] Speaker 08:
here, I'm going to have a fight about their consequential damages.

[00:26:09] Speaker 08:
But remember, nobody's putting iron in the ground until they've gone through this process.

[00:26:15] Speaker 08:
And this is one of the reasons why it's so strange to try this.

[00:26:17] Speaker 08:
Fert never even tried to figure out what the damages would be for someone who, like in PJAM, there's a three year out time period for capacity to bring on a new planned capacity.

[00:26:28] Speaker 08:
You get the obligation in auction and you deliver it later.

[00:26:32] Speaker 08:
I'm not sure that someone's going to be very successful at showing sort of consequential damages if you have because let's even plug in the 10 day grace period.

[00:26:41] Speaker 08:
So you're at day 11 and now you're going to have to pay a penalty.

[00:26:45] Speaker 08:
And in the world where you get to base it on their consequential damages of the lateness, when their commercial operation date is two and a half years in the future, I think it's very, very hard to say that they weren't able to actually come online during that time.

[00:26:59] Speaker 07:
I'm going to switch gears a little bit.

[00:27:03] Speaker 04:
Well, I just wanted to ask about, you keep trying to get us to suggest that this is a penalty, but why isn't it just not a limitation on the amount you can recover from the study?

[00:27:16] Speaker 08:
Because there is no other context in which a utility expends funds to perform a mandatory service or requires it to do, and they earn nothing on it except one.

[00:27:33] Speaker 08:
And that is in the context of an imprudence finding, which is a very unusual and rare remedy, which is when a utility somehow engages in behavior that is so bad that it is per se unreasonable.

[00:27:45] Speaker 08:
And this is like building a transmission line to the middle of the ocean where it's connecting to nothing, that kind of thing.

[00:27:51] Speaker 08:
That's what imprudence is.

[00:27:53] Speaker 08:
It's a pretty difficult standard to meet.

[00:27:55] Speaker 08:
And you have to look all the way back, I think, to Violet de Ferck, like 1988.

[00:27:59] Speaker 04:
But generally, Ferck gets to deal with its non-compliance.

[00:28:03] Speaker 08:
gets to deal with issues of non-compliance.

[00:28:05] Speaker 08:
You have to deal with issues of non-compliance all the time.

[00:28:08] Speaker 08:
And so someone will bring a complaint, and they'll bring a complaint under section 206.

[00:28:13] Speaker 08:
And they'll say, we think you did a bad thing because, and after we have this, there will be a hearing.

[00:28:17] Speaker 08:
Typically, it's a paper hearing.

[00:28:20] Speaker 08:
For a place to an order, we'll get an opportunity to have rehearing.

[00:28:22] Speaker 08:
And there we go.

[00:28:23] Speaker 08:
Here, we're going to pay the penalty right now.

[00:28:25] Speaker 08:
And then we're going to go into this appeal process.

[00:28:28] Speaker 08:
And this appeal process looks nothing like what I just described.

[00:28:31] Speaker 05:
If you appeal, you don't have to pay the penalty.

[00:28:33] Speaker 08:
You don't have to pay the penalty until you eventually lose.

[00:28:37] Speaker 05:
But I think if you were facing- I'm sorry.

[00:28:39] Speaker 05:
Did I mishear you?

[00:28:40] Speaker 05:
I thought you just said you pay it, and then you go into this appeal process.

[00:28:43] Speaker 08:
No, I'm sorry that I misspoke.

[00:28:45] Speaker 08:
You're assessed the penalty.

[00:28:49] Speaker 08:
And unless you take this thing called an appeal, which I would call a petition for discretionary waiver under this good cause standard, unless they give you mercy, you're going to pay.

[00:29:01] Speaker 08:
I don't think that any accountant would ever treat this liability as anything other than a cost you're facing.

[00:29:08] Speaker 08:
I think the SEC might have some concerns if you had a six, seven, or eight-figure penalty.

[00:29:11] Speaker 05:
You're getting way down the line here.

[00:29:12] Speaker 05:
We haven't seen this scheme in operation.

[00:29:15] Speaker 05:
No, we have not.

[00:29:16] Speaker 05:
I'm talking about ripeness here.

[00:29:21] Speaker 05:
You've got a view that it's this automatic loss thing.

[00:29:27] Speaker 05:
Yeah.

[00:29:28] Speaker 05:
That's your surmise.

[00:29:30] Speaker 05:
I suspect FERC will say no.

[00:29:31] Speaker 05:
We will look carefully at the record in each case and make a decision based on the facts.

[00:29:37] Speaker 05:
I think we have good reasons.

[00:29:38] Speaker 05:
I'm just going to finish here.

[00:29:39] Speaker 05:
And then we'll make a decision that's subject to judicial review.

[00:29:45] Speaker 08:
Your honor, I think we have absolutely excellent reasons for being very suspicious about our prospects under this strange, good cause, so-called appeal rule.

[00:29:56] Speaker 08:
First, there are zero procedures that we know about it.

[00:29:59] Speaker 08:
The entirety of the procedures that FERC has created are reproduced in a block quote in the middle of page seven of our reply briefing.

[00:30:06] Speaker 08:
It is three sentences long.

[00:30:07] Speaker 08:
You have 45 days to bring an appeal.

[00:30:09] Speaker 08:
You have 45 days to pay.

[00:30:11] Speaker 08:
If you lose the appeal or at the exhaustion, whatever other remedies you have.

[00:30:14] Speaker 08:
And the third sentence says, we may choose to excuse the penalty for good cause.

[00:30:19] Speaker 08:
That is all of our guidance we don't know about.

[00:30:22] Speaker 05:
Well, they have existing hearing procedures already on the books.

[00:30:26] Speaker 05:
Not for this weird thing.

[00:30:28] Speaker 05:
Well, wouldn't you just fall into their existing procedure?

[00:30:31] Speaker 08:
We don't even know, we don't know if we're going for an ALJ or we're going to have a paper hearing in front of the commission.

[00:30:36] Speaker 08:
We don't know, we know nothing about this, this process because FERC prefers to develop it ad hoc.

[00:30:41] Speaker 08:
I think that regulated entities have reasonable grounds for suspicion about a process that they don't know the rules about.

[00:30:47] Speaker 08:
It's very hard to order your commercial decisions.

[00:30:49] Speaker 05:
It seems like we're sort of getting out over at least our skis, maybe not yours for worrying, but ours legally.

[00:30:54] Speaker 05:
I don't know how we could declare and clear improper or something that we haven't yet seen.

[00:31:01] Speaker 05:
in work.

[00:31:01] Speaker 05:
I assume what you will do is you will pick which route you want, an ALJ or FERC, and you'll make a filing there and they'll say right or wrong and then shift it to the other forum and then you'll make your presentations and a record will be created.

[00:31:14] Speaker 08:
Problem one, we have no procedures.

[00:31:15] Speaker 08:
Problem two, we have no coherent standard.

[00:31:18] Speaker 08:
No one knows what good cause means.

[00:31:19] Speaker 05:
Imagine you got one of these penalties tomorrow.

[00:31:23] Speaker 08:
Okay.

[00:31:24] Speaker 05:
Exact same world we're in right now.

[00:31:25] Speaker 05:
Tomorrow.

[00:31:27] Speaker 05:
or your client did not.

[00:31:29] Speaker 05:
Your client did.

[00:31:31] Speaker 05:
Your client says, I want to challenge this.

[00:31:33] Speaker 05:
Would you say, I don't know what to do, or would you say, well, I'm going to pick the one that I think.

[00:31:41] Speaker 08:
If I'm going to pioneer this, I'm going to do what we do.

[00:31:44] Speaker 08:
FERC also has no procedures whenever this court issues a remand, which is why it could sometimes take a long time.

[00:31:48] Speaker 08:
So I would look back in that bag of tricks that I've used before, and I would file a motion with FERC saying, hey, I move to use these procedures on remand from this court's decision.

[00:31:58] Speaker 08:
So I would try to invent them.

[00:32:00] Speaker 08:
And FERC is going to have to invent something, but no one wants to be the person who's pioneering these things.

[00:32:05] Speaker 05:
You have a way to get to FERC and say, and challenge the panel.

[00:32:08] Speaker 05:
You're not disputing that.

[00:32:09] Speaker 08:
You're saying... No, I'm not denying that they have said, you can ask us for this relief.

[00:32:17] Speaker 08:
They haven't given us any rules for the relief, and they've got this weird good cause standard, and we don't know what it means.

[00:32:22] Speaker 08:
And so we keep asking them, what's this good cause standard means?

[00:32:25] Speaker 08:
We haven't seen this thing before in this context.

[00:32:28] Speaker 08:
There is a context or two contexts that you use good cause.

[00:32:31] Speaker 08:
One is if someone wants to ask in advance for a shortening of the statutory notice period, and it says in the statute where this comes from, this verbiage, that you usually have to file a new rate at least 60 days in advance.

[00:32:47] Speaker 08:
FERC will let you shorten that time period for good cause.

[00:32:50] Speaker 08:
You want to intervene late, good cause.

[00:32:53] Speaker 08:
You need a waiver, you get a four-part, you go through a four-part waiver test.

[00:32:56] Speaker 08:
We asked them, will the four-part waiver test apply?

[00:32:59] Speaker 08:
They said no.

[00:33:00] Speaker 08:
But again, why are we suspicious about this?

[00:33:02] Speaker 08:
Because what FERC has told us about what is going to happen doesn't give us a great deal of faith.

[00:33:08] Speaker 08:
They have told us in order 2023, and I will give you a happy to view all the sites if you want them.

[00:33:13] Speaker 08:
It does not the fact that it's force majeure doesn't mean that we're excused.

[00:33:18] Speaker 05:
The fact that they can't determine, of course, they're going to review the circumstances and listen to it.

[00:33:23] Speaker 05:
I mean, they've told us says force majeure.

[00:33:25] Speaker 05:
You're going to say, well,

[00:33:27] Speaker 05:
You know, your honor, they didn't your office is effective.

[00:33:29] Speaker 08:
They didn't say they didn't say we'll figure out whether or not it really is.

[00:33:33] Speaker 05:
That answer in an actual case.

[00:33:35] Speaker 08:
Okay, the second question or the second example is they.

[00:33:41] Speaker 08:
It doesn't matter what the cause of the penalty is, but the actual clincher is when we said what happens if, as we suspect will nearly always be the case, the cause of the problem is the transmission customer.

[00:33:54] Speaker 08:
They fail to give us information on time as a transmission, as a utility.

[00:33:58] Speaker 08:
We then, if you're an RTO, we need to pass it on to the RTO.

[00:34:01] Speaker 08:
We missed their gate because they missed our gate.

[00:34:03] Speaker 08:
And we come in and we say, so assume that we have shown that the transmission customer is at fault.

[00:34:08] Speaker 08:
And what did FERC tell us there?

[00:34:10] Speaker 08:
That could potentially be exculpatory.

[00:34:12] Speaker 08:
That's like the best possible case we could put on where the other guy we're supposed to be paying money to is the negligent party involved.

[00:34:19] Speaker 08:
And they said, we don't know.

[00:34:20] Speaker 08:
No one wants to go into an ad hoc procedure like that.

[00:34:24] Speaker 05:
Well, it might mean exactly what you've said, which would be hard to understand how they would reason that.

[00:34:30] Speaker 05:
Or it might mean when they say, we'll see whether we're going to make facts about who really was exculpatory and who had how much control and how much that thing caused the delay versus 12 other things caused the delay, which is why, again, it seems like all of this.

[00:34:44] Speaker 08:
Your Honor, they're very clear about one thing.

[00:34:46] Speaker 08:
They're very clear about the fact that transmission customer is never, ever paying if there's any sort of lateness.

[00:34:52] Speaker 05:
Again, that's your prediction.

[00:34:54] Speaker 08:
It's not my prediction.

[00:34:56] Speaker 08:
It's what they say.

[00:34:57] Speaker 08:
Again, let's please.

[00:34:58] Speaker 05:
Where do they say transmission customers won't ever pay?

[00:35:02] Speaker 05:
I mean, it's a different point altogether.

[00:35:03] Speaker 05:
Are you claiming that you have a right to payments from transmission customers?

[00:35:09] Speaker 08:
No, I meant to say that we are never allowed to keep any money from them if there is.

[00:35:17] Speaker 08:
Let me just read to you exactly what they say.

[00:35:19] Speaker 08:
So there's no reason to doubt the words.

[00:35:21] Speaker 08:
All right.

[00:35:23] Speaker 08:
They say, and this is exactly what I was covering earlier, this is in... Paragraphs 873 and 874 of order number 2023.

[00:35:37] Speaker 08:
It's a J, 1999 and 2000.

[00:35:38] Speaker 05:
Sorry, let me get those page numbers again.

[00:35:43] Speaker 08:
All right, so consistent.

[00:35:44] Speaker 05:
Sorry, what are the J pictures?

[00:35:46] Speaker 08:
1999 and 2000.

[00:35:47] Speaker 08:
It's paragraphs 873 and 874.

[00:35:50] Speaker 08:
So they say, consistent with other penalties.

[00:35:53] Speaker 08:
Well, your honor asked the question earlier.

[00:35:55] Speaker 08:
They say they defy their penalties.

[00:35:57] Speaker 08:
It's weird, because they definitely say their penalties repeatedly, right?

[00:36:01] Speaker 08:
So consistent with other penalties, the commission reposes that such penalties will not be recoverable in transmission rates.

[00:36:06] Speaker 08:
They're very clear that we can't.

[00:36:07] Speaker 05:
Can you just slow down?

[00:36:09] Speaker 05:
Sure.

[00:36:09] Speaker 05:
I think I might be.

[00:36:10] Speaker 05:
You said JA 1919?

[00:36:12] Speaker 05:
1999, 2000.

[00:36:16] Speaker 08:
That's my fault.

[00:36:17] Speaker 05:
I heard.

[00:36:18] Speaker 08:
It's going to party like it's 1999.

[00:36:22] Speaker 05:
That's my thought.

[00:36:25] Speaker 05:
You said paragraphs.

[00:36:29] Speaker 08:
It's eight seventy three and eight seventy four.

[00:36:32] Speaker 05:
Okay, got you now.

[00:36:33] Speaker 05:
I'm with the same place.

[00:36:33] Speaker 05:
You're okay.

[00:36:34] Speaker 08:
Consistent with other penalties, the commission reposes such penalties will not be recoverable in transmission rates and they say this several times.

[00:36:41] Speaker 05:
So, I want to make sure I'm finding.

[00:36:56] Speaker 05:
Sorry, 1919 to 2000 is describing the NPRM.

[00:37:02] Speaker 05:
That's right.

[00:37:03] Speaker 05:
There's something wrong with me.

[00:37:04] Speaker 05:
I'm not seeing.

[00:37:05] Speaker 05:
Is it carrying over from the?

[00:37:09] Speaker 05:
Yes.

[00:37:11] Speaker 05:
I'm not finding it.

[00:37:14] Speaker 05:
I'm sorry.

[00:37:15] Speaker 05:
I'm sure this is my fault.

[00:37:16] Speaker 05:
I'm just not finding.

[00:37:18] Speaker 05:
Uh is are you starting this time?

[00:37:19] Speaker 08:
Positive is a quote consistent with other penalties.

[00:37:21] Speaker 08:
The commission proposed such penalties would not be recoverable in transmission rates.

[00:37:24] Speaker 08:
That's perfectly consistent with the fact they were describing the number.

[00:37:27] Speaker 05:
Uh I'm sure it's here.

[00:37:30] Speaker 08:
I'm just not um Other trigger words in front of it.

[00:37:35] Speaker 08:
Reasonable effort standard did not provide meaningful incentive to comply with deadlines and then move on.

[00:37:40] Speaker 05:
Sorry with other penalties.

[00:37:42] Speaker 05:
Commission proposed that such penalties would not be recoverable in transmission rates.

[00:37:45] Speaker 05:
Yes.

[00:37:48] Speaker 05:
OK.

[00:37:49] Speaker 05:
That means we can't come back.

[00:37:51] Speaker 05:
I thought you started this by saying the customers would never have to pay anything.

[00:37:55] Speaker 08:
I'm trying to say that whatever.

[00:37:58] Speaker 08:
I thought you meant the interconnecting customers.

[00:38:01] Speaker 08:
Well, we can't recover them from ultimate customers and transmission rates and to direct your attention to another place, which is order number 2023 at paragraph 993, GA 2074.

[00:38:12] Speaker 08:
Wait, wait.

[00:38:13] Speaker 05:
Let me catch up to you.

[00:38:16] Speaker 05:
993?

[00:38:17] Speaker 08:
It's a very, very big record.

[00:38:21] Speaker 08:
Yes, ma'am.

[00:38:22] Speaker 08:
It is paragraph 993 of Order 2023.

[00:38:25] Speaker 08:
It is JA 2074.

[00:38:27] Speaker 08:
2074.

[00:38:29] Speaker 05:
Okay.

[00:38:29] Speaker 05:
Sorry, when they say transmission customers, does that mean interconnection customer or?

[00:38:40] Speaker 08:
Interconnection customer is the way I would refer to the people who are the transmission or the generation developers.

[00:38:46] Speaker 05:
So when you said

[00:38:48] Speaker 05:
Customer's never going to pay.

[00:38:50] Speaker 05:
I thought you meant the interconnection customer.

[00:38:52] Speaker 05:
You said the cost of delay.

[00:38:54] Speaker 08:
That's this one.

[00:38:57] Speaker 08:
This one is the one where we're saying.

[00:38:58] Speaker 08:
So let's say the interconnection customer is the one who is at fault.

[00:39:02] Speaker 08:
That's the one where we thought, OK, this is our best case.

[00:39:04] Speaker 08:
Like, surely they're going to let us go on this one, right?

[00:39:06] Speaker 08:
At least contributory negligence, something like that.

[00:39:08] Speaker 08:
And they say, no, that's just a potential basis for doing this.

[00:39:12] Speaker 08:
Look for the words potentially compelling basis.

[00:39:17] Speaker 08:
thought that was maybe going to be a shoe might have made us not come here who knows.

[00:39:22] Speaker 08:
As far as transmission rates are concerned what that means is if we get a penalty here up

[00:39:29] Speaker 08:
There are situations where utilities pay penalties.

[00:39:32] Speaker 08:
Often when they have costs, those things become a regulatory asset.

[00:39:34] Speaker 08:
You put them in your rates, you recover for them, unless they're imprudent.

[00:39:38] Speaker 08:
Again, the rare case when it's imprudent.

[00:39:40] Speaker 08:
When you say that you're not allowed to recover something in transmission rates, what they mean is that you and I, as retail customers at the end of the food chain, aren't paying anything.

[00:39:48] Speaker 08:
The LSEs that were making wholesale power.

[00:39:53] Speaker 05:
If a study delay is caused by the interconnection customer, not a rate customer, and not the transmission provider, that would present a potentially compelling basis for the commission to find the good cause exists.

[00:40:03] Speaker 05:
And you don't like that because it has the word potentially.

[00:40:06] Speaker 05:
Absolutely.

[00:40:06] Speaker 05:
But what's wrong with, I mean, if I said, if you come here and tell me that somebody did something wrong, you're going to win.

[00:40:14] Speaker 05:
Full stop.

[00:40:17] Speaker 05:
I wouldn't be a very good judge because I would say, well, I will definitely hear that.

[00:40:20] Speaker 05:
And that sounds like an important circumstance.

[00:40:23] Speaker 05:
But I do want to hear from the other party as to whether that happened and whether there were a multitude of causes here that caused the delay.

[00:40:31] Speaker 05:
I mean, I think that isn't that all potentially means they can't come out right out and say, if you tell us that, then we're going to automatically pull for you.

[00:40:42] Speaker 08:
I think there's really no mistaking the commission's tenor about whether or not this is going to happen.

[00:40:46] Speaker 08:
I think it is incompatible to think of them as ever being anything other than excused for a late study when the entire remedy is to give them back all of the money, regardless of whether or not they actually suffered any damages in any measurable way.

[00:41:01] Speaker 05:
With all the money?

[00:41:02] Speaker 05:
No, this is for each phase, right?

[00:41:04] Speaker 08:
We're going through.

[00:41:06] Speaker 08:
Yes, your honor.

[00:41:07] Speaker 08:
But if you pass a certain point, you are giving them back all their money.

[00:41:10] Speaker 08:
Pay them the length of the delay.

[00:41:12] Speaker 08:
Yes, exactly.

[00:41:14] Speaker 04:
No doubt that FERC can regulate its rates and provide these certain incentives that you are not calling penalties so that we can deal with this breakdown in the system and the queue and all of that.

[00:41:27] Speaker 08:
I'm saying they cannot do it under 206.

[00:41:30] Speaker 08:
I think we'd be in a very, very different world if to use a slightly different thing than what Judge Walker was postulating, which I expected we might want to talk about.

[00:41:37] Speaker 04:
So is that an admission that even if we were to vacate the penalties that you agree that the rest of the rule stays in place?

[00:41:43] Speaker 08:
Well, the other people are fighting the rest of the rule.

[00:41:46] Speaker 08:
The only thing we're fighting here is penalties.

[00:41:47] Speaker 08:
Let me sharpen this point this way.

[00:41:50] Speaker 08:
But you're aware from the record that there were early adopters.

[00:41:53] Speaker 08:
Some RTOs pioneered the idea of abandoning the rule that FERC put in place, the serial study procedures they had under 2003, which was never built to deal with the numeracy of the interconnection across we have right now.

[00:42:06] Speaker 08:
That was back in the era of we're going to go build a great big natural gas plant here, a great big coal plant here, possibly a nuclear plant.

[00:42:12] Speaker 08:
Now we're deluge with all these other things.

[00:42:14] Speaker 08:
2003 serial study, doing it one at a time was never meant to that.

[00:42:17] Speaker 08:
And it lasted too long.

[00:42:20] Speaker 08:
People began to pioneer this idea of using cluster studies.

[00:42:23] Speaker 08:
As soon as they proved to be successful, you immediately start to see these drops.

[00:42:27] Speaker 08:
It starts spreading like wildfire.

[00:42:28] Speaker 08:
Every RTO had adopted cluster studies by the time the final rule was even entered.

[00:42:34] Speaker 08:
The difference between the cluster studies that Burke imposed and the bulk of its rule, the part that we're not challenging,

[00:42:40] Speaker 08:
and in each case for continually found it to be just reasonable for us to do this is that they layered on something extra in the rule.

[00:42:47] Speaker 08:
The only thing that's new or interesting about the rule as far as we're concerned because we were voluntarily pursuing cluster studies because we want to get things built because that's the only way we get

[00:42:57] Speaker 08:
paid if we're a for-profit entity.

[00:42:59] Speaker 08:
And if you're an RTO, you have no incentive whatsoever to slow anything down because you are subject to mandatory reliability, penalties if you fail on reliability, but you have no financial stake at all.

[00:43:09] Speaker 08:
The only thing you care about is operating clean grid.

[00:43:12] Speaker 08:
So there is no incentive and never says anyone has the incentive to actually slow anything down.

[00:43:16] Speaker 08:
In fact, they go out of their way to say that they're not impugning anyone's past conduct.

[00:43:21] Speaker 08:
That's one of the main points in arbitrary capricious piece is that there is zero evidence of any misconduct that would ever amount to a penalty.

[00:43:30] Speaker 08:
Everyone's already doing this voluntarily because we have our interests are utterly aligned and that we want the inter connection to fixed.

[00:43:38] Speaker 08:
The problem was never anyone's behavior on the transition planning side.

[00:43:41] Speaker 08:
The problem was there was no discipline on the size of the queue.

[00:43:44] Speaker 08:
We've gotten better about figuring out ways to do that.

[00:43:46] Speaker 08:
We talk about the fact that my so figured out a way to choke off the mass because your honor, we were living in a world.

[00:43:52] Speaker 08:
until people started imposing these cluster study processes where there's more in the interconnection queue than there is installed capacity in this country.

[00:44:00] Speaker 08:
MISO was remarkably successful in doing what I think is a very common sense measure.

[00:44:04] Speaker 08:
We talk about this in our brief where they got

[00:44:07] Speaker 08:
agree that can't we just cap each cluster at 50% of the install capacity we already have?

[00:44:12] Speaker 08:
Isn't that a reasonable limit, the number of things we have to go after?

[00:44:14] Speaker 08:
Because there were two values in what VIRC was doing.

[00:44:16] Speaker 08:
They were so concerned about open access and treating everyone exactly fairly regardless of the nature of the thing, regardless of how big they were.

[00:44:23] Speaker 08:
It was very important then that everyone be treated equally.

[00:44:25] Speaker 08:
But eventually, you begin to have to make some hard choices about who's real and who's not real.

[00:44:30] Speaker 08:
You have the federal government and certain states giving all kinds of subsidies to encourage renewables because people sincerely believe that without renewables, we have too much carbon and we're all going to die.

[00:44:43] Speaker 04:
We're not debating that.

[00:44:46] Speaker 08:
So the only thing we have to do is penalties.

[00:44:48] Speaker 08:
That's it.

[00:44:48] Speaker 08:
From Judge Stenson.

[00:44:50] Speaker 07:
I think you'll like some of these questions because they are

[00:44:55] Speaker 07:
They are about just how the system works, how FERC works.

[00:45:01] Speaker 07:
These are FERC nerd questions from a non-FERC nerd.

[00:45:06] Speaker 07:
Let's start with who pays a transmission provider when the transmission provider transmits power?

[00:45:20] Speaker 08:
There can be instances where the generator pays for that.

[00:45:23] Speaker 08:
But typically, the costs go to load, the ultimate consumer.

[00:45:27] Speaker 08:
So it passes on through.

[00:45:28] Speaker 08:
So you seem very surprised.

[00:45:31] Speaker 08:
Maybe a misunderstood question.

[00:45:33] Speaker 07:
Well, I'm surprised that the guy who pays his electricity bill is writing a check to MISO.

[00:45:38] Speaker 08:
I don't think so.

[00:45:39] Speaker 08:
No, no, no, no, no.

[00:45:40] Speaker 08:
That's what I was trying to say ultimately.

[00:45:42] Speaker 08:
If you're in an RTO, then you are going to pay the central price for the power that you're buying.

[00:45:48] Speaker 08:
The transmission piece will be one component of it and it will then flow on through your actual utility and then ultimately to the consumer.

[00:45:58] Speaker 07:
Okay, so if it is a system operator, an RTO or an ISO,

[00:46:04] Speaker 07:
then that system operator is transmitting power.

[00:46:09] Speaker 07:
And who is writing them the check for transmitting the power?

[00:46:13] Speaker 08:
the purchasing load serving entity is writing a check.

[00:46:19] Speaker 08:
But if you're outside, let's say you're in a vertically integrated utility outside an RTO, that means you have the generation piece or the transmission piece and the distribution piece, then the transmission piece will be part of the bill that you were sending out.

[00:46:30] Speaker 08:
Look, even if you're inside an RTO, it's to the ultimate consumer.

[00:46:35] Speaker 08:
There's a transmission component in each one of these things.

[00:46:37] Speaker 08:
So it goes initially there and then it passes on through.

[00:46:41] Speaker 07:
And this is just a terminology question.

[00:46:49] Speaker 07:
I know we call system operators.

[00:46:51] Speaker 07:
What do we call the transmission owning providers?

[00:46:54] Speaker 07:
Is that what we're supposed to call them?

[00:46:56] Speaker 08:
Well, FERC likes to use the term here, transmission providers, as a pastel for whoever is providing transmission service, whether you're inside an RTO or not.

[00:47:05] Speaker 08:
If you're in an RTO, the operational control of the system goes to the RTO.

[00:47:10] Speaker 08:
That's what makes it an RTO.

[00:47:11] Speaker 08:
If you're not in an RTO, it's this other guy.

[00:47:17] Speaker 08:
An investor-owned utility, an IOU, or possibly it could be a cooperative or municipal utility, which aren't regulated.

[00:47:26] Speaker 07:
When we write this opinion, what word are we supposed to use?

[00:47:28] Speaker 08:
I would use load-serving entity.

[00:47:30] Speaker 08:
That's a good catch-all for the person who's ultimately responsible for getting power to your house.

[00:47:35] Speaker 08:
OK.

[00:47:37] Speaker 08:
That's the person in between the wholesale market and you.

[00:47:39] Speaker 08:
That's a catch-all term that I would use.

[00:47:42] Speaker 07:
OK, a load-serving entity.

[00:47:44] Speaker 07:
Yeah.

[00:47:44] Speaker 07:
OK.

[00:47:45] Speaker 07:
And they are your clients.

[00:47:48] Speaker 08:
They're my clients, and RTOs are also my clients.

[00:47:52] Speaker 07:
OK.

[00:47:52] Speaker 07:
So now I want to ask about how, whether it's load serving entities or system operators, I want to ask about how they are going to pay for the cost of doing studies faster than they used to do them.

[00:48:10] Speaker 07:
These might be friendly questions.

[00:48:14] Speaker 08:
No, I'm delighted to talk about this.

[00:48:17] Speaker 07:
One thing I take that they cannot do if they are load serving entities is they cannot just incur the late fee and then make the customer pay for the late fee.

[00:48:34] Speaker 07:
Right.

[00:48:35] Speaker 07:
That's what you and Judge Malette were talking about.

[00:48:36] Speaker 07:
Right.

[00:48:36] Speaker 08:
So certainly the interconnection customer is not paying for it.

[00:48:38] Speaker 08:
And then if you do pay a penalty, you can't then go try to recover it by sending it through as a component of your transmission rates.

[00:48:44] Speaker 08:
It's not meant to go to customers.

[00:48:46] Speaker 07:
OK.

[00:48:46] Speaker 07:
That's the penalty.

[00:48:48] Speaker 07:
Now, you could hypothetically avoid the late penalty by

[00:48:54] Speaker 07:
drawing an enormous amount of resources at these studies, so that they're done really fast.

[00:49:00] Speaker 08:
Yes, you could.

[00:49:01] Speaker 08:
And do you know who pays for that?

[00:49:03] Speaker 08:
The consumers do, because now it becomes a regulatory asset because you're doing a prudent thing.

[00:49:08] Speaker 05:
I believe it's the interconnection customers.

[00:49:10] Speaker 05:
Is that right?

[00:49:10] Speaker 05:
It's the interconnection customers, right?

[00:49:13] Speaker 05:
I don't know, is it the interconnection customers?

[00:49:15] Speaker 08:
They're paying for a study.

[00:49:18] Speaker 08:
But the study is the study and the employees.

[00:49:22] Speaker 05:
The order says in terms that the cost of increased resources be important to the speed up process.

[00:49:32] Speaker 05:
We'll be passed on to interconnection customers.

[00:49:33] Speaker 05:
Are you telling me that's factually inaccurate?

[00:49:36] Speaker 08:
I'm trying to say this.

[00:49:38] Speaker 08:
A person comes and pays for a particular service, they want this interconnection study done.

[00:49:43] Speaker 08:
I understood Judge Walker to be asking the question.

[00:49:46] Speaker 08:
If an RTO or an LSE goes out and

[00:49:51] Speaker 08:
gets a bunch of extra people.

[00:49:52] Speaker 08:
They don't exist, by the way.

[00:49:53] Speaker 08:
There's plenty of record evidence about how hard it is to get these people.

[00:49:57] Speaker 08:
If they go and get those people on as employees, and that's a prudent thing for them to do, particularly when FERCA just direct them to do that, then those costs that they encourage to provide that service become part of the applicable transmission rates.

[00:50:10] Speaker 08:
There is a giant section of the 18 CFR that's uniform accounts.

[00:50:13] Speaker 07:
I think that is the answer to my question.

[00:50:15] Speaker 07:
So and kind of sensitive.

[00:50:18] Speaker 07:
Merging that with Judge Mollett's question and your answer to her, when an interconnection customer comes along and wants a study, the load serving entity says, here's the cost of that study, and the interconnection customer pays that cost.

[00:50:37] Speaker 07:
And I'm guessing that cost is capped by FERC.

[00:50:40] Speaker 08:
We now know what the schedule is.

[00:50:43] Speaker 07:
In order to meet the deadline, the load serving entity has to vary.

[00:50:51] Speaker 08:
There's independent variations.

[00:50:52] Speaker 08:
They don't have to be exactly uniform.

[00:50:54] Speaker 08:
Yes, it will be fixed in a tariff that FERC will approve.

[00:50:57] Speaker 08:
That's probably the best way to describe it.

[00:51:00] Speaker 07:
But in order to go super fast and make sure that you never miss those deadlines, you might have to spend more money.

[00:51:06] Speaker 07:
Lots.

[00:51:07] Speaker 07:
Lots more money than you're getting from the interconnection customers when the customer pays for the study.

[00:51:12] Speaker 07:
I think you want that answer to be yes.

[00:51:14] Speaker 07:
I think the answer is yes.

[00:51:16] Speaker 08:
Yes, it is surely yes.

[00:51:18] Speaker 07:
And in order to hire all those new people, hypothetically,

[00:51:22] Speaker 07:
the transmission provider would pass that extra charge on to the consumer?

[00:51:31] Speaker 08:
It would become a component of their rate for transmission, which is a cost of service rate.

[00:51:37] Speaker 08:
There are lots of different boxes that you go into.

[00:51:40] Speaker 08:
Cost of fuel goes here.

[00:51:41] Speaker 08:
Cost of hardware goes here.

[00:51:43] Speaker 08:
This would be one of those things, labor.

[00:51:45] Speaker 07:
And would that rate have to be approved by FERC in a 205 filing?

[00:51:53] Speaker 08:
And broadly speaking, yes.

[00:51:55] Speaker 08:
But in practice, what happens now is people file formula rates, and you all have approved this, which have a methodology for setting the rates.

[00:52:04] Speaker 08:
But they don't tell you the exact number.

[00:52:06] Speaker 08:
And so after you have finished your, you true them up.

[00:52:11] Speaker 08:
And so you have kind of an estimate.

[00:52:12] Speaker 08:
But then you kind of true it up later.

[00:52:14] Speaker 08:
But all the components are already in the rate.

[00:52:16] Speaker 08:
You just sort of fill in the number.

[00:52:17] Speaker 08:
Like maybe this one changed, and this one's the same.

[00:52:19] Speaker 08:
But yes, it's like a matrix.

[00:52:20] Speaker 08:
And you're like, OK, was this much?

[00:52:21] Speaker 08:
Now it's this much.

[00:52:22] Speaker 07:
OK, that's all what I guessed, sort of.

[00:52:26] Speaker 07:
And it's helpful to get it confirmed.

[00:52:28] Speaker 07:
And when FERC's up here, I'll just double check with FERC that they say that's how it works as well.

[00:52:33] Speaker 07:
I suspect they will.

[00:52:35] Speaker 07:
Now, on the sort of legal point, the analysis here, it seems like it's somewhat reasonable what FERC is doing in here.

[00:52:47] Speaker 07:
You'll disagree.

[00:52:48] Speaker 07:
So let me tell you why it seems reasonable to me, and you tell me why you think it's not reasonable.

[00:52:51] Speaker 07:
Yes, sir.

[00:52:53] Speaker 07:
The consumers, hopefully, hypothetically, theoretically, will benefit when there's more supply than there is now.

[00:53:04] Speaker 07:
If demand holds steady and supply goes up, prices will go down.

[00:53:11] Speaker 07:
So since the consumer's prices are going to go down when all this new supply comes online, seems pretty fair that the consumers should ultimately sort of pay the cost of getting it online really fast.

[00:53:27] Speaker 07:
And they're not paying the cost directly.

[00:53:29] Speaker 07:
But as you just described, the beneficiaries of this system where the interconnection customers get online faster, the beneficiaries being the consumers,

[00:53:40] Speaker 07:
will pay for the cost of getting it online.

[00:53:44] Speaker 08:
Connor, you are dead on right.

[00:53:46] Speaker 08:
And I've been able to proceed according to my roadmap.

[00:53:48] Speaker 08:
I would have been talking about this under whether or not FERC shows whether and how these things are directly affected by rates.

[00:53:53] Speaker 08:
You're exactly right about what FERC's theory is, that the whole reason why they feel that they need to be so severe about down to the day on when these things are done is because we need to get this stuff in the ground so we can increase supply, so we can cause consumers rates to go down.

[00:54:06] Speaker 08:
It has always struck me as insane that they then say,

[00:54:09] Speaker 08:
that the consumer doesn't pay for it because the rule is cost causation and its corollary beneficiary pays.

[00:54:15] Speaker 08:
So if, as FERC says, the ultimate beneficiary of this entire rule is the ultimate consumer, then heck yes, they should be paying for the things that we do that are prudent.

[00:54:24] Speaker 08:
Now, if you hire a million people and they only need 50, that's probably not prudent.

[00:54:27] Speaker 07:
And they will pay.

[00:54:28] Speaker 07:
You'll charge them more and they'll pay.

[00:54:30] Speaker 08:
But what we can't do under this regime is fail to meet this spot.

[00:54:35] Speaker 07:
You can't charge them more for the late fees, but you can charge them more for the increased costs going fast so that you never have late fees.

[00:54:42] Speaker 08:
That is absolutely true.

[00:54:43] Speaker 08:
But you know what our limitation is there, Your Honor?

[00:54:46] Speaker 08:
We don't have any engineers to hire.

[00:54:49] Speaker 08:
they are absolutely impossible to find.

[00:54:52] Speaker 08:
Dominion's got this excellent affidavit where they calculate to the day how long it takes to even find a candidate.

[00:54:58] Speaker 07:
Wild numbers.

[00:54:58] Speaker 07:
But I imagine if you started telling engineers you will pay them a billion dollars a year to work for you, then there would very quickly be some engineers who stop doing what they're doing and start doing this.

[00:55:11] Speaker 07:
And then you would pass that billion dollar cost onto the customer.

[00:55:14] Speaker 08:
And then the minute that you do that, the Maryland Office of People's Counsel, the New Jersey Office of Rape Counsel, the Consumer Advocates Groups, the Ohio Consumer Council, all these people will come in and tell you that what you've done is just is raping and pillaging consumers.

[00:55:26] Speaker 08:
We fight about these kinds of things all the time.

[00:55:29] Speaker 07:
But when we do... That seems to me like a fight you should win.

[00:55:33] Speaker 07:
And that is not the fight before us.

[00:55:39] Speaker 08:
I agree that that's not the fight that's before us except that Fert tells us when we say we can't do this thing, they say they try to fiat into existence better and higher computing power and try to fiat into existence a highly skilled labor force that does not exist in the numbers we need to process them.

[00:55:55] Speaker 08:
Two companies in the country do this.

[00:55:58] Speaker 08:
If you can't source it internally and they make you pay a lot, a lot of money to do it.

[00:56:06] Speaker 08:
I don't think I've ever gotten to discuss anything about the arbitrage purchase point.

[00:56:09] Speaker 05:
Can I just one last question?

[00:56:12] Speaker 05:
I think we kept you up a very long time.

[00:56:14] Speaker 05:
It feels to me like a sort of extreme dream.

[00:56:22] Speaker 05:
FERC says the old system, reasonable efforts, not working, not good enough, extraordinary delays.

[00:56:32] Speaker 05:
And so they adopt the policy here, which you say, that's overkill.

[00:56:36] Speaker 05:
So I'm glad you asked the question.

[00:56:40] Speaker 08:
I see where you're going.

[00:56:41] Speaker 08:
Yes.

[00:56:45] Speaker 05:
You say it's overkill.

[00:56:48] Speaker 05:
What did your clients propose as something more than reasonable effort, something in between as a standard here for performance?

[00:56:57] Speaker 08:
I think we were perfectly content with reasonable efforts and I don't agree.

[00:57:01] Speaker 05:
So your clients did not propose anything in the record?

[00:57:03] Speaker 08:
No, we were mostly fighting a defensive battle against an offensive war here.

[00:57:06] Speaker 08:
All right.

[00:57:07] Speaker 05:
That was my question.

[00:57:08] Speaker 05:
I just want to know if in the record you guys had proposed an alternative mechanism, something sort of halfway in between that would have.

[00:57:16] Speaker 08:
No, we were content with 890.

[00:57:17] Speaker 08:
Our problem was that FERC never put in any evidence of anything at all in terms of causation.

[00:57:22] Speaker 08:
They have evidence that study delays exist.

[00:57:24] Speaker 05:
I'm just asking the question whether your clients had proposed an in-between standard, and it sounds like the answer.

[00:57:31] Speaker 08:
If one of the comments from one of the transmission providers talked about that, I've forgotten about it.

[00:57:35] Speaker 08:
And if I learned that I'm wrong, I will let you know on rebuttal.

[00:57:38] Speaker 04:
Thank you.

[00:57:38] Speaker 04:
And then just quick, the takings and due process arguments.

[00:57:42] Speaker 04:
Were those raised in rehearing because FERC did have it?

[00:57:46] Speaker 04:
Yes, Your Honor.

[00:57:48] Speaker 04:
Yes.

[00:57:48] Speaker 04:
You can't raise those arguments for the first time on rehearing.

[00:57:51] Speaker 08:
That's what they said.

[00:57:52] Speaker 08:
And Your Honor, I think you might remember from your Duke Energy progress decision, they tried this same gamble here where they said, we typically prefer to hear about arguments before we hear about the first time on rehearing.

[00:58:02] Speaker 08:
But I know Your Honor didn't incite this because you just made the decision on first principles and thank you.

[00:58:06] Speaker 08:
That was a heck of a public service.

[00:58:07] Speaker 08:
We appreciate it.

[00:58:09] Speaker 08:
The

[00:58:10] Speaker 08:
the this court has held since 1981 which is the same time the language they cite in rule 313 also came in the same year so they're both 40 years old but in cities of in uh in cities of uh villages of chaitham uh in 1981 this court squarely says and we quote it in in the reply brief um fully

[00:58:28] Speaker 08:
statutory tax plainly states that agreed parties may bring novel arguments to the position of the tension up to and including the rehearing request.

[00:58:37] Speaker 08:
This attempt to try to put us into a position, especially the context of a rulemaking proceeding, to forecast what potential errors might ever happen on the final rule, that has never been a requirement before.

[00:58:50] Speaker 08:
it may be administratively convenient for for but it doesn't say anything like that in FBA section three thirteen A. In fact, FBA section three thirteen B says, if you've got a good reason, you can actually, it's it's a very strict preservation requirement but in a three thirteen B, you can show just cause why you couldn't have raised the argument earlier.

[00:59:06] Speaker 08:
You can even bring it up for the first time on appeal and all this is like pretty well settled law.

[00:59:11] Speaker 04:
From uh first general authority under two oh six saying that instead they should go under uh three fifteen, three sixteen, three sixteen.

[00:59:18] Speaker 08:
Oh, I think we're missing some so that's

[00:59:20] Speaker 08:
That's about whether or not they have civil penalty authority anywhere under 206.

[00:59:24] Speaker 08:
They do not.

[00:59:25] Speaker 08:
You're talking about, I thought you were asking about their argument that we had to preserve our arguments raised on rehearing at some time earlier than rehearing.

[00:59:34] Speaker 08:
And you, they tried that.

[00:59:36] Speaker 08:
Yes, they did.

[00:59:37] Speaker 08:
That's exactly what they argued.

[00:59:39] Speaker 08:
And we're saying that has never been the law.

[00:59:41] Speaker 08:
It is crystal clear it's not the law in this circuit.

[00:59:44] Speaker 08:
Cities of Village of Chatham said that in 1981, we've got an entire string site in the reply before all the other many times that happened.

[00:59:49] Speaker 08:
And Your Honor didn't even need to rely on those cases to reach the correct conclusion.

[00:59:54] Speaker 08:
The Duke Energy case, you just figured it out from first principles and said, heck,

[00:59:57] Speaker 08:
No, I don't care what you think you typically prefer.

[00:59:59] Speaker 08:
There's nothing that says people can't raise it.

[01:00:02] Speaker 08:
And this is when you know FERC is in trouble, when they manufacture these kind of nutty, simultaneous, you failed to preserve, and also it's moot.

[01:00:12] Speaker 08:
And I know, Your Honor,

[01:00:14] Speaker 08:
Judge Mlett, you had mentioned this question, whether or not we were premature.

[01:00:18] Speaker 08:
We're not.

[01:00:19] Speaker 08:
Medimmune and many other cases are crystal clear that you don't have to wait in order to challenge the constitutionality of a penalty until they actually levitate on you.

[01:00:28] Speaker 08:
So we are certainly here now appropriately.

[01:00:31] Speaker 08:
And I don't know how else to read the law on that subject.

[01:00:37] Speaker 08:
We have every right to challenge the constitutionality.

[01:00:39] Speaker 05:
You're in the position of you can read all the elements of reinforcement challenges is your position.

[01:00:43] Speaker 05:
I think so.

[01:00:45] Speaker 05:
I know you said you wanted to talk about arbitrary and capacious and we have had a lot of questions for you as we're trying to learn what you already know.

[01:00:52] Speaker 05:
So what I think if my colleagues are okay with this is give you just a couple minutes because then they can address it and you'll have a chance if you choose on rebuttal to come back to it.

[01:01:02] Speaker 05:
I want to cut off all this.

[01:01:03] Speaker 08:
I'll be super fast about why this rule makes no sense because you've covered a lot of like pieces of it and it'll be easiest I think to weave them together.

[01:01:10] Speaker 08:
This entire thing is premised on the idea that there's evidence that there are such a thing as study delays.

[01:01:15] Speaker 08:
We have all the, there's the table, Appendix B of Order 2023 has all the data about this.

[01:01:21] Speaker 08:
I would submit that if you look at that data, you will see that everyone who started voluntarily adopting cluster studies was already showing significant gains.

[01:01:29] Speaker 08:
there is zero evidence that anyone and for deliberately very pointedly runs away from ever trying to tag any particular person with any errors.

[01:01:38] Speaker 08:
So we have an unjust unreasonable condition, but no cause of the condition because for does not want to look in the mirror and say we might have kept a word 2003 on a little bit too long.

[01:01:47] Speaker 08:
And that's what that's the mess that we're still trying to clean up.

[01:01:51] Speaker 08:
So

[01:01:54] Speaker 08:
Then they decide that they're going to now have to like layer on the penalties here.

[01:01:58] Speaker 08:
And because they decided they're going to lay on the penalties because they're aiming at the wrong problem, which is training to time, not to standard.

[01:02:06] Speaker 08:
They fail under step one because they never identify the cause.

[01:02:09] Speaker 08:
They fail under step two because imposing a penalty for delays is never, ever, as we have said in all of our pleadings below deferred and as we repeatedly say in our briefs here, we are going to eat a study delay penalty every single day if it means that we are going to have reliable studies.

[01:02:26] Speaker 08:
There is always a tension between any deadline and quality.

[01:02:29] Speaker 08:
It presents itself every time you write an opinion.

[01:02:32] Speaker 08:
It presents itself every time FERC is on rehearing.

[01:02:34] Speaker 08:
It's very difficult for FERC to act like there is no tension between these things when, as in this case and so many others, they failed to meet a statutory deadline to file a rehearing order and then come to you and say, can you please give us some more time because we really want to get this right and be able to deal with this.

[01:02:48] Speaker 08:
That's our position.

[01:02:50] Speaker 08:
There is nobody, and FERC never says anyone has an incentive to do anything other than get this done on time.

[01:02:55] Speaker 08:
RTOs have no incentive whatsoever financially on anybody's side.

[01:02:59] Speaker 08:
The only thing they care about is operational excellence, and it's very dear to them.

[01:03:04] Speaker 08:
If you are a TO inside of an RTO, you're going to be in two different kinds.

[01:03:10] Speaker 08:
Many, many transmission owners now are what we call pure wires company.

[01:03:14] Speaker 08:
They divest themselves in a generation.

[01:03:15] Speaker 08:
First energy, split off first energy solutions.

[01:03:18] Speaker 08:
Exelon used to also include Constellation.

[01:03:20] Speaker 08:
There's sort of like a reverse merger and rip them all apart.

[01:03:22] Speaker 08:
If you're a wires company, and if you're a wires only company, it's only do transmission distribution.

[01:03:27] Speaker 08:
Many, many, many companies are like that now.

[01:03:29] Speaker 08:
Your interests exactly align with the generation developer because your only way to get paid money if you're a wires only company is to build wires.

[01:03:38] Speaker 08:
So you want them to come on.

[01:03:40] Speaker 08:
You need them to come on so you can make more money.

[01:03:43] Speaker 08:
That leaves only one other population of people, and that's vertically integrated utilities.

[01:03:46] Speaker 08:
Let's subdivide them into their two different brackets.

[01:03:49] Speaker 05:
You're a vertically integrated utility.

[01:03:52] Speaker 08:
You're inside an RTO.

[01:03:53] Speaker 08:
You are an absolutely public process.

[01:03:55] Speaker 08:
You are bare naked.

[01:03:55] Speaker 08:
Everyone can see everything, every jot and tittle of your body.

[01:03:59] Speaker 08:
They know about it.

[01:04:00] Speaker 08:
You are not going to go away with any shenanigans.

[01:04:02] Speaker 08:
If you are a TO outside of an RTO, that means you're going to be subject to a state integrated resource plan.

[01:04:09] Speaker 08:
And you wouldn't have asked for somebody to come onto your system to provide generation unless the state allowed you to do an RFP to do that because all that goes into rate base.

[01:04:19] Speaker 08:
So there is no way you're going to get crosswise with your state regulator who actually has more control of your purse strings than FERC does.

[01:04:26] Speaker 08:
slowing down a project they RFP'd that you need to do in order to serve your native load.

[01:04:31] Speaker 08:
This is for all those areas out west.

[01:04:33] Speaker 08:
And that's why I think you'll see all these zeros.

[01:04:35] Speaker 08:
People outside of those RTOs, look at the zeros.

[01:04:38] Speaker 08:
No failures.

[01:04:39] Speaker 05:
Questions on those issues?

[01:04:40] Speaker 05:
No.

[01:04:42] Speaker 07:
You said that at step one, FERC didn't identify the cause of the problem.

[01:04:47] Speaker 08:
They misidentified the cause of the problem.

[01:04:50] Speaker 07:
Well, how is it possible that

[01:04:58] Speaker 07:
the problem of transmission providers taking a long time to do studies is at least not partly

[01:05:12] Speaker 07:
that the transmission providers didn't go faster.

[01:05:16] Speaker 08:
Because they never disciplined the size of the queue.

[01:05:21] Speaker 08:
It has included, for many, many years, people we were not allowed to exclude that were fairly speculative.

[01:05:27] Speaker 07:
That could be one factor, maybe even the biggest factor, for why these studies have taken as long as they have.

[01:05:35] Speaker 07:
Your Honor.

[01:05:36] Speaker 07:
Surely another factor is, if the transmission providers had thrown more money at the problem,

[01:05:43] Speaker 07:
would have gone faster.

[01:05:46] Speaker 08:
It is possible if we could find the labor supply that could have made it go faster.

[01:05:50] Speaker 08:
Everyone here, as I've just explained, is interested in getting it faster.

[01:05:53] Speaker 08:
You have correctly recognized that in order to make that investment, the ultimate consumers would probably at least upfront have to pay more.

[01:06:01] Speaker 08:
But the real issue has always been the size of the queue.

[01:06:03] Speaker 08:
And now that we've got a way of managing group projects and aren't doing everything serially, I think we're on a real road to recovery.

[01:06:10] Speaker 08:
It's going to get better.

[01:06:10] Speaker 07:
Putting aside where the funding will ultimately come from, would you agree that the entities that are in the best position to make sure, sorry, let me rephrase, the entities that are in the best position to speed up the studies are the entities that are doing the studies?

[01:06:29] Speaker 08:
That is true.

[01:06:32] Speaker 08:
But we are never, ever going to meet a deadline to try to avoid this penalty if it means we're going to run up against the really things we care about, which are first other set of mandatory penalties for reliability.

[01:06:44] Speaker 08:
That's reputational stuff.

[01:06:46] Speaker 08:
That's the core of the mission.

[01:06:47] Speaker 08:
That's good utility practice.

[01:06:49] Speaker 08:
That's what we're here to do.

[01:06:50] Speaker 08:
This is not.

[01:06:52] Speaker 08:
This is not some situation where we're trying to soak people.

[01:06:55] Speaker 08:
We actually all want the same thing.

[01:06:57] Speaker 08:
And if Burke would get out of the way and let us solve it, we'd solve it.

[01:07:01] Speaker 08:
But their insistence on having to treat everyone as if they're the exact same quality that a solar plant, which can only deliver for half the day, is the same thing as a 1,700 megawatt natural gas plant that produces energy on demand.

[01:07:11] Speaker 08:
That's nonsense.

[01:07:13] Speaker 08:
And having to pretend that that was not nonsense for a very long time meant that we had this huge stack of queues.

[01:07:18] Speaker 08:
Production tax credits gone now.

[01:07:20] Speaker 08:
Queues beginning to thin.

[01:07:21] Speaker 08:
The speculative projects are beginning to wane out.

[01:07:24] Speaker 08:
I think I see a road to recovery up here.

[01:07:26] Speaker 08:
Sticking us with penalties while we're trying to get there?

[01:07:29] Speaker 08:
That is foolish.

[01:07:30] Speaker 08:
All it does is result in finger pointing.

[01:07:31] Speaker 08:
No one is cooperating anymore because everyone's worried about who's going to pay the day in penalty.

[01:07:39] Speaker 05:
Thank you very much.

[01:07:39] Speaker 05:
All right.

[01:07:39] Speaker 05:
Thank you very much.

[01:07:40] Speaker 05:
And we'll give you some time for rebuttal.

[01:07:42] Speaker 05:
Thank you, ma'am.

[01:07:56] Speaker 03:
Good morning.

[01:07:57] Speaker 03:
I may please the court.

[01:07:58] Speaker 03:
I'm Albert Lynn, and I'm here to address some of the arguments unique to the nonprofit system operators.

[01:08:04] Speaker 03:
I'd like to reserve one minute for rebuttal.

[01:08:07] Speaker 03:
I want to begin by emphasizing that the system operators agree with and join all the arguments Mr. Shepard has raised about why the entire regime of study delay penalties is unlawful.

[01:08:17] Speaker 03:
But if this court rejects those arguments, then it must reach the additional problems raised by FERC's imposition of that regime on the system operators.

[01:08:27] Speaker 03:
And I'd like to focus- One quick fact question.

[01:08:28] Speaker 03:
Yes, Your Honor.

[01:08:30] Speaker 05:
All system operators are non-profit.

[01:08:32] Speaker 03:
Yes, I'd like to focus on one one in particular, and that's whether FERC has adequately addressed the different ability of the system operators to pay the study delay penalties.

[01:08:47] Speaker 03:
And so here's the very brief setup.

[01:08:49] Speaker 03:
FERC admits, it said in the order, that the nonprofit system operators are materially different from the for-profit transmission owners in their ability to pay penalties, number one.

[01:08:58] Speaker 03:
Number two, FERC is not allowed to treat materially dissimilar entities similarly.

[01:09:04] Speaker 03:
And so three, it purported to, and this is a quote, account for the differences with various supposed accommodations.

[01:09:12] Speaker 03:
Here's the problem.

[01:09:13] Speaker 03:
FERC's reasoning doesn't hold up.

[01:09:16] Speaker 03:
As FERC itself recognized, the way system operators differ from other transmission providers is that they lack a guaranteed means of absorbing the penalty costs.

[01:09:27] Speaker 03:
And so put another way, that means they lack access to financial resources to pay the penalties without first getting permission from FERC.

[01:09:36] Speaker 03:
And so the problem is, every one of the purported solutions for it provides isn't responsive to that problem.

[01:09:43] Speaker 03:
They all come back to ask us for permission.

[01:09:47] Speaker 03:
And so that's ultimately, in a nutshell, why the reasoning doesn't hold up.

[01:09:51] Speaker 03:
The solution doesn't actually address the acknowledged problem.

[01:09:55] Speaker 05:
And as Commissioner- They recently acted, I think, on huge AMs.

[01:10:00] Speaker 05:
First of all, they delayed the penalties for roughly three years, which is plenty of time for folks to make a 205 filing.

[01:10:10] Speaker 05:
Can you explain, did they authorize, how did they address this issue or not in their action on PJMs?

[01:10:19] Speaker 03:
This issue did not come up in the PJM filing.

[01:10:24] Speaker 03:
And the response, Your Honor, to the three-year delay.

[01:10:27] Speaker 05:
I'm sorry.

[01:10:28] Speaker 05:
I don't mean to answer one of your three-year delay thing, too, but why wouldn't PGM have asked for this authority?

[01:10:34] Speaker 03:
I don't think they just haven't raised the issue yet.

[01:10:38] Speaker 03:
The PGM thing was about one of the issues was whether they even have to comply with the new study regime.

[01:10:48] Speaker 05:
Was it filed after the 2023 order?

[01:10:50] Speaker 03:
Yes.

[01:10:51] Speaker 03:
So FERC rejected.

[01:10:52] Speaker 05:
It was not to ask to pass this on to their customers.

[01:10:56] Speaker 03:
that issue hasn't been raised yet.

[01:10:58] Speaker 03:
But one of the things that PJM said, for example, was that they were essentially wanted to continue to use the reasonable effort standard and for Excedendo.

[01:11:08] Speaker 03:
So there could be multiple other, this issue could come up later if you reject this challenge.

[01:11:15] Speaker 03:
But I think the problem, yes, you are.

[01:11:17] Speaker 05:
I want to let you answer to make sure I understand what you're saying to me here when you say it could come up later.

[01:11:23] Speaker 03:
There could be another 205 filing.

[01:11:25] Speaker 05:
But they've had two years now and they haven't made a 205.

[01:11:30] Speaker 05:
Have any system operators since this order became effective made a 205 filing asking for the ability to pass on these penalty costs to customers or have some other avenue that they've proposed for dealing with that?

[01:11:50] Speaker 03:
As I understand it, that request hasn't been made.

[01:11:52] Speaker 03:
But if I could answer the question to that, which is I think it comes back to our point is they can't kick that issue down the road to a 205 filing.

[01:12:05] Speaker 03:
And the reason for that is that they have acknowledged that there is this material dissimilarity.

[01:12:13] Speaker 03:
And that question of discrimination has to be addressed

[01:12:18] Speaker 03:
in the order itself.

[01:12:20] Speaker 03:
So the FERC has cited to the mobile oil case, the Tennessee gas case, and those cases do say that agencies don't have to solve all the problems in a particular right rulemaking.

[01:12:33] Speaker 03:
But this court also said in the Maryland People's Council case from 1985, Judge Scalia opinion, that that may be true

[01:12:40] Speaker 03:
accept where the issue goes to the heart of the question that is before the agency at the time.

[01:12:46] Speaker 03:
And this question of non-discrimination

[01:12:49] Speaker 03:
is, goes to the heart, that, and justness and unreasonableness, right?

[01:12:54] Speaker 03:
That is the burden that the agent, that is a very statutory authority question that is before the agency.

[01:13:01] Speaker 03:
When it goes through a 206 process, there's the two-step process from Ameramain, they have to one, find that the existing rates and practices are unjust, unreasonable, and nondiscriminatory.

[01:13:11] Speaker 03:
Then they have to propose, they have to put in place a replacement rate, and to do that,

[01:13:16] Speaker 03:
The agency must carry the burden of establishing that it's just reasonable and not discriminatory.

[01:13:23] Speaker 03:
And here they acknowledged that there is a right discriminatory concern before them at the time because they acknowledged that the system operators are different.

[01:13:34] Speaker 03:
They have to answer that.

[01:13:36] Speaker 03:
in the order, in order to have satisfied their requirement under 206 to promulgate a replacement rate.

[01:13:43] Speaker 03:
So my answer to your question, Your Honor, I mean, yes, there are practical questions about have the 205s been filed, what might they or might they not do with it?

[01:13:51] Speaker 03:
But the problem is they've never resolved the question of non-discrimination that they themselves acknowledged was before them, and the statute requires them to answer that question.

[01:14:02] Speaker 05:
So my question wasn't to the exclusion of

[01:14:05] Speaker 05:
I assume one could both litigate this claim, as you are here, that it's discriminatory or unreasoned in its differential treatment, whichever label you want to put on it, and also belt and suspenders make a 205 filing asking for an alternative means of dealing with these penalties.

[01:14:28] Speaker 05:
But maybe I've misheard.

[01:14:29] Speaker 05:
Are you saying a 205 order

[01:14:34] Speaker 05:
They can't make a 205 order.

[01:14:37] Speaker 05:
for system operators to approve this payment system?

[01:14:41] Speaker 03:
No, no.

[01:14:41] Speaker 03:
They can.

[01:14:42] Speaker 03:
I'm saying that that is not an adequate answer to your point.

[01:14:48] Speaker 03:
That is not an adequate answer for purposes of this order, because it doesn't satisfy their burden under 206.

[01:14:56] Speaker 03:
At the time that they promulgate the rate of practice, which is this order, it doesn't satisfy their burden to show that the replacement rate is just reasonable and not

[01:15:05] Speaker 03:
discrimination, because they have acknowledged that there is this material dissimilarity, and the statute requires them to address that.

[01:15:13] Speaker 03:
Also to your honor about the subsequent 205 filings, there's a couple different ways to address this pass-through penalty.

[01:15:20] Speaker 03:
One is to file a 205 in advance and ask for a default structure.

[01:15:24] Speaker 03:
And the other is when penalties are imposed, to then ask, file a 205 with respect to each one of those penalties, and ask for the ability to pass those through.

[01:15:34] Speaker 03:
I mean, as they point out,

[01:15:35] Speaker 03:
If there is a penalty imposed and there's an appeal process, as you were discussing with Mr. Shepard, perhaps the penalty would be lifted, right?

[01:15:43] Speaker 03:
So there would be no reason for that particular penalty to ask for a 205.

[01:15:49] Speaker 03:
If you decide that for a can kick all of these non-discriminatory questions down the road to subsequent 205 filings, there will be opportunities for the system operators to address these pass-through penalties at those times.

[01:16:04] Speaker 05:
I would have assumed they'd rather have an upfront answer and mechanism for dealing with these, assuming that there will be delays.

[01:16:13] Speaker 05:
Maybe there won't now because of the improvements.

[01:16:15] Speaker 05:
But rather than

[01:16:20] Speaker 05:
doing it after the penalties.

[01:16:22] Speaker 03:
And they do, which is precisely the sort of practical basis behind this argument, which is this dissimilarity exists today.

[01:16:32] Speaker 03:
We are on unequal footing today.

[01:16:34] Speaker 03:
The uncertainty is a real problem for us because it means that the penalty regime has a different impact on the system operators because they don't even know if a penalty is imposed and it's upheld how they're going to pay for it.

[01:16:47] Speaker 03:
So yes.

[01:16:48] Speaker 03:
They do want the certainty.

[01:16:51] Speaker 03:
But the legal argument here is that everybody agrees that that unequal footing exists today.

[01:16:59] Speaker 05:
So imagine in a counterfactual that every system operator, when this rule came out, said, they say we can deal with this through 205.

[01:17:09] Speaker 05:
All of them had filed, every single one had filed a 205 petition asking to be able to

[01:17:17] Speaker 05:
customers, or maybe they come up with some other creative way of dealing with it, but asking for a way for them to deal with it, reflective of their differential circumstances.

[01:17:29] Speaker 05:
And FERC grants every single one.

[01:17:31] Speaker 05:
Yes, Your Honor.

[01:17:33] Speaker 05:
Would you still be arguing that the rule is invalid because it's discriminatory, or would that show that

[01:17:42] Speaker 05:
the rule, which consists both of this penalty scheme and the special avenue for relief for system operators, which doesn't apply to anyone else, combined would show that, in fact, it's not discriminatory.

[01:17:54] Speaker 03:
I appreciate it.

[01:17:55] Speaker 03:
I understand the question now, Your Honor.

[01:17:57] Speaker 03:
I think the answer to that is twofold.

[01:18:00] Speaker 03:
One, the short answer is yes.

[01:18:02] Speaker 03:
I would still be arguing that, and I'll explain why.

[01:18:07] Speaker 03:
If, in this counterfactual, the two of fives have been filed for default structures, they have been passed, and I'm standing here today and said, practically, it would resolve a lot of the concern, right?

[01:18:20] Speaker 03:
But it still doesn't change the fact that the statute required for the time that it promulgated this rule to answer and resolve the question of nondiscrimination.

[01:18:34] Speaker 05:
Because the kidney answer be,

[01:18:39] Speaker 05:
Well, we don't want to impose some sort of global way of dealing with penalties for system operators because they might have different ideas and innovation is how things go forward.

[01:18:49] Speaker 05:
So instead of us saying, here's how you can deal with it, top down, we want to hear from you on what you think would be fair and everything under the circumstances way of dealing with this problem.

[01:19:04] Speaker 05:
bottom up.

[01:19:05] Speaker 03:
I think it might be different if I could add one more piece to your hypothetical.

[01:19:09] Speaker 03:
And they said, and we will not

[01:19:13] Speaker 03:
put this penalty regime into place for system operators until that is decided.

[01:19:19] Speaker 03:
I know they said there's a three-year delay, but there was no guarantee that they would decide some sort of default structure if it had to be a different one for each system operator before the penalty regime went into place.

[01:19:34] Speaker 03:
That's what MISO asked for.

[01:19:36] Speaker 03:
One of their alternatives in the rehearing petitions was, hey, let's figure this stuff out ahead of time before the penalty regime goes into place.

[01:19:46] Speaker 03:
Then you will have answered the material dissimilarity that everybody agrees exists, and you will have carried your statutory burden to resolve the discrimination.

[01:19:57] Speaker 03:
Your Honor, I understand your counterfactual hypothetical.

[01:20:01] Speaker 03:
But I think the problem is it assumes that it's OK to kick this can down the road.

[01:20:06] Speaker 03:
I mean, it's always possible.

[01:20:09] Speaker 05:
Kicking the can down the road, I think my question is there were different ways of FERC acknowledged the differential consequences here.

[01:20:19] Speaker 05:
So we don't have that situation where they just didn't acknowledge it.

[01:20:24] Speaker 05:
And they could have said, here's a cookie cutter answer.

[01:20:27] Speaker 05:
of deal with the charge on this.

[01:20:32] Speaker 05:
And maybe you all would say, that's fine, that's reasonable, that's good, you dealt with the problem.

[01:20:36] Speaker 05:
Or they could say, you tell us based on the characteristics of your own particular system, your own customers, how the whole thing's going, what works best for you.

[01:20:47] Speaker 05:
But we view it because we have to, that's our duty.

[01:20:50] Speaker 05:
And I thought I heard from your answer that the first would be OK under the law, but the second is not.

[01:21:00] Speaker 03:
I think the second might be OK, maybe would be OK, if they had then said, and let's go through that process before the penalty regime takes effect.

[01:21:13] Speaker 05:
I have another fact question.

[01:21:14] Speaker 05:
This is a nerd fact when you're for nerd things.

[01:21:19] Speaker 05:
I have no idea.

[01:21:20] Speaker 05:
On average, how long, once a 205 petition is filed, does it take for FERC to act on it?

[01:21:28] Speaker 03:
I don't know the answer to that question, Your Honor.

[01:21:30] Speaker 03:
I will admit to being less of a FERC nerd than my co-counsel.

[01:21:34] Speaker 05:
It turned out, on average, it was two years.

[01:21:38] Speaker 05:
I don't mean to build any lilies here or anything or disparage them if they're doing them super fast.

[01:21:47] Speaker 05:
I understand, Your Honor.

[01:21:48] Speaker 03:
But I think, I mean, I think the issue is all of your hypotheticals, I think, again, with respect, sort of assume that it's OK to resolve the nondiscrimination question in the future.

[01:22:08] Speaker 03:
And then if it practically might work out,

[01:22:12] Speaker 03:
then we're okay, right?

[01:22:14] Speaker 03:
And the contention that I have is it might have worked out and it might have not worked out, right?

[01:22:21] Speaker 03:
And under your hypotheticals, yes, it did work out in that hypothetical world.

[01:22:25] Speaker 03:
Everybody filed the two of fives, acted expeditiously, came up with solutions that resolved the discrimination.

[01:22:32] Speaker 03:
But the problem is that that's one hypothetical in the universe of hypotheticals that might have happened under this order.

[01:22:40] Speaker 05:
But it's all hypothetical because I'm actually quite astonished to hear that no one's asked.

[01:22:47] Speaker 05:
In two plus years, two years, no one's asked.

[01:22:52] Speaker 05:
I mean, the brief comes to us as this is why this is a huge problem for system operators.

[01:22:59] Speaker 05:
And it makes sense.

[01:22:59] Speaker 05:
And FERC acknowledged that they're just in a different place.

[01:23:03] Speaker 05:
And that's the theme of this problem on discrimination is what are we going to do with this bill when we get it?

[01:23:12] Speaker 05:
We can't do what everyone else can do.

[01:23:14] Speaker 05:
And FERC says,

[01:23:18] Speaker 05:
We hear you, here's how we can deal with it.

[01:23:22] Speaker 05:
As part of the order, I didn't do this as some post-hoc letter to everybody.

[01:23:26] Speaker 05:
As part of the order, it said, here's how we will prevent that discrimination.

[01:23:34] Speaker 03:
And no one takes them up on their own?

[01:23:35] Speaker 03:
With respect, Your Honor, what they say is, here's how we might prevent it, but we might not.

[01:23:40] Speaker 03:
So for example, they point to some other prior regimes that have penalties, like the NERC reliability regime, where there's a similar problem.

[01:23:48] Speaker 03:
And what's happened in that regime is that there are two of five filings that happen after the penalty is imposed.

[01:23:56] Speaker 03:
And in those cases, FERC has granted the ability to pass through.

[01:24:01] Speaker 03:
But with every single one of them, they say,

[01:24:04] Speaker 03:
Let's all remember this is case by case, and we're going to, you know, if there's another penalty, we're going to look at that penalty.

[01:24:11] Speaker 03:
You're going to have to file another 205.

[01:24:12] Speaker 05:
That's the problem here after the penalties attached process, which it sounds like maybe people want to do.

[01:24:18] Speaker 05:
If they've offered you an upfront tariff amendment to allow you to deal with this, looking forward, you won't have to do it on a case by case basis.

[01:24:28] Speaker 03:
But the reality is that they haven't said, we're going to do this for you.

[01:24:34] Speaker 03:
They said, come to us.

[01:24:35] Speaker 05:
You can come to us.

[01:24:36] Speaker 05:
People have to come make their records.

[01:24:38] Speaker 05:
They can't license up front.

[01:24:40] Speaker 05:
Again, they've chosen not to do a cookie cutter.

[01:24:43] Speaker 05:
Everyone can do it this way.

[01:24:45] Speaker 05:
You come tell us, but we can't approve it until we see what you're telling us.

[01:24:48] Speaker 05:
It might be that we would like to protect ourselves by

[01:24:52] Speaker 05:
charging three times any potential penalty in advance, the maximal penalty in advance, because we don't know what penalties will be.

[01:24:59] Speaker 05:
And they go, well, that's too much.

[01:25:01] Speaker 05:
Right.

[01:25:02] Speaker 05:
They can't say we will allow X or Y without knowing what's presented to them.

[01:25:08] Speaker 05:
All the time FERC qualifies things by saying, here's a mechanism.

[01:25:12] Speaker 05:
We will review it.

[01:25:13] Speaker 05:
There's legal standards governing how we review it.

[01:25:16] Speaker 05:
This is not completely within their discretion.

[01:25:19] Speaker 05:
There's legal standards.

[01:25:20] Speaker 05:
There's legal review in the courts.

[01:25:22] Speaker 03:
But the point of disagreement, I think, Your Honor, between me and you is that they said, you can come to us with these default filings.

[01:25:30] Speaker 03:
We might grant them.

[01:25:31] Speaker 03:
We might not.

[01:25:32] Speaker 03:
We're still going to put this penalty regime in place.

[01:25:35] Speaker 03:
They specifically rejected the request by MISO, one of the system operators, that you should hold off on the imposition of the penalty regime until, look, you want to invite us to file some stuff?

[01:25:45] Speaker 03:
Let's file some stuff.

[01:25:46] Speaker 03:
Let's work out what these default structures are before the penalty regime.

[01:25:51] Speaker 05:
And that is the- They had rephrased it and said, we're going forward with this rule, but we have this avenue, special counter over here.

[01:26:02] Speaker 05:
Our system operator said it's part of our rule.

[01:26:06] Speaker 05:
And we are allowing you enough time to come to us.

[01:26:09] Speaker 05:
And we, imagine they had added this, we'll act on your 205 petitions.

[01:26:15] Speaker 05:
within a timeframe that should precede, assuming everyone knows when a cluster study cycle is, let's assume everyone knows it's three years.

[01:26:24] Speaker 05:
And we will, if you file them, you know, within the first six months or eight months after the order, we will act on them within three years.

[01:26:35] Speaker 05:
Then you'd be fine.

[01:26:36] Speaker 05:
I think it would be this, just another way of saying the penalty, don't worry, the penalties won't kick in for you until we have acted on your application.

[01:26:43] Speaker 03:
Yes.

[01:26:45] Speaker 03:
We assume that's another way of saying that.

[01:26:47] Speaker 03:
I think if that's what they, then I think it would be materially different.

[01:26:50] Speaker 03:
Because again, I think the obligation is on them to take the steps that will guarantee that this discriminatory problem that everybody agrees exists will be resolved.

[01:27:01] Speaker 03:
And what they did here is they reserved to themselves the unfettered discretion

[01:27:06] Speaker 03:
while still putting in place the penalty regime to maybe resolve it and maybe not resolve it.

[01:27:12] Speaker 03:
And Your Honor, I'm not going to assume things, but I think the dispute here might feel a little academic, but I don't think it is academic.

[01:27:22] Speaker 03:
Because I think the issue is it's one thing to have them say, whether it's through some creative process, as we've discussed, here is how we will resolve this.

[01:27:33] Speaker 03:
And they specifically said in the record we are rejecting that.

[01:27:43] Speaker 03:
We are rejecting the idea that this penalty regime cannot go into place until

[01:27:51] Speaker 03:
And I can, Your Honor, if you would like, I can, this page, JA 3736, paragraph 405.

[01:27:57] Speaker 03:
They say, we decline this invitation to guarantee, essentially, that we're going to come up with some structures before the penalty regime goes into place.

[01:28:06] Speaker 03:
And Your Honor, that might be a question for my friend at FERC.

[01:28:09] Speaker 03:
Why reject that?

[01:28:12] Speaker 03:
And I think that's why it's not an academic difference.

[01:28:14] Speaker 03:
FERC resisted that idea.

[01:28:16] Speaker 05:
Did any system operators

[01:28:20] Speaker 05:
complain in the record, put in a comment, an objection on rehearing that said, three cluster study cycles is not enough time for us to get a 205 filing into you to deal with these penalties.

[01:28:38] Speaker 05:
Did they tell FERC that's not, if FERC was thinking, I don't know what they're thinking, but they were thinking in their head like I've been saying, and I don't know.

[01:28:44] Speaker 05:
but if they phrased this in a way to allow enough time.

[01:28:49] Speaker 05:
Did anyone say that?

[01:28:50] Speaker 03:
I can't remember that, I can't remember specifically.

[01:28:53] Speaker 03:
But I think I would just suggest that the MISO suggestion that you should hold this off is of the same height.

[01:29:01] Speaker 05:
No, hold off then is

[01:29:04] Speaker 05:
Just don't do it until we all get together and we all solve this thing.

[01:29:07] Speaker 05:
And that puts an awful lot of control on the system operators over the time frame.

[01:29:12] Speaker 03:
Not necessarily.

[01:29:13] Speaker 03:
Not necessarily.

[01:29:14] Speaker 05:
Not necessarily, but maybe.

[01:29:16] Speaker 03:
Well, because I think under 206, right, they could require us to file.

[01:29:20] Speaker 03:
They could say submit something within 150 days or submit your proposals within six months.

[01:29:26] Speaker 05:
I mean, FERC has... You can stop your clients from doing that too.

[01:29:29] Speaker 05:
I'm sorry.

[01:29:30] Speaker 05:
I mean, it's just nothing's stopped your clients from doing it.

[01:29:32] Speaker 05:
I mean, it's like if we're court and we're like, you know, we set briefing schedules, we want cases to move.

[01:29:37] Speaker 05:
And if the parties go, it's a complex case.

[01:29:42] Speaker 05:
Let's figure out exactly who's briefing on what and who's doing whatever.

[01:29:46] Speaker 05:
And don't set a briefing schedule till we get back to you on exactly how we want it all to shake out.

[01:29:57] Speaker 05:
I'll let you know.

[01:29:58] Speaker 05:
And the other side objects, by the way.

[01:30:00] Speaker 03:
Right.

[01:30:01] Speaker 05:
And your honor, ultimately- We go, we're not going to give you total control.

[01:30:03] Speaker 05:
Make a suggestion.

[01:30:04] Speaker 05:
But this is a multi-party process here.

[01:30:06] Speaker 03:
Yes.

[01:30:07] Speaker 03:
But ultimately, in that situation, the court has the final say.

[01:30:10] Speaker 03:
And I think FERC here could have required us to do it.

[01:30:13] Speaker 03:
And the key here, and it comes back to the legal point that I was making, is that the burden is on FERC.

[01:30:18] Speaker 03:
under 206.

[01:30:20] Speaker 03:
It has to carry its burden of showing that the replacement rates promulgating is just reasonable and not unduly discriminatory.

[01:30:27] Speaker 03:
They had the means within their power to get that done.

[01:30:33] Speaker 03:
And so I don't think this is an academic debate.

[01:30:35] Speaker 03:
I think we do understand each other about what needed to get done.

[01:30:41] Speaker 03:
And I think our contention is that FERC didn't carry its burden.

[01:30:45] Speaker 03:
It tried to put it on us.

[01:30:46] Speaker 03:
And ultimately, it could have done.

[01:30:48] Speaker 07:
That's great.

[01:30:51] Speaker 07:
Very helpful.

[01:30:54] Speaker 07:
There's something in the briefing about how

[01:30:59] Speaker 07:
some system operators need their stakeholders' approval and file a 205, make a 205 filing.

[01:31:07] Speaker 07:
Yes, Your Honor, it was NISO, the New York Independent System Operators.

[01:31:12] Speaker 07:
And if I understand the argument, it's that some of the stakeholders are the

[01:31:20] Speaker 07:
the customers who under the 205 filing will have to foot the bill for penalties.

[01:31:27] Speaker 07:
So if those customers have a veto power over the 205 filing and if they have a monetary incentive for that filing not to happen, then the filing will never happen.

[01:31:36] Speaker 03:
Yes, Your Honor.

[01:31:37] Speaker 03:
That is an additional wrinkle to the difficulty.

[01:31:40] Speaker 03:
It highlights, I think, the dissimilarity between the system operators.

[01:31:46] Speaker 07:
In your answers to Judge Millett, you did seem kind of bullish on 205 filings being the solution.

[01:31:53] Speaker 07:
You faulted FERC for not kind of guaranteeing them as the solution.

[01:31:58] Speaker 07:
But

[01:31:58] Speaker 07:
I don't understand why you would be so bullish on 205 filings if they're not going to happen in some system operators.

[01:32:09] Speaker 03:
appreciate you reminding me of this wrinkle that NISO has.

[01:32:14] Speaker 03:
Speaking for all the system operators, I think there's a view that potentially we could essentially work this out with FERC, but yes, I think NISO has a very unique, each of the system operators actually has, I mean, they have their own agreements with their transmission members in terms of

[01:32:32] Speaker 03:
how they work.

[01:32:35] Speaker 03:
And this court recognized in the Atlantic City case that 205s with respect to ISOs and RTOs are a little bit different than transmission owners for this very reason.

[01:32:45] Speaker 07:
I mean, maybe a counter argument to your argument, your NISO specific argument is, I mean, the stakeholder probably doesn't want to pay the penalty fee, but they'd rather pay the penalty fee than have the system operator go bankrupt.

[01:32:59] Speaker 07:
So they actually will allow the 205 filing.

[01:33:01] Speaker 03:
potentially, FERC did not respond to this problem that we raised in the record.

[01:33:10] Speaker 03:
So again, I think it comes, yes, Your Honor.

[01:33:12] Speaker 07:
No, you can finish something.

[01:33:13] Speaker 07:
No, no, I was just going to reiterate my point.

[01:33:16] Speaker 07:
Did Mr. Sheppard say anything you disagree with?

[01:33:22] Speaker 07:
I don't think so, Your Honor.

[01:33:24] Speaker 07:
That's helpful too.

[01:33:24] Speaker 07:
And then one of the things that Mr. Sheppard and I were talking about is

[01:33:30] Speaker 07:
the at least theoretical possibility that whatever increased costs there are to transmission providers to do these studies faster, those costs could be passed along through rates to the consumers.

[01:33:48] Speaker 07:
Would that also, would that be as theoretically possible for the system operators as it is for the loads serving entities?

[01:33:57] Speaker 03:
So I think the answer is complicated because each of the system operators has their own tariffs and their own essentially contracts with their transmission members and how operational costs are passed through.

[01:34:10] Speaker 03:
I think the main point here, not to duck your question, is on the penalty.

[01:34:17] Speaker 03:
there's nothing that suggests that they can recover that from anybody.

[01:34:21] Speaker 03:
And I don't think Fert disagrees with that.

[01:34:25] Speaker 07:
And then I guess my last question is, there was this joint or unopposed joint motion about argument and what was going to be covered and not covered.

[01:34:37] Speaker 07:
And what am I to make of the motion basically saying that you all didn't want to

[01:34:46] Speaker 07:
Talk about the energy, what's the name of that thing?

[01:34:51] Speaker 03:
Oh, the energy service standard versus the... No, it's not that we don't want... I think we were trying to conserve the court's time, and so we thought the main arguments to advance were essentially one, two, and three, and we said for issues four and five,

[01:35:08] Speaker 03:
that we're happy to rest on the briefs, but we are available to answer questions if the court has any.

[01:35:15] Speaker 03:
And I am available to answer questions on five, which has to do with the energy service standard versus the network service.

[01:35:21] Speaker 07:
Can I just see if I understand the service standard?

[01:35:24] Speaker 07:
Of course.

[01:35:26] Speaker 07:
Imagine I am an interconnection customer, and I go to transmission system A, and I say, OK, I want to connect, and you need to do a study.

[01:35:37] Speaker 07:
And it turns out that when I connect to system A, that's going to have some kind of effect on system B. So system B, there needs to be a study about system B. I tell system A, I'm looking for energy service.

[01:36:02] Speaker 03:
So non-firm service.

[01:36:03] Speaker 07:
Non-firm service.

[01:36:04] Speaker ?:
OK.

[01:36:05] Speaker 07:
System B says, well, when we do this study, we want to do a study based on firm service.

[01:36:14] Speaker 07:
Is that the status quo before Order 2023?

[01:36:19] Speaker 07:
Have I described it?

[01:36:22] Speaker 03:
I don't know if maybe, I mean, I think the status quo is that the affected system has the flexibility to justify whether it wants to use a network service or an energy service.

[01:36:35] Speaker 03:
But maybe the better answer to your question is that that's not the factual scenario that is of concern here and why there is an objection under issue five.

[01:36:45] Speaker 03:
So the factual scenario that's of concern is,

[01:36:48] Speaker 03:
The generation interconnection customer goes to transmission system A and says, I want firm service, network service.

[01:36:58] Speaker 03:
But it's going to have an impact on system B. FERC has now prohibited system B from using a network service standard to figure out what the impacts on its system are going to be.

[01:37:11] Speaker 03:
Now, FERC's answer to that is in the ordinary course,

[01:37:19] Speaker 03:
essentially the affected system is going to have two opportunities to figure out what the impacts are.

[01:37:26] Speaker 03:
There's going to be the initial modeling or study that's done at the time of the interconnection request.

[01:37:35] Speaker 03:
And then they say, but that's different from the ultimate transmission

[01:37:40] Speaker 03:
When system A will agree to interconnection, and then there will have to be a subsequent request by the generation customer, and system A at that time will then decide whether there actually can be transmission, whether power can flow.

[01:37:53] Speaker 03:
And then at that time, system B will have essentially another bite at the apple to figure out whether there are reliability impacts.

[01:37:58] Speaker 03:
Because FERC agrees that the energy service standard, because it's less rigorous,

[01:38:03] Speaker 03:
is not going to catch the same number of reliability problems as the network service standard is.

[01:38:10] Speaker 03:
And the objection issue five is that's not always the case.

[01:38:16] Speaker 03:
There's not always going to be two opportunities because

[01:38:21] Speaker 03:
As an example, MISO, when it allows interconnection to happen, also grants the transmission service, the deliverability, essentially.

[01:38:32] Speaker 03:
And so SPP, which is a neighboring RTO, doesn't get

[01:38:37] Speaker 03:
the two opportunities to assess reliability.

[01:38:41] Speaker 03:
And so they say, so for that reason, we want the flexibility to continue to use the network service standard when the request is for network service because we're concerned that the energy service standard is not rigorous enough in that one opportunity to catch all the reliability concerns.

[01:38:58] Speaker 03:
And so the argument in issue five is that

[01:39:00] Speaker 03:
And then, again, similar to what we were talking about before, FERC sort of acknowledges this problem, says that, but SPP hasn't shown that it occurs outside of its particular circumstances, and that you should file the 205 resolve.

[01:39:16] Speaker 03:
And now our response to that is that that 205 opportunity is illusory, because they've already said,

[01:39:23] Speaker 03:
having the flexibility to decide between energy service and network service testing is unjust, unreasonable, and discriminatory.

[01:39:34] Speaker 03:
And they say, well, look, in the 205, we'll give you flexibility.

[01:39:36] Speaker 03:
But the reality is, yes, there is flexibility, but not flexibility that is at odds, directly at odds with

[01:39:44] Speaker 03:
what they have already found is unreasonable in the order.

[01:39:48] Speaker 03:
And Judge Millett, you mentioned the PJM compliance filing.

[01:39:51] Speaker 03:
I think that's a very good example.

[01:39:52] Speaker 03:
We've already seen this in play.

[01:39:54] Speaker 03:
PJM and its compliance filing said, you know what, we kind of want to essentially, this is the way FERC characterizes, we kind of want to continue to use the reasonable effort standard and not the deadlines with the cutoffs.

[01:40:05] Speaker 03:
And in rejecting that, Ferg says, no, that is a collateral attack on this order.

[01:40:12] Speaker 03:
And that's our point here is that the idea that we can come back with a 205 and ask for something that is directly contradictory, contrary to the fundamental holding that forms the premise of your order, that is an illusory answer to, again, a problem that is acknowledged.

[01:40:29] Speaker 07:
So I think I did follow and I think

[01:40:33] Speaker 07:
largely persuaded about especially your last few points.

[01:40:39] Speaker 07:
I'm not sure yet though that the

[01:40:45] Speaker 07:
the system that 2023 creates is worse than the system it replaced.

[01:40:52] Speaker 07:
And here's why, either the system B is going to, in my hypothetical, either the system B is gonna have the flexibility to decide what kind of testing to do, or it's gonna not have the flexibility.

[01:41:08] Speaker 07:
When it has the flexibility,

[01:41:11] Speaker 07:
it's going to choose to test the firm service because that's gonna be a higher number, higher dollar figure.

[01:41:22] Speaker 07:
And that's an accurate figure if it turns out that the service ends up being firm service.

[01:41:30] Speaker 07:
And it's an inflated figure if it turns out that the service ends up being non-firm service.

[01:41:36] Speaker 07:
So sometimes it's accurate and sometimes it's inflated in favor of system B.

[01:41:40] Speaker 03:
Can I answer your question?

[01:41:43] Speaker 03:
Because I think I understand it.

[01:41:44] Speaker 03:
So I think the way to think about this is to remember that the 206 process is two steps.

[01:41:50] Speaker 03:
So first, FERC decides that the existing rater practice is unjust, unreasonable, and discriminatory.

[01:41:56] Speaker 03:
And I think that goes to your question.

[01:41:59] Speaker 03:
Is the original system, is the current system not good?

[01:42:03] Speaker 03:
Maybe so.

[01:42:03] Speaker 03:
Maybe so.

[01:42:04] Speaker 03:
Maybe so under step one.

[01:42:05] Speaker 03:
Our objection is with step two, I think, is with what are you promulgating in its place?

[01:42:11] Speaker 03:
And what they're promulgating in its place is everybody has to use energy service.

[01:42:15] Speaker 03:
And there's a middle ground there, which is you have to use energy service unless maybe the request is for network service.

[01:42:24] Speaker 03:
right?

[01:42:25] Speaker 03:
Because it gets at your hypothetical, which is, well, what happens if the generation customer is asking for energy service, but you really want to use network service standard?

[01:42:33] Speaker 03:
There are other ways to skin the cat, so to speak.

[01:42:37] Speaker 03:
And I think our complaint is that what they promulgated at step two hasn't adequately addressed this problem.

[01:42:45] Speaker 05:
Is that proposal in the record?

[01:42:48] Speaker 05:
The proposal you just made, what you should do is

[01:42:53] Speaker 05:
let them use, I mean, it's hard with cluster studies because you're gonna have a bunch of clients and maybe nobody but one wants firm service.

[01:43:00] Speaker 05:
I'm not quite sure how it works out, but was it proposed and all this was explained and how it's gonna work for cluster studies?

[01:43:05] Speaker 03:
I believe so.

[01:43:06] Speaker 03:
I think are the SVPs' request is that they wanna be able to use network service where the request is for firm service.

[01:43:13] Speaker 05:
I thought the argument there was the way they've designed their entire system upfront is this network driven

[01:43:22] Speaker 05:
characteristic.

[01:43:24] Speaker 05:
And they're only one.

[01:43:25] Speaker 05:
And so the question here is whether... No, I don't... You got to sort of wag the dog here.

[01:43:30] Speaker 03:
I see what you're saying.

[01:43:31] Speaker 03:
No, I don't think that that's right.

[01:43:32] Speaker 03:
I think they do... So they propose, let us... Let us do network service.

[01:43:40] Speaker 05:
And let the customers have the choices to which they want.

[01:43:44] Speaker 05:
If the customer wants network service, let's use that.

[01:43:48] Speaker 05:
If the customer wants

[01:43:51] Speaker 05:
Energy service.

[01:43:52] Speaker 05:
Yeah, I think.

[01:43:53] Speaker 05:
It's no sense.

[01:43:54] Speaker 03:
I'm sorry.

[01:43:55] Speaker 05:
It's all energy service.

[01:43:56] Speaker 05:
I think.

[01:43:56] Speaker 05:
They want champagne?

[01:43:58] Speaker 05:
We'll calculate champagne.

[01:43:59] Speaker 05:
If they want sparkling water, we'll calculate sparkling water.

[01:44:02] Speaker 03:
I think in the sense, yeah, I mean, I don't know that I would put it as let the customer choose, but I think it would be where the interconnection customer has asked for network service because that

[01:44:16] Speaker 03:
will have higher reliability impacts, we should be allowed to assess, do an effective system study using network service as well, and not be limited.

[01:44:27] Speaker 05:
And they've made that proposal to FERC.

[01:44:30] Speaker 03:
I believe so, but I will check.

[01:44:33] Speaker 03:
If I'm incorrect about that, I will let you know.

[01:44:36] Speaker 05:
Any questions?

[01:44:39] Speaker 05:
Thank you so much.

[01:44:40] Speaker 05:
Thank you, your office.

[01:44:42] Speaker 05:
Appreciate it.

[01:44:42] Speaker 03:
Are you doing rebuttal?

[01:44:43] Speaker 03:
You're both doing rebuttal?

[01:44:43] Speaker 03:
I have just one minute, yes.

[01:44:45] Speaker 05:
Thank you.

[01:44:45] Speaker 05:
I just want to make sure.

[01:44:46] Speaker 05:
All right, I'm here for the.

[01:45:03] Speaker 06:
Good morning.

[01:45:03] Speaker 01:
Good morning.

[01:45:05] Speaker 01:
May it please the court, Melissa Alfano, for the Trade Association petitioners.

[01:45:09] Speaker 01:
Or as Mr. Shepard said earlier, the other people protesting the rest of the rule.

[01:45:15] Speaker 01:
I just want to note, we're not protesting or arguing against the rest of the rule.

[01:45:20] Speaker 01:
And in fact, we're interveners on behalf of FERC in some portions of it.

[01:45:23] Speaker 01:
We are here today to address two limited issues where FERC, without explanation, declined to allow penalty-free withdrawal when interconnection customers are facing

[01:45:34] Speaker 01:
substantial and unexpected increases in interconnection costs.

[01:45:38] Speaker 05:
And in fact, I thought they did explain it.

[01:45:43] Speaker 05:
And we're just allowing it at this very late stage because your withdrawal is extraordinarily disruptive to both the transmission providers and everyone else in your cluster.

[01:46:00] Speaker 05:
And so there's going to be full new costs

[01:46:05] Speaker 05:
And delays loved on to everybody and we got to make a decision about who bears the consequence of that.

[01:46:14] Speaker 05:
And it's going to be the one who withdraws rather than all the everyone else in the cluster and the transmission provider.

[01:46:23] Speaker 05:
You said there's no explanation.

[01:46:24] Speaker 05:
I think that's an explanation.

[01:46:26] Speaker 01:
Well, that would be an explanation, had it not conflicted with paragraph 43 of the order in which FERC said cost uncertainty poses a significant barrier to interconnection because it forces interconnection customers to finance substantial increases in unexpected costs.

[01:46:41] Speaker 01:
What FERC is effectively doing is at this very late stage in the process where interconnection customers are receiving one of their final studies or in the case of effective systems,

[01:46:50] Speaker 01:
studies, receiving the final study after it even executed the interconnection agreement.

[01:46:55] Speaker 01:
What FERC is doing is saying, despite the fact that your costs nearly doubled in some instances, or in the case of affected systems, it could have doubled or tripled.

[01:47:05] Speaker 01:
And by the way, as a couple of palm mentors pointed out in the underlying proceeding, these are not small amounts of money.

[01:47:11] Speaker 01:
These are millions, sometimes hundreds of millions.

[01:47:15] Speaker 01:
Under the old system.

[01:47:17] Speaker 01:
under the old system.

[01:47:19] Speaker 05:
Right.

[01:47:19] Speaker 05:
Well, the whole point is the current system is with cluster studies and everything is supposed to reduce surprise.

[01:47:26] Speaker 05:
There will still be some, but it should hopefully be less.

[01:47:31] Speaker 05:
Is that wrong?

[01:47:32] Speaker 05:
Did I misunderstand something?

[01:47:33] Speaker 01:
It should hopefully be less, but there's no guarantee.

[01:47:36] Speaker 01:
And yes, Burke has moved to cluster studies, but has been pointed out earlier, many of the regions have actually already moved to cluster studies before order 2023.

[01:47:45] Speaker 05:
And so- How long before?

[01:47:48] Speaker 01:
I can tell you for a fact in MISO, it was, I think, like 2016.

[01:47:53] Speaker 01:
I think other regions were slightly after that.

[01:47:55] Speaker 01:
MISO was a bit of the innovator there.

[01:48:00] Speaker 01:
But it was still the case that there were these unexpected costs and affected systems.

[01:48:05] Speaker 01:
These studies have played the process for quite some time, not doing the studies themselves, but the fact that these studies come in late and come in with substantial increases in interconnection costs.

[01:48:18] Speaker 01:
to your question about, I just want to make sure I was saying it right, that the interconnection customers would be paying, sorry.

[01:48:31] Speaker 05:
So what I was saying is that, look, if a surprise happens very, very late in the process, there's going to be pain all around.

[01:48:45] Speaker 05:
what FERC decided is, well, who's going to bear that pain?

[01:48:50] Speaker 05:
And you don't bear all the pain.

[01:48:51] Speaker 05:
It's a 20% penalty.

[01:48:53] Speaker 05:
It's not 100% penalty for the costs of your withdrawal or for the costs of the 20%, I guess, the increased costs that go on to everyone else.

[01:49:03] Speaker 05:
And so FERC had to choose somebody.

[01:49:08] Speaker 05:
You want them to choose

[01:49:11] Speaker 05:
the withdrawing person still gets out of having to pay anything, which means everyone else around them has to absorb it.

[01:49:19] Speaker 05:
Is that right?

[01:49:20] Speaker 01:
That is right.

[01:49:21] Speaker 01:
But the everyone else absorbing it is absorbing far less than the withdrawing party is.

[01:49:26] Speaker 05:
Well, it's spread out across more people.

[01:49:28] Speaker 05:
Yes.

[01:49:28] Speaker 05:
Your clients are going to be a lot of those other people who have to absorb costs probably as often as they're the one or maybe more often than they're the one withdrawing.

[01:49:43] Speaker 05:
I mean, the people in the cluster.

[01:49:45] Speaker 01:
Yes, but the harm to those customers is far lower than the harm to the withdrawing customer, who would have to pay 20% of the new network upgrade costs, which can be in the millions of dollars at that point.

[01:49:58] Speaker 01:
And especially in terms of affected systems, without any sort of cap, we don't know if those cap costs can be double or triple the original estimated network upgrade costs.

[01:50:10] Speaker 01:
So FERC did this all.

[01:50:13] Speaker 01:
in contradiction to what was going on.

[01:50:15] Speaker 01:
And I just want to point out, we don't dispute the concept of penalties, re-graduated penalties, but what FERC is doing in its order 2023 and its brief is justifying the graduated penalties of the penalty structure.

[01:50:29] Speaker 01:
We didn't protest that there.

[01:50:32] Speaker 01:
What we are saying is FERC failed to give a reason explanation as to why that 100% threshold, limited instances where interconnection customers are at the last minute faced with costs that render their projects un-economic, why that threshold is appropriate.

[01:50:45] Speaker 01:
And so what FERC then does in its brief is rely on two cases, Public Service Colorado and Pacific Four.

[01:50:52] Speaker 01:
I want to note that these two cases didn't actually appear in Order 2023 to support the 100% threshold.

[01:50:58] Speaker 01:
In the NOPA notice of proposed rulemaking, it was for the penalty structure generally.

[01:51:02] Speaker 01:
And then in the order, it was for two different pieces.

[01:51:06] Speaker 01:
So FERC relies on these cases in its brief now.

[01:51:10] Speaker 01:
But what FERC is really doing now is engaging in a post hoc salvage operation for its failure to actually explain that 100% increase.

[01:51:16] Speaker 05:
100%, so if it's less than 100% surprise,

[01:51:28] Speaker 05:
It's going to be less money, less pain.

[01:51:32] Speaker 05:
I mean, you talked about great big millions and millions of dollars surprises.

[01:51:35] Speaker 05:
I have no idea how these numbers work out, but won't a lot of those be, especially if you bring in the affected systems numbers, get you to the 100% threshold or not?

[01:51:48] Speaker 01:
It could bring in the effective system threshold, could.

[01:51:51] Speaker 01:
But what FERC also declined to do with respect to affected systems studies is require them to come in on time.

[01:51:58] Speaker 01:
There's no guarantee that those projects can come in on time, and there's no cap on those costs.

[01:52:03] Speaker 01:
And FERC, in fact, admits this in Order 2023A.

[01:52:05] Speaker 05:
This is the other thing that's really confusing me in this case.

[01:52:09] Speaker 05:
Are we talking about jurisdictional affected systems or non-jurisdictional affected systems?

[01:52:17] Speaker 01:
Well, in some cases, it is non-jurisdictional affected systems.

[01:52:22] Speaker 05:
I really don't, because it's important, I think, to understand this argument.

[01:52:27] Speaker 05:
Is there a percentage of effective systems out there?

[01:52:33] Speaker 05:
How often it is that the effective system is jurisdictional versus non-jurisdictional?

[01:52:40] Speaker 01:
In case of the significant increase, or just generally?

[01:52:42] Speaker 05:
In case of where you're concerned, the sticker shock ones is for a cause.

[01:52:47] Speaker 05:
Some of the yellow might be more than the sticker shock.

[01:52:48] Speaker 05:
It might be like bolio over prices.

[01:52:52] Speaker 01:
Um, I don't have that number, um, but we couldn't.

[01:52:56] Speaker 05:
Do you have an experiential estimate or sense?

[01:53:00] Speaker 05:
Yes.

[01:53:02] Speaker 05:
From the developer perspective.

[01:53:03] Speaker 05:
Yes.

[01:53:05] Speaker 05:
Um, yeah, you guys have been blown out of water by these prices, I guess in the past, you, you, you have clients who represent a lot of these folks.

[01:53:11] Speaker 05:
How often pre-disorder has it been a huge problem when it's a non-jurisdictional versus jurisdictional?

[01:53:20] Speaker 01:
It's been a problem in both.

[01:53:22] Speaker 01:
To be quite honest, interconnection customers tend to keep their project economics in terms of what sends them out of business and out of the queue because their project has been completely upended.

[01:53:33] Speaker 05:
There are other protections in the order when it's a jurisdictional system.

[01:53:39] Speaker 05:
that allow you to postpone doing your large generator interconnection agreement if the assisted system study is delayed coming in.

[01:53:49] Speaker 05:
You have until 30 calendar days after receipt of the affected system study report to execute your large connector interconnection agreement.

[01:53:58] Speaker 05:
And it's that execution of that agreement that takes you out of the 100% threshold.

[01:54:03] Speaker 05:
So as for jurisdictional effective studies, you actually have

[01:54:08] Speaker 05:
protections here that allow you to not take yourselves out of the 100% threshold until after you receive the study.

[01:54:17] Speaker 05:
Correct.

[01:54:17] Speaker 05:
We haven't challenged that.

[01:54:18] Speaker 05:
OK, so are we only talking now about non-jurisdictional effective systems?

[01:54:23] Speaker 01:
We can be, yes.

[01:54:24] Speaker 01:
And what that actually just highlights is there's a link.

[01:54:27] Speaker 05:
We don't know how often that is.

[01:54:31] Speaker 01:
But exactly, we don't know how often there is.

[01:54:33] Speaker 01:
We don't know how much of it's a problem.

[01:54:36] Speaker 05:
I mean, if a lot of us, I'm only asking out of my ignorance, if a lot of the affected system study delays are coming from, and I just don't know, but let's assume, for business questions, 70% are jurisdictional.

[01:54:51] Speaker 05:
FERC has given you all the tools you need to protect yourself from getting thrown out into

[01:55:00] Speaker 05:
no withdrawal penalty avoidance, no 100% avoidance at all.

[01:55:08] Speaker 05:
You've got that.

[01:55:09] Speaker 05:
So it would only be like 30%.

[01:55:11] Speaker 05:
Yes.

[01:55:12] Speaker 05:
But if it's reversed, if it's 70% or outside jurisdiction, then it looks like a different problem.

[01:55:18] Speaker 05:
And so I just didn't see anything in the briefing.

[01:55:21] Speaker 05:
But tell me if there's anything that I missed in the briefing or in the record that tells me

[01:55:29] Speaker 05:
how big the non-jurisdictional problem is where FERC just can't do anything to kind of help you out because they're non-jurisdictional.

[01:55:39] Speaker 01:
We don't have that number.

[01:55:41] Speaker 05:
Does it matter to show whether this is unreasoned?

[01:55:49] Speaker 05:
We could play number games on this.

[01:55:54] Speaker 05:
Less often, it's non-jurisdictional, and they tend not to have the biggest sticker shocks.

[01:56:03] Speaker 05:
It's jurisdictional ones that have the biggest sticker shock.

[01:56:07] Speaker 05:
That's one way.

[01:56:08] Speaker 05:
If it's mostly non-jurisdictional, and those are the ones that come in with the explosively high surprises, that's a different problem.

[01:56:18] Speaker 05:
But if FERC just wasn't told anything about

[01:56:21] Speaker 05:
They did what they could to regulate for the affected systems that are jurisdictional.

[01:56:25] Speaker 05:
So I just don't even have a sense of what the scope of the problem is here.

[01:56:32] Speaker 01:
So what FERC failed to do was set any threshold, both

[01:56:39] Speaker 01:
They have some protections for if the effective system is jurisdictional, but then none, really, if the effective system is non-jurisdictional.

[01:56:47] Speaker 05:
So we're really only talking about the failure set of threshold for non-jurisdictional, because the protections they gave you allow you to keep yourself in, still subject to the 100% withdrawal exemption.

[01:57:02] Speaker 05:
Yes.

[01:57:03] Speaker 05:
Maybe you don't want to, maybe you want to sign some papers earlier, but the clients actually get to control that.

[01:57:11] Speaker 05:
So that seems hard to understand how that's much of a problem.

[01:57:15] Speaker 05:
Or it hasn't been briefed from the perspective of we have complete control.

[01:57:18] Speaker 05:
We have control over this process when it's an effected, jurisdictional effected system.

[01:57:26] Speaker 05:
So we're only, I'm assuming, because I'm wrong here, but what you're really concerned about

[01:57:32] Speaker 05:
is the lack of an exemption, any exemption for non-jurisdictional effective systems, price surprises, at the very latest stage of the interconnection study process.

[01:57:49] Speaker 01:
That is one of the concerns.

[01:57:51] Speaker 01:
Looking at it this way, there are far fewer non-jurisdictional entities that this is going to come up with.

[01:57:56] Speaker 01:
And that actually highlights the need for the exemptions in the first place.

[01:58:00] Speaker 01:
This isn't something that's going to have a massive and often impact on the customers in the queue, which again, that harm is spread amongst all of the customers in the queue that are remaining as opposed to one customer incurring a significant harm.

[01:58:18] Speaker 05:
But that's the one that's causing the problem.

[01:58:20] Speaker 01:
Is it the customer has done everything at that point, pay the increased deposits?

[01:58:27] Speaker 01:
It's not choosing to withdraw.

[01:58:28] Speaker 01:
It's being forced to withdraw.

[01:58:30] Speaker 05:
Well, it's came into again with the rule on the book.

[01:58:33] Speaker 05:
I'm not an economist.

[01:58:34] Speaker 05:
I'm assuming economists can calculate all these risks and out to you.

[01:58:37] Speaker 05:
And so you will have made a sophisticated decision about going into this.

[01:58:42] Speaker 05:
And one of those things will be factored in is

[01:58:46] Speaker 05:
You can figure out, first of all, in advance if there's a non-jurisdictional affected system anywhere along your line.

[01:58:52] Speaker 05:
You can figure that out in advance.

[01:58:54] Speaker 05:
And then they can come in.

[01:58:55] Speaker 05:
And by the way, they're not going to come in now with the champagne service, right?

[01:58:59] Speaker 05:
So they're going to come in with the cheaper version service, anyhow, I think, or maybe not.

[01:59:03] Speaker 05:
Maybe, I guess, FERC can't even dictate what modeling they use.

[01:59:07] Speaker 05:
Maybe I'm wrong about that.

[01:59:10] Speaker 05:
You're going to know upfront if you've got an unregulated effective system.

[01:59:15] Speaker 05:
And so it's just a question of what companies do all the time.

[01:59:21] Speaker 05:
And that is calculate economic risks and pros and cons, benefits and not.

[01:59:28] Speaker 05:
What are the chances?

[01:59:28] Speaker 05:
And then make sophisticated decisions.

[01:59:32] Speaker 01:
They're not going to know for certain upfront what these customers are doing, what they have to do in this

[01:59:37] Speaker 01:
in the interconnection process is make decisions based on the best information available to them.

[01:59:43] Speaker 01:
And on the energy service modeling, we're not taking a position necessarily on whether or not it should be the case.

[01:59:51] Speaker 01:
But there's a paper in the record, the Enel paper.

[01:59:55] Speaker 01:
I can give you the JA site somewhere.

[02:00:00] Speaker 01:
But there's an Enel paper that basically explains that there is no protection that would

[02:00:07] Speaker 01:
ensure that these costs are limited, or that even these costs were identified in the earlier stage of the process.

[02:00:12] Speaker 01:
Because when you're going all in on cluster studies, which is fine, we never protested that, but you don't quite know your impacts or your costs until you know your cluster.

[02:00:24] Speaker 01:
And that is something as you move forward.

[02:00:26] Speaker 01:
So these are projects that take estimates, think about what are the possibilities, and then make the investment based on that information.

[02:00:35] Speaker 01:
And so what we are talking about are these late stage costs that are unexpected because despite everything that those projects have done, all of the due diligence, all of the increased deposits, all of the increased site control, despite all of that, their costs can nearly go up.

[02:00:54] Speaker 01:
And that's the limited situation that we're talking about.

[02:00:56] Speaker 05:
I think this rule has been in effect for a couple of years now.

[02:01:01] Speaker 05:
Do you have an example?

[02:01:04] Speaker 05:
I know it sounds like a record.

[02:01:05] Speaker 05:
You guys know this world so much better than I do.

[02:01:08] Speaker 05:
Of a non-jurisdictional affected system blowing everything up.

[02:01:18] Speaker 01:
So despite the rule being in effect as a rule,

[02:01:22] Speaker 01:
Um, it actually hasn't been implemented and it was just earlier this summer where FERC accepted the last of the major RTOs compliance filings.

[02:01:31] Speaker 01:
So it's still going into effect in a sense.

[02:01:34] Speaker 01:
And we haven't, um, gotten to the actual rubber meets the road.

[02:01:39] Speaker 01:
There is a case though, and it's cited, I think, um, definitely throughout the proceedings, the Tenaska case, Tenaska clear clique versus- That was pre-order.

[02:01:47] Speaker 01:
Yeah, that was pre-order.

[02:01:48] Speaker 05:
Yeah.

[02:01:49] Speaker 05:
I think that's, I'm not sure that's-

[02:01:51] Speaker 05:
Tell me what the number was in that case.

[02:01:57] Speaker 01:
There were several numbers in that case and it started around 100 million and at some point went up to 900 million and so part of the fight was the non-jurisdictional system.

[02:02:08] Speaker 01:
Correct.

[02:02:09] Speaker 01:
AECI.

[02:02:11] Speaker 05:
Your costs, maybe I'm wrong here, the costs, will the cost still be spread around if you stay in?

[02:02:19] Speaker 05:
Won't the cost be spread around everyone in the cluster or am I wrong about that?

[02:02:23] Speaker 01:
Well, if you stay in, the costs of the upgrades are allocated to you based on how much it depends on each region.

[02:02:33] Speaker 01:
However, if you stay in, you have to be stuck with

[02:02:39] Speaker 01:
This is the penalty free withdrawal depends on the cost that you incur.

[02:02:46] Speaker 01:
The cost that you may shift to other interconnections if there is a withdrawal is not necessarily the same number because it depends on who is in the cluster, where they are located, and what other network upgrades might be identified in a different manner.

[02:03:07] Speaker 01:
now that one project is gone and it's difficult to see in a cluster study.

[02:03:12] Speaker 01:
You know, Excel points out in their comments that it's hard to actually know what the impact will be on withdrawal until the which all happens.

[02:03:33] Speaker 05:
All right.

[02:03:34] Speaker 05:
I don't think there's any further questions from my colleagues.

[02:03:38] Speaker 05:
Did you have a point or two that we didn't?

[02:03:40] Speaker 05:
I didn't.

[02:03:41] Speaker 05:
I shouldn't say we.

[02:03:43] Speaker 05:
It's my fault you didn't get a chance to make that you can make quickly.

[02:03:48] Speaker 01:
Just a real quick note, since we were talking about the rule not quite being in effect, but not

[02:03:53] Speaker 01:
really being in fact, this is a situation where, you know, I do want to note we asked for the remand without vacatur just because FERC has now accepted all these filings and parts of it will be going into effect.

[02:04:05] Speaker 01:
What we are pointing out to pointing out are things that are occurring at the very final stages of the interconnection process.

[02:04:11] Speaker 01:
So we are years away from this.

[02:04:13] Speaker 01:
So this is something that FERC could on remand come to a different conclusion and then fix the error.

[02:04:20] Speaker 01:
And then it would still not actually cause

[02:04:22] Speaker 01:
the full harm until later, or prevent the harm, I guess.

[02:04:27] Speaker 05:
All right.

[02:04:28] Speaker 05:
Thank you.

[02:04:32] Speaker 05:
Now we will hear from Burke, who's been talking about a lot.

[02:04:46] Speaker 00:
Thank you, your honors.

[02:04:47] Speaker 00:
Good morning and may it please the court, Robert Solomon for the commission.

[02:04:54] Speaker 00:
There is much legally that I disagree with, especially as to the transmission providers, but I think I will start.

[02:05:02] Speaker 00:
if you allow me factually to correct two misstatements.

[02:05:08] Speaker 00:
One, Judge Walker, you were asking Mr. Sheppard about the recovery of study costs if they turn out to be

[02:05:17] Speaker 00:
loftier and more prohibitive than anticipated.

[02:05:21] Speaker 00:
There is a true up in the rulemaking.

[02:05:27] Speaker 00:
There is a true up in the tariff, in particular section 13.3 of the interconnection procedures, which you can find on 4058.

[02:05:38] Speaker 00:
The commission also explained this on 3713 and note 702, identifying relevant tariff provisions.

[02:05:46] Speaker 00:
There is a true up.

[02:05:48] Speaker 00:
I think the anticipation is that the study costs will be less than the initial study deposit.

[02:05:56] Speaker 00:
But if, in fact, it becomes wildly expensive to hire qualified electrical engineers, if it turns out that the study costs

[02:06:06] Speaker 00:
are higher than the initial study deposit, then in fact there is a true up and interconnection customers will pay the increased study costs.

[02:06:19] Speaker 00:
There was some confusion as to interconnection customers versus ultimate

[02:06:26] Speaker 00:
consumers or ultimate customers.

[02:06:29] Speaker 00:
But I'm glad you brought up and I'm glad you focused on the interest of the ultimate consumer because fundamentally, this is what the rulemaking is about.

[02:06:41] Speaker 00:
There is plenty of discussion of transmission providers and interconnection customers.

[02:06:47] Speaker 00:
The commission believes that we have appropriately balanced the interests of those two groups.

[02:06:54] Speaker 00:
But fundamentally,

[02:06:55] Speaker 00:
customers will benefit from increased competition in wholesale power markets with the effect of reducing wholesale prices and improving the reliability of service.

[02:07:12] Speaker 00:
That's fundamentally, that's our paramount concern.

[02:07:16] Speaker 00:
The other factual misstatement is

[02:07:20] Speaker 07:
Before you change it from the true up topic, can you tell me a little bit more about how that would work?

[02:07:26] Speaker 07:
The transmission provider has to invest a huge amount of money in order to go faster than they currently go and meet these deadlines going forward.

[02:07:41] Speaker 07:
They invest all that money and they're not fully compensated for that investment by the current costs of the studies that they charge interconnection customers.

[02:07:52] Speaker 07:
And so then are you saying that the way a true up would work is they would then say, well, we now need to charge a lot more for these studies and would FERC have to approve that or how would that work?

[02:08:06] Speaker 00:
I don't think so.

[02:08:07] Speaker 00:
There is a billing and invoicing section of the tariff as well.

[02:08:14] Speaker 00:
And the process works as either a rebate or a surcharge that is the responsibility of the interconnection customer.

[02:08:27] Speaker 07:
So presumably they would say, oh, they're now

[02:08:31] Speaker 07:
We now need X more dollars from the interconnection customer for having done this study.

[02:08:36] Speaker 07:
You owe us X dollars.

[02:08:38] Speaker 07:
And I guess if the customer, if the interconnection customer thought that that was unreasonable, maybe they could go to FERC to challenge it or something.

[02:08:45] Speaker 00:
That is absolutely correct.

[02:08:46] Speaker 00:
There is always that opportunity to make a challenge at the commission to argue individualized

[02:08:54] Speaker 00:
circumstances.

[02:08:55] Speaker 00:
I think at the very outset of the argument, Judge Millett, you mentioned the ample process that is in place.

[02:09:05] Speaker 00:
Most of the focus has been on the possibility of making an individualized Section 205 filing demonstrating individual

[02:09:15] Speaker 00:
circumstances or regional differences.

[02:09:19] Speaker 00:
I also want to focus on the compliance proceedings, which the commission has been considering for the last year, especially as to system operators.

[02:09:32] Speaker 00:
To the extent the individualized transmission provider believes that the default mechanisms in place

[02:09:42] Speaker 00:
do not appropriately fit the particularized circumstances of that particular transmission provider, the commission will review the compliance filing and determine if the transmission provider has offered a reasonable independent entity variation, if it's a system operator,

[02:10:05] Speaker 00:
or consistent with or superior to if it's a non-system operator.

[02:10:11] Speaker 00:
The Commission does not want to be disruptive to the efforts that transmission providers have already made.

[02:10:20] Speaker 00:
And we are extremely grateful that transmission providers have taken the effort over the years to make filings with the Commission and to try to adopt

[02:10:34] Speaker 00:
incremental improvements over the status quo.

[02:10:38] Speaker 00:
But fundamentally what the commission has done here is find that the existing procedures, the existing rules, which may have been

[02:10:50] Speaker 00:
fine in the day no longer meet the moment because of the changing circumstances of generators that wish to go online because of soaring electrical demand.

[02:11:04] Speaker 00:
We know about artificial intelligence and data centers.

[02:11:08] Speaker 00:
The commission identified a real problem

[02:11:14] Speaker 00:
that generators are unable to process through the interconnection queue and to go online in a timely manner.

[02:11:26] Speaker 00:
The situation was bad and the situation is getting

[02:11:29] Speaker 00:
worse, indeed.

[02:11:30] Speaker 04:
Even if we agree with you with respect to the problem, because nobody disagrees that there's an extreme backlog, Q and all of that, there seems to be a lot of emphasis on the 100% penalty, and you're basing that on a case, you're basing it on comments, but is there any real empirical data about how you come to that number specifically, or are those cases and comments context specific?

[02:11:54] Speaker 00:
Thank you, Judge Childs.

[02:11:56] Speaker 00:
There is empirical data and there are cases.

[02:12:00] Speaker 00:
The commission could have moved sooner.

[02:12:03] Speaker 00:
The commission adopted an additional rulemaking five years earlier in 2018.

[02:12:09] Speaker 00:
This was our order 845.

[02:12:12] Speaker 00:
rulemaking.

[02:12:13] Speaker 00:
There were commenters who argued that the reasonable effort standing was the standard was no longer working and that the commission should impose deadlines and what the commission said is that may be true but we prefer to have additional empirical data and the commission requested that transmission providers

[02:12:36] Speaker 00:
post and file information about the study process.

[02:12:44] Speaker 00:
The commission has identified the number.

[02:12:46] Speaker 04:
Like, why not 75%?

[02:12:48] Speaker 04:
Why not 90%?

[02:12:50] Speaker 00:
Well, thank you.

[02:12:51] Speaker 00:
This is the second factual misstatement that I wish to clear up.

[02:12:57] Speaker 00:
The interconnection customers, the clean energy petitioners, are arguing that the 100% figure comes out of thin air.

[02:13:06] Speaker 00:
The notice of proposed rulemaking itself at

[02:13:18] Speaker 00:
page 180 and note 209, when the commission proposed the 25% standard, the 100% standard, the no additional standard for affected system studies, the commission recognized that other transmission providers had previously filed with the commission and the commission had approved

[02:13:45] Speaker 00:
Withdrawal penalties in particular, we cited tri state and Pacific Corp and public service company of Colorado.

[02:13:57] Speaker 00:
Fundamentally, and this is what Judge Millett, you were bringing up, late stage withdrawals are particularly destructive.

[02:14:07] Speaker 00:
They are particularly upsetting as to timeliness and cost certainty.

[02:14:16] Speaker 00:
And what the commission did in this rulemaking

[02:14:20] Speaker 00:
after reviewing the empirical evidence that we asked for, after reviewing the transmission provider filings that we had approved, we were able to take advantage

[02:14:36] Speaker 00:
of the early adapters in part, we were able to take advantage of the best practices in developing the rule and providing all of the particularized criteria, but we found fundamentally

[02:14:51] Speaker 00:
that there are two principal drivers of the delay.

[02:14:56] Speaker 00:
One upfront, too many duplicative and speculative applications flooding the queue.

[02:15:06] Speaker 00:
So we adopted

[02:15:08] Speaker 00:
various standards, not just simply the withdrawal penalties, but we adopted substantially increased study deposits.

[02:15:17] Speaker 00:
We require interconnection customers to demonstrate site control and to demonstrate commercial readiness.

[02:15:23] Speaker 00:
And we believe we have made the job of the transmission providers much

[02:15:29] Speaker 04:
I'm still trying to get to your answer about the 100% versus the 90% versus the 75%.

[02:15:36] Speaker 04:
The number, not the problem, the number for the penalty.

[02:15:39] Speaker 00:
Excuse me, Your Honor.

[02:15:41] Speaker 00:
The Commission acknowledged that those cases that I had cited, those transmission providers specifically had asked for a 25%

[02:15:56] Speaker 00:
safe harbor, penalty free withdrawal at the cluster stage.

[02:16:01] Speaker 00:
Those transmission providers had specifically asked for a 100% penalty free withdrawal at the facilities study stage.

[02:16:13] Speaker 00:
And those particular transmission providers had not provided for an additional safe harbor for affected systems for the reasons that Judge Millett had recognized that the later the stage of the withdrawal

[02:16:33] Speaker 00:
the more devastating the impact is on other interconnection customers.

[02:16:39] Speaker 04:
So is this number going to be for everybody or are you going to look at it on a case-by-case basis?

[02:16:44] Speaker 00:
That is the number for everybody, but we don't think it's going to be a problem.

[02:16:49] Speaker 04:
The reason I ask that is because you just made a statement that says these transmission providers asked for, so it sounds like you were going case-to-contact specific.

[02:17:00] Speaker 00:
Well, we needed something.

[02:17:01] Speaker 00:
This is a matter of line drawing.

[02:17:03] Speaker 00:
And even the clean energy petitioners agree that something more than 25% is appropriate for a late stage withdrawal.

[02:17:14] Speaker 00:
We could have picked 50.

[02:17:15] Speaker 00:
We could have picked 100.

[02:17:16] Speaker 00:
We could have picked 200.

[02:17:19] Speaker 00:
We believe there is plenty of authority

[02:17:22] Speaker 00:
for the proposition that something higher than 25% is appropriate.

[02:17:27] Speaker 00:
I think even clean energy petitioners agree that a higher number is appropriate at a later stage.

[02:17:36] Speaker 07:
I'm guessing that like 10,000% would have been inappropriate.

[02:17:38] Speaker 07:
So why is the range you just described 50%, 200%?

[02:17:45] Speaker 07:
Why is that appropriate and 10,000% not appropriate?

[02:17:50] Speaker 00:
Because we actually had those numbers in play with respect to transmission providers that had earlier made filings with us.

[02:17:59] Speaker 00:
And frankly, we're not.

[02:18:00] Speaker 05:
So you had to at least two transmission providers that had adopted this very scheme.

[02:18:06] Speaker 05:
The commission had previously approved and had a chance to see it work.

[02:18:11] Speaker 00:
Yes, which is.

[02:18:14] Speaker 05:
But that was the empirical evidence you have.

[02:18:16] Speaker 00:
I think that is empirical.

[02:18:17] Speaker 00:
I was focusing primarily on the additional data that we... My question was a friendly question.

[02:18:23] Speaker 00:
Yes.

[02:18:24] Speaker 00:
We feel like that is a very valid basis for picking a number.

[02:18:28] Speaker 00:
We have to pick a higher number, and it's a valid basis to pick the numbers that have previously worked.

[02:18:36] Speaker 00:
I also want to emphasize, Judge Millett, which you were emphasizing, that

[02:18:43] Speaker 00:
We believe that any unanticipated cost increase at the affected system study stage will come in when we're still at the 25 and 100% thresholds, because they typically will come in before the final cluster restudy or before the final facilities study.

[02:19:07] Speaker 05:
Judge Millett, you're- Are you talking about, oh, please go ahead.

[02:19:10] Speaker 05:
You're about to answer the question I'm about to ask, so go ahead.

[02:19:13] Speaker 00:
You're correct that the non-jurisdictional providers are particularly problematic because they do not have the incentive that jurisdictional providers have.

[02:19:29] Speaker 00:
Where there is no penalty-free withdrawal, the Commission is acting on behalf of all interconnection customers.

[02:19:40] Speaker 00:
Yes, there is the possibility that a single interconnection customer may wish to withdraw penalty-free from the queue at a late stage.

[02:19:53] Speaker 00:
But that will be at the expense of all other interconnection customers, including Ms.

[02:20:01] Speaker 00:
Alfano's clients, who remain in the queue and who will be subject to additional delay from further restudy and will be subject to additional cost

[02:20:14] Speaker 00:
And particularly striking, I do want to point out that the interconnection customers in their brief, they never mention what we believe is the most important safeguard, which is there's never an obligation to pay a withdrawal penalty if the withdrawal will not result in a material effect

[02:20:39] Speaker 00:
either as to timing or costs on other interconnection customers that remain in the queue.

[02:20:46] Speaker 05:
Did that ever happen?

[02:20:49] Speaker 00:
No, we're not aware of that ever happening.

[02:20:53] Speaker 05:
So it doesn't seem like much protection.

[02:20:57] Speaker 05:
By its very nature and timing, it's going to really be rough on everybody else, financially and time-wise on everybody else.

[02:21:06] Speaker 05:
So that test will never be met.

[02:21:09] Speaker 00:
Well, it will be financially rough on everybody else inside the queue.

[02:21:14] Speaker 00:
All I'm saying is all of this discussion about penalty-free withdrawals, whether they should be 25% or 100% or 200% or 1,000%, none of that matters if there is no material impact on other interconnection customers within the queue.

[02:21:34] Speaker 00:
By definition,

[02:21:35] Speaker 00:
If the penalty-free withdrawals come into play, the safeguards that the interconnection customers are concerned about, by definition, there will be harm to other interconnection customers.

[02:21:52] Speaker 00:
That is the agency's principal concern that the later the stage of withdrawal, the more destructive to the cause that we're all championing here, which is

[02:22:05] Speaker 00:
timely studies, a timely, transparent, cost-effective, and reliable interconnection process.

[02:22:19] Speaker 05:
Do you have an answer to my question about how often affected systems are jurisdictional versus non-jurisdictional?

[02:22:33] Speaker 00:
I think the percentage number is small.

[02:22:35] Speaker 05:
We're talking primarily non-jurisdictional as small or jurisdictional as small.

[02:22:43] Speaker 00:
Well, it's not just jurisdictional versus non-jurisdictional.

[02:22:48] Speaker 00:
non-jurisdictional that has not accepted as a matter of reciprocity the same open access, non-discriminatory transmission and interconnection service that jurisdictional providers have committed to.

[02:23:05] Speaker 00:
There is a process in our regulation.

[02:23:07] Speaker 05:
So there's a lot of non-jurisdictional systems out there

[02:23:13] Speaker 05:
that essentially will voluntarily sign on to the same rules as this order?

[02:23:18] Speaker 00:
That is correct because they also get the advantages of non-discriminatory open access transmission tariff.

[02:23:26] Speaker 05:
And for those ones that voluntarily sign on, then the protections such as

[02:23:32] Speaker 05:
You can the host provider has to give you until 30 days after the effective system.

[02:23:36] Speaker 05:
Report come study comes in before requiring you to sign.

[02:23:41] Speaker 05:
Large generator and interconnection agreement, which is what takes you out of the.

[02:23:50] Speaker 05:
even to most non-jurisdictional effective systems?

[02:23:55] Speaker 00:
Yes, Your Honor.

[02:23:55] Speaker 00:
I'm not sure about the exact percentage.

[02:23:58] Speaker 00:
The concern is lack of timeliness and jurisdictional providers and non-jurisdictional providers who have

[02:24:07] Speaker 00:
accepted a reciprocal obligation so that they can receive the reciprocal benefits, remained subject to the timeliness requirements and affected system studies, the impacts on system B in Judge Walker's

[02:24:25] Speaker 00:
hypothetical.

[02:24:27] Speaker 00:
Those are still subject to the 150-day time frame.

[02:24:33] Speaker 00:
They are still subject to the $1,000, $2,000, $2,500 a business day penalty.

[02:24:40] Speaker 05:
So we don't think it's going to be much of a problem.

[02:24:44] Speaker 05:
have to re-up under order 2023 and say, yeah, we're still on non-jurisdictional and still have to say we're on board or they already signed their agreement.

[02:24:52] Speaker 05:
I just didn't know if you've gotten a bunch of these reciprocity agreements in.

[02:24:57] Speaker 00:
No, I don't think they need to re-up.

[02:24:59] Speaker 00:
They would need to affirmatively come back to the commission and say they no longer wish to be reciprocal.

[02:25:06] Speaker 05:
Has that happened post order 2023 that you're aware of?

[02:25:09] Speaker 00:
I am not aware of that happening since order 888 back in 1996, our original open access transmission rulemaking.

[02:25:20] Speaker 00:
And I'm glad we have segwayed to that point because what the commission is doing here is really

[02:25:28] Speaker 00:
Nothing particularly different than the rulemakings that it undertook back in 1996 with respect to our open access, non-discriminatory transmission, rulemaking that was affirmed by this court in transmission access policy study group and ultimately affirmed by the Supreme Court.

[02:25:48] Speaker 00:
This is really no different than our original interconnection rulemaking order 2003, which was affirmed by this court in the 2007 National Association case.

[02:26:01] Speaker 00:
This is really a little different than the order 1000 transmission planning and cost allocation rulemaking that was affirmed by this court in the South Carolina Public Service Authority case.

[02:26:16] Speaker 00:
Fundamentally

[02:26:19] Speaker 00:
And Judge Shiles, in particular, you were asking questions about the statutory and constitutional underpinnings of our actions here.

[02:26:30] Speaker 00:
Lest we forget, the Commission has already acted generically.

[02:26:34] Speaker 00:
If anything, this is an easier case than those other rulemaking proceedings.

[02:26:39] Speaker 00:
But statutorily, under Section 206 of the Federal Power Act, what those cases instruct

[02:26:47] Speaker 00:
is that if the commission finds a systemic nationwide problem, the commission can act generically.

[02:26:59] Speaker 00:
Now, some transmission providers have made some filings with the commission offering incremental benefits and the commission is

[02:27:11] Speaker 00:
appreciative of that.

[02:27:13] Speaker 00:
But of course, no transmission provider has offered the entire bundle of reforms that the agency believes is appropriate.

[02:27:25] Speaker 00:
And what this court has said in those cases is the mere fact that there might be pockets or islands

[02:27:36] Speaker 00:
of compliance does not mean that the agency was not able to act generically.

[02:27:43] Speaker 00:
And here we have the quintessential

[02:27:47] Speaker 00:
circumstances for an agency to act generically, one we already have.

[02:27:52] Speaker 00:
We have found that the old generic proceedings no longer work.

[02:27:57] Speaker 00:
We do have empirical evidence.

[02:28:00] Speaker 00:
In particular, we asked the transmission providers to give us data about their processing of the studies.

[02:28:11] Speaker 00:
And we found that despite best efforts,

[02:28:14] Speaker 00:
This still remains a problem.

[02:28:18] Speaker 00:
Indeed, the commission called it a dire problem of noncompliance uniformly across the country, including areas in which cluster study approaches have been in place for a number of years.

[02:28:37] Speaker 00:
The commission attached a very useful appendix B to its

[02:28:45] Speaker 00:
Order 2023, that is found at page 2587.

[02:28:49] Speaker 00:
The commission also explained in considerable detail, provided all of the metrics of delay.

[02:28:58] Speaker 00:
We believe that this is a much more serious issue than the transmission providers let on.

[02:29:04] Speaker 07:
Yes, Your Honor.

[02:29:04] Speaker 07:
On the topic of whether the late fees are a civil penalty or not,

[02:29:12] Speaker 07:
They, transmission providers, argue that the fees serve a purpose of deterrence.

[02:29:22] Speaker 07:
And your brief argues that they serve a purpose of an incentive.

[02:29:28] Speaker 07:
And I don't understand the difference.

[02:29:36] Speaker 00:
We believe the commission has offered a performance incentive

[02:29:42] Speaker 07:
But that sounds like a deterrent against underperforming.

[02:29:48] Speaker 00:
Well, transmission providers are claiming that we're engaging in Orwellian distinctions.

[02:29:52] Speaker 00:
The key distinction is the compensatory versus punitive description.

[02:30:00] Speaker 00:
That is the takeaway of the co-kesh

[02:30:04] Speaker 00:
case and we believe that your hypothetical to transmission providers is very apt here if the commission had said simply return all of the under recovery or the losses

[02:30:21] Speaker 00:
that the interconnection customers have incurred, that would be a classic compensatory remedy.

[02:30:31] Speaker 00:
This is nothing at all like the Kokesh case.

[02:30:34] Speaker 07:
Do you agree with them that that hypothetical would involve much smaller fees than the schedule of fees here?

[02:30:49] Speaker 00:
not necessarily, it depends upon the

[02:30:53] Speaker 00:
degree of the losses of the interconnection customer, depends how you define that.

[02:31:00] Speaker 00:
I should point out, and I think this was much of the discussion topside, that there are considerable outlays that interconnection customers are providing.

[02:31:12] Speaker 00:
Again, it's not just simply the initial study deposit, they have to secure

[02:31:19] Speaker 00:
financing, they have to demonstrate site control and commercial readiness, which might entail additional deposits.

[02:31:28] Speaker 00:
But fundamentally, then the reason why this is compensatory, not punitive.

[02:31:34] Speaker 00:
is that the transmission providers are paying good money for a timely study of impacts.

[02:31:43] Speaker 07:
You mean the interconnection customers are paying?

[02:31:45] Speaker 00:
Yes, the interconnection customers are paying for a timely study.

[02:31:49] Speaker 00:
Thank you, your honor.

[02:31:50] Speaker 00:
To the extent the transmission providers are providing an untimely study of system impacts,

[02:32:00] Speaker 00:
They are providing lesser value to the interconnection customer.

[02:32:07] Speaker 07:
Can I ask you about the, this is a bit in the weeds, but the NISO issue for 205 filings where the stakeholder could prevent a filing.

[02:32:18] Speaker 07:
What's your response to that?

[02:32:20] Speaker 00:
We don't believe that's going to be a problem and we believe that the customers will be motivated to provide whatever supermajority vote that one particular system operator needs under that one particular tariff provision.

[02:32:35] Speaker 07:
Because?

[02:32:37] Speaker 00:
Because I think everybody agrees in the value of a timely, transparent

[02:32:46] Speaker 00:
process.

[02:32:47] Speaker 00:
The transmission providers will have ample opportunity to make money once generators come online and become interconnected.

[02:32:55] Speaker 07:
Lots of people like nice things but don't want to pay for them.

[02:33:03] Speaker 00:
That of course is correct.

[02:33:05] Speaker 00:
If for some reason the 205 vehicle is unavailable to this particular transmission provider, we believe that there is another mechanism, section 206, the transmission provider can come in and essentially file a complaint against this particular provision that perhaps doesn't allow them to make the contemplated

[02:33:29] Speaker 00:
filing.

[02:33:30] Speaker 07:
They wouldn't need the stakeholders permission to file the 206.

[02:33:35] Speaker 00:
I don't think so, or certainly not the super majority permission.

[02:33:39] Speaker 00:
And this has come up on occasion, not in this circumstance, but there have been other rate filings where the system operator files under section 206 instead of section 205.

[02:33:53] Speaker 07:
Can I ask you about the network system versus energy system for affected systems?

[02:33:58] Speaker 07:
That's a lot of systems, if I got it right.

[02:34:02] Speaker 07:
I'm trying to remember exactly what Mr. Lin said, but I think he said, look, maybe the status quo pre-2023 order was not terrific.

[02:34:16] Speaker 07:
But instead of kind of replacing one bad system with another bad system, there was a middle ground.

[02:34:24] Speaker 07:
And he described it, I think, as where

[02:34:27] Speaker 07:
the interconnection customer has asked for network service, then the study should be allowed to test for network service or firm service.

[02:34:44] Speaker 07:
Why isn't that correct?

[02:34:46] Speaker 00:
Well, that is a possibility, but I do want to take a step back here.

[02:34:50] Speaker 00:
Previously, under our old rules, there was nothing

[02:34:56] Speaker 00:
as to affected systems.

[02:34:59] Speaker 00:
The commission in the new rulemaking added an entirely new Article 9 dealing with affected systems.

[02:35:09] Speaker 00:
As part of those new rules, the commission necessarily had to address the modeling of impacts on system B when there is a request to interconnect with system A. All the commission did here was to articulate, at least in the first instance, where there hadn't been any guiding rule, our preference for the lower cost

[02:35:37] Speaker 00:
energy modeling system as opposed to the network modeling system.

[02:35:42] Speaker 07:
The commission offered a number of justifications and I refer this court to... I think I'm familiar enough with the good reasons for this reform.

[02:35:56] Speaker 07:
But you said a minute ago, I think you said something like maybe they could when I was describing Mr. Lin's proposal.

[02:36:05] Speaker 07:
So are you saying that if an effective system were to do that, you know, after this order goes into effect, that that might be allowed?

[02:36:18] Speaker 00:
That might be allowed.

[02:36:19] Speaker 07:
I thought that the 2023 order said you have to do an energy system study.

[02:36:28] Speaker 00:
The commission will be receptive to whatever individualized arguments are presented to us.

[02:36:35] Speaker 00:
The new rule is the baseline default rule.

[02:36:40] Speaker 00:
To the extent any transmission provider believes that the default rules do not accurately capture

[02:36:50] Speaker 00:
the reality of circumstances within that region, the commission will be receptive to those.

[02:36:58] Speaker 07:
I think that's probably music to the ears of the transmission providers.

[02:37:06] Speaker 07:
But I can imagine Mr. Lin when he gets back up here saying that what you just said is not what the order says.

[02:37:15] Speaker 00:
Well, there's I've heard much skepticism from transmission providers about the processes that the commission has provided with respect to the energy versus network system.

[02:37:29] Speaker 00:
The argument that we received, I think from only one system operator that was Southwest Power Pool was that this is problematic because of the

[02:37:40] Speaker 00:
mismatch between the neighboring mid-continent system operator and southwest power pool.

[02:37:48] Speaker 00:
And we address those arguments 3814 to 3820.

[02:37:53] Speaker 00:
But if there's anything that we have missed or there are any new circumstances or any arguments that reflect the

[02:38:05] Speaker 00:
borderline between other system orders.

[02:38:07] Speaker 07:
So you're just saying maybe this would be, maybe this sort of third way would be okay if it's put in a 205 filing and approved by FERC.

[02:38:16] Speaker 07:
Is that?

[02:38:17] Speaker 00:
Yes, Your Honor.

[02:38:18] Speaker 00:
Utilities always have the right to make Section 205 filings.

[02:38:22] Speaker 07:
And it would not, it's not obvious, you're saying it's not obvious that FERC would deny that on the grounds that it is in conflict with Order 2023.

[02:38:30] Speaker 07:
That's what you're saying.

[02:38:31] Speaker 00:
It is not obvious.

[02:38:32] Speaker 00:
The commission has made a preliminary finding.

[02:38:35] Speaker 00:
It prefers the energy approach.

[02:38:39] Speaker 00:
I think there was a reference to the Tanaska case.

[02:38:42] Speaker 00:
Using the network approach can be prohibitively expensive and not provide a commensurate

[02:38:50] Speaker 00:
benefit to the interconnecting customer.

[02:38:53] Speaker 00:
The commission made reference to Mid-Continent, which uses the energy system, and found that there haven't been any documented reliability concerns.

[02:39:04] Speaker 00:
But if there's something more we need to know, we'll hear it.

[02:39:08] Speaker 00:
Which leads me to the due process that we have.

[02:39:15] Speaker 05:
I want to hear about the process issues, but I want to understand something about how these studies work now that you have a cluster system.

[02:39:26] Speaker 05:
So the question posed is if one company wants network service on the effective system, then they can do a network system modeling.

[02:39:44] Speaker 05:
But I had thought, and that is maybe completely wrong here, that the whole point of cluster studies is that you have people grouped together, whatever criteria.

[02:39:57] Speaker 05:
So would you allow, can they, let's say there's one company in a cluster that wants network service and everyone else is good with energy service.

[02:40:07] Speaker 05:
Would the study, because they say, hey, I want network service, would the study then be done

[02:40:14] Speaker 05:
on using network service modeling, which is going to make both the study and the ultimate costs super more expensive for everybody in the cluster?

[02:40:24] Speaker 05:
Or are, despite the clustering, am I wrong?

[02:40:27] Speaker 05:
Is everyone getting individualized studies?

[02:40:30] Speaker 05:
I just don't understand how this, I want network, nobody else does.

[02:40:33] Speaker 05:
And so that's going to drive this study?

[02:40:36] Speaker 00:
Well, the answer is yes and no.

[02:40:37] Speaker 00:
For purposes of the initial cluster,

[02:40:43] Speaker 00:
The degree of deliverability or the preference for network versus energy, I believe, doesn't matter.

[02:40:49] Speaker 00:
What matters to the annual cluster process is that you demonstrate all of the prerequisites.

[02:40:59] Speaker 00:
And the prerequisites are that you have demonstrated site control and demonstrated commercial readiness.

[02:41:07] Speaker 00:
But what this means is within the cluster,

[02:41:10] Speaker 00:
there are interconnection requests at various points of interconnection.

[02:41:18] Speaker 00:
The cluster is more a timing cluster as opposed to a geographic proximity cluster.

[02:41:23] Speaker 05:
The cluster study I had thought was by the transmission providers, but it sounds like instead you're telling me the cluster study is a study of the interconnection customers?

[02:41:34] Speaker 00:
the transmission providers provide the cluster study of the interconnection customers and their particular points of interconnection.

[02:41:49] Speaker 05:
And the facility study stage, is it all individualized then?

[02:41:51] Speaker 05:
I want firm service.

[02:41:53] Speaker 05:
Those are all individual.

[02:41:54] Speaker 00:
Yes, facilities is individualized because you're focusing on

[02:42:00] Speaker 00:
the individual facilities of the individual customer.

[02:42:05] Speaker 00:
But the cluster study, cluster restudy, and the affected system study, they are all clustered.

[02:42:15] Speaker 05:
And then was there a proposal in the rulemaking from Southwest Pool or whoever it was, anybody, that in fact what the rule should be

[02:42:28] Speaker 05:
What your default rules should be, if you request energy service, that's how the modeling will be done.

[02:42:35] Speaker 05:
If you request network, that's how it will be done.

[02:42:38] Speaker 00:
I believe that was the request of Southwest Power Pool.

[02:42:44] Speaker 05:
And why isn't the emphasis now an individualized study?

[02:42:47] Speaker 05:
Why isn't the answer to that, obviously?

[02:42:48] Speaker 05:
Yes, it seems crazy to have someone do an energy service study when that's not going to be the service that's provided.

[02:42:55] Speaker 00:
Because the commission was focusing on the perceived benefits of the energy study and focused on the potential mismatch that the interconnection customer will be paying for a firm.

[02:43:11] Speaker 05:
But there won't be a mismatch if you adopt a rule that says, tell them what you want, and that's how it'll be modeled.

[02:43:16] Speaker 05:
If you want a network, that's what we model, and you

[02:43:20] Speaker 05:
Will we pay in for that study?

[02:43:22] Speaker 05:
And you will have to stick with that service.

[02:43:24] Speaker 05:
And if you want, there's no mismatch then.

[02:43:27] Speaker 05:
I mean, it seems like there was one mismatch and now it's replaced with another mismatch.

[02:43:31] Speaker 00:
Well, we're starting with a uniform approach.

[02:43:33] Speaker 00:
Again, there wasn't anything before in the rules and the tariff as to affected system studies.

[02:43:42] Speaker 00:
We now have a big new article, Article 9,

[02:43:46] Speaker 05:
I understand all that.

[02:43:46] Speaker 05:
That's now the starting point.

[02:43:48] Speaker 05:
I understand that's your starting point.

[02:43:50] Speaker 05:
So now there's something where there was nothing.

[02:43:53] Speaker 05:
But your answer to one mismatch was to impose another?

[02:43:56] Speaker 00:
Well, we'll see what the transmission providers offer, if anything, to the commission.

[02:44:04] Speaker 00:
Right now, there is no mismatch.

[02:44:07] Speaker 05:
It is possible that a file- They offered to the commission, why don't you make it a match-match instead of a mismatch?

[02:44:14] Speaker 05:
They offered that to the commission.

[02:44:15] Speaker 05:
I don't know why they wouldn't apply to everybody.

[02:44:17] Speaker 05:
I get that Southwest has its own sort of unique design, but why wouldn't?

[02:44:22] Speaker 00:
Well, this is why we start with a generic rule and then we provide for compliance filings and we provide for individualized Section 205 filings.

[02:44:32] Speaker 00:
These are the defaults.

[02:44:35] Speaker 00:
This is the basic package

[02:44:38] Speaker 00:
of reforms that the commission believes are appropriate.

[02:44:41] Speaker 00:
But we're very sensitive to the regional and individualized concerns of particular transmission providers.

[02:44:50] Speaker 00:
This is especially true with respect to system operators, Mr. Lin's focus.

[02:44:58] Speaker 00:
And we note that the system operators are similarly situated to the extent that they conduct the study and they have

[02:45:09] Speaker 00:
dominion over the system that they administer, but they're also differently situated.

[02:45:15] Speaker 00:
The commission recognized that cost recovery is a little bit different for system operators.

[02:45:22] Speaker 00:
So they're able to make compliance filings, they're able to make section 205 filings on either a default or case specific basis.

[02:45:31] Speaker 00:
Judge Millett, you asked questions about why they haven't done so sooner.

[02:45:35] Speaker 00:
There is nothing stopping them from filing sooner.

[02:45:39] Speaker 00:
Now, perhaps they want to wait until their compliance filings are accepted.

[02:45:45] Speaker 00:
Perhaps they want to wait until a year or two of this three-year transitional process has elapsed.

[02:45:57] Speaker 00:
but they have the ability to make filings.

[02:46:01] Speaker 00:
There's nothing particularly new here.

[02:46:04] Speaker 00:
The commission in its rulemaking made reference to earlier rulemakings, in particular its order 890, transmission service rulemaking, and its order 672, NERC reliability violation rulemakings.

[02:46:23] Speaker 00:
In those cases,

[02:46:25] Speaker 00:
We similarly insisted that the system operators be subject to these penalty schemes, but we offered this mechanism the ability to file something else.

[02:46:39] Speaker 07:
So if a system operator makes a 205 filing that

[02:46:48] Speaker 07:
changes a mismatch into a match match that 205 filing would be approved by FERC.

[02:46:57] Speaker 00:
I think the commission would look favorably upon that because much of the concern is the mismatch as opposed to the match match.

[02:47:06] Speaker 05:
I think it's just called a match but that's my fault.

[02:47:10] Speaker 00:
I could have just said match.

[02:47:12] Speaker 05:
But so is the default rule there because

[02:47:20] Speaker 05:
That's commonly what people want is energy service analysis or just so that makes things go faster.

[02:47:26] Speaker 05:
Or, you know, if the only one that's going to want this network services Southwest, that's one thing, but if it's.

[02:47:37] Speaker 05:
And some of the rules, the explanation regarding it, it sounded like it was sort of a sui generis concern for Southwest, but I just don't know.

[02:47:45] Speaker 05:
I would maybe, it sounds like this is more a question of what the interconnection customer wants.

[02:47:51] Speaker 00:
And if interconnection customers commonly want network rather than... I don't know what interconnection customers want, but I do think this is a sui generis issue concerning the Southwest power pool.

[02:48:07] Speaker 05:
Listen, the commission described it, but I guess I'm just surprised that what do I know about this?

[02:48:11] Speaker 05:
I would have thought there'd be a variety of interests in different levels of service.

[02:48:16] Speaker 00:
What do you know?

[02:48:19] Speaker 00:
What do I know?

[02:48:20] Speaker 00:
Among all of the issues presented, this is the most technically challenging, the one that is

[02:48:28] Speaker 00:
most electrical engineering in nature.

[02:48:32] Speaker 00:
What is more legal and less electrical engineering is the good cause appeal process.

[02:48:41] Speaker 00:
Now, transmission providers are suspect, but there is a process already in place.

[02:48:48] Speaker 00:
The commission didn't have to spill more ink on the process.

[02:48:52] Speaker 00:
We already do have a process

[02:48:55] Speaker 00:
at 18 CFR 385.101.

[02:48:58] Speaker 00:
This is our standard rules of practice and procedure.

[02:49:03] Speaker 00:
The commission actually was quite detailed.

[02:49:08] Speaker 05:
The court, the agency- What will govern penalty appeals?

[02:49:11] Speaker 00:
Which will govern a penalty appeal.

[02:49:14] Speaker 05:
The commission said- Why did the commission say that?

[02:49:16] Speaker 05:
It's nice to hear it from you.

[02:49:18] Speaker 05:
Why did the commission say that when these people came in saying, how's it going to work?

[02:49:21] Speaker 00:
There you go.

[02:49:23] Speaker 00:
Well, that's why I'm explaining this now and hoping to alleviate some of the transmission providers concerns.

[02:49:31] Speaker 00:
We did note that there would be a filing.

[02:49:34] Speaker 00:
We did note that there would be an order.

[02:49:37] Speaker 00:
We noted that that order is subject to agency rehearing, that that order is subject to judicial review.

[02:49:45] Speaker 00:
Such an order has to be an on the record

[02:49:48] Speaker 00:
adjudication that fully explains itself, just like any filing or any proceeding under our general rules of practice and procedure.

[02:50:02] Speaker 00:
And we think this is what

[02:50:03] Speaker 00:
the transmission providers want.

[02:50:07] Speaker 00:
They claim that we've kicked the can down the road.

[02:50:11] Speaker 00:
We have not.

[02:50:12] Speaker 00:
We have been responsive to their concerns for some type of process that allows for them to argue individualized circumstances and regional differences

[02:50:28] Speaker 00:
We have not acted in an unduly discriminatory manner.

[02:50:33] Speaker 00:
We have not acted in a confiscatory manner.

[02:50:37] Speaker 00:
Constitutionally, the transmission providers still have full opportunity to recover their costs.

[02:50:47] Speaker 00:
Indeed, this court in the 2007 National Association case approving the earlier rulemaking said that it was indisputable

[02:50:56] Speaker 00:
that the commission has the ability to disallow imprudent or unreasonably incurred costs.

[02:51:04] Speaker 00:
We don't think this is going to be much of a problem.

[02:51:07] Speaker 00:
We believe that the deadlines are reasonably attainable.

[02:51:11] Speaker 00:
We're not aware of any real problems with respect to those

[02:51:19] Speaker 00:
penalty schemes or cluster approaches or whatever that have already been put in place, but in the off chance that there is such a problem, the processes are in place.

[02:51:31] Speaker 07:
You respond to this in your brief a little bit already, but the transmission petitioners say you approved PJM's new system on like Monday, and then on Tuesday, you said it's not just and reasonable.

[02:51:49] Speaker 00:
Monday and Tuesday are relative.

[02:51:54] Speaker 00:
As a practical matter, the approach that we approved in 2022 will be in effect for a number of years to the benefit of PJM customers.

[02:52:08] Speaker 00:
We also acknowledged in the 2022

[02:52:13] Speaker 00:
order the pendency of this generic rulemaking and we said we would consider the broader issue of reasonable efforts and timetables and penalties in that generic proceeding and we wouldn't make any further changes at this time.

[02:52:35] Speaker 00:
So PJM and all of the transmission providers have been provided ample notice that the commission very well could adopt precisely the scheme that it adopted in these orders.

[02:52:55] Speaker 05:
Any other questions?

[02:52:56] Speaker 05:
All right.

[02:52:57] Speaker 05:
Thank you very much.

[02:52:57] Speaker 05:
Thank you.

[02:52:58] Speaker 05:
Now from the respondent interveners, Mr. Tom.

[02:53:18] Speaker 02:
Good morning, Your Honors.

[02:53:19] Speaker 02:
Afternoon.

[02:53:21] Speaker 02:
Alexander Tom on behalf of respondent intervenors.

[02:53:24] Speaker 02:
May it please the court, I'd like to focus my time today just to clarify a few points.

[02:53:29] Speaker 02:
First, a couple of factual issues that I think go to the reasonableness and fairness of the system, and then a couple of quick legal points.

[02:53:36] Speaker 02:
So first, two parts of the who pays question that I think have been

[02:53:42] Speaker 02:
discussed today, but maybe not entirely clear.

[02:53:45] Speaker 02:
So I want to reiterate, as FERC's council said, that interconnection customers are the ones who pay for the costs of studies.

[02:53:53] Speaker 02:
And so FERC acknowledged that its requirements might require transmission providers to make additional investments to dedicate more personnel to invest in computing.

[02:54:04] Speaker 02:
And it said both in 2023 at JA 2085 and at JA

[02:54:10] Speaker 02:
3645 and Order 2023A, that those additional costs can be recovered from interconnection customers.

[02:54:18] Speaker 02:
And it also said to their point that they may not be able to find additional personnel, that that is an extenuating circumstance that they can raise in an appeals process.

[02:54:27] Speaker 02:
And then on the question of who pays for penalties, the reason that interconnection customers don't pay penalties if they cause a delay, FERC addressed that as well.

[02:54:36] Speaker 02:
So at JA 3780, this is paragraph 458, it explained that if an interconnection customer causes a delay, for example, by missing some internal deadline, it can be deemed withdrawn.

[02:54:47] Speaker 02:
The transmission provider has that power.

[02:54:49] Speaker 02:
So it will be kicked out of the queue.

[02:54:51] Speaker 02:
It will pay a withdrawal penalty and it will not be eligible to receive any of the redistributed late fees.

[02:54:58] Speaker 02:
And then it also said that if for some reason the customer is still in the queue, it could then, for instance, if there were multiple causes, the customer contributed some amount to the delay.

[02:55:11] Speaker 02:
it could reduce the penalty by that amount.

[02:55:14] Speaker 02:
And so again, that's the flexibility that FERC reasonably reserved to address different circumstances that could arise in the appeals process.

[02:55:25] Speaker 02:
Turning to just a couple of quick legal points to the question about FERC's timeline to act on 205 filings, it has a tight timeline to act.

[02:55:34] Speaker 02:
So if a system operator files a default cost recovery proposal under section 205, FERC has 60 days to act or it takes effect by operational law.

[02:55:45] Speaker 02:
So just wanted to... 60 days?

[02:55:46] Speaker 02:
Yes, that's in the statute.

[02:55:50] Speaker 02:
And then I also just wanted to briefly clarify the affected system study issue.

[02:55:56] Speaker 02:
So the question is, there's a difference between the level of service that's being requested on the host system and the level of service that is being used to model effects on another system.

[02:56:09] Speaker 02:
And so FERC points out, and it's brief at page 116, that the mismatch is actually that

[02:56:15] Speaker 02:
If you're using a network modeling service on the affected system, you can be basing your analysis on services that the interconnection customer would not receive.

[02:56:28] Speaker 02:
And that's also at JA 2261 in org 2023.

[02:56:36] Speaker 02:
And then finally, I just want to point to a couple of other examples regarding penalties that also operate without the section 316A provisions.

[02:56:48] Speaker 02:
So FERC referenced the traffic ticket penalties.

[02:56:51] Speaker 02:
So these are not traffic tickets that we get for driving too fast, but mechanisms that FERC has approved in system operator tariffs.

[02:57:00] Speaker 02:
And if someone violates a provision in a system operator tariff,

[02:57:04] Speaker 02:
They get a penalty, they can either pay the ticket or they can file a section 206 complaint with the commission, get an appeal in which the commission considers all relevant circumstances.

[02:57:15] Speaker 02:
And that's not, again, subject to the provisions that they say apply here.

[02:57:19] Speaker 02:
That's also true for the order 890 penalties where the commission required transmission providers who do those studies late to file a notification filing that serves similar purpose as the appeal.

[02:57:32] Speaker 02:
And then it's also true in the PJM capacity market penalties, which council referenced, for example, in Winter Storm Elliott.

[02:57:40] Speaker 02:
Those are not assessed through the specific procedures that have been referenced.

[02:57:51] Speaker 07:
Tom, can you talk a little bit about why Earth justice has standing?

[02:57:56] Speaker 02:
Yes, sir.

[02:57:57] Speaker 02:
So to clarify, I work for justice with my clients are not for research, defense council and Sierra club.

[02:58:04] Speaker 07:
Okay.

[02:58:04] Speaker 07:
But I do appreciate it.

[02:58:06] Speaker 07:
I wasn't used, but just want to make sure that's clear on the record.

[02:58:08] Speaker 07:
And what was an in our DC have standing?

[02:58:12] Speaker 02:
Yes.

[02:58:13] Speaker 02:
So,

[02:58:16] Speaker 02:
We have standing as defensive interveners because our members will be exposed to increased rates if the rule is struck down.

[02:58:24] Speaker 02:
I'm sorry.

[02:58:26] Speaker 02:
Our members and our NRECs and Sierra Club members are rate payers across the country.

[02:58:33] Speaker 02:
For example, we provided declarations with our

[02:58:36] Speaker 02:
motion to intervene of rate payers in PJM, in the MISO territory, the organizations themselves pay for electricity in the offices.

[02:58:45] Speaker 02:
I think there's an ample record here, Burke's findings about the increased costs of delay, the fact that it's stifling competition.

[02:58:55] Speaker 07:
I thought that for associational standing, the injury had to be somehow connected to the purpose of the association.

[02:59:02] Speaker 07:
I don't think NRDC's purpose is to pay electric bills.

[02:59:06] Speaker 02:
Well, so...

[02:59:09] Speaker 02:
Insofar as NRDC is paying its own electric bills, that's a direct injury to the organization.

[02:59:16] Speaker 02:
NRDC's purposes are to promote clean, affordable, reliable energy.

[02:59:22] Speaker 02:
And so the affordability component, and then I think as has been noted here and also in the record, the fact is that many of the resources that are in the queue that have been severely delayed in connecting are wind, solar, and storage.

[02:59:41] Speaker 02:
resources that fit within our purposes.

[02:59:43] Speaker 04:
Well, I would just add on that standing issue.

[02:59:46] Speaker 04:
Your standing argument is not in your opening brief.

[02:59:48] Speaker 04:
It's in your motion to intervene, which was only granted for a lead to intervene.

[02:59:52] Speaker 04:
Is that correct?

[02:59:54] Speaker 02:
Yes, Your Honor.

[02:59:54] Speaker 02:
So we are here as respondent interveners.

[02:59:58] Speaker 02:
We moved to intervene, which the court granted, and with our motion to intervene, we both provided argument on why we meet the test for intervention and also why we meet Article 3 standing, which this court's precedent still requires.

[03:00:14] Speaker 05:
You said that if FERC doesn't meet the 60-day deadline for acting on a 205 petition, the petition just automatically takes effect.

[03:00:25] Speaker 05:
What are you citing for that?

[03:00:27] Speaker 02:
So that's in the statute itself and then it's not in the briefs.

[03:00:31] Speaker 02:
Your Honor, this is section 205D and the way that it's been interpreted.

[03:00:36] Speaker 02:
205D is in DOG?

[03:00:39] Speaker 02:
So 205D requires 60 days notice before a rate can take effect.

[03:00:44] Speaker 02:
There have previously been issues where FERC has been deadlocked and unable to act within 60 days.

[03:00:50] Speaker 02:
There were some reviewability issues there, and then Congress added a provision, Section 205G, that provides if the commission is deadlocked, it's considered.

[03:01:01] Speaker 05:
Well, since then, they're not deadlocked.

[03:01:04] Speaker 05:
They just haven't acted in 60 days.

[03:01:06] Speaker 02:
That's an example of if they're deadlocked, and that deals with reviewability, but that is how 205D has been interpreted.

[03:01:13] Speaker 05:
So 205D says it takes effect after 60 days, even if the commission is not deadlocked, it's not like in a quorum, there's not too many vacancies, whatever, if they just haven't gotten around to it.

[03:01:28] Speaker 02:
Yeah, the rate is on file and then and I'm sure first council could speak to that as well that they work pretty hard to meet that 60 days in every case as much as they can.

[03:01:41] Speaker 04:
And you mentioned earlier lower electric bills, but is that not a generalized entry for everybody?

[03:01:47] Speaker 02:
Your Honor, so that's I think a different, there's a difference between a generalized and abstract injury and so that's FEC, the Akins, this is a 1998 Supreme Court case.

[03:01:57] Speaker 02:
The difference between a generalized abstract injury and an injury that is widely shared but concrete for the individual.

[03:02:04] Speaker 02:
And so these are concrete, particularized individuals for members who pay higher rates on their rate bill.

[03:02:12] Speaker 02:
See, I'm beyond time.

[03:02:13] Speaker 02:
If I could make one.

[03:02:15] Speaker 05:
If you had one more, were you about to say you had one more point?

[03:02:17] Speaker 02:
One quick point.

[03:02:18] Speaker 02:
Yes.

[03:02:18] Speaker 02:
Just on the takings issue and this idea that you cannot, you have to be able to recover your actual costs.

[03:02:24] Speaker 02:
I would direct the court to the Supreme Court's Duquesne Light decision, which involves denial of cost recovery for millions of dollars in a canceled plan.

[03:02:35] Speaker 05:
Thank you.

[03:02:35] Speaker 05:
Thank you, Your Honor.

[03:02:39] Speaker 05:
Mr. Sheppard, I think you said you wanted two minutes for rebuttal, and we'll round you up to three.

[03:02:44] Speaker 05:
How about that?

[03:02:45] Speaker 08:
Thank you, Your Honor.

[03:02:47] Speaker 08:
I appreciate it, and your indulgence earlier.

[03:02:49] Speaker 08:
I really want to emphasize how much I appreciate how very seriously you all are taking this trying to get to the bottom of things.

[03:02:56] Speaker 08:
Excellent questions, and I think we're all going to get to a better place as a result of your review here.

[03:03:01] Speaker 08:
Several points, just to share, I'm trying to sort of focus them by...

[03:03:06] Speaker 08:
by functional area.

[03:03:08] Speaker 08:
First, I need to make a correction.

[03:03:10] Speaker 08:
As I remember, I was very uncomfortable when you were asking me about whether or not anyone had proposed alternatives to reasonable efforts.

[03:03:15] Speaker 08:
As soon as I sat down, I was deluged with notes reminding me that I had signed a brief that page 73 of which points out that Midwest ISO, the New York ISO, and PJM did, in fact, all propose alternatives.

[03:03:27] Speaker 08:
One of them is like regular client of mine, so that was a heck of a mess.

[03:03:31] Speaker 08:
There's a lot going on here.

[03:03:33] Speaker 08:
But Petitioner Brief 73 has the citations for those except the PGM one, because it is CEG and needed the words back.

[03:03:40] Speaker 08:
But yes, people did, in fact, in fact, ask.

[03:03:43] Speaker 05:
Do you happen to know what the proposal any of those proposals were?

[03:03:46] Speaker 05:
I don't have your memory too much about everything going on.

[03:03:49] Speaker 08:
They all had a theme, which was, can you just let us get here in a place that's not going to cause us to have to lose our actual costs?

[03:03:57] Speaker 08:
We think we have alternative paths, and Burke was not tempted.

[03:04:00] Speaker 08:
I don't think that any of them had any other particular similarities.

[03:04:04] Speaker 08:
So there we are.

[03:04:05] Speaker 08:
But it was important, and I really wanted to correct the record there.

[03:04:09] Speaker 08:
Thank you.

[03:04:09] Speaker 08:
I appreciate this theme that Bob was pushing about, the idea that someone paying for a timely study.

[03:04:16] Speaker 08:
It's a bit more important they're paying for an accurate study.

[03:04:18] Speaker 08:
Your honor was talking about there's been champagne and sparkling water.

[03:04:22] Speaker 08:
That's what's happening here.

[03:04:23] Speaker 08:
This is a high-end request for a very high-end service.

[03:04:26] Speaker 08:
This is not Domino's doing a pizza delivery thing where if they're 30 seconds late, you get one free.

[03:04:32] Speaker 08:
This is not a marketing ploy.

[03:04:34] Speaker 08:
We're trying to connect billions of dollars of infrastructure and trying to get the cost allocation.

[03:04:39] Speaker 08:
If we screw this up, lights go out.

[03:04:41] Speaker 08:
That's bad.

[03:04:42] Speaker 08:
People die.

[03:04:43] Speaker 08:
I'm not trying to be hyperbolic, I'm being very serious.

[03:04:47] Speaker 08:
Yes, everyone wants something on time.

[03:04:49] Speaker 08:
No one is saying that they are happy when things slow down.

[03:04:52] Speaker 08:
I tried to explain before, especially wires, TOs and RTOs have every incentive on earth to get these things done as quickly as possible.

[03:05:01] Speaker 05:
What's a wire to you?

[03:05:04] Speaker 08:
Wires only.

[03:05:05] Speaker 08:
Transmission owners.

[03:05:07] Speaker 08:
Sorry.

[03:05:07] Speaker 08:
When I get in a hurry, I'm going to use the jargon.

[03:05:11] Speaker 08:
So I'm talking about like the entire Exelon family, wires and distribution now.

[03:05:16] Speaker 08:
All of First Energy except the Peace in West Virginia, wires.

[03:05:19] Speaker 08:
PPL, wires.

[03:05:20] Speaker 08:
It's becoming a kind of dominant thing.

[03:05:22] Speaker 08:
proposed functional unbundling back in the 80s, now it's actually like physically unbundling.

[03:05:28] Speaker 08:
So we have things other than vertically integrated utilities now.

[03:05:33] Speaker 08:
On the question about whether or not this is punitive, last pass at this point, the penultimate paragraph in CoCash deals with the question of whether or not

[03:05:47] Speaker 08:
deals with the feature that I think most clearly makes the penalty, regardless of whether the money goes to the treasury or that goes back to someone else.

[03:05:54] Speaker 08:
That may be a compensation with them.

[03:05:56] Speaker 08:
Either way, it's a loss of money for us.

[03:05:57] Speaker 08:
But very importantly, and this is in the paragraph of co-cash, they address this question.

[03:06:02] Speaker 08:
As demonstrated by this case, SEC disgorgement sometimes is ordered without consideration of the defendant's expenses that reduce the amount of illegal profit.

[03:06:10] Speaker 08:
We actually quote this in our briefs.

[03:06:11] Speaker 08:
I just really want to bring it to your attention here.

[03:06:13] Speaker 08:
They then go on to cite the third restatement of restitution.

[03:06:17] Speaker 08:
And then, in such cases, disgorgement does not simply restore the status quo.

[03:06:21] Speaker 08:
It leaves the defendant worse off.

[03:06:23] Speaker 08:
And that's punishment.

[03:06:24] Speaker 08:
And that's what's happening to us.

[03:06:26] Speaker 08:
We provided them a study.

[03:06:28] Speaker 08:
We lost our investment in that study.

[03:06:30] Speaker 08:
We paid these people to perform the study, then had to pay these people what we paid these people.

[03:06:34] Speaker 08:
And so we are, in fact, worse off.

[03:06:35] Speaker 08:
So it is clearly for us, it is clearly punishment.

[03:06:39] Speaker 08:
And not just because we didn't earn something, but because we lost something.

[03:06:43] Speaker 08:
I really think that that makes this a very important difference that overshadows the possibility that under Kokesh that maybe it would go back to the person, maybe it would go back to the department, maybe it wouldn't go back to the department.

[03:06:57] Speaker 08:
I think it overwhelms that point entirely.

[03:06:59] Speaker 08:
Next, I'm very happy that Bob started talking about appendix B. I waved it around a little bit and I strongly encourage you.

[03:07:07] Speaker 05:
better to say you're your friend, Mr. Solomon.

[03:07:10] Speaker 05:
My very good friend, Mr. Solomon.

[03:07:11] Speaker 05:
You're very well on the panel for the record.

[03:07:13] Speaker 05:
Thank you, your honor.

[03:07:14] Speaker 05:
I appreciate it.

[03:07:16] Speaker 05:
It's my husband's name, too, and I'm like, what?

[03:07:19] Speaker 08:
Oh, yeah, that would be bad.

[03:07:21] Speaker 08:
So what this shows, what a PINIXB shows, because it breaks down how many times you have late break.

[03:07:30] Speaker 08:
This is JA2587.

[03:07:34] Speaker 08:
and on.

[03:07:35] Speaker 08:
This is where all of the numbers are listed for who was late how many times.

[03:07:41] Speaker 08:
So it persists through 2592.

[03:07:43] Speaker 08:
It consists of four tables.

[03:07:47] Speaker 08:
It's broken down by which RTO we're talking about, and then it breaks it down by which TO we're talking about.

[03:07:52] Speaker 08:
And so a point that I would like to dwell on more before, but I'm glad they just opened the door to come back to it, is please note that as we emphasize our briefs, 87% of the violations upon which FERC based this national order came from one RTO.

[03:08:07] Speaker 08:
Within that RTO,

[03:08:09] Speaker 08:
More than 80% of the queue takes place in two utilities that share southwestern Virginia.

[03:08:16] Speaker 08:
Please look at the trend lines on these, because the trend lines are basically good.

[03:08:20] Speaker 08:
KISO repeatedly down to zero at the end of the year.

[03:08:24] Speaker 08:
When we pointed this out to them, their answer about the fact that, would you have done this if 87% of the numbers were different?

[03:08:30] Speaker 08:
Because FERC left PJM in knowing darn well that it had just approved them to change.

[03:08:36] Speaker 08:
And then they took SPP out, and SPP had good numbers.

[03:08:39] Speaker 08:
So we were a little peeved that the evidence seemed to be manipulated to make the problem even worse.

[03:08:44] Speaker 08:
We're not saying the position's great, but to come back and say that if 87% of the evidence went away, that we'd be in the same spot, that's really hard to take.

[03:08:57] Speaker 08:
What this appendix shows is a wilder.

[03:08:59] Speaker 05:
I think you're familiar with the appendix.

[03:09:00] Speaker 05:
You referenced it many times.

[03:09:02] Speaker 05:
Yes, ma'am.

[03:09:02] Speaker 05:
We briefly talked about this.

[03:09:03] Speaker 05:
Yes, it did.

[03:09:04] Speaker 05:
It sure did.

[03:09:05] Speaker 05:
The PJM stuff.

[03:09:06] Speaker 05:
So are there no further questions from my colleagues?

[03:09:09] Speaker 05:
I'll give you one sentence.

[03:09:11] Speaker 05:
Don't inhale.

[03:09:13] Speaker 08:
There's no such thing.

[03:09:15] Speaker 08:
We cannot file a 206 to overturn a rule set forth in first order.

[03:09:21] Speaker 08:
As Mr. Tom said, that is simply not true.

[03:09:24] Speaker 08:
If we did, that is going to absolutely be thrown back as a collateral.

[03:09:29] Speaker 08:
There was a semicolon.

[03:09:30] Speaker 08:
Thank you.

[03:09:32] Speaker 05:
We'll also give you.

[03:09:34] Speaker 05:
3 minutes, but can you ask against the factual question?

[03:09:41] Speaker 05:
Go quickly to not of course here.

[03:09:43] Speaker 05:
It sounds to me like some operators can sometimes assign a particular transmission or maybe multiple transmission.

[03:09:50] Speaker 05:
Members to undertake.

[03:09:53] Speaker 05:
the studies themselves rather than the system operator doing it.

[03:09:58] Speaker 05:
How often is it the system operator is the one actually doing this study as opposed to assigning it out to maybe the most relevant transmission?

[03:10:06] Speaker 03:
I don't have a percentage for you, but I don't think it's like 2% versus 98%.

[03:10:13] Speaker 03:
I think it's, I mean, it's not in the rec, so they do talk about in the record how

[03:10:18] Speaker 03:
you know, in cases where the transmission provider member is directly responsible and any penalties incurred will go to that transmission provider.

[03:10:30] Speaker 03:
But there's nothing so far as I know that breaks down the percentage.

[03:10:34] Speaker 03:
I mean, I think our answer to that is look at

[03:10:37] Speaker 03:
that's good and well for when it happens, and it will reduce the situations.

[03:10:40] Speaker 05:
Well, I think it happens most of the time.

[03:10:42] Speaker 05:
But I think if this is a rare bird, that's a different way of trying to understand how to think about that.

[03:10:48] Speaker 03:
I think the answer is it's not something that's almost all of the time.

[03:10:53] Speaker 03:
I think everybody agrees that there's some mix.

[03:10:54] Speaker 05:
Is it almost never?

[03:10:55] Speaker 03:
Mix.

[03:10:58] Speaker 03:
I think the most I'm comfortable saying at this point is it's a mix.

[03:11:03] Speaker 03:
The one thing that I wanted to try to convey on Reply is there is sort of a theme that runs between the two arguments that I'm here addressing and it really boils down to is the availability of a 205 an infinite and run that gets that FERT can turn to and say there's a 205 available and therefore this problem that you're facing is not really a problem that needs to be addressed today.

[03:11:28] Speaker 03:
And I think the answer to that is

[03:11:31] Speaker 03:
Yes, it makes sense for individual circumstances.

[03:11:34] Speaker 03:
And my friend said that a lot of times there's always the opportunity.

[03:11:37] Speaker 03:
And as they acknowledge, a 205 is always available.

[03:11:40] Speaker 03:
So the answer can't be that they can always solve the problem that is raised to them by pointing to the 205.

[03:11:47] Speaker 03:
There have to be limits.

[03:11:49] Speaker 03:
And I think, at least for the two arguments that I'm raising, there are two relevant limits.

[03:11:54] Speaker 03:
As for the dissimilar situation of the system operators, again, I think the answer to that is that that is a question that goes to the heart of the statutory authority that they are exercising.

[03:12:06] Speaker 03:
And if I just really quick could point you to the Maryland People's Council case versus FERC 761F2nd 768.

[03:12:14] Speaker 03:
And what says is, while there may well be circumstances where a particular objection is more properly deferred to a later proceeding, that is assuredly not the case where the objection goes to the heart of the public interest determination immediately to be made.

[03:12:27] Speaker 03:
And our contention is that

[03:12:30] Speaker 03:
You know, explaining why the replacement rate, which is what they're doing here is not discriminatory is the heart of the determination that's being made as to the network service, energy service.

[03:12:43] Speaker 05:
I'm so sorry.

[03:12:44] Speaker 05:
I know you're really she make the second point, but replacement rate.

[03:12:48] Speaker 03:
Well, so what they do in the 206 context is they say, it's rate or practice, right?

[03:12:52] Speaker 03:
They say, what's happening now, I think, I use rate, right?

[03:12:56] Speaker 03:
What's happening now is that.

[03:12:56] Speaker 03:
And so we're going to do something in its place.

[03:12:58] Speaker 03:
That's what I mean by replacement rate.

[03:13:00] Speaker 03:
And so I think that that's the heart of the question that's immediately being decided.

[03:13:04] Speaker 03:
So 205 can't be a get out of jail free card for that.

[03:13:07] Speaker 03:
On the network service and energy service, again, they invoke 205 to answer that.

[03:13:12] Speaker 03:
And they say, well, you can come to us and you can say,

[03:13:15] Speaker 03:
how we really want to do network service when the interconnection customer asks for network service.

[03:13:20] Speaker 03:
I think, again, there's got to be a limit there.

[03:13:22] Speaker 03:
They're saying it's going to be looked on favorably, and we're very happy to hear that.

[03:13:28] Speaker 03:
But I think an example is, Your Honor, you referenced, again, the PJM compliance filing that they have ruled on.

[03:13:36] Speaker 03:
And they said there, we are rejecting your effort

[03:13:40] Speaker 03:
to continue the reasonable efforts standard, because that is a collateral attack on the order.

[03:13:46] Speaker 03:
I'm glad to hear my friends say that, first, I look favorably upon this, but 205s are not used to contradict the rulings that they've squarely made in the order itself.

[03:13:59] Speaker 05:
Can I?

[03:14:00] Speaker 03:
Yes, Your Honor.

[03:14:01] Speaker 05:
If someone asks, says to, because this is only as to effective systems,

[03:14:07] Speaker 05:
effective system, I would like network service, and put this rule aside, so a pre-rule system, I would like network service, and they go, great, we're gonna model network service, you're gonna pay for this study, and the study will tell you the costs of this super duper service.

[03:14:29] Speaker 05:
And that all happens, is the effective system then obligated to provide

[03:14:36] Speaker 05:
that network service that was studied?

[03:14:38] Speaker 05:
And tell me if the answer is different for jurisdictional and non-jurisdictional effective systems.

[03:14:44] Speaker 03:
The answer, I believe, is no.

[03:14:46] Speaker 03:
Because the question that the affected system is analyzing is not their providing network service to the interconnection customer.

[03:14:56] Speaker 03:
It's the effect on their system B

[03:14:59] Speaker 03:
of system A giving the interconnection customer network service.

[03:15:04] Speaker 03:
So what's happening here is the interconnection customer is going to system A and saying, hey, I want network service or energy service.

[03:15:11] Speaker 03:
And then system A says to system B, this could affect system B. And system B says, OK, I now need to do a study that figures out what the reliability impacts are going to be on my system from A providing the service that is requested.

[03:15:29] Speaker 03:
B is not, this is not.

[03:15:31] Speaker 07:
From A providing the service to the interconnect.

[03:15:33] Speaker 03:
Correct, correct.

[03:15:34] Speaker 03:
Yes, you are.

[03:15:34] Speaker 03:
And so if the interconnection customer wants energy service from A, then B will do an energy service study.

[03:15:43] Speaker 03:
If the interconnection customer wants network service from A, then B wants to do a network service level study because the impacts are going to be greater because these, you know, the wires are all connected, right?

[03:15:57] Speaker 03:
And so if

[03:15:58] Speaker 05:
I'm not sure why I get that, because the only point of network is almost like a prioritization thing.

[03:16:04] Speaker 05:
But some power is going to be coming through, whether it's paid for by the champagne people or paid for by the people on standby.

[03:16:12] Speaker 05:
They come in when there's nothing there.

[03:16:14] Speaker 05:
It's going to be the steady flow of power coming through to the affected system.

[03:16:20] Speaker 05:
And so now, because I thought your point was if someone says to the affected system, I want network.

[03:16:25] Speaker 05:
That's the only one that's required to do the energy service study.

[03:16:30] Speaker 05:
I want to do network service with you, then we should be able to analyze it that way.

[03:16:35] Speaker 05:
But now what you're telling me is if someone says, I want network service all the way through, obviously, I've already pulled up Frontier on the, what do you call it, the main line, the host?

[03:16:46] Speaker 05:
The host, that might work.

[03:16:50] Speaker 05:
And so you're going to give me the super expensive study and I'm going to go and that study is going to be for here's the cost of all these upgrades.

[03:16:56] Speaker 05:
I'm going to make so that I can wait.

[03:16:58] Speaker 05:
This is what it would cost.

[03:16:59] Speaker 05:
And you're not going to get it.

[03:17:01] Speaker 05:
So then we that's what the air out of here.

[03:17:03] Speaker 03:
No, no.

[03:17:04] Speaker 03:
So the difference is.

[03:17:06] Speaker 03:
If one system, again, let's call it A, is providing network service to an interconnection customer, that means it's firm service as opposed to interruptible service.

[03:17:19] Speaker 03:
That's going to have a greater impact on the neighboring systems because the transmission wires are connected and the electrons go where they go.

[03:17:27] Speaker 03:
So A is the one that's guaranteeing that there will always be transmission because it's firm as opposed to interruptible.

[03:17:34] Speaker 03:
But the concern is that when that kind of service is provided on system A, it's really, as I understand again, I'm neither a FERC nerd nor a physician or a physics major.

[03:17:45] Speaker 05:
Or a physician.

[03:17:46] Speaker 03:
Or a physician.

[03:17:47] Speaker 03:
Not even that.

[03:17:47] Speaker 03:
Or a physics major.

[03:17:48] Speaker 03:
But as I understand it, the issue is when you provide non-interruptible service in one area and they're all interconnected, the effect on the neighboring system is greater because the electrons are non-interruptible.

[03:18:02] Speaker 03:
And then they will flow where they flow.

[03:18:05] Speaker 03:
And they can flow into the neighboring systems.

[03:18:07] Speaker 03:
And again, maybe this is the better way to answer your question.

[03:18:10] Speaker 03:
There's no, FERC admits that when an affected system

[03:18:14] Speaker 03:
uses an energy service standard to test the impact of network service on system A, it will not catch as much.

[03:18:27] Speaker 03:
And so that's ultimately the issue here.

[03:18:29] Speaker 05:
It will not catch as much.

[03:18:31] Speaker 03:
In terms of the impacts, the reliability impacts.

[03:18:33] Speaker 05:
How much is the differential?

[03:18:36] Speaker 03:
I'm not I'm not able to quantify it.

[03:18:38] Speaker 03:
Yeah, I can't quantify the difference.

[03:18:40] Speaker 03:
But again, for degrees that that's true.

[03:18:43] Speaker 03:
And their answer to that is, I think, as I said before, you're going to have a second opportunity.

[03:18:48] Speaker 05:
If that turns out to be material impacts.

[03:18:51] Speaker 05:
But in fact, if it's not material impacts down here, because those folks are going to be riding network service, I guess lots of ions will be coming in.

[03:18:58] Speaker 05:
But if it's not going to be

[03:19:01] Speaker 05:
that much material impact, then there's, if we don't know how much the impact is, it's hard to know why this across the board rule.

[03:19:08] Speaker 03:
Well, I think, I'm sorry, I think the point is that it's enough that first answer is not these

[03:19:16] Speaker 03:
impacts are so small that it's not really a problem.

[03:19:19] Speaker 03:
The first answer is it's okay because the way these things work is there'll be a second opportunity for the effective system to catch sort of the additional impact problems.

[03:19:32] Speaker 05:
And as the brief explains... That seems to assume the answer that this isn't going to be an across the board crippling problem because why would they adopt such a silly regime?

[03:19:41] Speaker 05:
And so if they understood the complaints to be

[03:19:45] Speaker 05:
sometimes this can be a problem, or sometimes the impact, the differential will be so big, it's gonna be a problem, but not all the time.

[03:19:55] Speaker 05:
Then that's the type of thing you say, fine, if you can show us you've got an actual real problem here, come let us know.

[03:20:04] Speaker 05:
But as of now, we think we've got to balance a lot of interests here.

[03:20:08] Speaker 05:
And yeah, there's gonna be some difference, but it's not going to make that big a difference.

[03:20:14] Speaker 03:
It comes back to my response to you earlier, which is they acknowledge that it will be a problem in some cases.

[03:20:22] Speaker 03:
And the answer to that is going to be a 205.

[03:20:27] Speaker 03:
And the 205 is to ask for something that we have already said.

[03:20:31] Speaker 03:
you're not allowed to have.

[03:20:32] Speaker 03:
And that is ultimately our complaint, is that it's an illusory safety valve.

[03:20:36] Speaker 03:
205s can be useful safety valves in lots and lots of situations, but it's not appropriate for the system operators because the burden is on FERC to answer the question.

[03:20:46] Speaker 03:
It's not appropriate here because it's illusory.

[03:20:48] Speaker 03:
Because they're just going to tell us, as they did to PJM recently, your attempt to do what we said is unreasonable is a collateral attack.

[03:20:57] Speaker 05:
We want to just get rid of this entire regional effort saying the whole purpose of the rule

[03:21:01] Speaker 05:
was, but when they have said in the order itself, look, if this is a real problem for you, for an individual, we think this works on balance best for everyone across the board.

[03:21:13] Speaker 05:
But if you can show us that for you as an individual, we need to make some adjustment or tweaking, that's 205.

[03:21:20] Speaker 03:
And, Your Honor, let me make this very clear.

[03:21:22] Speaker 03:
If this court wants to write an opinion that notes that FERCS has said this and that they are going to take this seriously and that they can provide us with something that seems to be squarely at odds with what they've ordered, we will take that.

[03:21:38] Speaker 07:
Can I ask one question?

[03:21:38] Speaker 07:
I know we're well, you know, it's 1253, but do you want FERCS brief?

[03:21:46] Speaker 07:
Get it.

[03:21:49] Speaker 07:
They just wrote 1 sentence that I wanted to see if you agree with.

[03:21:54] Speaker 07:
You understand better than I do.

[03:21:56] Speaker 07:
Page 116.

[03:22:00] Speaker 07:
On this topic of network service, energy service.

[03:22:04] Speaker 07:
Okay, so it's the 2nd sentence of that 1st paragraph.

[03:22:10] Speaker 07:
More specifically, network service models often result in significant network upgrades on the affected system funded by the customer.

[03:22:18] Speaker 07:
But that customer does not receive the guarantee of top tier network transmission service in return.

[03:22:25] Speaker 07:
The affected system provider can block or reduce delivery of the customer's output.

[03:22:31] Speaker 07:
setting energy services, the default model prevents this incident.

[03:22:34] Speaker 07:
So does that affected system provider can block or reduce delivery of the customer's output?

[03:22:41] Speaker 03:
I think that what that's getting at is the same question that Judge Malat asked, which is, is the affected system providing the network service, the uninterruptible service, or is it

[03:22:54] Speaker 03:
providing interruptible service, essentially.

[03:22:57] Speaker 03:
And the answer to the question is the affected system is not provided, not required to provide the network service.

[03:23:07] Speaker 03:
The network service request is made by the interconnection customer of the host system, system A.

[03:23:13] Speaker 03:
But again, irrespective of whether system B is providing higher level servers or lower level servers, the issue is that the impact on system B is higher when system A provides networks.

[03:23:27] Speaker 07:
Can system B do anything that would prevent the interconnection customer from receiving network service from system A?

[03:23:37] Speaker 03:
No.

[03:23:41] Speaker 03:
Thank you, Your Honor.

[03:23:42] Speaker 05:
All right, that the case is submitted, but thanks to all counsel for helping us with it.

[03:23:48] Speaker 05:
Oh, I'm sorry.

[03:23:49] Speaker 05:
We're not back on.

[03:23:50] Speaker 05:
All right.

[03:23:51] Speaker 05:
I withdraw my thanks.

[03:23:53] Speaker 05:
No, I apologize.

[03:23:56] Speaker 01:
I promise I'll be quick.

[03:23:57] Speaker 01:
I know I'm standing between everyone here on lunch.

[03:23:59] Speaker 01:
On our bottle, I just would like to address two points.

[03:24:03] Speaker 01:
First, the fundamental assumption that we're discussing here, and then first, misreliance on the Pacific or tri-state and PSCO cases.

[03:24:10] Speaker 01:
So one, the fundamental issue here is actually when the interconnection customer will make the decision as to whether or not to withdraw.

[03:24:18] Speaker 01:
Not if it will withdraw, but when it makes that choice.

[03:24:21] Speaker 01:
If the project becomes economics, there's nothing that the penalties can do to change that.

[03:24:26] Speaker 01:
What the penalties do is just say, hey, we already know you're economic, but you also have to pay 10 or 20% more.

[03:24:34] Speaker 01:
So that is what is at issue here.

[03:24:36] Speaker 01:
You disagree with the point that

[03:24:39] Speaker 05:
Almost all affected systems are either jurisdictional or have these reciprocity agreements where they're going to comply with these deadlines.

[03:24:46] Speaker 05:
You're not going to be forced to find file your.

[03:24:51] Speaker 05:
Your agreement large generator agreement until if you wish until after you have the study.

[03:24:57] Speaker 05:
So this really is a.

[03:25:00] Speaker 05:
vanishingly small set of situations where you're going to have a problem, a delayed study by the effective system at all, let alone one that has such extraordinary dollar impact on it as to make this a huge problem, make it some sort of huge arbitrary and capricious problem for them to say, well, who's going to bear the cost of this?

[03:25:25] Speaker 01:
It doesn't matter what I believe.

[03:25:27] Speaker 01:
It's a matter of what FERC said in footnote nine, footnote nine of its brief, in which it says, it notes that affected system studies can come in late.

[03:25:35] Speaker 05:
Didn't, I'm not sure.

[03:25:38] Speaker 05:
I am asking not what you believe, but what you know.

[03:25:40] Speaker 05:
Is this a real problem?

[03:25:43] Speaker 05:
How often is, there's one example, okay, pre-rule.

[03:25:47] Speaker 05:
But if this is sort of, are we asking whether the freakish situation

[03:25:54] Speaker 05:
should wag the dog here, that's a different argument you've got to make than if this is a recurring and crippling problem in reality.

[03:26:06] Speaker 01:
I'll again point you to foot 09 of first brief where they point out that there is in fact a problem.

[03:26:12] Speaker 01:
So then

[03:26:13] Speaker 01:
Moving on from that, just quickly to address the misreliance on the non-RTO cases, Tri-State, Piesco, and Pacific War.

[03:26:20] Speaker 01:
As I just said, they're non-RTO cases and FERC relies on those for the 100% as the threshold for host system withdrawal.

[03:26:31] Speaker 05:
Does it matter whether they're non-RTO or an RTO for purposes of the withdrawal penalty?

[03:26:35] Speaker 01:
The scope of the problem.

[03:26:37] Speaker 01:
In the NOPA, at the end of the NOPA, there is a table attached to it.

[03:26:42] Speaker 05:
RTOs are all going to be jurisdictional and subject to the same protections I've already discussed with you.

[03:26:48] Speaker 01:
as are the non-RTOs, but what we're looking at is the scope of the harms that we're trying to protect against, and then what one of the RTOs saw themselves.

[03:26:58] Speaker 01:
So JA0335, there is the table of delays.

[03:27:02] Speaker 01:
It shows the RTOs are significantly more delayed and significantly more projects at that time.

[03:27:10] Speaker 01:
Pre-2023.

[03:27:11] Speaker 01:
Pre-2023.

[03:27:13] Speaker 01:
there's yeah so it's that it doesn't necessarily change the number of projects going in in some instances but anyway so these are much larger and they're going to be much larger cues because these are much larger geographic areas.

[03:27:27] Speaker 01:
Piasco covers part of Colorado.

[03:27:29] Speaker 01:
Tri-state covers part of Colorado.

[03:27:31] Speaker 01:
PJM covers 13 states.

[03:27:34] Speaker 01:
So, with respect to that, FERC looked at these small regions and said, this threshold should apply nationally, which is strange because in the NOPA proceeding itself, MISO, which already had a withdrawal penalty threshold of a per megawatt amount, actually suggested that their version of it works.

[03:27:52] Speaker 01:
And this is, they're suggesting it after PSCO and Pacific Corps had already been in place and had already been noted in the NOPA.

[03:28:01] Speaker 01:
So, with that, that's it.

[03:28:03] Speaker 05:
All right, thank you.

[03:28:04] Speaker 05:
And now I will repeat our great thanks.

[03:28:07] Speaker 05:
If I can speak on behalf of my colleagues, a great thanks to all of you for assisting us with all the issues in this case.

[03:28:13] Speaker 05:
And the case is submitted.