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Case number 24-1039 et al.

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Michigan Electric Transmission Company LLC petitioner versus Federal Energy Regulatory Commission.

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Mr. Street for the petitioner, Mr. Kennedy for the respondent, Ms.

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Roby for the interveners for the respondent.

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Good morning, Mr. Street.

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Good morning, your honor.

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May it please the court.

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The Commission Unlawfully Deprived, METC,

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of its exclusive ownership of network upgrades, because it interpreted the term system to mean the same thing as facility in the transmission owners agreement, when both plain English and the relevant context would give distinct meaning to those terms.

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I'll turn first briefly to standing, which we think is straightforward.

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FERC rejected METC's claim of 100% ownership

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and denied METC's request to delete the interveners from the Generator Interconnection Agreement.

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A decision from this court enforcing the plain language of the TOA would redress that error by giving METC 100% ownership.

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Burke's order had immediate injurious consequences.

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Rather than being able to enter into a contract with just MISO and Eagle Creek, the generator, knowing that it would have 100% ownership of the network upgrades, METC instead was required to negotiate and ultimately enter into a contract with MPPA and Wolverine, parties that it did not wish to contract with and which it believes do not have any rights.

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Is the kind of formal label for what you did was a protest.

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Am I right?

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Yes.

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So when you file a protest, do you get to ask for sort of the equivalent of declaratory relief?

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Is that normal?

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Yes.

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Yes.

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The parties propose what they think the GIA should look like.

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MISO, as the RTO, accepts one proposal and puts that forward to FERC.

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Because my client, Metsy, objected, it was an un-executed generator interconnection agreement.

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It goes then before FERC, METC files its protest saying, here's what we think the ownership allocation should be with respect to these network upgrades.

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I think FERC would have had the authority to say, we agree.

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And this proposal by Michigan Electric is the proposal we order everyone to do.

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Yes.

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Yes.

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Because the transmission owners agreement provides scenarios with respect to who owns these network upgrades.

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So it was up to the commission to properly interpret that plain language and declare the proper ownership

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of those network upgrades.

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And we would, of course, had 100% under our plain reading of the TOA.

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This doesn't bear on standing, but it's relevant, I think, to where we are, which is to say, now there's another un-executed agreement, correct?

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I mean, it has not resolved.

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It's been accepted for filing, but it has not resolved the question of ownership.

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Yes, Your Honor.

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Is the commission, does the commission have the authority to determine ownership under those circumstances where you've already been remanded and negotiated, still can't reach an agreement?

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Or is it possible that just never be an agreement and the facilities won't be built?

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New GIA has been executed and accepted by FERC for filing, even though nobody knows who owns what.

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The facilities are being designed and built by METC.

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But the question remains as to who owns those facilities.

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So there is no guidance to the parties from the commission with respect to how to negotiate this or who owns what.

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And there's no suggestion that the commission is going to pull a rabbit out of a hat and find some provision that resolves this dispute.

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So we are sort of in limbo and that goes to part of our standing that we're having to go forward and design and build these upgrades, not knowing whether we even own 100% or 33% or 0%.

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Was there a requirement that you go forward with construction?

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No, the generator wanted to get this power onto the grid.

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And so we were forced with the idea of either just not executing an agreement at all and just letting things sit, which is an injury in itself because we can't begin collecting the return, or going ahead and executing with the ownership blanks left open for resolution by this court.

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If there are no further questions on standing.

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If the court were to hold this is not right,

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When do you assume FERC would respond to resolve the question?

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As I mentioned to Judge Ginsburg, I don't think FERC is ever going to be able to resolve this question.

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They sent it back to the parties to be negotiated.

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So I guess at some point the parties would just put their heads together and come up with something and propose that to FERC.

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Our point regarding ripeness is that there's already an injury now because we've had to negotiate, spend dollars and cents in time negotiating.

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We've had to effectively enter into this contract or just sit there and delay.

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And those are currently dollars and cents injuries of the type this court recognized as sufficient in the Rio Grande and Great Lakes cases.

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There's also the planning and the financial uncertainty that comes from not knowing what upgrades we own.

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But I'll stop there on standing unless there are further questions.

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Turning to the merits of the Transmission Owners Agreement, Section 6, Romanet 1, gives METC 100% ownership because the network upgrades here connect to a quote, single-owners system.

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METC owns the system to which Eagle Creek will interconnect, while the interveners own a facility on that system.

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This is made clear in the order below.

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In paragraph two of the order below, Burke says, and I quote, the Stix Murphy line is jointly owned by METC MPPA and Wolverine and is located on METC's transmission system in Michigan.

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At paragraph seven of the same order, the commission says, quote, Eagle Creek is planning to construct

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the solar generating facility, which will connect to METC's transmission system.

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That should have been all the commission needed to do to resolve this case.

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It's even more striking if you look back to previous FERC orders involving these very same assets, the Michigan Public Power Agency order, and the MISO order, which we discuss at length on pages 24 through 26 of our opening brief.

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The MPPA order, FERC said,

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that MPPA and Wolverine have, quote, joint ownership interests in transmission facilities that are part of the METC transmission system.

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MISO order referred to Wolverine's MPPA and METC's joint ownership of certain transmission facilities on the METC system.

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So FERC knew that these were distinct terms that had a meaning, and those orders reflect that the meaning of the term system is the legacy

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collection of interconnected transmission assets that METC inherited from the integrated monopoly, while the term facility means one component of that system, such as a transmission line or a substation.

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To which I understand it says basically, look, we use those terms inconsistently in other sources to which you don't point, of course.

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It really is not that clean cut.

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If it were that clean cut, there'd be certain anomalies.

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Let me take you to the one of most concern.

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It's at 43 in their brief.

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What if the interconnection takes place between facilities owned by A and B, but those facilities are within the footprint of C's system?

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Section 6.1 and 6.2 would be in direct conflict.

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What do you say?

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Well, I think it's important to note that FERC does not make any textual arguments in support of its position.

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It does take potshots at our position.

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It's not on 6-1, but it's saying, look, if you're right about 6-1, then 6-2 is deprived of all meaning.

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And all upgrades anywhere connected to the system would be property would be owned by medical

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So let me respond directly to that.

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First of all, I want to point out that that is a hypothetical conflict that FERC does not identify has ever arisen in a case.

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And there's a good reason for that.

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If there were this potential conflict were to ever arise between Romanette 1 and Romanette 2,

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either the Commission or the court would construe those together to give both of them a fact and I think what the Commission could do is to say if if the facility if the new jet new Transmission connects between two facilities within the same system then Roman at two is the more specific provision and that would control but I think there's also this is also very important that there's a reason that

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that this is likely never going to arise.

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And METC actually explained this quite helpfully before the commission at JA 189 to 90.

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And there METC explained that FERC applies Romanet 2 when there is a long range transmission facility that is connecting two different systems together.

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It's typically two different systems that are far apart.

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For example, a long-range transmission line between Iowa and Wisconsin.

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That's what Romanet 2 applies to.

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It doesn't apply to generator interconnection.

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It applies to these long-range.

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So under those... Is there anything in the terms of 2 to limit it that way?

[00:10:15] Speaker 03:
No, I don't think it's in the terms of 2, other than it does say it connects between two facilities, which suggests that this is not a... You just gave me an example where it's two systems.

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Well, it's two facilities on two systems.

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And that's just practically when that has applied, because if it is not a generator interconnecting to a system, which is Romanet 1.

[00:10:37] Speaker 05:
I think the transcript will show that you just said we could think of this as connecting two facilities on two different systems or connecting two different systems.

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In other words, you're using the terms interchangeably.

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I am not using the terms interchangeably, Your Honor.

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I am saying that the times in which FERC has, as a practical matter, applied Romanet 2, is when there is a long-range transmission facility that happens to connect facilities on two different systems.

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And therefore, as a practical matter, the conflict is not going to arise.

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That's just the nature of what two is getting at is long range transmission facility.

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Is one point in your brief, that precise point?

[00:11:18] Speaker 03:
I don't think that that precise point is in our brief.

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I don't think it is.

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But we did point out that this is a hypothetical conflict that has never arisen and that the court or the commission could reconcile the two conflicts.

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Let me ask, I think the way the brief puts it is basically if that were to arise, they'll figure it out.

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And I think that when we went back and looked at what we had said below, we explained very helpfully to FERC why this had never arisen.

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And FERC didn't contest that interpretation.

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In fact, I think it even... Where is that?

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It's at 189 to 190.

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You said that earlier.

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Yes.

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And I don't have the direct site, but the commission recognized that argument in its order as well.

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At one point in the brief, the commission says the ownership

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Determinant distinction in section six is the number of miscontinent owners at the points of interconnection, not whether the point of interconnection is viewed as a system or facility.

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Moreover, as the Stix Murphy agreements themselves establish, the Stix Murphy line is a collection of components that work together as a system to transmit electricity.

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Why is that wrong?

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Well, first of all, your honor, that is a post-hoc rationalization.

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The commission never.

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I mean, much of what we're getting from both sides is winging it, because the language isn't clear anywhere.

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And you're both doing your best to try and give it some sense.

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And I'm respectful of both sides.

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So I don't know about post-hoc rationalization.

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You just came up with something that wasn't in your briefie there, and we listened.

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So if you just answer.

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Sure, of course.

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I'm not the agency.

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But beyond that, the agency

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Yeah, so I mean, the commission could have written or the tariff on the transmission owners could have written the tariff that way to focus on points of interconnection, but it doesn't.

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Instead, it uses the distinct terms systems and facilities.

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And I think we can see the absurdity in what the commission is saying when we compare their initial order versus their rehearing order.

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Recall that in their initial order, they're addressing the intervener's argument

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that six Roman at two applies.

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And there they say Sticks Murphy is quote a single facility at paragraph 88 of their initial order.

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In the rehearing order, they turn around and they say, no, Sticks Murphy is actually a system.

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So there's no single system owner because everybody owns part of that system.

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So those two things cannot be held together.

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And I think in one's mind at the same time.

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So when will the last one come?

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Certainly.

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I mean, it may be.

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Both of you are kind of winging it along the way.

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The language is hardly clear in the contracts and anything else we're being directed to.

[00:14:09] Speaker 04:
Well, in system facility, quite frankly, those two terms are not clear cut in the materials we're looking at.

[00:14:16] Speaker 03:
Well, I would respectfully disagree without belaboring the point, which is that in this very order and in the previous orders that I quoted to the court,

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The court says the Stix Murphy line is a facility that exists on METC's transmission system.

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So the system is this legacy set of interconnected transmission assets.

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A facility is something like a line or a substation.

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The commission knows that.

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It uses those terms that way all the time.

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It doesn't use the terms interchangeably.

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That's an argument they came up with on the rehearing order to, for whatever reason.

[00:14:46] Speaker 04:
Well, have they ever said that definitively?

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I think that they said that when they used the language that I quoted.

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That's all you have, just this case.

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I mean, you're saying it like everyone in the world understands this.

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And so in preparing, I was looking for an expression of that world known understanding.

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I don't see it anywhere.

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Right.

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So system is not a defined term in the TOA.

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To that extent, you're precisely correct.

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So I think that it's appropriate to look at the way FERC uses that term.

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which again is to refer to this geographic system.

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Whereas a facility just in plain English, a facility versus a system, a facility is going to be something that makes up the system.

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So I think you're right, there's no definition that we can point to.

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We can point to the way the commission used the term in regard to these very assets and we can point to plain English.

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We can also point to the fact that under the commission's interpretation,

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there is a gap in coverage of the transmission owners agreement.

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It gives no guidance to these parties as to who owns the network upgrades in this scenario.

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I think that's a strong strike against Burke's reading.

[00:15:59] Speaker 06:
You said a minute ago that a facility is a line.

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And I think your understanding of system is that a system is a bunch of connected lines.

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Why why why should we just view that as one long line?

[00:16:17] Speaker 03:
Well, because it is more than lines, it's lines, it's substations, it's all of the other assets that are in a single facility, as you understand it, include like line substation line.

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I don't think that would be one facility.

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It would not be a system.

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It could potentially be multiple facilities.

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A system is the system as a whole, which is a geographically coterminous legacy set of wires that really got inherited from the monopoly.

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That's the way the commission uses it when it says the METC system.

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Just zoom out for a second.

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The sticks line, you say that's a facility, not a system.

[00:17:01] Speaker 06:
Yes.

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And I get that it's shorter than the rest of the system.

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But is there a substation in the middle of the Murphy line?

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Yes.

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So why is that not a system with three facilities?

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Let's say there's only one substation.

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Line, substation, line.

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Why is the sticks Murphy line not a system with three facilities?

[00:17:26] Speaker 03:
Well, OK, so you can have a system, and you can have a multiple number of facilities that still are not a system.

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The system is the overall collection.

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Just as in our.

[00:17:38] Speaker 06:
That just sounds like you're saying.

[00:17:40] Speaker 06:
I think pretty sympathetic to your argument.

[00:17:41] Speaker 06:
So I'm just trying to figure out.

[00:17:43] Speaker 06:
Well, let me push it and test it a little bit.

[00:17:45] Speaker 06:
And sometimes it sounds like you're saying, like, a facility, a system is just like,

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bigger than a facility.

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Sometimes you're saying a facility is a small system and a system is a big system.

[00:18:04] Speaker 06:
I know that's not what you're saying, but I want to see why that's not what you're saying.

[00:18:07] Speaker 03:
Sure.

[00:18:07] Speaker 03:
No, a system is the total collection of transmission assets that the legacy transmission provider operates.

[00:18:16] Speaker 03:
So we own

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We wholly own 98 to 99% of all the assets that are transmission assets in lower Michigan.

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That's our system.

[00:18:25] Speaker 03:
That's the way the commission uses the term system.

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A facility is any smaller component of that.

[00:18:31] Speaker 03:
I mean, it could be one facility.

[00:18:32] Speaker 03:
It could be multiple facilities.

[00:18:34] Speaker 03:
But I think the direct answer to your question, FERC, gives you, right, in its order.

[00:18:39] Speaker 03:
Order at paragraph 88, it says the Sticks Murphy line is a, quote, single facility.

[00:18:44] Speaker 03:
So it has told us.

[00:18:46] Speaker 06:
But Judge Ginsburg says, you know, sometimes they call it a system.

[00:18:49] Speaker 06:
Sometimes they call it a facility.

[00:18:51] Speaker 06:
Right.

[00:18:51] Speaker 06:
If you want to do, like, you know, a cocktail party and just pick out your friends.

[00:18:55] Speaker 03:
Well, I think that the fact that they're calling it a facility at one place and then saying, oh, well, it could be a system on rehearing shows the irrationality of its order.

[00:19:04] Speaker 06:
Is that the only time that they make the switch?

[00:19:07] Speaker 06:
Because the timing there would seem artificial.

[00:19:12] Speaker 06:
I mean, that would support your argument.

[00:19:14] Speaker 03:
Let's put it this way.

[00:19:16] Speaker 03:
The other side has not identified any other time when a facility has been called a system.

[00:19:21] Speaker 03:
The only thing they do is use defined terms like transmission system.

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And those use transmission system to mean the collective of all of the facilities.

[00:19:30] Speaker 03:
And they try to say, well, that means system equals facilities.

[00:19:32] Speaker 03:
Well, no, system equals the collection of facilities.

[00:19:35] Speaker 03:
Now, I think, as Judge Edwards referenced, there is this point of interconnection theory.

[00:19:41] Speaker 03:
As I've argued, I think that that is a pure policy argument.

[00:19:43] Speaker 03:
It's not a textual argument.

[00:19:46] Speaker 03:
And maybe it would make sense to have written the TOA that way, but it's simply not written that way.

[00:19:51] Speaker 03:
Whereas METC's interpretation gives each term its natural meaning, and it makes sense as a practical matter.

[00:19:57] Speaker 03:
I think that's important, because FERC's argument sounds in policy.

[00:20:01] Speaker 03:
Ours actually makes more sense as a policy matter if you look

[00:20:07] Speaker 03:
If you look at section 6, Romanet 1.

[00:20:11] Speaker 06:
You're a bit over your time, Mr. Street.

[00:20:13] Speaker 06:
I know we've asked you a lot of questions, and I'm partly responsible for that.

[00:20:17] Speaker 06:
But if you can wrap up in a minute or so.

[00:20:20] Speaker 03:
Certainly.

[00:20:21] Speaker 03:
Thank you, Your Honor.

[00:20:22] Speaker 03:
This will be the last point, which is that our argument makes sense as a policy matter.

[00:20:26] Speaker 03:
If you look at section 6, Romanet 1, you see that ownership of the network upgrades goes along with, quote, the responsibility to construct those network upgrades.

[00:20:37] Speaker 03:
It makes sense to keep the ownership and the responsibility to construct with the legacy system owner, because the legacy system owner is the one with the expertise and experience in building transmission infrastructure.

[00:20:50] Speaker 03:
And here, that's METC.

[00:20:51] Speaker 03:
Under the commission's argument, you could have one-off facility owners, like the interveners, with ownership of network upgrades, even though Wolverine is a generation company.

[00:21:02] Speaker 03:
It doesn't have the expertise or the experience to construct those facilities or, as one goes on to say, maintain such facilities.

[00:21:11] Speaker 06:
Who maintains and operates the Stick Murphy line?

[00:21:13] Speaker 06:
Is it just you, only you?

[00:21:15] Speaker 06:
Yes.

[00:21:17] Speaker 06:
So I think that and on your metaphor about the skeleton and the bones.

[00:21:23] Speaker 06:
So, you know, bones are connected by things that are not bones.

[00:21:27] Speaker 06:
I think it's been a while since I did, you know, an ad, a high school anatomy or something.

[00:21:32] Speaker 06:
But as I understand it, facilities are connected to each other by other facilities.

[00:21:39] Speaker 06:
Right.

[00:21:40] Speaker 06:
Sure.

[00:21:40] Speaker 06:
I think the analogy breaks down a little bit there.

[00:21:44] Speaker 03:
I'm not sure that I follow, but I think I would say that even if there are facilities connected to other facilities by facilities, that doesn't make that small group a system in the sense that the commission uses the term system.

[00:21:58] Speaker 06:
I'm just a little confused about why.

[00:22:01] Speaker 06:
Sometimes it sounds like you're saying system is big, facility is small.

[00:22:06] Speaker 06:
If that's it, that doesn't seem like a very good line to draw between the two because, I mean, how do we know that the Stix Murphy line isn't big enough to be a system?

[00:22:18] Speaker 03:
Besides what the commission said, that it's a single facility.

[00:22:20] Speaker 06:
I think that's a strong point.

[00:22:21] Speaker 03:
So I would put it this way, Your Honor.

[00:22:24] Speaker 03:
It's not that a system is big.

[00:22:26] Speaker 03:
and facilities are small, it's that a system is the overall collective, and you have individual facilities that are part of that system, and you have more than one facilities that are also a subcomponent of that system, whether it's the Stix Murphy line or whatever the Stix Murphy line connects to.

[00:22:43] Speaker 06:
Is the Stix Murphy line multiple facilities?

[00:22:46] Speaker 03:
No, I think we would agree with the commission that it's a single facility.

[00:22:49] Speaker 06:
But it does have lines connected by generator stations, right?

[00:22:53] Speaker 03:
It has lines that are connected to substations.

[00:22:56] Speaker 03:
Yes.

[00:22:56] Speaker 03:
Yeah.

[00:22:57] Speaker 06:
And substation is a facility.

[00:23:00] Speaker 03:
I mean, I don't have any quarrel with the commission saying the line is a facility.

[00:23:04] Speaker 03:
That's the way both the line that the sticks Murphy line is a single facility.

[00:23:09] Speaker 03:
That's what we've always argued.

[00:23:10] Speaker 03:
I think that makes sense.

[00:23:12] Speaker 03:
But even if you view it as two facilities, that doesn't make it a system.

[00:23:17] Speaker 05:
Uh, you, uh, counselor, you're referring us to 189 to 190.

[00:23:22] Speaker 05:
the Joint Appendix.

[00:23:24] Speaker 05:
I thought it was for the proposition that the Commission uses 6-2 when it's faced with your Iowa to Wisconsin example.

[00:23:34] Speaker 05:
But a quick read here suggests to me this is not an empirical observation at 1-89 to 90 at all.

[00:23:42] Speaker 05:
It's your interpretive point.

[00:23:46] Speaker 03:
I think that it is our view of what the Commission, when the Commission has used Section 6, Romanet 2 to assign ownership, because in those instances of the long-range transmission connecting Iowa and Wisconsin, for example, the Commission gave equal ownership of that transmission line to the Iowa system and to the Wisconsin system.

[00:24:08] Speaker 03:
And again, the Commission didn't push back on that and say, no, that's an incorrect interpretation.

[00:24:14] Speaker 03:
In fact, remember, it rejected the intervener's reading of 6 Romanet 2.

[00:24:20] Speaker 03:
So I guess I would wrap up just by saying, whatever the hypothetical issues that could arise with our interpretation, they pale in comparison to FERC's, which is conflating the key terms to mean the same thing and is leaving gaps in coverage that leave the parties to negotiate without any guidance.

[00:24:52] Speaker 02:
Thank you.

[00:24:54] Speaker 02:
Good morning, Your Honor.

[00:24:55] Speaker 02:
It's Robert Kennedy on behalf of the Commission.

[00:24:59] Speaker 02:
The Commission appropriately found in this case that Section 6 of the Transmission Owners Agreement doesn't have ownership of network upgrades turn on whether the point of interconnection is better characterized as a facility or a system.

[00:25:12] Speaker 02:
That conclusion is consistent with the structure of Section 6, which uses the terms interchangeably, as we discussed before, consistent with other portions of the tariff and the transmission owners agreement, which equate facility to system.

[00:25:26] Speaker 02:
And it avoids some of the interpretive problems that are associated with Michigan Electric's interpretation.

[00:25:32] Speaker 02:
With respect to the structure of Section 6, I think you see the interchangeability of the terms.

[00:25:37] Speaker 02:
Most clearly, in 6.2 and 6.3, they both describe precisely the same situation, a new piece of infrastructure being put onto the grid between two existing pieces of the grid.

[00:25:49] Speaker 02:
In 6.2, it's described as being placed between two facilities.

[00:25:54] Speaker 02:
In 6.3, it's described as being connected to systems.

[00:25:59] Speaker 02:
And I think that shows the key variable in Section 6 isn't whether the point of interconnection can be

[00:26:06] Speaker 02:
dubbed a facility or system, but the key variable is where is the interconnection taking place.

[00:26:10] Speaker 02:
It uses the words connected and who are the owners, the number and their identity.

[00:26:15] Speaker 02:
the terms facility and system are just simply used interchangeably, and that's consistent with the various definitional terms that the Commission went through in its analysis to determine there wasn't some ownership-determinative distinction between facility and system.

[00:26:33] Speaker 02:
You see in paragraph 86 of the initial order and footnote 89 of the rehearing order, the Commission cites the

[00:26:41] Speaker 02:
the tariffs generator interconnection procedures definition of transmission owners.

[00:26:46] Speaker 02:
And in there, it describes facilities as a portion of the transmission system.

[00:26:52] Speaker 02:
The definition of transmission system in those generator interconnection procedures describes the system as simply the facilities owned by the transmission owner.

[00:27:02] Speaker 02:
And these are the pro forma terms.

[00:27:04] Speaker 02:
The parties incorporated the same terms into their proposed interconnection agreement.

[00:27:10] Speaker 02:
The commission also looked at the definition of system in the transmission owner's agreement.

[00:27:15] Speaker 02:
And all that says is that the facilities comprise the system.

[00:27:18] Speaker 02:
So nowhere in the way the parties used those terms is there a stark distinction between a facility and a system such that section six should be read to have ownership turn on that.

[00:27:32] Speaker 06:
You agree that Michigan Electric maintains and operates the Sticks Murphy line?

[00:27:39] Speaker 02:
That is my understanding.

[00:27:40] Speaker 02:
I believe the interveners pay some of the operational costs, but I believe there's an agreement that they'll be operational.

[00:27:47] Speaker 02:
And that was the same agreement that they proposed with respect to the upgrades.

[00:27:51] Speaker 06:
Do you know of any other facility, there may be many, I don't know, but do you know of any other facility that is maintained and operated by someone other than the system owner?

[00:28:06] Speaker 02:
Well, I mean, your question gets into what is a system.

[00:28:09] Speaker 02:
I will say in footnote one of the intervener's brief, they cite to MISO's website where MISO lists all the facilities that have been transferred to their operational control.

[00:28:20] Speaker 02:
And you can go through it, you know, owner by owner and see in a number of those cases, there are jointly owned facilities.

[00:28:28] Speaker 02:
And particularly among these three parties that are apart from the Stix Murphy line, there are a number of

[00:28:35] Speaker 02:
jointly owned facilities.

[00:28:36] Speaker 02:
I don't know, frankly, what the agreement is among all those parties as to who will operate.

[00:28:43] Speaker 02:
But it's not an uncommon situation that there is jointly owned facilities.

[00:28:47] Speaker 06:
Someone could say, I don't operate this.

[00:28:50] Speaker 06:
I don't care whether, for the purpose of this question, what's not distinguished between a facility and a system?

[00:28:55] Speaker 06:
I don't operate this thing, but it is mine.

[00:29:03] Speaker 02:
I'm sorry.

[00:29:04] Speaker 06:
I don't operate in the system, but it's my system.

[00:29:07] Speaker 02:
Well, yeah.

[00:29:07] Speaker 02:
I don't think that's an unreasonable interpretation.

[00:29:11] Speaker 02:
Has it ever been said?

[00:29:14] Speaker 02:
I don't operate the system.

[00:29:15] Speaker 02:
Well, I mean, that's the position here of the parties.

[00:29:19] Speaker 02:
Yeah, I don't know whether it's come up in that way, but it's certainly not unreasonable.

[00:29:24] Speaker 02:
I mean, you think.

[00:29:26] Speaker 06:
When things are unprecedented, it's a red flag.

[00:29:28] Speaker 06:
I'm not saying it means you lose.

[00:29:30] Speaker 06:
If this is the first case when anyone has ever said,

[00:29:33] Speaker 06:
I don't operate this system, but it is my system.

[00:29:36] Speaker 02:
Well, I think this is minor.

[00:29:37] Speaker 02:
This is the first case there had at least as far as I've been able to see where there's been a dispute under interpreting section 61 here.

[00:29:47] Speaker 02:
But again, I think to your point, your honor, that it's important to look at section six doesn't just say system, it's a single owner system.

[00:29:55] Speaker 02:
So we're almost at opening day.

[00:29:57] Speaker 02:
George Steinbrenner was the owner

[00:29:59] Speaker 02:
was a owner of the Yankees.

[00:30:01] Speaker 02:
There were minority partners, but he certainly operated the team.

[00:30:04] Speaker 02:
That didn't make him the single owner.

[00:30:07] Speaker 02:
And so I think that's one of the, you saw it in the discussion today, one of the fundamental problems with Michigan Electric's position is what is a system?

[00:30:18] Speaker 02:
They say,

[00:30:19] Speaker 02:
A single line, even though it transmits energy over the Stix Murphy line, 45 miles, that's not a system.

[00:30:27] Speaker 02:
All these definitions that the parties use just say it's the facilities turned over to MISO.

[00:30:32] Speaker 02:
So again, you go to the MISO website and you see Wolverine and Michigan Public Power have turned over a number of facilities to MISO, including the Stix Murphy line.

[00:30:42] Speaker 02:
On their system, is it on their system?

[00:30:44] Speaker 02:
There's no language in the operative agreements here that would help with that determination.

[00:30:51] Speaker 02:
They sort of import some connectivity requirement almost.

[00:30:56] Speaker 02:
But if you look at, again, you go to that website, the parties have jointly claimed ownership interest in three lines stemming from the Murphy substation.

[00:31:08] Speaker 02:
you know there's three or four times at least where for said it's michigan electrics system why did you say it's their system if it's not their system well i think the the reason again the commission until rehearing this crystal clear provision that supposedly governs this wasn't raised to the commission on rehearing so it was not asked to kind of take a hard look at section six one

[00:31:30] Speaker 02:
and see did the parties mean a distinction between system and facility.

[00:31:36] Speaker 02:
I mean, we don't dispute that in the normal course, there could be some distinction between the system and facility.

[00:31:44] Speaker 02:
But the question before the commission was, did the parties intend in section six for ownership to turn on some undefined distinction between the two?

[00:31:52] Speaker 02:
And we think the commission reasonably found that they didn't.

[00:31:54] Speaker 02:
The other interpretive problem

[00:31:57] Speaker 02:
that you noted, Judge Ginsburg, is what happens if, again, there's multiple jointly owned facilities within presumably among these parties.

[00:32:07] Speaker 02:
So what happens if there's a network upgrade between two jointly owned facilities?

[00:32:13] Speaker 02:
under Section 6-2, the answer would be they split it, but taking their position that everything within our legacy facility is ours, they would get ownership under 6-1.

[00:32:24] Speaker 02:
And there's a conflict there.

[00:32:25] Speaker 02:
If you just look at where is it connecting?

[00:32:29] Speaker 05:
They also, at that point, defending that point, faulted the commission with the point that there is no evidence on the record that there are any other facilities

[00:32:43] Speaker 05:
of the METC system that are not wholly owned by METC.

[00:32:49] Speaker 02:
I believe their point was that there's not any facility on their system that they don't at least have some ownership interest in.

[00:32:56] Speaker 02:
There are a number, as I understand it, of jointly owned facilities.

[00:32:59] Speaker 02:
I think their statement was that there's no facility that they don't have any ownership in that falls within however they define it.

[00:33:09] Speaker 02:
And to be fair, that was the

[00:33:12] Speaker 02:
That was the circumstance the commission used in talking about the conflict that emerged, but it will equally emerge with a connection between jointly owned facilities.

[00:33:23] Speaker 04:
And I have.

[00:33:25] Speaker 04:
Responsibility is it to resolve this?

[00:33:27] Speaker 02:
I'm sorry?

[00:33:28] Speaker 04:
Whose responsibility is it to resolve this?

[00:33:31] Speaker 02:
Well, ultimately, I mean, this kind of gets into why we raised the standing argument here.

[00:33:36] Speaker 02:
The commission didn't make an ownership determination, didn't preclude single ownership, didn't require joint ownership.

[00:33:43] Speaker 02:
If you look at section 16 of the intervener's brief, they suggest that there could be additional provisions that bear on the ownership question here.

[00:33:54] Speaker 02:
But it did, I mean, the commission freely acknowledged that it did

[00:33:58] Speaker 02:
this case did reveal a gap in the tariff.

[00:34:00] Speaker 02:
And, you know, petitioners see that as a strike against the commission's interpretation.

[00:34:05] Speaker 02:
I would just point you to, you know, section six here.

[00:34:10] Speaker 02:
On the top right, it has the revision numbers.

[00:34:12] Speaker 02:
And when this case started, we're up to revision 36.

[00:34:15] Speaker 02:
These are complex systems with complex questions.

[00:34:19] Speaker 02:
So it's not uncommon that factual disputes show a gap in the tariff, I think.

[00:34:25] Speaker 02:
Whose responsibility is it to do that?

[00:34:28] Speaker 02:
So if there is no other provision that bears on it, I guess the parties would have to come to an agreement of shared ownership, propose that to the commission.

[00:34:38] Speaker 02:
The commission view that.

[00:34:40] Speaker 04:
whose responsibilities.

[00:34:42] Speaker 02:
Well, then it could be, it could be up, it could be up to mid continent to say there is a gap on our tariff here.

[00:34:47] Speaker 02:
It was how we're going to revise it.

[00:34:49] Speaker 02:
And, uh, and we're going to, well, it'd have to be proposed to the commission and the commission would have to approve it as being just in reasonable responsibility to decide ultimately.

[00:34:59] Speaker 02:
Yes.

[00:34:59] Speaker 02:
Yes.

[00:35:00] Speaker 02:
In response to, um, you know, in reaction to what, um, either these parties or MISO puts in front of the commission, MISO could revise and submit for approval.

[00:35:11] Speaker 05:
change in the transmission.

[00:35:14] Speaker 02:
They could say, yes, commission, you identified this gap.

[00:35:19] Speaker 02:
Here's how we're going to fill it.

[00:35:20] Speaker 02:
Of course, that raises the question, OK, well, does that apply to this situation in terms of retroactivity?

[00:35:31] Speaker 02:
I'm not saying that's a clear, I'm not saying that answer won't, that result won't resolve all the spew.

[00:35:36] Speaker 05:
It's a new submission that's now before the commission.

[00:35:39] Speaker 05:
Was that submitted by MISO or by the other parties?

[00:35:42] Speaker 02:
I believe MISO submits it on behalf of the other parties.

[00:35:45] Speaker 02:
And my understanding it's, they described it as a placeholder agreement and they can describe it better than I, but as I understood it, they're saying, you know, we entered into this agreement so that connection can go forward.

[00:36:00] Speaker 02:
We'll resolve ownership.

[00:36:01] Speaker 02:
issues after this case is resolved.

[00:36:05] Speaker 02:
So they want to get something on record so it can go ahead, but left open the question of ownership.

[00:36:11] Speaker 05:
That they will resolve it after this case is determined?

[00:36:14] Speaker 02:
Well, yes.

[00:36:15] Speaker 02:
They've already filed a document.

[00:36:18] Speaker 02:
Right, but it doesn't lay out how the ownership of the network upgrades would be.

[00:36:25] Speaker 05:
I understand that.

[00:36:26] Speaker 05:
I thought they were leaving it to the commission to do that.

[00:36:29] Speaker 02:
Well, as I understood, they're saying, we're going to leave this open until the court rules on this appeal, and then we'll take it under consideration and figure out a path forward.

[00:36:41] Speaker 04:
I'm not sure whether you're answering it clearly or you're trying to avoid it.

[00:36:45] Speaker 04:
No, no, no.

[00:36:47] Speaker 04:
Either it ends with the commission and they have to decide this question or not.

[00:36:51] Speaker 02:
Ultimately, the commission will have to approve the generator interconnection agreement.

[00:36:56] Speaker 04:
If they come back and say we can't we can't reach a resolution, we think we still think we own all of it.

[00:37:02] Speaker 04:
Who's going to resolve that?

[00:37:04] Speaker 02:
Then I think that might be a question for the commission to take evidence and resolve it itself.

[00:37:12] Speaker 04:
And that's only might be in your mind, you think, but you're not.

[00:37:15] Speaker 02:
Well, yeah, if this is a gap, then the commission would have to, ultimately, if the parties aren't able to come to a resolution, yes, then the commission would have to resolve that question somehow.

[00:37:29] Speaker 00:
OK.

[00:37:29] Speaker 06:
Let me see if there are any other questions.

[00:37:34] Speaker 02:
No?

[00:37:35] Speaker 02:
Thank you, Your Honors.

[00:37:50] Speaker 01:
May it please the court, Deborah Roby on behalf of intervenors, Michigan Public Power and Wolverine.

[00:37:55] Speaker 01:
And I'd like to start with Judge Edward's question first.

[00:37:58] Speaker 01:
The commission will decide this.

[00:38:01] Speaker 01:
The commission will decide this because what was put before them was a very specific provision, section 6.1, and section, started with section 6.2.

[00:38:09] Speaker 01:
Are we dealing with facilities between two owners of the commission said we can't find that that's not here we don't have that situation.

[00:38:16] Speaker 01:
Are we dealing with it was only then by the way the Michigan electric comes in and says.

[00:38:22] Speaker 01:
Let's talk about section 61 because at the outset of the proceeding before for they were the ones who said appendix B section 6 doesn't apply at all.

[00:38:31] Speaker 01:
After the commission said Section 62 doesn't apply, they come in on rehearing and say, ah, let's look at Section 61.

[00:38:39] Speaker 01:
So they're being critical of FERC for switching between facilities, which is what 62 addresses, and system, which what 61 addresses, is a result of the switch in position of Michigan Electric here.

[00:38:53] Speaker 01:
So what the commission has before it right now is a newly executed GIA, generator and a connection agreement.

[00:38:59] Speaker 01:
All three of the transmission owners have signed that agreement, by the way.

[00:39:03] Speaker 01:
And there is a placeholder in that agreement that says the three transmission owners will have to discuss among themselves how we're going to resolve the question of ownership.

[00:39:13] Speaker 01:
And if we can't come to an agreement, which is why we're here premature, by the way, if we can't come to an agreement, it doesn't mean that we have

[00:39:21] Speaker 01:
No way to address it.

[00:39:23] Speaker 01:
Michigan Electric doesn't like what the commission's decision was on 6-1, but it's not here because of that decision.

[00:39:30] Speaker 01:
It cannot deny it is one of three owners.

[00:39:34] Speaker 01:
It is a joint owner, along with Wolverine and Michigan Public Power.

[00:39:38] Speaker 01:
This is by agreement.

[00:39:41] Speaker 01:
We are strange bedfellows, but here we are.

[00:39:43] Speaker 01:
The three of us are going to have to work this out.

[00:39:45] Speaker 01:
And if we can't rely on 6-1, we have the miso tariff.

[00:39:50] Speaker 01:
Attachment FF of the MISO tariff, which is not before the court today, because it was not before the commission before it, we have other provisions in the tariff that we can look to to help us resolve this.

[00:40:02] Speaker 01:
And if we can't resolve it on our own, then we'll have to put forth our best arguments to the commission yet again on how to address this.

[00:40:10] Speaker 01:
But this can be addressed and will be addressed before FER.

[00:40:12] Speaker 01:
We are here prematurely.

[00:40:14] Speaker 01:
The next thing I'd like to address, if I could,

[00:40:16] Speaker 01:
is Section 6.1 and the distinction between facilities and system.

[00:40:24] Speaker 01:
And the significance of the point of interconnection.

[00:40:27] Speaker 01:
Even METC agrees.

[00:40:29] Speaker 01:
You don't get to a system without going through a facility.

[00:40:33] Speaker 01:
The point of interconnection here is to the Stix Murphy line.

[00:40:37] Speaker 01:
A point of interconnection is not an abstract concept.

[00:40:41] Speaker 01:
A system is not an abstract concept.

[00:40:43] Speaker 01:
You only get to the system by going through the facilities.

[00:40:47] Speaker 01:
So the facility I'd issue here is a Stix Murphy line that has three owners.

[00:40:52] Speaker 01:
And under the MISO tariff, the owners agreed that when network upgrades are ordered by MISO, under the MISO rules, it is the owners that have the right to own those upgrades.

[00:41:04] Speaker 01:
That's how we get to ownership among the three of us.

[00:41:11] Speaker 01:
Judge Walker, you asked about can a single facility be a system?

[00:41:17] Speaker 01:
I'm sorry, the commission has answered this question as well.

[00:41:21] Speaker 01:
Footnote 90 of the order honoree hearing recognizes that there are transmission owners who have a single facility and that single facility can be a system and is a system.

[00:41:32] Speaker 01:
So the Commission's use of facility versus system depends on the circumstances presented before it.

[00:41:38] Speaker 01:
And Section 6 uses the terms system and facility in a lower case term so that it can address the different circumstances that exist throughout the very vast region that is the mid-continent region.

[00:41:50] Speaker 06:
What is the difference between the system and the facility?

[00:41:53] Speaker 06:
It depends on the circumstances.

[00:41:55] Speaker 01:
Well, let's use footnote 90 where there is a single owner that has a single facility that is in the MISO region that is also a system.

[00:42:07] Speaker 01:
And let's apply that in the context of section 6.1.

[00:42:11] Speaker 01:
If that line were part of the METC system, as METC says, but METC is not the owner of that line, then under METC's interpretation of 6-1, it would be METC that gets the right to own the upgrades to that line because it's part of its system.

[00:42:28] Speaker 01:
That's an absurd result.

[00:42:31] Speaker 01:
And it's no less absurd when you apply it to the facility that is the Stix Murphy line, where it has 1% ownership.

[00:42:37] Speaker 01:
versus 99%.

[00:42:38] Speaker 06:
And that's not just a hypothetical, that's a, there's a real one.

[00:42:42] Speaker 01:
That's a, that's a real world.

[00:42:43] Speaker 01:
There could be an interconnection to that line, to the, to the owner that is listed in a footnote.

[00:42:49] Speaker 06:
Yes.

[00:42:49] Speaker 06:
But what, what, what is, what is the example of it?

[00:42:55] Speaker 01:
I'm not sure I'm understanding the question exactly.

[00:42:57] Speaker 06:
Although you could say it's, it's the, it's the Lansing Ann Arbor line.

[00:43:01] Speaker 06:
That's the example.

[00:43:02] Speaker 01:
It's it's it's referenced in footnote 90 and I forget the name of the name.

[00:43:07] Speaker 01:
They name they name the company.

[00:43:08] Speaker 01:
Yes, that owns that.

[00:43:11] Speaker 01:
The that it's it's it's their line and it's it's a singles owners line.

[00:43:17] Speaker 01:
in which case, if there's an upgrade to that, you're in Section 6.1 territory.

[00:43:23] Speaker 01:
So is it a facility or is it a system?

[00:43:26] Speaker 01:
And the Commission correctly looked to the governing documents, the Transmission Owners Agreement.

[00:43:31] Speaker 01:
They looked to the MISO tariff, including the generator interconnection procedures, to help inform what does system mean in this case.

[00:43:39] Speaker 01:
They correctly and reasonably determined, we can't apply Section 6.1 here because we don't have a system that has a single owner.

[00:43:49] Speaker 01:
And again, Metzi agrees and Metzi says a system is made up of facilities.

[00:43:54] Speaker 01:
So whether you look at the Stix Murphy agreement or the Stix Murphy line as a facility or a system,

[00:44:00] Speaker 01:
as a facility distinct from a system as METC claims, or whether you look at the Stix Murphy line as a system, as the commission reasonably concludes, the fact is you have a system made up facilities and 6-1 cannot apply.

[00:44:14] Speaker 06:
Michigan Electric has, whether you want to call facilities or systems, that cover like two-thirds of Michigan, the lower peninsula, I think.

[00:44:23] Speaker 06:
Is that right?

[00:44:24] Speaker 01:
Yeah, I'd like to touch on that.

[00:44:26] Speaker 01:
Michigan Electric is the majority owner.

[00:44:28] Speaker 01:
Reference to the Michigan Electric system is often a term as an ease of reference.

[00:44:34] Speaker 01:
If you want to think of it in terms of law firms, you have six partners that you're going to refer to, maybe the first or two, but it's a

[00:44:40] Speaker 01:
It's an informality and there's no legal significance given to that.

[00:44:44] Speaker 01:
And other times, if the legal significance attached to it is, that means it's the facilities owned by Michigan Electric.

[00:44:51] Speaker 01:
So when somebody's using the METC system, they're using the facilities that METC owns.

[00:44:58] Speaker 06:
Does anybody else operate any of the facilities on

[00:45:03] Speaker 06:
what I'm gonna call the system covering two thirds of the lower peninsula?

[00:45:06] Speaker 01:
Yes, Wolverine is a transmission owner and it operates its system.

[00:45:13] Speaker 01:
It has ownership in facilities that, along with Metzi, that Metzi operates and that operation is by contract, but it makes it no less of a system that belongs to Wolverine, which means we're not in a single owner's system.

[00:45:28] Speaker 06:
And the way Michigan Electric is thinking of it, that Wolverine system

[00:45:32] Speaker 06:
would have to be part of the Michigan Electric system.

[00:45:35] Speaker 06:
That's part of what Michigan Electric is calling its own system.

[00:45:38] Speaker 01:
Well, I don't want to answer for that.

[00:45:41] Speaker 01:
I don't think so.

[00:45:44] Speaker 06:
But it does sound like there's a Wolverine system.

[00:45:47] Speaker 06:
And there's a system.

[00:45:49] Speaker 01:
A system can refer to and does refer to the facilities that you own that somebody else may operate.

[00:45:54] Speaker 01:
It doesn't mean that it's not a system that's yours.

[00:45:57] Speaker 01:
And also to your question.

[00:46:00] Speaker 06:
Some people operate.

[00:46:01] Speaker 06:
You're saying some people operate

[00:46:03] Speaker 06:
things on Michigan Electric's system that some people other than Michigan Electric operate things operate facilities on Michigan Electric.

[00:46:11] Speaker 01:
Michigan Electric operates facilities in the lower Michigan territory.

[00:46:17] Speaker 01:
There are other owners and systems in the lower Michigan area.

[00:46:23] Speaker 06:
They're not part of Michigan Electric.

[00:46:25] Speaker 01:
Well, they are not part of

[00:46:29] Speaker 01:
the facilities that Michigan Electric operates and that Michigan Electric calls its system.

[00:46:36] Speaker 01:
And I guess my point is it is not a system that has a single owner because there are other owners of the facilities that make up the system.

[00:46:49] Speaker 01:
The fact that they operate it doesn't make it theirs any more than

[00:46:54] Speaker 01:
if somebody else were operating it.

[00:46:58] Speaker 01:
That operation is by agreement.

[00:46:59] Speaker 01:
And yes, there are other areas in MISO that have that same arrangement.

[00:47:03] Speaker 01:
We have others, clients that have the same arrangements.

[00:47:06] Speaker 06:
Thank you very much.

[00:47:10] Speaker 06:
Thank you.

[00:47:12] Speaker 06:
Maybe three minutes for rebuttal.

[00:47:18] Speaker 03:
Thank you, Your Honor.

[00:47:19] Speaker 03:
A few points in direct response there.

[00:47:21] Speaker 03:
First of all, I think it's important to note that the Commission didn't just say METC had a system in an offhand way in its previous orders.

[00:47:29] Speaker 03:
And even in this order, it said that METC owned the system and MPPA and Wolverine owned a facility on that system.

[00:47:36] Speaker 03:
So they used them distinctly.

[00:47:38] Speaker 03:
Now, we've got talk about a Wolverine system.

[00:47:40] Speaker 03:
That would have been cited all over their brief if there was any reference in a previous Commission order to a Wolverine system.

[00:47:46] Speaker 03:
There's a Wolverine facility that is on the METC system.

[00:47:50] Speaker 03:
I think your questions about operation go right to the point.

[00:47:54] Speaker 03:
We had the Steinbrenner hypothetical.

[00:47:57] Speaker 03:
The problem here is that we have plain text of Section 6, Romanet 1, which says that the ownership of the network upgrades goes along with the responsibility to construct and maintain those upgrades.

[00:48:11] Speaker 03:
A METC is the one that actually is going to maintain and construct these upgrades, as we've already heard.

[00:48:17] Speaker 03:
And otherwise, we have generators that don't even know how to build transmission, much less operate transmission, that are owning network upgrades.

[00:48:25] Speaker 03:
So I think that goes strongly to the plain text.

[00:48:29] Speaker 03:
We've heard the argument about that it would be absurd if there was a facility in which we own 0%, but it was within our system.

[00:48:39] Speaker 03:
There is no evidence of that.

[00:48:41] Speaker 03:
And I can tell you that is not the case.

[00:48:43] Speaker 03:
There is no point on METC system where we don't own at least some of a facility.

[00:48:47] Speaker 03:
In fact, we wholly own 98 to 99%.

[00:48:49] Speaker 05:
But that's not in the record.

[00:48:52] Speaker 03:
Well, that's not in the record either way, because the commission just used a hypothetical.

[00:48:57] Speaker 03:
And it didn't say, and here's the point on the system.

[00:48:59] Speaker 03:
And of course, FERC hasn't pushed back on that.

[00:49:01] Speaker 03:
I think it effectively conceded that in its argument this morning.

[00:49:06] Speaker 03:
I think what we heard from Judge Edwards' questioning of the commission is that the gap that is created by the commission's interpretation is a huge practical problem.

[00:49:17] Speaker 03:
It throws the parties back into totally undirected negotiations with no idea who's going to resolve it.

[00:49:23] Speaker 03:
The commission suggests that this should be done through a revision to the tariffs.

[00:49:27] Speaker 03:
Well, A, that presumes this is not unambiguous in our favor already.

[00:49:31] Speaker 03:
But I think that that cuts against them.

[00:49:33] Speaker 03:
That means if FERC does not like the way the plain language is being applied, or MISO doesn't like the way the plain language is being applied, then they go and revise it to put in the points of interconnection theory.

[00:49:44] Speaker 03:
You don't jam up the transmission owner, METC, here that has relied on the plain text of that agreement.

[00:49:52] Speaker 03:
as part of the transmission owners agreement.

[00:49:55] Speaker 03:
And finally, I would just point out, I think at the absolute best, FERC can get to ambiguity under a very lenient reading of Chevron step one.

[00:50:05] Speaker 03:
And if you think that that is where we are, then the court does have to address whether Chevron-like deference continues to apply to interpretations of contracts and tariffs after Lope or Bright.

[00:50:16] Speaker 03:
We don't think it should hold that, but if you go with our interpretation,

[00:50:20] Speaker 03:
that the plain language is unambiguous and giving METC 100% of these network upgrades, then the court does not need to reach that question.

[00:50:28] Speaker 06:
Did you say something a minute or two ago that's responsive to the footnote 90 argument that Ms.

[00:50:33] Speaker 06:
Roby?

[00:50:34] Speaker 03:
I have to say I'm completely perplexed by that argument.

[00:50:37] Speaker 03:
I looked at footnote 90 in both the order and the rehearing.

[00:50:40] Speaker 03:
It does not discuss any point on the METC system or on any system where the system owner does not own some part of the

[00:50:50] Speaker 03:
of the facility.