On November 5, 2013, the United States Court of Appeals for the D.C. Circuit (“DC Circuit”) issued an unpublished opinion upholding FERC’s orders relating to the allocation of costs resulting from compliance with the “must-offer” regime in California. Petitioners City of Anaheim, California (among others) sought review of FERC’s orders, arguing FERC acted in an arbitrary and capricious manner by determining: (1) that the cities benefit from expenses incurred by certain generating units in the California market in operating at minimum load in order to assure power availability; and (2) that the cities should bear some of the costs of maintaining minimum load under cost causation principles.
FERC initially affirmed an Administrative Law Judge’s decision upholding a set of cost allocation criteria in Attachment E to California Independent System Operator Corporation’s (“CAISO”) tariff, finding the criteria just and reasonable. After granting rehearing, FERC ordered CAISO to modify the cost allocation criteria in Attachment E to make the cost allocation more consistent with cost causation principles. On appeal, the DC Circuit held that FERC did not act arbitrarily and capriciously by allocating costs consistent with cost causation principles or by modifying Attachment E. The DC Circuit also concluded that FERC did not “disregard” the criteria it adopted in Attachment E in light of its instruction in the underlying order on rehearing to CAISO to modify the criteria and its adequate explanation for its actions.
A copy of the order may be found here.