On March 8, 2016, the U.S. Court of Appeals for the D.C. Circuit (“D.C. Circuit”) granted Xcel Energy Services Inc.’s (“Xcel”) petition for review of FERC orders related to tariff revisions filed by Southwest Power Pool, Inc. (“SPP”) to implement a formula rate for transmission service on behalf of Tri-County Electric Cooperative, Inc. (“Tri-County”), a non-jurisdictional transmission owner. 

On February 1, 2012, SPP filed tariff revisions to implement a formula rate for transmission service on behalf of Tri-County.  Xcel protested, arguing that FERC should only grant SPP’s filing if Tri-County agreed to make refunds or suspend the proposed rates during FERC’s review. FERC accepted SPP’s filing – to become effective April 1, 2012 as requested – and established hearing and settlement judge procedures, without refund. Xcel filed a request for rehearing and stay, arguing that FERC erred by not fully reviewing Tri-County’s revenue requirement before allowing the rates to take effect. Xcel requested that FERC accept and suspend SPP’s filing, subject to refund and hearing procedures.

On February 21, 2013, FERC issued its order on rehearing, stating that it erred in allowing the rates to go into effect without Tri-County’s commitment to refund any difference between the filed rate and the rate ultimately determined by FERC. However, FERC stated that it lacked jurisdiction under the Federal Power Act (“FPA”) to make Tri-County’s collected rates subject to refund and ordered SPP to either remove the tariff provisions with Tri-County’s rate or provide Tri-County’s voluntary commitment to make refunds. Xcel filed for rehearing and clarification, arguing that FERC had jurisdiction to order that the rates be suspended because the rates at issue belonged to SPP, not Tri-County. FERC denied rehearing and accepted SPP’s filing in which Tri-County agreed to pay prospective refunds. In doing so, FERC stated that, under 18 C.F.R. § 2.4(a), rate schedules cannot be suspended after they take effect, and in this case, FERC only had authority to order prospective relief under the FPA section 206.

Xcel petitioned the D.C. Circuit for review. The D.C. Circuit granted the petition in part, ruling that FERC had jurisdiction to order refunds because SPP, not non-jurisdictional Tri-County, was charging rates and providing service. In addition, the D.C. Circuit stated that FERC’s reliance on 18 C.F.R. § 2.4(a) was misplaced because FERC in fact has limited discretion to suspend effective rates and because, in this instance, FERC acknowledged an error of law in placing rates in effect without refund protection despite finding that the rates appeared unjust and unreasonable. The D.C. Circuit further stated that FPA section 309, which authorizes FERC “to perform any and all acts, and to prescribe, issue, make, amend, and rescind such orders” to carry out the FPA, provides FERC remedial discretion beyond prospective relief under FPA section 206. In addition, the D.C. Circuit stated that where FERC acknowledged that it erred, “its initial rate order is ultra vires” and FERC cannot further its error by its refusal to suspend the existing rate schedule. The D.C. Circuit remanded the case to FERC for “appropriate action.”

A copy of the opinion is available here.