On September 16, 2022, a panel of three judges on the United States Court of Appeals for the District of Columbia Circuit (“D.C. Circuit”) issued a decision in United Power, Inc. v. FERC affirming FERC’s exclusive jurisdiction over exit fees charged by Tri-State Generation and Transmission Association, Inc. (“Tri-State”), a Colorado generation and transmission cooperative.

Before 2019, Tri-State was exempt from FERC’s jurisdiction. However, in September 2019, Tri-State admitted its first non-utility member, Mieco, Inc. (“Mieco”), a natural gas supplier. United Power, Inc. (“United”) and La Plata Electric Association, Inc., two Tri-State members that opposed Mieco’s membership, subsequently filed complaints with the Colorado Public Utilities Commission (“CPUC”) requesting that the CPUC establish exit fees for their departure from Tri-State. Tri-State then filed a petition for declaratory order (“Petition”) requesting that FERC issue an order stating that 1) Tri-State is subject to FERC’s jurisdiction, and 2) FERC has exclusive jurisdiction over any exit charge levied by Tri-State. In response to the Petition, FERC issued an order (“Declaratory Order”) holding that because of Tri-State’s admission of Mieco, Tri-State is no longer exempt from FERC’s jurisdiction. FERC further concluded that it holds concurrent jurisdiction with the CPUC over exit charges. On rehearing of the Declaratory Order, FERC reaffirmed its jurisdiction over Tri-State and modified its finding with respect to exit fees, ultimately finding that any exit fee charged by Tri-State is subject to FERC’s exclusive jurisdiction.

On appeal to the D.C. Circuit, United argued that FERC did not have jurisdiction over Tri-State or exclusive jurisdiction over exit fees charged by Tri-State. The D.C. Circuit rejected both of United’s arguments. The D.C. Circuit noted that it was reasonable for FERC to assert jurisdiction over Tri-State while proceedings addressing the challenges to Mieco’s membership remained ongoing at the CPUC. The D.C. Circuit stated that it did not matter that “FERC might have to revisit its determination at some later, indefinite time[] [because] [p]roviding even temporary clarity to the parties is useful.” Concerning the exit fee issue, the D.C. Circuit agreed with FERC that exit fees are rates charged “in connection with” the transmission or sale of electric energy and are subject to FERC’s exclusive jurisdiction. The D.C. Circuit explained that exit fees are “an important part of the integrated bargain to which a firm agrees when it becomes part of a generation and transmission cooperative[] [and] [i]f there were no obligation to pay an equitable exit charge . . . then the cost of electricity under the requirements contract surely would be higher.”

As a result of the D.C. Circuit’s ruling, FERC has exclusive jurisdiction to determine the justness and reasonableness of Tri-State’s exit fees. The D.C. Circuit’s ruling could affect other electric cooperatives that fall under FERC’s jurisdiction and could factor into decisions by distribution cooperative utilities in other states to leave their cooperative power suppliers.

You can find a copy of the D.C. Circuit opinion here.