On July 7, 2023, the U.S. Court of Appeals for the District of Columbia Circuit (“D.C. Circuit”) issued an opinion rejecting petitioner Hecate Energy Green County 3 LLC’s (“Hecate”) claim that the New York Independent System Operator (“NYISO”) tariff did not contain sufficient detail to put it on notice that NYISO would assess network upgrade costs resulting from non-jurisdictional projects.  Instead, the Court agreed with FERC that because its tariff gave “fair notice,” NYISO “had not impermissibly adopted a practice that was not in its tariff.”

This dispute began when Hecate, an electric generation developer, filed a complaint against NYISO with FERC, arguing that NYISO impermissibly charged a rate not on file with FERC when NYISO assessed the developer $10 million in network upgrade costs needed to interconnect Hecate’s solar facility with the NYISO transmission grid.  These costs were largely attributable to the inclusion of six non-jurisdictional facilities in NYISO’s interconnection study for Hecate.  Hecate argued that the NYISO tariff did not provide notice that non-jurisdictional projects would be included in its interconnection study because the underlying transmission owner’s practice of reporting non-jurisdictional projects to NYISO when they are considered “firm” was not expressly included in the NYISO tariff, in violation of section 205(c) of the Federal Power Act (“FPA”).  FERC rejected Hecate’s argument; finding that the NYISO tariff provided sufficient notice that non-jurisdictional projects would be included in the study.

The D.C. Circuit, upon review of the tariff language, held that the tariff provided Hecate with “fair notice” that non-jurisdictional facilities would be included as part of NYISO’s study.  The Court agreed with FERC that the tariff’s language indicated that a base case study would include data from the last Annual Transmission Reliability Assessment, which, according to a different section of the tariff, included “all other changes to existing facilities . . . that are . . . reported by Market Participants to the [System Operator] as scheduled to occur during the five[-]year cost allocation study planning period.”  From there, the Court reasoned that non-jurisdictional facilities counted as such “changes,” which it supported by a “catch all” provision in another part of the tariff that the Court admitted “does not cover the non jurisdictional generation project at issue here” but nevertheless found that it “strongly suggest[s] that generation projects ‘identified as firm’ by a transmission owner (like the projects at issue here) fall within the catch-all in subsection (vii).”  Defending its holding, the Court cited the Commission’s “broad discretion” under case law defining what is commonly referred to as the rule of reason, which requires practices that “affect rates and service significantly” and are “realistically susceptible of specification” must be filed in a jurisdictional tariff.  In response to Hecate’s claim that the transmission owner’s practice was realistically susceptible of specification, the Court explained that “even specifiable practices that significantly affect rates need not be included if they are clearly implied by the tariff’s express terms[,]” holding that the practice at issue was clearly implied by the express terms of the NYISO tariff.

The opinion, issued in Case No. 21-1192, can be found here.