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TNA Merchant Projects, Inc. v. Federal Energy Regulatory Commission

United States Court of Appeals, District of Columbia Circuit

May 19, 2017

TNA Merchant Projects, Inc., Petitioner
Federal Energy Regulatory Commission, Respondent Bonneville Power Administration, Intervenor

          Argued March 21, 2017

         On Petitions for Review of Orders of the Federal Energy Regulatory Commission

          James K. Mitchell argued the cause and filed the cause for petitioner.

          Susanna Y. Chu, Attorney, Federal Energy Regulatory Commission, argued the cause for respondent. With her on the brief was Robert H. Solomon, Solicitor.

          J. Courtney Olive, Special Assistant U.S. Attorney, Bonneville Power Administration, argued the cause for intervenor. With him on the brief was Jennifer A. Gingrich, Attorney Advisor. Barbara C. Biddle and Jeffrey A. Clair, Attorneys, U.S. Department of Justice, and Mary K. Jensen, Attorney, Bonneville Power Administration, entered appearances.

          Before: Pillard, Circuit Judge, and Edwards and Sentelle, Senior Circuit Judges.


          Edwards Senior Circuit Judge.

         In 2008 the Federal Energy Regulatory Commission ("FERC" or "Commission") invoked Section 205 of the Federal Power Act (the "Act" or "FPA") to order Chehalis Power Generating, L.P., ("Chehalis") to refund a portion of the rates it had charged a customer because they were not just and reasonable. Several years later, FERC had second thoughts. It determined that Chehalis should not, after all, have been required to pay these funds and held that Chehalis ought to recover funds with interest. But Bonneville Power Administration ("Intervenor"), the customer to whom Chehalis had paid the refund, had no interest in voluntarily returning the money. Chehalis sought relief from FERC by filing a Motion for an Order Requiring Recoupment of Payments. FERC, however, in a perplexing decision, held that it could not order recoupment because the Commission's refund authority does not extend to exempt public utilities such as the Intervenor Bonneville. We hold that FERC erred when it held that it lacked the authority to grant the Order Requiring Recoupment.

         Section 309 of the FPA, which permits FERC to "perform any and all acts . . . [as may be] necessary or appropriate to carry out [the Act's] provisions, " 16 U.S.C. § 825h, clearly affords FERC the authority necessary to make Chehalis whole. In concluding otherwise, FERC looked to §§ 201(f) and 205 which prohibit it from ordering governmental entities, such as Bonneville, to refund "rates or charges" that FERC determines are "not justified." 16 U.S.C. § 824d(e); see 16 U.S.C. § 824(f). FERC determined that because it could not require Bonneville to grant "refunds" under § 205, it was also barred from granting "recoupment" of a refund in favor of Chehalis. This reasoning does not hold up. The strictures of §§ 201(f) and 205 place no limits on FERC's ability to grant this form of relief.

         FERC clearly had jurisdiction over the subject of this dispute - i.e., the funds that it ordered Chehalis to pay to Bonneville in refunds pursuant to § 205 of the FPA. Therefore, FERC retained the authority to order Bonneville to return the funds when the agency acknowledged that its initial order was mistaken. Section 309 vests the Commission with broad remedial authority, including the authority to grant recoupment when it is justified. And § 201(f) does not limit the authority of FERC to grant relief under § 309 with respect to matters that are beyond the strictures of § 201(f) and § 205. An order of recoupment, as distinguished from an order to refund under § 205, is beyond the strictures of § 201(f) and § 205.

         We uphold FERC's determination that, on the record of this case, recoupment of funds by Chehalis is appropriate. We reverse the Commission's determination that the Act does not grant the agency authority to order Bonneville to repay the funds that it should not have received. However, we remand the case to allow the Commission to determine whether it should apportion its recoupment order. FERC amply explained why recoupment is justified in this case, but in assessing the equities the Commission did not consider whether something less than full recoupment might be warranted.

         I. BACKGROUND

         Chehalis operates an electric generating plant that is interconnected with the electric transmission system of Intervenor, a federal agency within the Department of Energy. See TNA Merchant Projects, Inc. v. FERC, 616 F.3d 588, 589- 90 (D.C. Cir. 2010); Br. for FERC at 4. Since the commencement of this litigation, Chehalis's corporate parent, TNA Merchant Projects, Inc., the Petitioner in this case, has sold its equity ownership interests in Chehalis but retained the right to litigate this matter. Br. for Petitioner at 8. For convenience's sake we, like the parties, will refer to Petitioner as Chehalis.

         Prior to 2005, Chehalis supplied reactive power to Intervenor pursuant to an Interconnection Agreement that did not provide for Chehalis to be compensated for this service. TNA Merchant Projects, Inc., 616 F.3d at 590. In May 2005, Chehalis filed a proposed rate schedule with FERC, which set forth "Chehalis' rates for the provision of Reactive Power Service, " that would allow it to charge Intervenor for its services for the first time. See id. (quoting Chehalis Rate Schedule, Joint Appendix ("JA") 10). The accompanying letter informed FERC ...

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