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Duke Energy Corporation v. Federal Energy Regulatory Commission

United States Court of Appeals, District of Columbia Circuit

June 15, 2018

Duke Energy Corporation, et al., Petitioners
v.
Federal Energy Regulatory Commission, Respondent PJM Interconnection, L.L.C., Intervenor

          Argued October 24, 2017

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

          Matthew Allen Fitzgerald argued the cause for petitioners. With him on the briefs were Noel H. Symons and Katlyn A. Farrell.

          Elizabeth E. Rylander, Attorney, Federal Energy Regulatory Commission, argued the cause for respondent. With her on the brief were Robert H. Solomon, Solicitor, and Susanna Y. Chu, Attorney.

          Jeffrey W. Mayes argued the cause for intervenor PJM Interconnection, L.L.C., and amicus curiae Independent Market Monitor for PJM. With him on the brief were Michael J. Thompson and Paul M. Flynn. Ryan J. Collins entered an appearance.

          Before: Tatel, Griffith, and Millett, Circuit Judges.

          OPINION

          TATEL, CIRCUIT JUDGE

         To prepare for a bitterly cold day during the January 2014 "polar vortex, " Duke Energy Corporation, a generator of electricity, purchased exceptionally expensive natural gas, which it ended up not needing. Claiming that its regional transmission organization, PJM Interconnection, had directed it to purchase the gas and that the governing tariff provided for indemnification, Duke sought reimbursement for its losses. PJM rejected Duke's claim, as did the Federal Energy Regulatory Commission (FERC). For the reasons set forth in this opinion, we deny Duke's petition for review.

         I.

         The United States electrical grid has been described as "the most complex machine ever made." Phillip F. Schewe, The Grid: A Journey Through the Heart of Our Electrified World 1 (2007). Fortunately, only a few details are necessary to understand this case.

         PJM Interconnection, L.L.C., Intervenor here, a regional transmission organization, operates the transmission system spanning all or part of thirteen mid-Atlantic and Midwestern states. PJM also manages the markets in which electricity is bought and sold within this territory.

         Most electricity is traded in PJM's "day-ahead market." Generators offer electricity into that market by noon each day, including in their offers not only the price, but also the amount of notice they will need to provide the electricity. Based on predicted demand, PJM then derives a market-clearing price for all sales to be made the next day and, by 4 P.M., notifies generators whether and when they are scheduled to run. Even if a generator is scheduled to run, however, PJM may or may not call on it to provide energy, depending on demand and other variables.

         PJM also manages a yearly "capacity market." "The capacity market is designed to ensure sufficient resources are available to maintain the reliability of the system." Duke Energy Corp. v. PJM Interconnection, L.L.C., 151 FERC ¶ 61, 206, 62, 279 (2015) (Initial Order). Generators bid into that market to become Generation Capacity Resources-generators paid to offer all of their available capacity into the day-ahead market and to operate if called upon by PJM. As FERC explained while interpreting a similar tariff, "economic considerations are irrelevant to determining whether a unit is physically available." New England Power Generators Association, Inc. v. ISO New England Inc., 144 FERC ¶ 61, 157, 67, 902-03 (2013) (internal quotation marks omitted).

         Petitioners, Duke Energy Corporation and various other related corporate entities ("Duke"), are members of the PJM Tariff, a contract between PJM and the member utilities. Duke operates the Lee Facility, located 90 miles west of Chicago, which has eight eighty-megawatt natural-gas-fired combustion turbines. In 2014, the ...


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