On November 10, 2022, the District of Columbia Court of Appeals — the District’s highest court — granted in full the petition for review filed by the D.C. Office of People’s Counsel (“OPC”), reversing and remanding D.C. Public Service Commission (“PSC”) rulings with respect to two aspects of its approval of Potomac Electric Power Company’s (“Pepco”) proposed multi-year rate increase.

The first issue concerned whether D.C. ratepayers should be on the hook for costs incurred by Pepco to clean up PCB contamination of the Anacostia River emanating from Pepco’s Benning Road power station.  The commission had rejected OPC’s argument that an earlier, PSC-approved settlement agreement banned the inclusion in rates of environmental remediation investigation and feasibility study costs. The court reversed, rejecting claims that the commission’s reading of the settlement language was entitled to deference, and remanded for a determination of the proper allocation of the environmental costs.

The second issue concerned the commission’s approval of a Pepco energy efficiency program notwithstanding the company’s failure to seek program approval from the District’s Sustainable Energy Utility before seeking to include program costs in rates. The court found that the commission’s decision was at odds with the plain language of the statute.

Spiegel partner Scott Strauss argued the case and was assisted by associate Amanda Drennen. The court’s decision is linked below.

Spiegel & McDiarmid LLP attorneys achieved a significant victory that should reduce the bills paid by New England wholesale electric ratepayers to retain two gas-fired generators and their affiliated fuel supplier. In 2018, the owner of Mystic Units 8 & 9 moved to retire the generators, but the system operator, ISO New England (“ISO-NE”) found that the units were needed for reliability because they receive their fuel from the Everett LNG Terminal (“Everett”), and thus relieve pressure on the New England’s constrained interstate gas pipeline system. ISO-NE and Mystic’s owner negotiated a contract to retain the generators under cost-of-service rates from June 2022 through May 2024 and filed the arrangements with the Federal Energy Regulatory Commission (“FERC”).

Spiegel attorneys Scott Strauss, Jeff Schwarz, and Amber Martin Stone represented the Connecticut Public Utilities Regulatory Authority, Connecticut Department of Energy and Environmental Protection and Connecticut Office of Consumer Counsel in the evidentiary hearing before FERC and on appeal of aspects of FERC’s decision to the D.C. Circuit. On appeal, the Connecticut parties briefed and argued the case jointly with the Massachusetts Attorney General and New England States Committee on Electricity (collectively, State Petitioners). Jeff Schwarz argued the case for State Petitioners in the D.C. Circuit.

In a lengthy August 23 opinion by Chief Judge Srinivasan, and Judges Henderson and Rao, the D.C. Circuit granted State Petitioners’ petitions for review, denied Mystic’s cross-petitions, and remanded the matter back to FERC. The panel agreed with State Petitioners that FERC acted arbitrarily in holding New England ratepayers responsible for 91 percent of Everett’s fixed operating costs—the entire amount allocated to Everett’s vaporized LNG sales—even though Everett also sells vapor to customers besides Mystic. The panel also found arbitrary FERC’s claim that while it had jurisdiction to approve the Mystic agreement’s pass-through of Everett costs, the Commission lacked jurisdiction to require inclusion of a claw-back provision mandating refunds of those costs in the event that Mystic (or Everett) continues operating when the agreement ends. In contrast, the court affirmed the aspects of FERC’s decisions challenged by Mystic, including the Commission’s decision to reduce the generating units’ rate base and to exclude the Mystic owner’s cost of purchasing the Everett facility.

A copy of the decision is linked below.

Spiegel & McDiarmid LLP attorneys achieved another milestone in a lawsuit brought by the Northern California Power Agency (“NCPA”) and the cities of Redding, Roseville and Santa Clara, California, to recover overcharges imposed on them by the U.S. Bureau of Reclamation under the Central Valley Project Improvement Act (“CVPIA”).

NCPA and the cities buy hydroelectric power generated by the Bureau’s Central Valley Project (“CVP”) in California and pay prices that include an allocated share of the CVP’s capital costs. Since Congress first authorized CVP development in the 1930s, the Bureau has performed several interim cost allocation studies, most recently in the 1970s. The studies allocated CVP costs among the project’s water and power contractors and those project purposes (such as flood control) that are funded by the federal government. To develop annual water and power rates, the Bureau updates the allocations every year and applies them to current plant balances.

To help fund efforts to mitigate the CVP’s environmental impact, the CVPIA imposes additional charges on CVP water and power contractors. It caps water user charges and ties them to the amount of water delivered each year. It also requires that, to the greatest extent possible, CVPIA charges must be assessed in the same proportion, on a ten-year average basis, as water and power users’ respective allocations for repayment of CVP capital costs.

NCPA and the Cities sued the United States in 2014, alleging that the Bureau violated the CVPIA proportionality requirement and instead charged power contractors excessive amounts to make up for reduced collections from water users in drought years. The Court of Federal Claims dismissed the suit, finding that the proportionality requirement was not binding. N. Cal. Power Agency v. United States, 139 Fed. Cl. 74 (2018).

NCPA hired Spiegel & McDiarmid to appeal, and in November 2019 the U.S. Court of Appeals for the Federal Circuit reversed the decision. The court held that the CVPIA’s proportionality limit is binding and remanded for the trial court to quantify the overcharge damages. N. Cal. Power Agency v. United States, 942 F.3d 1091 (Fed. Cir. 2019). In January 2020, the Bureau published a final cost allocation for the CVP.

On remand, plaintiffs and the United States disagreed about how to calculate the proportional charges the Bureau should have levied. Plaintiffs argued for measuring proportionality using the cost allocations that were in effect during the relevant historical periods. The United States contended that the historical allocations were in error and should be revised to remove certain costs from the amounts allocated to water users. Each side moved for summary judgment, asking the court to rule that its method was correct.

In an August 18, 2022 opinion, the court agreed with NCPA and the cities and granted their motion. Under the plaintiffs’ approach endorsed by the court, plaintiffs’ damages for fiscal years 2008 through 2020 are expected to exceed $81 million.

Spiegel attorneys Lisa Dowden, Jeff Schwarz, Scott Strauss, Peter Hopkins, Amber Martin Stone and Amanda Drennen represented NCPA and the cities. Jeff Schwarz argued the appeal before the Federal Circuit and the summary judgment motions on remand.

The August 18 decision is linked below.

The D.C. Circuit vacated and remanded Federal Energy Regulatory Commission (“FERC”) Opinions No. 569 and 569-A, which had established a new way to set the allowed profit (return on equity, or “ROE”) for electric transmission investment in the extensive Midcontinent Independent System Operator (“MISO”) area.

Spiegel partner David Pomper argued the ROE methodology issues on behalf of our clients (Mississippi and Missouri state regulators and municipal transmission customers) and a broad coalition of other customer representatives. Judge Walker, writing for a unanimous panel, agreed with his argument that FERC arbitrarily relied on a Risk Premium model to set ROEs after previously (and forcefully) rejecting that model.  Because the Risk Premium model was integral to the challenged methodology, the court vacated FERC’s decision.

The matter now goes back to FERC, which will have to re-evaluate its ROE methods. The result should be a further ROE reduction, beyond the substantial reduction already ordered by FERC using its flawed methodology. Because FERC has used this case to establish ROE methods for all public utilities and gas pipelines, this legal victory should have a positive impact on ratepayers nationwide.

Bayne, Bogorad, Nurani, Pomper, Schwarz, Strauss Highlighted

Spiegel & McDiarmid LLP thanks our clients for their continued support and confidence as reflected in the recognition the firm has recently received from Chambers USA.

For the ninth consecutive year, Chambers & Partners has recognized Spiegel & McDiarmid LLP as one of the nation’s leading law firms in the area of “Energy: Electricity (Regulatory & Litigation) — Nationwide.” Chambers also recognizes Cindy Bogorad, David Pomper and Scott Strauss individually as among the top lawyers in that category. Chambers ranks “the world’s best lawyers and law firms based on in-depth, objective research” and extensive interviews with clients and colleagues. Their guide is considered the premier survey of attorneys and law firms in the country.  We are gratified by the comments we received from clients and others as reported in Chambers USA.  You may read the full review on Chambers’s website.

In addition, for the year 2022, Washington DC Super Lawyers has again selected Cindy Bogorad, David Pomper, Jeff Schwarz and Scott Strauss as “Super Lawyers,” and Jeff Bayne and Latif Nurani as “Rising Stars.”  Super Lawyers, a Thomson Reuters business, is a rating service of outstanding attorneys from more than seventy practice areas who have attained a high degree of peer recognition and professional achievement.  Super Lawyers are selected through a process involving independent research, peer nominations and peer evaluations.

On January 25, 2022, finding that FERC’s decisions “present a troubling pattern of inattentiveness to potential anti-competitive effects of PG&E’s administration of its open-access Tariff,” the D.C. Circuit issued a combined opinion granting San Francisco’s petitions for review of two separate Federal Energy Regulatory Commission (“FERC”) orders. The two cases involved longstanding disputes with Pacific Gas and Electric Company (“PG&E”) over the city’s ability to access PG&E’s distribution system and receive wholesale distribution service on fair terms. The court vacated both of FERC’s rulings which had been in PG&E’s favor.

The first case involved a PG&E requirement that San Francisco install unnecessary and expensive facilities in order to interconnect new, relatively small city customers to PG&E’s distribution system. These unnecessary facilities would also be oversized and would take up valuable space that the city could otherwise use for things such as childcare at affordable housing facilities and parking at healthcare centers. The D.C. Circuit found that FERC had failed to engage in reasoned decision-making in allowing PG&E to impose this requirement, and that PG&E had not identified any safety, reliability, or other reasons to support it.

The second case involved a “grandfathering” provision in PG&E’s Tariff that gave San Francisco the right to serve certain customers. The court found that FERC had ignored the clear language of the Tariff and improperly allowed PG&E to refuse to provide grandfathered Tariff service to certain of San Francisco’s longstanding customer base—city agencies, tenants on city properties, and entities providing service in coordination with the city.

The court remanded both cases to FERC for further proceedings consistent with the court’s opinion.
Spiegel attorneys William Huang, Katie Mapes and Jeff Bayne represented the city on these cases. You may read the decision in City & Cnty. of S.F. v. FERC, 24 F.4th 652 (D.C. Cir. 2022), at the link below.

Bogorad, Pomper, Strauss Highlighted

Spiegel & McDiarmid LLP thanks our clients for their continued support and confidence as reflected in the recognition the firm has recently received from Chambers USA.

For the eighth consecutive year, Chambers & Partners has recognized Spiegel & McDiarmid LLP as one of the nation’s leading law firms in the area of “Energy: Electricity (Regulatory & Litigation) — Nationwide.” Chambers also recognizes Cindy Bogorad, David Pomper, and Scott Strauss individually as among the top lawyers in that category. Chambers ranks “the world’s best lawyers and law firms based on in-depth, objective research” and extensive interviews with clients and colleagues. Their guide is considered the premier survey of attorneys and law firms in the country.  We are gratified by the comments we received from clients and others as reported in Chambers USA.  You may read the full review on Chambers’s website.

In addition, for the year 2021, Washington DC Super Lawyers has again selected Cindy Bogorad, David Pomper, Jeff Schwarz and Scott Strauss as “Super Lawyers,” and Jeff Bayne and Latif Nurani as “Rising Stars.”  Super Lawyers, a Thomson Reuters business, is a rating service of outstanding attorneys from more than seventy practice areas who have attained a high degree of peer recognition and professional achievement.  Super Lawyers are selected through a process involving independent research, peer nominations and peer evaluations.

On February 19, 2021, the U.S. Court of Appeals for the District of Columbia Circuit issued an opinion affirming Federal Energy Regulatory Commission (FERC) orders reducing the return on equity (“ROE”) adders paid to three stand-alone transmission companies (“transcos”) operating in the Midcontinent Independent System Operator (MISO) footprint. Int’l Transmission Co. v. FERC, No. 19-1190 (D.C. Cir. Feb. 19, 2021).

The appeal stemmed from a 2018 Federal Power Act section 206 proceeding in which Spiegel attorneys Cindy Bogorad, David Pomper and Steve Pearson represented a coalition of MISO transmission customers challenging the ROE adders that three MISO transcos (collectively, the ITC Transcos) were receiving based on their past independence from electricity market participants. FERC had awarded 100 basis point adders to Michigan’s International Transmission Company and Michigan Electric Transmission Company, and a 50 basis points adder to ITC Midwest. The customer coalition had argued that the ITC Transcos lost their independence as a result of a merger through which they were indirectly acquired by two foreign companies — Fortis, Inc. and GIC (Ventures) Pte. Ltd. — whose generation and distribution affiliates participate in Eastern Interconnection energy and capacity markets. FERC had found that the transmission companies’ independence from other market participants had been compromised (though not eliminated) by the merger, and reduced the ITC Transcos’ ROE adders to 25 basis points.

The ITC Transcos challenged FERC’s decision at the D.C. Circuit, arguing primarily that FERC’s determination should have been based on an analysis of the transcos’ geographic proximity to affiliated generation, rather than the broader review of the ITC Transcos’ independence that FERC actually employed. Spiegel attorneys Cindy Bogorad, David Pomper and Amber Martin Stone, along with other parties’ counsel, drafted an intervenor brief defending FERC’s orders.

In the February 19 opinion, the court affirmed FERC’s orders, finding that FERC had reasonably determined that the ITC Transcos’ independence had been compromised. The court’s opinion recited intervenors’ showing that ITC had affiliates “located in [MISO-]bordering areas close enough to be affected by [the ITC Transcos’] decisions.” The court also rejected the ITC Transcos’ contention that FERC’s analysis was limited to a strictly geographic test. The decision preserves substantial refunds and rate reductions resulting from the FERC orders appealed from. A copy of the court’s opinion is available here.

Bogorad, Strauss Ranked

Spiegel & McDiarmid LLP wishes to thank our clients for their continued support and confidence as reflected in the recognition the firm has recently received from Chambers Global.

Chambers & Partners has again recognized Spiegel & McDiarmid LLP as one of the nation’s leading law firms in the area of “Energy: Electricity (Regulatory & Litigation) — Nationwide.” Chambers also recognizes Cindy Bogorad and Scott Strauss individually as among the top lawyers in that category.

Chambers ranks “the world’s best lawyers and law firms based on in-depth, objective research” and extensive interviews with clients and colleagues. Their guide is considered the premier survey of attorneys and law firms in the country.  We are gratified by the comments we received from clients and others as reported in Chambers Global.  You may read the full review on Chambers’s website.