United States: FERC Corrects Legal Error On Remand From D.C. Circuit, Orders SPP To Issue Refunds Collected For Non-Jurisdictional Co-Op's Formula Rate

On July 21, 2016, FERC issued an order in a proceeding on remand from the United States Court of Appeals for the District of Columbia Circuit ("D.C. Circuit"). In its order, FERC acknowledged that it had committed legal error by accepting, without refund commitment, proposed revisions to the Southwest Power Pool Inc.'s ("SPP") Open Access Transmission Tariff ("Tariff") implementing a formula rate for Tri-County Electric Cooperative Inc. ("Tri-County"), and had failed to correct this legal error on rehearing. To remedy its error, FERC directed SPP to bill Tri-County for certain amounts collected under Tri-County's formula rate, and issue refunds to ratepayers.

Section 201(f) of the Federal Power Act ("FPA") generally excludes electric cooperatives such as Tri-County from FERC's ratemaking jurisdiction. However, federal courts have determined that FERC may nonetheless review the rates of such non-jurisdictional entities if those rates affect FERC-jurisdictional transactions or if the entity is part of a FERC-jurisdictional Regional Transmission Organization ("RTO") or Independent System Operator ("ISO"), in order to ensure that the RTO's or ISO's rates are just and reasonable. Federal courts have also found that FERC does not have authority under the FPA to order these non-jurisdictional entities to pay refunds. As a result of these determinations, in cases where FERC requires additional procedures (e.g., hearing and settlement judge procedures) to evaluate the justness and reasonableness of a proposed rate for a non-jurisdictional entity, FERC's practice has been to accept the RTO's or ISO's rate filings to take effect subject to refund, pending the outcome of the proceeding, only when the non-jurisdictional entity voluntarily agrees to make refunds in the event that FERC, upon its subsequent review, determines that the rate as proposed is not just and reasonable. If the non-jurisdictional entity does not agree to such refund protection, FERC's practice has been to delay the effective date of the proposed rate while FERC conducts its review.

In 2012, SPP filed revisions to its Tariff to implement a formula rate for Tri-County—an electric cooperative excluded from FERC's jurisdiction under Section 201(f) of the FPA. FERC accepted SPP's filing and set it for hearing and settlement judge proceedings, and granted an effective date of April 1, 2012. However, at the time of FERC's acceptance, Tri-County had not voluntarily committed to refund the difference between the as-filed rate and the rate ultimately found to be just and reasonable by FERC. As a result, Xcel Energy Services Inc. ("Xcel") and other parties sought rehearing of FERC's hearing order approving Tri-County's rate and argued that FERC did not follow its normal practice, described above.

On rehearing in 2013, FERC acknowledged that it had erred in allowing SPP's rate proposal for Tri-County's formula rate to go into effect April 1, 2012, without a commitment from Tri-County to refund the difference between the as-filed rate and the rate ultimately found to be just and reasonable, and found that the effective date should instead have been specified in an order following hearing and settlement judge procedures. In light of these findings on rehearing, FERC found that it would not be just and reasonable to allow SPP to continue to pass through Tri-County's proposed rate prior to FERC's order establishing a just and reasonable rate. Accordingly, FERC directed that SPP either: (1) remove Tri-County's rate from its Tariff until FERC issued an order following hearing proceedings; or (2) submit a compliance filing providing, prospective from the day after its order on rehearing, a voluntary commitment by Tri-County to refund any difference between the proposed rate and the rate ultimately found to be just and reasonable. On March 19, 2013, SPP submitted a voluntary commitment from Tri-County.

Several parties, again including Xcel, requested rehearing of FERC's determination in its 2013 rehearing order, arguing, among other things, that FERC's prospective remedy was insufficient, and that FERC should have used its equitable discretion to apply relief retroactively to remedy the harm caused by its legal error. In response, FERC stated that the only remedy available at the time of the 2013 rehearing order was the prospective remedy it adopted, and that FERC could not provide retroactive relief back to April 1, 2012 because such action, according to FERC, would be inconsistent with the FPA.

In a decision from the D.C. Circuit remanding the case back to FERC, the court found that "[FERC] appears, from the record before the court, to have misapprehended its remedial powers and thus arbitrarily declined to weigh the equities underlying [protesters'] request for retroactive relief." The court concluded that section 309 of the FPA provides FERC with broad remedial authority, including the ability to remedy its errors retroactively, and that FERC had yet to evaluate the equities of providing refund protection to recover unlawful rates in the current proceeding.

In its most-recent, July 21, 2016 order, FERC exercised its equitable discretion and directed SPP to bill Tri-County for the amounts collected under Tri-County's formula rate that SPP collected between April 1, 2012 and February 21, 2013, with interest, and issue refunds to ratepayers. FERC stated that this remedy was designed "to put the parties in the positions in which they would have been absent Commission legal error." FERC cited judicial precedent supporting its conclusion that, where FERC has committed legal error, it may order refunds and authorize an RTO like SPP to seek recoupment from non-jurisdictional customers (such as Tri-County's). FERC noted that the D.C. Circuit in its remand order had instructed FERC to "evaluate the equities" of providing refund protection to recover unlawful rates caused by its legal error, and that, when applying such an analysis to the present circumstances, "equity favors requiring SPP to seek recoupment." FERC added that this action was consistent with its general policy of ensuring that the parties harmed by its legal errors are put in the same position in which they would have been had FERC not committed its legal error.

A copy of FERC's order may be found here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Christopher Zentz
In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.