On April 4, 2017, the United States Court of Appeals for the
District of Columbia Circuit ("DC Circuit") held that
FERC had erred in finding that the terms of an interconnection
agreement between NextEra Desert Center Blythe, LLC
("NextEra"), Southern California Edison Company
("SCE"), and the California Independent System Operator
("CAISO") clearly and unambiguously bars NextEra from
receiving Congestion Revenue Rights ("CRR"). The DC
Circuit remanded the case to FERC for consideration in light of the
The interconnection agreement at issue in the case is intended
to connect two NextEra utility-scale solar power plants –
Genesis Solar Energy Center and McCoy Solar Energy Center –
to SCE's transmission facilities being operated by CAISO.
The interconnection agreement identifies the need for
permanent transmission upgrades ("Upgrades") to reliably
deliver power from NextEra's solar plants to SCE. Based
on concern that the Upgrades would not be complete in time for
NextEra to deliver the energy to SCE on schedule, CAISO and SCE
identified an "Interim Project" that would allow NextEra
to deliver energy to SCE while the Upgrades are being
In December 2014, CAISO informed NextEra that the congestion
cost associated with the Interim Project would result in the
release of CRRs. In response, NextEra claimed it was entitled
to receive CRRs associated with the Interim Project under section
36.11 of CAISO's Tariff, which provides for the allocation of
CRRs to "Project Sponsors of Merchant Transmission
Facilities." Upon CAISO's refusal to allocate
NextEra's requested CRRs, NextEra filed a complaint with
On June 3, 2015, FERC denied NextEra's complaint on a
finding that NextEra is ineligible for CRRs in connection with the
Interim Project. Specifically, FERC found that Article 11.4
of the interconnection agreement provides that CRRs under the CAISO
Tariff are only available to NextEra "in lieu of a refund of
the cost of Network Upgrades." Given that the Interim
Project does not qualify as a Network Upgrade under the CAISO
Tariff, FERC concluded that NextEra was not eligible for a refund,
and thus not eligible for CRRs in lieu of a refund. FERC
explicitly declined to address whether NextEra would otherwise be
entitled to CRRs under CAISO Tariff section 36.11 on grounds that
the provision is "inapposite" and "does not
apply" to the Interim Project. NextEra filed a request
for rehearing, which FERC rejected on the same rationale.
The DC Circuit found "a simple logical flaw" in
FERC's interpretation of the interconnection agreement.
Specifically, the DC Circuit found that Article 11.4 of the
interconnection agreement does not clearly and unambiguously mean
that a Network Upgrade is the only way a sponsor may qualify for
receipt of CRRs. The DC Circuit noted further that FERC
elected not to consider NextEra's arguments for entitlement to
CRRs under section 36.11 of the CAISO Tariff. Having found
that FERC's reason for denying NextEra's complaint was a
flawed interpretation of CAISO's Tariff and the interconnection
agreement, the DC Circuit concluded that the case required a remand
for further consideration.
The DC Circuit emphasized that its finding of ambiguity does not
prejudge the conclusion that FERC should reach on remand. The
DC Circuit opinion is available here.
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