United States Court of Appeals, District of Columbia Circuit
Petition for Review of Orders of the Federal Energy
Jeffrey K. Janicke argued the cause for petitioner. With him
on the briefs were William T. Miller and Kimberly B. Frank.
John M. Adragna entered an appearance.
R. Fulton, Attorney, Federal Energy Regulatory Commission,
argued the cause for respondent. On the brief were Robert H.
Solomon, Solicitor, and Lisa B. Luftig, Attorney.
Lee Shepherd, Jr. argued the cause for intervenor. With him
on the brief were James P. Danly and Thomas Orvald.
Before: Garland, Chief Judge, and Griffith and Kavanaugh,
Griffith, Circuit Judge
Federal Energy Regulatory Commission determined that Florida
Power & Light Company overcharged Seminole Electric
Cooperative, Inc. for electricity and ordered a refund.
Seminole claims that it was entitled to a larger refund and
petitions for review. We deny the petition.
transmits electricity to its electrical-cooperative customers
by purchasing transmission services from Florida Power. For
every hour of the day, Seminole tells Florida Power the
amount of electricity it expects its customers to use. When
Seminole's customers take more electricity from the
transmission system than expected, Florida Power must make up
the difference with extra generation. By the same token, when
Seminole's customers take less electricity than expected,
Florida Power must find ways to deal with the excess
generation. Either way, Florida Power incurs extra costs to
provide this so-called "energy imbalance service, "
which are passed along to Seminole according to a formula set
forth in Schedule 4 of the tariff that governs the rates
Florida Power may charge.
4, summarized in the following table and reproduced in
relevant part below,  divides up
charges for energy imbalance service into three tiers or
"deviation bands:" a tier with a low rate that
applies to deviations of up to 1.5% (with a minimum deviation
of 2 megawatts); one with a medium rate that applies to
deviations greater than 1.5% up to 7.5% (or greater than 2
megawatts up to 10 megawatts); and one with a high rate that
applies to deviations above 7.5% (or above 10 megawatts).
Charge for Electricity
Between 0% and 1.5%, with a minimum of 2 megawatts
100% of incremental cost
Greater than 1.5% up to 7.5%, or greater than 2
megawatts up to 10 megawatts
110% of incremental cost
Above 7.5%, or above 10 megawatts
125% of incremental cost
filed a complaint with FERC alleging that Florida Power was
violating Schedule 4 in two respects. First, Seminole claimed
that Florida Power had been using the wrong measure for four
and a half years to determine which tier's rate applies.
Specifically, Florida Power would charge Seminole at a
certain tier's rate if Seminole's usage crossed
either the percentage or the megawatt threshold for
that tier, rather than wait for the usage to cross
both thresholds before imposing that rate. A simple
example illustrates the problem: Suppose usage by
Seminole's customers deviated by 2.5% from what was
scheduled, but that-in absolute terms-the deviation amounted
only to 1.9 megawatts. Florida Power would charge Seminole at
the second tier's rate, rather than the first tier's
rate, simply because the deviation (i.e, the imbalance)
exceeded 1.5%. According to Seminole, that was impermissible
because the tariff allowed charges at the second tier's
rate only when usage had deviated by more than 1.5% (in
relative terms) and more than 2 megawatts (in
absolute terms). FERC ultimately agreed with Seminole that
Florida Power's practice violated the tariff and that the
co-op had been overcharged about $3.18 million-a finding that
is not disputed by any party and is not at issue in this
case. However, the remedy for that violation is.
ordered Florida Power to refund the overcharges for a period
going back 24 months from when Seminole first complained
about them. FERC based its decision to restrict the refund
period in this way on a provision of the companies'
service agreement, reproduced below,  that establishes the process for
challenging bills issued pursuant to the tariff. As FERC
understood that provision, Seminole was barred from
challenging any bill that it waited longer than 24 months to
contest. Quite apart from its reading of how the time bar
works, FERC argues that it would have exercised its
discretion to restrict Seminole's refund anyway on the
ground that the co-op should have discovered the overcharges
earlier. Seminole challenges FERC's decision to limit the
complaint to FERC alleged a second way that Florida Power was
violating the tariff: Florida Power applied the rate of the
highest applicable tier to the entirety of
Seminole's imbalance, rather than apply each tier's
rate to the portion of the imbalance that fell within each
tier. To simplify what may seem at first blush a complicated
matter, imagine that Seminole scheduled 100 megawatts of
electricity to be delivered, but ended up using 111
megawatts, meaning that its customers used 11% more
electricity than it had scheduled on their behalf. In that
scenario, Florida Power would charge the highest tier's
rate (125% of marginal cost) on all of
Seminole's 11% deviation-a practice FERC refers to as
is not allowed under Seminole's reading of the tariff.
According to Seminole, in this example Florida Power must
charge the first tier's rate (100% of marginal cost) on
the first 1.5 percentage points of Seminole's deviation;
the second tier's rate (110% of marginal cost) on the
portion of Seminole's deviation that is greater than 1.5%
up to 7.5%; and the third tier's rate (125% of marginal
cost) only on the very last portion of Seminole's
deviation, above 7.5% up to 11%. In Seminole's view,
charges for energy imbalance service work like the tax code:
you pay the highest rate only on that portion of your income
that falls into the highest tax bracket, not on all of your
income. FERC refers to this ...