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NextEra Desert Center Blythe, LLC v. Federal Energy Regulatory Commission

United States Court of Appeals, District of Columbia Circuit

April 4, 2017

NextEra Desert Center Blythe, LLC, Petitioner
v.
Federal Energy Regulatory Commission, Respondent California Independent System Operator Corporation and Southern California Edison Company, Intervenors

          Argued March 2, 2017

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

          John N. Estes III argued the cause for petitioner. With him on the briefs were Gerard A. Clark and John Lee Shepherd, Jr.

          Elizabeth E. Rylander, Attorney, Federal Energy Regulatory Commission, argued the cause for respondent. On the brief were Robert H. Solomon, Solicitor, and Ross R. Fulton, Attorney.

          William H. Weaver argued the cause for intervenors California Independent System Operator Corporation, et al. With him on the brief were Daniel J. Shonkwiler, Roger Collanton, and Rebecca A. Furman.

          Before: Henderson, Tatel and Srinivasan, Circuit Judges.

          OPINION

          Tatel, Circuit Judge

         In this petition for review, a major producer of solar power challenges orders of the Federal Energy Regulatory Commission denying its effort to obtain financial instruments known as Congestion Revenue Rights. Because FERC erroneously concluded that the relevant contract and tariff provisions unambiguously foreclose petitioner's request, we remand to the Commission so that it may "consider the question afresh in light of the ambiguity we see." Cajun Electric Power Cooperative, Inc. v. FERC, 924 F.2d 1132, 1136 (D.C. Cir. 1991).

         I.

         This case concerns two solar power plants in the California desert-the Genesis solar plant in Desert Center and the McCoy solar plant near Blythe-and a transmission project that connects them with customers in Southern California. Together, the facilities generate 500 megawatts of electricity, enough to power approximately 180, 000 homes every year. See NextEra Energy Resources Partners, Genesis Solar Energy Center, https://goo.gl/tdbXt4; NextEra Energy Resources Partners, McCoy Solar Energy Center, https://goo.gl/mo3KlR. Producing all that power from sunlight requires an enormous scale: the Genesis plant alone occupies some 1, 900 acres. Bureau of Land Management, Genesis Solar Energy Project, https://goo.gl/8qdMRM.

         Prior to completion of the two facilities, Genesis and McCoy entered into long-term agreements to sell their power to electric utilities, including Southern California Edison Company. Petitioner NextEra Desert Center Blythe, LLC was then formed to connect Genesis and McCoy to the grid. In August 2011, NextEra, Edison, and the California Independent System Operator (CAISO)-the authority tasked with operating transmission facilities in California-reached an agreement to govern the interconnection of Genesis and McCoy to the CAISO-controlled grid. Central to this case, that agreement identified the need for high-voltage transmission upgrades, known as the West of Devers Upgrades, in order to safely and reliably deliver electricity from the two solar plants.

         NextEra, however, soon grew concerned that the permanent West of Devers Upgrades would not be completed in time for it to meet its obligations to the electric utilities. In response, CAISO and Edison identified a temporary fix, known as the Interim Project, to meet NextEra's needs in the meantime. By subsequent letter agreement, NextEra and Edison committed to the Interim Project, with Edison responsible for construction and NextEra footing the bill. The parties then amended their initial agreement to incorporate the letter agreement. For simplicity's sake, we will refer to the amended agreement and letter agreement together as the Interconnection Agreement.

         In December 2014, CAISO informed NextEra that it planned to release Congestion Revenue Rights ("CRRs"). CRRs arise from CAISO's method for setting wholesale electricity prices, which builds the cost of congestion into the price of energy. Sacramento Municipal Utility District v. FERC, 616 F.3d 520, 524 (D.C. Cir. 2010) (explaining how CAISO sets wholesale electricity prices). Put simply, energy costs more in areas requiring the use of congested transmission lines and less in areas that do not. Id. at 524-25. CRRs are financial instruments that are principally used to allow the holder to avoid paying congestion costs. Id. at 527. Because the holder of a CRR is entitled "to be paid the congestion costs associated with transmitting a given quantity of electricity between two specified points" a party that pays for transmission and holds a corresponding CRR will receive back from CAISO the amount it paid for congestion. Id. (citation omitted).

         According to NextEra, it was initially shocked to learn that the Interim Project would result in the release of CRRs. Even so, NextEra informed CAISO that, in its view, it is 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." CAISO and Edison disagreed. In response, and initiating the ...


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