TNA Merchant Projects, Inc. v. FERC

Filing

OPINION [1675907] filed (Pages: 17) for the Court by Judge Edwards. [13-1008, 15-1320, 16-1009]

USCA Case #13-1008

Document #1675907

Filed: 05/19/2017

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued March 21, 2017

May 19, 2017
No. 13-1008

TNA MERCHANT PROJECTS, INC.,
PETITIONER
v.
FEDERAL ENERGY REGULATORY COMMISSION,
RESPONDENT
BONNEVILLE POWER ADMINISTRATION,
INTERVENOR

Consolidated with 15-1320, 16-1009

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

James K. Mitchell argued the cause and filed the cause for
petitioner.
Susanna Y. Chu, Attorney, Federal Energy Regulatory
Commission, argued the cause for respondent. With her on the
brief was Robert H. Solomon, Solicitor.
J. Courtney Olive, Special Assistant U.S. Attorney,
Bonneville Power Administration, argued the cause for

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intervenor. With him on the brief was Jennifer A. Gingrich,
Attorney Advisor. Barbara C. Biddle and Jeffrey A. Clair,
Attorneys, U.S. Department of Justice, and Mary K. Jensen,
Attorney, Bonneville Power Administration, entered
appearances.
Before: PILLARD, Circuit Judge, and EDWARDS and
SENTELLE, Senior Circuit Judges.
Opinion for the Court filed by Senior Circuit Judge
EDWARDS.
EDWARDS, Senior Circuit Judge: In 2008 the Federal
Energy Regulatory Commission (“FERC” or “Commission”)
invoked Section 205 of the Federal Power Act (the “Act” or
“FPA”) to order Chehalis Power Generating, L.P., (“Chehalis”)
to refund a portion of the rates it had charged a customer
because they were not just and reasonable. Several years later,
FERC had second thoughts. It determined that Chehalis should
not, after all, have been required to pay these funds and held
that Chehalis ought to recover funds with interest. But
Bonneville Power Administration (“Intervenor”), the customer
to whom Chehalis had paid the refund, had no interest in
voluntarily returning the money. Chehalis sought relief from
FERC by filing a Motion for an Order Requiring Recoupment
of Payments. FERC, however, in a perplexing decision, held
that it could not order recoupment because the Commission’s
refund authority does not extend to exempt public utilities such
as the Intervenor Bonneville. We hold that FERC erred when
it held that it lacked the authority to grant the Order Requiring
Recoupment.
Section 309 of the FPA, which permits FERC to “perform
any and all acts . . . [as may be] necessary or appropriate to
carry out [the Act’s] provisions,” 16 U.S.C. § 825h, clearly

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affords FERC the authority necessary to make Chehalis whole.
In concluding otherwise, FERC looked to §§ 201(f) and 205
which prohibit it from ordering governmental entities, such as
Bonneville, to refund “rates or charges” that FERC determines
are “not justified.” 16 U.S.C. § 824d(e); see 16 U.S.C. § 824(f).
FERC determined that because it could not require Bonneville
to grant “refunds” under § 205, it was also barred from granting
“recoupment” of a refund in favor of Chehalis. This reasoning
does not hold up. The strictures of §§ 201(f) and 205 place no
limits on FERC’s ability to grant this form of relief.
FERC clearly had jurisdiction over the subject of this
dispute – i.e., the funds that it ordered Chehalis to pay to
Bonneville in refunds pursuant to § 205 of the FPA. Therefore,
FERC retained the authority to order Bonneville to return the
funds when the agency acknowledged that its initial order was
mistaken. Section 309 vests the Commission with broad
remedial authority, including the authority to grant recoupment
when it is justified. And § 201(f) does not limit the authority of
FERC to grant relief under § 309 with respect to matters that
are beyond the strictures of § 201(f) and § 205. An order of
recoupment, as distinguished from an order to refund under §
205, is beyond the strictures of § 201(f) and § 205.
We uphold FERC’s determination that, on the record of
this case, recoupment of funds by Chehalis is appropriate. We
reverse the Commission’s determination that the Act does not
grant the agency authority to order Bonneville to repay the
funds that it should not have received. However, we remand
the case to allow the Commission to determine whether it
should apportion its recoupment order. FERC amply explained
why recoupment is justified in this case, but in assessing the
equities the Commission did not consider whether something
less than full recoupment might be warranted.

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I.

BACKGROUND

Chehalis operates an electric generating plant that is
interconnected with the electric transmission system of
Intervenor, a federal agency within the Department of Energy.
See TNA Merchant Projects, Inc. v. FERC, 616 F.3d 588, 589–
90 (D.C. Cir. 2010); Br. for FERC at 4. Since the
commencement of this litigation, Chehalis’s corporate parent,
TNA Merchant Projects, Inc., the Petitioner in this case, has
sold its equity ownership interests in Chehalis but retained the
right to litigate this matter. Br. for Petitioner at 8. For
convenience’s sake we, like the parties, will refer to Petitioner
as Chehalis.
Prior to 2005, Chehalis supplied reactive power to
Intervenor pursuant to an Interconnection Agreement that did
not provide for Chehalis to be compensated for this service.
TNA Merchant Projects, Inc., 616 F.3d at 590. In May 2005,
Chehalis filed a proposed rate schedule with FERC, which set
forth “Chehalis’ rates for the provision of Reactive Power
Service,” that would allow it to charge Intervenor for its
services for the first time. See id. (quoting Chehalis Rate
Schedule, Joint Appendix (“JA”) 10). The accompanying letter
informed FERC that these rates were “initial rates” because
Chehalis had “never sought to charge for this service before.”
JA 6.
This initial rate designation was significant. FERC
“regulates rates for wholesale interstate sales of electricity
pursuant to sections 205 and 206 of the Federal Power Act.”
Middle S. Energy, Inc. v. FERC, 747 F.2d 763, 765 (D.C. Cir.
1984). As relevant here, § 205(a)–(c) require that “all rates for
jurisdictional sales of electricity . . . be reasonable and just,”
that there be no “undue preferences and discrimination among
customers,” and that sellers file “all rate schedules” with

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FERC. Id. To ensure that these requirements are met, § 205(e)
permits FERC to suspend a rate schedule for up to five months
after it is filed so that it can hold a hearing regarding the
proposed rates. See id. If FERC deems the rates to be “unjust
and unreasonable” it “may require refunds of any rates
collected” during this time period. Id. This refund authority,
however, applies only to “changed,” as opposed to “initial”
rates. See TNA Merchant Projects, Inc., 616 F.3d at 590.
In spite of Chehalis’s protestations to the contrary, in July
of 2005 FERC found that its proposed rate schedule was a
“changed rate[].” Order, JA 101. The Commission reasoned
that “[a]n initial rate schedule must involve a new customer and
a new service” and Chehalis was not offering either, simply
continuing to “provid[e] reactive power to [Intervenor].” Id.
FERC then exercised its authority under § 205(e) to suspend
these rates “for a nominal period, to become effective August
1, 2005 . . . subject to refund.” Id.; TNA Merchant Projects,
Inc., 616 F.3d at 590. FERC denied Chehalis’s request for
rehearing and, on April 17, 2008, concluded that Chehalis’s
proposed rates were excessive and ordered it to refund
Intervenor “a portion of the revenues it had collected for
supplying reactive power service to [Intervenor] from August
1, 2005 through September 30, 2006,” an amount totaling
approximately $2 million. Order on Rehearing, JA 330.
Chehalis appealed FERC’s initial order and denial of
rehearing, arguing that its May 2005 proposed rate schedule
was not a “changed rate” subject to suspension and refund. See
TNA Merchant Projects, Inc., 616 F.3d at 590–91. This court
vacated and remanded FERC’s orders because we found that
FERC had failed to explain why Chehalis was required to file
an initial rate schedule when it was providing Intervenor with
power gratis, a claim which was essential to FERC’s argument
that Chehalis’s May 2005 proposed rate schedule constituted a

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changed rate. See id. at 592–93. On remand, FERC issued an
order addressing this matter, which again held that Chehalis’s
May 2005 proposed rate schedule constituted a changed rate.
See Order, JA 251. After FERC denied its request for
rehearing, Chehalis once more appealed FERC’s determination
to this court. See Br. for FERC at 8.
Before we had a chance to rule on this matter, however,
FERC requested, and was granted, a voluntary remand in order
to “more fully consider” the arguments raised in Chehalis’s
opening brief. Order on Voluntary Remand, JA 296. FERC
then issued a new order on October 17, 2013, which reaffirmed
its finding that “Chehalis should have earlier filed a rate
schedule for its provision of reactive power service, making its
later filing . . . a changed rate.” Id. It noted, however, that its
precedents on this point had not been entirely clear and thus
stated that its determination that entities should file “rates,
terms and conditions for the provision of reactive power
service . . . for which there is no compensation” was a
prospective policy, inapplicable to Chehalis. Id. at 299.
Therefore, it reasoned, “it would be appropriate for Chehalis to
recover the amounts previously refunded to [Intervenor], with
interest.” Id.
On July 16, 2015, FERC issued a new order addressing
both Chehalis and Intervenor’s requests for rehearing as well
as a motion for an order requiring recoupment of payments
filed by Chehalis. See Order on Rehearing, JA 319. It denied
the parties’ requests for rehearing and emphasized that, “after
balancing the equities of [this] case,” it believed that
recoupment would be appropriate because “Chehalis should
not be penalized given the need for clarification of the policy
governing the filing of rates, terms and conditions for the
provision of reactive power service.” Id. at 328; see id. at 325.

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In response to Chehalis’s motion for an Order Requiring
Recoupment, FERC “affirm[ed] [its] prior determination that
recoupment of funds by Chehalis would be appropriate,” but
held that the Act did not “grant [it] authority to order
[Intervenor] to repay the funds at issue.” Id. at 332. In an Order
on Rehearing issued on November 19, 2015, FERC reiterated
this position. It reasoned that it could not draw on § 309 of the
Act to order Intervenor to return Chehalis’s refund, as using
this provision “to order recoupment would be an overreach,
because the Commission’s refund authority under section 205
does not extend to exempt public utilities such as [Intervenor]
. . . . [and § 309] does not grant the Commission any broader
authority than that provided by section 205.” Order on
Rehearing, JA 339. Chehalis then petitioned this court for
review of FERC’s July 16, 2015 and November 19, 2015
Orders. This petition was consolidated with two other petitions
previously filed by Chehalis, which effectively placed before
this court every order issued after our decision in TNA
Merchant Projects, Inc. described above.
II. ANALYSIS
A. Standard of Review
In general, this court will “set aside a decision [by FERC]
only if it is arbitrary and capricious or otherwise contrary to
law.” Envtl. Action, Inc. v. FERC, 939 F.2d 1057, 1061 (D.C.
Cir. 1991). FERC’s interpretation of the FPA, including its
“jurisdictional provisions,” however, “enjoy[s] Chevron
deference.” Nat’l Ass’n of Regulatory Util. Comm’rs v. FERC,
475 F.3d 1277, 1279 (D.C. Cir. 2007); see S.C. Pub. Serv. Auth.
v. FERC, 762 F.3d 41, 54 (D.C. Cir. 2014). When FERC has
taken action pursuant to its delegated authority under the Act,
“unless Congress has directly spoken to the contrary, or FERC
has unreasonably or impermissibly interpreted the statute, we

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must defer to the Commission’s construction of ambiguous
provisions of the FPA.” Transmission Access Policy Study Grp.
v. FERC, 225 F.3d 667, 694 (D.C. Cir. 2000).
B. FERC Has the Authority to Issue An Order of
Recoupment
As noted above, FERC concluded that it could not “order
recoupment . . . because the Commission’s refund authority
under section 205 does not extend to exempt public utilities”
such as Bonneville. Order on Rehearing, JA 339 (emphasis
added). The Commission’s refund authority under § 205 does
not extend to Bonneville because it is an exempt public utility
under § 201(f) of the FPA. FERC thus concluded that because
it could not require Bonneville to grant “refunds” under § 205,
it was also barred from granting “recoupment” of a refund in
favor of Petitioner. This is a tortured interpretation of the
statute that finds no support in the words of the Act or in the
case law.
To be clear: § 201(f) states that “[n]o provision in
[subchapter II] shall apply to, or be deemed to include” certain
non-jurisdictional entities, such as Intervenor, “unless such
provision makes specific reference thereto.” 16 U.S.C.
§ 824(f). Because § 205 also appears in subchapter II of the
FPA and it does not expressly authorize FERC to order “nonjurisdictional entities” to pay refunds, the Commission
concluded that § 201(f) bars it from making Chehalis whole.
The case law is clear that § 205, when read in conjunction
with § 201(f), bars FERC from ordering a non-jurisdictional
entity to provide a refund to another entity. See, e.g.,
Transmission Agency of N. Cal. v. FERC, 495 F.3d 663, 673–
75 (D.C. Cir. 2007); Bonneville Power Admin. v. FERC, 422
F.3d 908, 914–26 (9th Cir. 2005). These decisions are

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inapposite, however, because this case does not involve a
request for a refund under § 205. This case concerns
recoupment, which is an entirely distinct remedy from a refund.
See Black Oak Energy, LLC v. FERC, 725 F.3d 230, 243–44
(D.C. Cir. 2013). FERC does not doubt that it has the authority
to order recoupment, and it does not claim that the authority to
do this comes from § 205. Therefore, § 201(f) and § 205,
together, do not limit FERC’s authority to order a recoupment
where a non-jurisdictional entity improperly received a refund.
The starting point for our analysis of FERC’s authority to
issue an order of recoupment in this case must thus be § 309,
not § 205. Section 309 permits FERC to “perform any and all
acts . . . [as may be] necessary or appropriate to carry out [the
Act’s] provisions.” 16 U.S.C. § 825h. This provision vests
FERC with broad remedial authority, and we have held that it
allows FERC to “use means of regulation not spelled out in
detail [in the Act].” Niagara Mohawk Power Corp. v. FPC, 379
F.2d 153, 158 (D.C. Cir. 1967). Obviously, any actions that
FERC takes under § 309 must “conform[] with the purposes
and policies of Congress” and cannot “contravene any terms of
the Act.” Id. Thus, § 309 cannot be used to supersede specific
statutory strictures, such as §§ 201(f) and 205’s prohibition on
requiring a non-jurisdictional entity to provide a refund to
another entity. However, beyond strictures of this sort, that
plainly limit FERC’s authority, § 309 affords the agency broad
authority to “remedy its errors” and correct unjust situations.
Xcel Energy Servs. Inc. v. FERC, 815 F.3d 947, 956 (D.C. Cir.
2016).
FERC says that § 309 does not grant the Commission any
broader authority than that provided by § 205. That may be so,
but it is beside the point. Section 205, as relevant in this case,
addresses refunds and the issue here is recoupment. Chehalis is

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not seeking a refund pursuant to § 205, so the limits imposed
on FERC’s § 205 refund authority are not in play.
Our case law makes it clear that both § 309 and FERC’s
implicit remedial authority under the Act provide the agency
with considerable latitude when it is prescribing remedies for
violations of the FPA and attempting to undo harms caused by
its own mistaken or unlawful acts. A good example is the
decision in Xcel. In that case, the court addressed a situation in
which FERC had improperly permitted the rates filed by a
regional transmission organization or “RTO” (an umbrella
organization that manages the transmission facilities of its
members, which can include both public and non-public
utilities) to take effect without securing an agreement that one
of its members, a non-jurisdictional entity, would voluntarily
“make refunds in the event the Commission determines the rate
as filed is not just and reasonable.” 815 F.3d at 950; see id. at
950–51; Transmission Agency of N. Cal., 495 F.3d at 667. In
spite of the fact that FERC admitted that this action was
unlawful, it nonetheless held that it lacked the authority to
order the RTO to issue refunds due to its longstanding policy
that “rate schedules cannot be suspended after they take effect.”
Xcel, 815 F.3d at 952; see id. at 955. We rejected this decision,
holding that FERC’s “position that its section 205 error of law
is irremediable beyond prospective relief” appeared to be
“irreconcilable with the authority Congress granted it in section
309 to remedy its errors.” Id. at 956.
FERC argues on appeal that Xcel has no bearing on this
case because “it addressed the Commission’s authority to
correct an acknowledged legal error” whereas here the
“Commission merely stated that it would be ‘appropriate’ for
Chehalis to recover the refunds it had paid to Bonneville in
light of the Commission’s policy clarification.” Br. for FERC
at 19. This is a fairly tortured interpretation of the events that

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took place in the proceeding below. Indeed, this claim is hard
to square with FERC counsel’s cogent defense of the
Commission’s decision explaining why recoupment is
appropriate in this case:
[After FERC sought remand of this case from the
court], the Commission clarified its policy regarding
the filing requirements for reactive power service.
Recognizing that its precedents had not been entirely
clear, the Commission determined that, in fairness, its
clarified policy should apply prospectively only.
Accordingly, the Commission found that it would be
appropriate for Chehalis to recover refunds it had
issued to Bonneville prior to the agency’s policy
clarification, thus absolving Chehalis of refund
liability arising from the May 2005 filing.
Br. for FERC at 2. This statement recognizes that FERC’s
regulatory policy was unclear and that it rejected a retroactive
application of the new policy because “[a] fundamental
principle in our legal system is that laws which regulate persons
or entities must give fair notice of conduct that is forbidden or
required.” FCC v. Fox Television Stations, 132 S. Ct. 2307,
2317 (2012). An agency cannot enforce a rule against a party
if it is unduly vague or if the party did not otherwise have fair
notice of the rule. See, e.g., Christopher v. SmithKline Beecham
Corp., 132 S. Ct. 2156, 2167 (2012) (agency’s interpretation of
an ambiguous regulation will not be upheld if it results in
“unfair surprise” to regulated parties). In other words, agencies
must provide regulated parties fair warning of the conduct a
regulation prohibits or requires. Id.
In this case, FERC has conceded that, because the agency’s
precedents were confusing, Petitioner did not have good reason
to know that its rate filing would be treated as a “changed rate”

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under § 205 and, thus, be subject to refunds under § 205. These
circumstances offer enough, pursuant to Xcel, to justify an
order of recoupment under § 309. Indeed, FERC’s orders make
clear it does not doubt that Chehalis is entitled to recoupment;
it merely worries that it may not have the authority to order
recoupment because of the statutory strictures of §§ 201(f) and
205. As explained above, FERC is wrong with respect to the
application of §§ 201(f) and 205 in this case.
The decision in Xcel makes it clear that FERC enjoys broad
authority when its past actions are determined to be wrong. See
Xcel, 815 F.3d at 954–56; Nat. Gas Clearinghouse v. FERC,
965 F.2d 1066, 1073–75 (D.C. Cir. 1992) (per curiam) (noting
with approval the Commission’s decision to order “retroactive
recoupment of refunds that were found on judicial review to
have been improperly ordered”). This authority emanates from
an understanding that an “agency, like a court, can undo what
is wrongfully done by virtue of its order.” United Gas
Improvement Co. v. Callery Props., Inc., 382 U.S. 223, 229
(1965). “Without such corrective power, [regulated parties]
would be substantially and irreparably injured by FERC errors,
and judicial review would be powerless to protect them from
much of the losses so incurred.” Nat. Gas Clearinghouse, 965
F.2d at 1074–75; see also United Gas Improvement Co., 382
U.S. at 229; Pub. Utils. Comm’n of Cal. v. FERC, 988 F.2d
154, 162–63 (D.C. Cir. 1993).
The breadth of FERC’s remedial authority is also evident
in Black Oak Energy, in which our court accepted the
proposition that FERC may issue an order of recoupment in
circumstances that are very similar to those in this case. 725
F.3d at 243–44. In Black Oak Energy, an organization, PJM,
had accumulated a surplus of funds that it was required to
disburse to market participants. See id. at 234–35. It took “the
first crack” at determining who should receive this surplus and,

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in so doing, excluded “virtual marketers” from the list of
potential recipients. Id. at 235–36. FERC initially approved this
proposed distribution system, but later determined that PJM’s
failure to disburse a portion of the surplus to these marketers
was unlawful, and ordered PJM to refund them “surplus
allocations . . . amounting to $37 million.” Id. at 241; see id. at
236, 243; Black Oak Energy, LLC v. PJM Interconnection,
LLC, 128 FERC ⁋ 61,262, 62,221–22 (2009). After PJM paid
this refund, however, “FERC took another look at the matter of
refunds and changed its view, effectively ordering PJM to
recoup the refunds it had paid the virtual marketers.” Black Oak
Energy, LLC, 725 F.3d at 241. On appeal, this court remanded
without vacating FERC’s recoupment orders because we found
it plausible that FERC could correct its failure to explain why
recoupment was appropriate in the case “while reaching the
same result.” Id. at 244.
The parallels between this case and Black Oak Energy are
striking. In both cases, FERC responded to a purported
violation of the FPA – PJM’s failure to disburse some of the
surplus to virtual marketers and FERC’s determination that
Chehalis’s May 2005 rate schedule was subject to review as a
changed rate – by ordering a jurisdictional entity to pay a
refund. And in each case FERC later changed its mind and
determined that the jurisdictional entity should be permitted to
recoup the refund it had issued. Black Oak Energy thus
provides strong support for the position that FERC retained the
authority to amend its decision to require Chehalis to refund a
portion of its rates and order recoupment. See Black Oak
Energy, LLC, 725 F.3d at 242.
The Commission has no answer for the decision in Black
Oak Energy. In its brief to this court, FERC attempts to
distinguish Black Oak Energy by simply saying that the case
“concerned the recoupment of refunds previously ordered by

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the Commission, but did not involve governmental entities.”
Br. for FERC at 18. This is an entirely unsatisfactory answer
because it rests on the assumption that Petitioner is seeking a
refund under § 205 and, thus, FERC is barred by § 201 from
granting any relief. But, as explained above, this case is not
about a refund under § 205. It is about FERC’s remedial
authority under § 309. Xcel and Black Oak Energy make it clear
that FERC has authority to order recoupment in this case.
Intervenor has been a party throughout this case. It would
be the height of irony if Intervenor was permitted to urge FERC
to order Chehalis to provide them with a refund in the
proceeding below and then deny Chehalis the right to recoup
these monies after FERC determined they should never have
been disbursed in the first place. There is nothing in the statute
to indicate that Congress intended such a result.
We thus find that FERC erred in determining that it lacked
the authority to issue an order of recoupment. In so holding, we
vacate FERC’s November 19, 2015 Order on Rehearing and
the portion of FERC’s July 16, 2015 Order regarding
Chehalis’s Motion for an Order Requiring Recoupment and
remand this case to FERC for further proceedings regarding
Chehalis’s request for recoupment. FERC clearly had
jurisdiction over the funds that it ordered Chehalis to pay to the
Intervenor in refunds pursuant to § 205 of the FPA. Therefore,
it retained authority under § 309 to order Intervenor to return
the funds when the agency acknowledged that its initial order
was mistaken.
C. Chehalis’s Remaining Claims
Nothing in this decision is meant to disturb FERC’s finding
that a utility providing reactive power “has an obligation to file
a rate schedule,” regardless of whether it receives

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compensation for this service. Order Denying Rehearing, JA
285–86. Chehalis seeks to challenge FERC’s determination on
this point, but the matter is not properly before us.
“Courts ‘may not decide questions that cannot affect the
rights of litigants in the case before them or give opinions
advising what the law would be upon a hypothetical state of
facts.’” Daimler Trucks N. Am. LLC v. EPA, 745 F.3d 1212,
1216 (D.C. Cir. 2013) (quoting Chafin v. Chafin, 133 S. Ct.
1017, 1023 (2013)). But that is just what Chehalis would have
us do here. See Br. for Petitioner at 18–37. Because FERC
determined that Chehalis’s May 2005 rate schedule was a
changed rate in an order issued on July 2005, and denied
Chehalis’s request for rehearing on this matter in December
2005, FERC determined that it had the authority to require that
Chehalis provide Intervenor with the refund at issue in this
case. See TNA Merchant Projects, Inc., 616 F.3d at 590.
Chehalis paid Intervenor these funds on May 15, 2008. Refund
Report, JA 242. We subsequently vacated both of these
decisions in 2010. See TNA Merchant Projects, Inc., 616 F.3d
at 589. Therefore, the orders that Chehalis now contests have
had no impact on its interests. FERC’s determination, on
remand from TNA Merchant Projects, Inc., that Chehalis
should have filed a rate schedule prior to May 2005 occurred
long after Chehalis paid the refund. See Order on Remand, JA
251–52. And its subsequent decision to exempt Chehalis from
this policy by applying it prospectively certainly caused
Chehalis no harm. Thus, in the absence of any cognizable
injury caused by the orders that it challenges on appeal, we hold
that Chehalis lacks standing to contest FERC’s determination
that the FPA requires the filing of a rate schedule, even when
an organization does not charge for the provision of reactive
power. See Summers v. Earth Island Inst., 555 U.S. 488, 494–
95 (2009).

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D. The Scope of Our Remand
To avoid any confusion going forward, it will be useful for
us to summarize the precise terms of this decision. First, we
reverse and vacate FERC’s determination that it lacks the
authority to issue an order of recoupment in this case. Second,
we do not disturb FERC’s holding that recoupment of funds is
appropriate in this case. That holding is now the law of the case.
Third, we deny the petitions for review of the remaining orders
challenged on appeal. Fourth, we remand the case so that FERC
can more carefully balance the equities of this case to
determine the amount of recoupment to which Chehalis is
entitled.
Our decision in Black Oak Energy emphasized that FERC
must “consider[] all the [relevant] factors” before concluding
“that recoupment [is] the proper path.” 725 F.3d at 244. The
same principle applies here. On remand, FERC should evaluate
the relevant equities, including Chehalis’s possible confusion
regarding the necessity of filing a rate schedule prior to May
2005 and the fact that it charged Intervenor a rate which FERC
deemed to be unjust and unreasonable, when determining how
much of the refund Chehalis will be permitted to recoup.
The Intervenor claims that if it is required to return the
entire amount that it received in refunds, plus interest, it would
unjustly enrich Chehalis by “compensating [it] for reactive
power at a rate over 250% of what the just and reasonable rate
should have been.” Br. for Intervenor at 32. Intervenor also
argues that, if Chehalis is correct that the rate was new and so
not subject to § 205, Bonneville would have been entitled to a
refund under FPA § 206, 16 U.S.C. § 824e, which applies to
new as well as changed rates. Section 206 authorizes FERC to
examine a new rate and order a refund if FERC determines that
it is not just and reasonable. Thus, Bonneville contends, even

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USCA Case #13-1008

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if Chehalis could not have predicted that FERC would treat
Chehalis’s rate filing as a changed rate under § 205, it should
have reasonably anticipated that its rate filing would be
reviewable under § 206. Under § 206, Intervenor adds,
“Chehalis would have owed nearly the same amount of refunds
to Bonneville,” and Chehalis concedes as much. Br. for
Intervenor at 32. We express no views on these claims. We will
leave it to FERC to address Intervenor’s arguments when it
weighs the equities of recoupment on remand.

III. CONCLUSION
As explained in the opinion above, we grant in part and
deny in part Chehalis’s petitions for review, and remand this
case for further proceedings consistent with this opinion.

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