Illinois Commerce Commission v. Federal Energy Regulatory Commission (ICC II)

721 F.3d 764 (2013)

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Illinois Commerce Commission v. Federal Energy Regulatory Commission (ICC II)

United States Court of Appeals for the Seventh Circuit
721 F.3d 764 (2013)

Facts

In 2010, regional transmission organization (RTO) Midwest Independent Transmission System Operator, Inc. (MISO) sought approval from the Federal Energy Regulatory Commission (FERC) (defendant) to impose a fee on MISO’s members (i.e., utility-company customers) to pay for the construction of high-voltage power lines to transmit electricity generated by wind farms. Utilities in MISO’s region were encouraged or required to obtain some of their electricity from renewable sources like wind, and MISO contended that the transmission lines were necessary to move wind energy generated in lightly populated Great Plains states to more densely populated areas. MISO asserted that the transmission-line construction projects were multi-value projects (MVPs), a classification that required a project to (1) cost at least $20 million; (2) involve high-voltage power lines; and (3) help an RTO’s members meet state renewable-energy requirements, fix reliability problems, or provide economic benefits in multiple pricing zones. MISO claimed that the transmission lines would increase the reliability of the electricity supply and the efficiency of electrical distribution in MISO’s region. MISO proposed allocating the cost of the MVPs among all the utility companies that drew power from MISO’s grid in proportion to each utility’s share of the MISO region’s total wholesale electricity consumption rather than simply allocating the cost to the utility companies nearest to the transmission line. FERC approved MISO’s proposed rate design. Several entities challenged FERC’s decision, arguing that the MVP fees were not just and reasonable because they were not proportionate to the anticipated benefits to utility customers. Specifically, entities including the Illinois Commerce Commission (collectively, the Illinois objectors) claimed that all of MISO’s members were being forced to pay for construction projects that would benefit only a few members. However, the Illinois objectors provided no specific comparisons of costs and benefits to MISO’s members. Michigan utilities and regulators (collectively, the Michigan objectors) asserted that the Michigan utilities should be required to pay MVP fees only for MVP projects built in Michigan because (1) Michigan utilities were forbidden by state statute from counting renewable energy generated outside Michigan toward the utilities’ renewable-energy requirements and (2) Michigan utilities did not obtain much power from the MISO grid outside of Michigan and thus would not benefit from projects constructed outside Michigan. However, one of the proposed MVPs was a transmission line from Indiana to Michigan that would make more electricity available to Michigan at a lower cost.

Rule of Law

Issue

Holding and Reasoning (Posner, J.)

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