South Carolina Public Service Authority v. Federal Energy Regulatory Commission

The Federal Energy Regulatory Commission (FERC) (defendant) issued Order No. 1000 to address concerns that the deficiencies in the existing electric-transmission-planning and cost-allocation processes would inhibit the construction of new electric-transmission facilities and adversely affect electricity rates. Specifically, FERC was concerned that insufficient planning for the future construction of transmission lines and the lack of methods for allocating the construction costs among those who would benefit from the construction would likely result in inadequate expansion of transmission capacity and, in turn, rates that were not just and reasonable. The final rule under Order No. 1000 required each electric-transmission provider (i.e., an entity that owned or operated a transmission line) to participate in both the regional-planning process for regional transmission facilities and, if applicable, the coordination of interregional transmission facilities. The final rule also mandated that transmission providers comply with specified regional cost-allocation principles, such as cost causation, which was a requirement that costs must be allocated roughly in proportion to benefits. The final rule required transmission providers to include their methods for cost allocation in their open-access transmission tariff (OATT) rate filings with FERC, but the rule did not dictate exactly how to allocate or pay for costs. The South Carolina Public Service Authority, other state regulatory agencies, transmission providers, regional transmission organizations, and electric-industry trade associations (the challengers) (plaintiffs) challenged FERC’s authority to adopt the transmission-planning and cost-allocation reforms within the final rule. The challengers argued that FERC lacked the power to mandate transmission planning and that the cost-allocation requirements were arbitrary and capricious. FERC claimed that under § 206 of the Federal Power Act (FPA), it had authority to regulate transmission planning and cost allocation because both affected interstate wholesale rates.