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Supreme Court Rejects Challenges to Lower Court Decision Upholding MISO “MVP” Regional Cost Allocation

On February 24, 2014, the U.S. Supreme Court denied two petitions for a writ of certiorari challenging a lower court’s opinion upholding the Midcontinent Independent System Operator, Inc.’s (“MISO”) Multi-Value Project (“MVP”) cost allocation. The Supreme Court’s denial of certiorari leaves in place an opinion by the U.S. Court of Appeals for the Seventh Circuit (“Seventh Circuit Court”), Illinois Commerce Commission v. FERC, 721 F.3d 764 (7th Cir. 2013) (“ICC II”), which largely affirmed the Federal Energy Regulatory Commission’s (“FERC”) 2010 approval of the MISO MVP cost allocation methodology.

On July 15, 2010, following months of negotiations among MISO, its transmission owners, affected state commissions, and other stakeholders, MISO and participating MISO Transmission Owners (“MVP Applicants”) submitted to FERC a filing to adopt system-wide cost allocation for transmission upgrades that offered specified MISO-wide benefits (the “MVP Filing”).  The MVP Filing proposed the creation of a new category of regionally-beneficial projects—MVPs—and allocation of the costs of such projects to all customers taking service under MISO’s Open Access Transmission, Energy and Operating Reserve Markets Tariff.  MVPs are designed to facilitate compliance with public policy requirements, address multiple reliability needs, and provide economic benefits on a regional scale.  The regional cost allocation underlying the MVP proposal was based on FERC’s cost causation principle and the Seventh Circuit Court’s “roughly commensurate” standard for cost allocation articulated in Illinois Commerce Commission v. FERC, 576 F.3d 470, 477 (7th Cir. 2009) (“ICC I”).  The MVP Applicants provided testimony and other evidence demonstrating that an initial slate of MVP “starter projects” could deliver between $582 million and $798 million in annual economic benefits.

After considering numerous pleadings both supporting and opposing the MVP Filing, FERC generally approved the MVP proposal in December 2010, finding that the evidence presented by the MVP Applicants demonstrated that the proposal is just and reasonable and will appropriately ensure that entities who benefit from the construction of transmission facilities pay a roughly commensurate share of the costs of those facilities.1 FERC determined that the MVP methodology will identify projects that provide regional benefits and allocate the costs of those projects accordingly, facilitate investment in new transmission facilities to integrate large amounts of location-constrained resources, support documented energy policy mandates or laws, reduce transmission congestion, and accommodate new or growing loads.  FERC largely denied the requests for rehearing of its initial order approving the MVP proposal.

Numerous parties filed petitions for review of the MVP Orders.  Building on its holding in ICC I, the ICC II Court affirmed the MVP Orders in all significant respects on June 7, 2013, finding that the MVP methodology satisfies the just and reasonable standard of the Federal Power Act by ensuring that costs are allocated in a manner roughly commensurate with benefits.  The ICC II Court explained that as the MVP Applicants had shown, and as FERC reasonably concluded, MVPs would improve reliability and access to lower cost resources, benefitting all users of the MISO transmission system.

Two groups of petitioners – Michigan Attorney General Bill Schuette, et al. (“Michigan Petitioners”) and Hoosier Energy Rural Electric Cooperative, Inc., et al. (“Hoosier Petitioners”) – filed petitions for a writ of certiorari on October 7, 2013 at the U.S. Supreme Court.  On January 8, 2014, MISO and certain of the MISO Transmission Owners filed a joint brief opposing the petitions, as did the U.S. Department of Justice (on behalf of FERC).  Hoosier Petitioners and Michigan Petitioners filed their reply briefs on January 21 and 22, 2014, respectively.  The Supreme Court denied the petitions for certiorari on February 24, 2014.  The Supreme Court’s denial of certiorari became final on March 21, 2014, the deadline to seek rehearing, when neither group of Petitioners filed for rehearing.

Wright & Talisman, P.C. represented the MISO Transmission Owners in all stages of this proceeding, including in the negotiations to develop the MVP cost allocation methodology, before FERC, and at the Seventh Circuit Court and Supreme Court.  Please contact us via email or call (202) 393-1200 if you have any questions or would like further information regarding this proceeding, or other electric industry or natural gas regulatory matters.

  1. Midwest Indep. Transmission Sys. Operator, Inc., 133 FERC ¶ 61,221 (2010), order on reh’g, 137 FERC ¶ 61,074 (2011) (“MVP Orders”), aff’d sub nom. ICC II, 721 F.3d 764.  MISO was known as the Midwest Independent Transmission System Operator, Inc. during the time that these issues were pending before FERC. ↩︎