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News Analysis

The transmission industry may have to wait even longer for a final decision on challenges to Order 2000 if FERC gets its way.
Fortnightly Magazine - January 1 2002

RTO costs more than the benefits, and they don't want it?" There is no indication what FERC's reaction would be if a collaborative process yielded a thanks-but-no-thanks response.

Are the Courts Sidestepping the Issue?

Counsel for utility companies, public utilities, and FERC all agree that no one in the industry is challenging the notion of restructuring the transmission market. On the other hand, there's no doubt that various industry segments would like parts of the order changed to address their specific problems.

There is every chance that the appeals court will decline to rule on the merits of the Order 2000 appeal. Those who attended the argument said the court seemed quite interested in FERC's ripeness argument.

"The D.C. Circuit, in recent years, has been reluctant to consider the substance of an agency decision when it thinks there may be a chance later to hear a case with more details," said Jonathan D. Schneider, the lawyer who argued for Santee Cooper. "I think there's a reasonably good chance the court will decide not to address all the questions, on ripeness grounds."

At the argument, "the court appeared more concerned about the ripeness issue than the substantive issues" raised by Snohomish PUD, says Christensen.

Susan Kelly, who represents the TDUs, was more blunt: "I am afraid the D.C. Circuit will dodge" the substance of the Order 2000 appeals. The GridSouth appeal, in particular, makes Kelly worry. That appeal is pending before the Fourth Circuit Court of Appeals, a court over which the D.C. Circuit has no authority. Yet, the D.C. Circuit court could decide to wait on the Fourth Circuit's court's decision before moving forward on the Order 2000 appeal. "Procedurally, it's a nightmare," Kelly says. "I don't know where it all is going to go."

In the midst of such legal uncertainty, there is a good deal of urgency about RTO formation, Kelly says. Right now, she has clients who are trying to negotiate long-term power supply contracts, but they have no idea what's going to happen to the shape of the industry, or who they will be working with in a few years. She has many clients who are extremely upset, and has at least one client that is completely beside itself, not knowing the terms and conditions for future power sales. "We just need to get to the finish line here," Kelly says. One of the clear consequences of this uncertainty is the virtual standstill for new transmission construction.

Schneider says it is unfortunate that the FERC is pressing to postpone the court's decision. "The industry would benefit from a decision on the generic issues in a generic context." In the absence of a clear-cut decision, he says it is likely the industry will probably begin restructuring around the contours of the existing rulemaking. Should the rulemaking be overturned or modified down the road, unscrambling the industry would be very costly, at a minimum.

In the end, FERC is fairly likely to prevail on Order 2000. For one thing, courts are notoriously deferential to agency rulemaking. For another, even those