Citations
- 879 F.3d 966
Full opinion text
OPINION
THOMAS, Chief Circuit Judge:
In this petition for review, we consider whether the Federal Energy Regulatory Commission (“FERC” or “Commission”) arbitrarily and capriciously determined that Pacific Gas & Electric Company (“PG&E”) was eligible for an incentive adder for remaining a-member of the . California Independent System Operator Corporation (“Cal-ISO”) when state ■ law prevented PG&E’s departure without authorization. We conclude that it did, and we grant the petition.
I
Section 201 of the Federal Power Act (“FPA”) gives FERC jurisdiction over the rates, terms, and conditions of service for the transmission and salé at wholesale of electric energy in interstate commerce. 16 U.S.C. §§ 824(a)-(b). Section 219 of the FPA, added in 2005, directed FERC to promulgate a rule providing incentive-based rates for electric transmission for the purpose of benefitting consumers through increased reliability and lower costs of power. 16 U.S.C. § 824s(a). As relevant here, section 219(c) required FERC to provide incentives to induce utilities to join regional transmission organizations. 16 U.S.C. § 824s(c). FERC did so in 2006 through the adoption of Order 679 and the rehearing orders that followed. Promoting Transmission Investment Through Pricing Reform, Order No. 679, 116 FERC ¶ 61,057 (“Order 679”), order on reh’g, Order No. 679-A, 117 FERC ¶ 61,345 (2006) (“Order 679-A”), order on reh’g, Order No. 679-B, 119 FERC ¶ 61,-062 (2007) (“Order 679-B”).
Order 679 established upward adjustments, or “incentive adders,” to the rate of return on equity of utilities that participate in transmission organizations. Order 679 set forth the terms on which FERC would grant the incentive adders. FERC determined that it would “not grant outright any incentives,” but that it would grant such incentives “when justified” in the context of • individual declaratory orders or section 205 filings. Order 679 at PP 1, 326. FERG would evaluate adder requests on a “case-by-case basis,” Id. at P 326. .
Orddr 679 provided that adders would be available for utilities that “have already joined, and that remain members of,” transmission organizations in “recognition of the benefits that flow from membership” and the fact that “continuing membership is generally voluntary.”'Order 679 at P 331. The order stated that a utility