The Federal Energy Regulatory Commission (FERC) cannot legally justify its about-face on a Southwest Power Pool (SPP) plan to regionally allocate the costs of transmission projects within the grid operator's 14-state footprint, the D.C. Circuit heard on Thursday. The "FERC Grid Plan Backtrack" has spurred a heated legal battle, with critics asserting that the commission’s reversal flouts established energy cost principles.

Electric cooperatives Sunflower Electric Power Corp. and Midwest Energy Inc. argued that FERC's retroactive rejection of SPP’s plan in July 2023—just nine months after approving it—abandoned core cost-causation principles embedded in the Federal Power Act. These principles mandate that the costs charged to transmission customers should align closely with the benefits they receive. By reversing course, the co-ops allege that FERC acted unfairly and inconsistently with federal energy law.

FERC's Mootness Argument Challenged by Co-ops

In its defense, FERC claims that neither cooperative has standing to challenge the decision. It argues that Midwest Energy has not demonstrated that it owns any of the "byway" transmission facilities affected by the decision. As for Sunflower, FERC points to its recent separate approval of four Sunflower projects as a reason to dismiss their challenge. However, the co-ops rebutted this in a Thursday reply brief, asserting that FERC’s argument is more about mootness than standing—and that the agency's reasoning is flawed regardless.

"That recent FERC order remains subject to review by both FERC and this court, which several respondent-intervenors have sought," the co-ops emphasized. "And the order does not come close to granting the full relief petitioners seek here, as the tariff amendment established a waiver process that would govern not just existing facilities, but future facilities."

FERC Grid Plan Backtrack : Co-ops Say FERC’s Concerns Are Unfounded

Once the question of standing is set aside, the co-ops argue that FERC's rationale for reversing the grid plan still falls flat. The agency’s concerns about discriminatory project cost allocation and a lack of transparency, they say, are insufficient to justify a reinstatement of the previous cost allocation structure, which they view as unfair.

"FERC also continues to ignore the fact that it rejected precisely the same discrimination and transparency concerns the first time around — and did so on the basis of modifications that the commission itself directed to address those very concerns," the co-ops wrote.

Background on the FERC Grid Plan Backtrack

The dispute has its roots in SPP’s proposal to create a waiver that would allow its board to decide, on a case-by-case basis, whether to distribute the costs of byway facilities—mutually beneficial transmission projects ranging from 100 kilovolts to 300 kilovolts—across the entire region. This plan was intended to address the increased development of wind energy projects within the wind-rich areas of the SPP grid in the central U.S., with power primarily being sent to areas of higher electricity demand.

Initially, FERC commissioners approved the SPP plan in October 2022, a decision that faced challenges in both the D.C. and Eighth Circuits by multiple utilities and stakeholders. However, in July 2023, FERC reversed its decision, prompting lawsuits from Sunflower and Midwest Energy, which have since been consolidated. Numerous entities have stepped in to either support or oppose FERC’s actions.

Stakeholders Push Back Against FERC’s Reversal

Joining Sunflower and Midwest Energy in opposition to FERC's "Grid Plan Backtrack" are SPP itself, the Kansas Corporation Commission, and Basin Electric Power Cooperative. In a Thursday reply brief, they emphasized that SPP had revised its plan twice to satisfy FERC’s concerns, and that the agency now cannot reject the plan for the same reasons it initially dismissed.

"FERC's reversal has left SPP and its stakeholders subject to a seemingly endless game of regulatory 'bring me a rock,'" the intervenors argued. "FERC's actions are unsupported by the record and contrary to FERC's own precedents."

Legal Perspectives on FERC's Actions

Helgi C. Walker, Midwest Energy’s lead counsel from Gibson Dunn & Crutcher LLP, maintained that FERC’s original decision to approve the SPP plan was the correct one, and that the agency has failed to provide a sufficient justification for its sudden reversal.

"In FERC's response brief, the agency's litigators just parroted the flawed arguments in the commission's orders, but they offer nothing to excuse or explain the commission's unlawful regulatory bait-and-switch," Walker said in a statement Friday. "We look forward to the court's review."

Meanwhile, a FERC spokesperson said that the agency does not comment on ongoing court matters.

FERC Grid Plan Backtrack : Legal Teams Representing Each Party

Sunflower is represented by Erin E. Murphy and Nicholas A. Aquart of Clement & Murphy PLLC. Midwest Energy has a team from Gibson Dunn & Crutcher LLP, including Helgi C. Walker, William R. Hollaway, Jeffrey Liu, and Reed Sawyers. SPP is represented by Matthew J. Binette, Ruth M. Porter, and Sigifredo Perez of Wright & Talisman PC. Representing the Kansas Corporation Commission in-house are Brian G. Fedotin and Carly Rose Masenthin, while Basin Electric is represented by Jesse Halpern and Rebecca L. Shelton of Thompson Coburn LLP. FERC’s legal team includes general counsel Matthew R. Christiansen, solicitor Robert H. Solomon, and senior attorney Carol J. Banta.