Southwestern Electric Cooperative, Inc. v. Federal Energy Regulatory Commission

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United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued October 10, 2003 Decided November 7, 2003
No. 02-1168
SOUTHWESTERN ELECTRIC COOPERATIVE, INC.,
PETITIONER
v.
FEDERAL ENERGY REGULATORY COMMISSION,
RESPONDENT
SOYLAND POWER COOPERATIVE, INC.,
INTERVENOR
On Petition for Review of Orders of the
Federal Energy Regulatory Commission
Michael R. Postar argued the cause for petitioner. With
him on the briefs was Eli D. Eilbott.
David H. Coffman, Attorney, Federal Energy Regulatory
Commission, argued the cause for respondent. With him on
Bills of costs must be filed within 14 days after entry of judgment.
The court looks with disfavor upon motions to file bills of costs out
of time.

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the brief were Cynthia A. Marlette, General Counsel, and
Dennis Lane, Solicitor.
William D. DeGrandis argued the cause for intervenor.
With him on the brief was Bruce D. Ryan.
Before: R ANDOLPH, ROGERS , Circuit Judges, and WILLIAMS,
Senior Circuit Judge.
Opinion for the Court filed by Circuit Judge ROGERS.
ROGERS, Circuit Judge: Southwestern Electric Cooperative,
Inc. (‘‘Southwestern’’) challenges four orders of the Federal
Energy Regulatory Commission relating to its withdrawal
from the Soyland Power Cooperative, Inc. (‘‘Soyland’’). The
parties entered into a series of agreements for accomplishing
the withdrawal. Due to ambiguities in the agreements, the
Commission endeavored to interpret the agreements in a
manner that best reflected the parties’ intent, consistent with
the public interest. On appeal, Southwestern contends that
the Commission erred by failing to dismiss Soyland’s counter-
claims as barred under the Closing Agreement and Mutual
Release (‘‘Release’’) and, alternatively, as unduly discrimina-
tory. Southwestern additionally contends that the Commis-
sion was arbitrary and capricious in construing and applying
the withdrawal formula.
We hold that the Commission’s interpretation of the Re-
lease, namely that Southwestern would be released from
further liability for its withdrawal obligations to Soyland only
once it paid the amount that was ultimately due under the
parties’ agreements, was reasonable. By contrast, South-
western’s interpretation relies on an exception in the Release
while both ignoring anterior language in the Release that
limits its effect to prior acts or omissions, and also failing to
account adequately for the ambiguity of what constitutes a
default under the Release. The Commission also reasonably
concluded that there was insufficient evidence of undue dis-
crimination, particularly in light of the fluidity of the situation
of other contemporaneously withdrawing members. Accord-
ingly, because Southwestern’s other challenges did not show
the Commission’s construction and application of the parties’

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agreements to be arbitrary and capricious, but a reasonable
effort to reflect the parties’ intent, we deny the petition for
review.
I.
Southwestern Electric Cooperative is an electricity distrib-
utor serving customers in rural Illinois. Soyland Power
Cooperative provides its member-owners with electricity gen-
eration and transmission services. All Soyland members are
electricity distribution cooperatives in rural Illinois. In 1976,
Southwestern entered into a long-term all-requirements
wholesale power contract with Soyland that was due to expire
in 2015. Southwestern thereby became a member of Soyland,
and was represented on Soyland’s Board of Directors. Until
1996, Soyland had operated subject to rules of the Rural
Electrification Administration, now the Rural Utilities Service
(‘‘RUS’’), pursuant to the terms of a large loan. RUS re-
quired the cooperative to secure the loan by entering into
long-term, full-requirements wholesale power contracts with
all its members. After paying off its $1.1 billion debt to RUS
in 1996, however, Soyland became subject to regulation by
the Federal Energy Regulatory Commission. Pursuant to
§ 205 of the Federal Power Act (‘‘FPA’’), 16 U.S.C. § 824d,
and the Commission’s regulations, 18 C.F.R. pt. 35, Soyland
filed its wholesale power contracts, formula rate for recovery
of its costs under those contracts, and its 1997 budget. The
Commission accepted those contracts and the formula rate.
Soyland Power Coop., Inc., Letter Order, Docket No. ER96–
2967 ff. (May 21, 1997).
Relieved of its obligation to maintain the long-term con-
tracts with its members, Soyland formed a special Buyout
Evaluation Committee to develop a method for members to
withdraw from the cooperative. The committee’s formation
was spurred by Southwestern’s expressed desire, previously
frustrated, see United States v. Southwestern Elec. Coop.,
Inc. v. Soyland Power Coop., No. 86–3419 (S.D. Ill. Dec. 28,
1987) (Memorandum and Order), to cancel prematurely its
contract with Soyland. The President of Southwestern’s

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Board of Directors, who held one of his cooperative’s two
seats on the Soyland Board, served on the committee. The
committee, aided by outside consultants, devised a Withdraw-
al Policy. The Policy was adopted unanimously by Soyland’s
Board of Directors, including both Southwestern representa-
tives.
The Withdrawal Policy included a formula for satisfying
withdrawing members’ obligations to the remaining Soyland
members. The Board sought to ensure that the non-
withdrawing members would not bear added costs as a result
of the early withdrawal of members like Southwestern.
Therefore, withdrawing members were required to make a
withdrawal payment sufficient to cover their share, among
other things, of Soyland’s long-term agreements with third
parties. The Withdrawal Policy required withdrawing mem-
bers to make a lump-sum payment, as calculated by Soyland
using a Withdrawal Formula, contained in Attachment A of
the Withdrawal Policy. The Attachment, entitled ‘‘Methodol-
ogy for Computing Lump Sum Payment of Member With-
drawal,’’ included an ‘‘Example of Application,’’ which consist-
ed of 23 ‘‘items.’’ Each ‘‘item’’ described how a particular
component of the formula might be estimated and allocated
among members, and each provided a ‘‘reference’’ to serve as
a basis for the item’s computation.
Pursuant to the Withdrawal Policy, Southwestern entered
into a Withdrawal Agreement with Soyland on November 4,
1996. The Commission approved the Withdrawal Policy and
the Withdrawal Agreement by order of May 21, 1997. The
parties also signed a Release on May 30, 1997, which freed
each party from ‘‘any and all claims,’’ ‘‘known or unknown,’’
arising from ‘‘any act or omission TTT prior to the date of this
[Release]TTTT’’ The Release provided an exception for ‘‘any
such claim TTT arising out of a failure by Withdrawing
Member to perform its obligations under the Withdrawal
AgreementTTTT’’ On May 31, 1997, Southwestern made its
exit payment of $40,594,311, as calculated by Soyland. It
withdrew from Soyland the following day. As provided for by
the parties’ agreements, the withdrawal payments were twice

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recalculated by Soyland, reducing Southwestern’s payment to
$40,383,030.
On December 8, 1998, Southwestern filed a complaint with
the Commission for a refund of approximately $12 million
based on Soyland’s alleged miscalculation of the withdrawal
payment. See 63 Fed. Reg. 71,456 (Dec. 28, 1998). Soyland
counterclaimed, seeking an upward adjustment of approxi-
mately $3 million of Southwestern’s withdrawal payment.
The Commission, in the first order on review, 86 FERC
¶ 61,217 (1999) (‘‘Hearing Order’’), dismissed the complaint in
part, denied Southwestern’s motion to reject the counter-
claims, and established a refund effective date. The Commis-
sion set for hearing the computation of the withdrawal pay-
ment under the Withdrawal Policy, which it treated as akin to
a formula rate.
Following the hearing, the Administrative Law Judge
(‘‘ALJ’’) ruled that Soyland had miscalculated various aspects
of the withdrawal payment. See 90 FERC ¶ 63,001 (2000)
(‘‘Initial Decision’’). He rejected Soyland’s counterclaims as
‘‘unduly discriminatory,’’ because they sought additional
amounts from Southwestern that Soyland had not sought
from two other contemporaneously withdrawing members,
which had not filed complaints with the Commission. The
ALJ also rejected Southwestern’s claim that the mandatory
Opt–Out Fee paid by Soyland to Illinois Power, its electricity
supplier, as a result of Southwestern’s withdrawal had been
passed on incorrectly to Southwestern. On the whole, howev-
er, the ALJ granted Southwestern much of the relief it had
sought. Both parties requested rehearing.
In the second order on review, Opinion No. 450, 95 FERC
¶ 61,254 (2001), the Commission summarily affirmed most of
the ALJ’s rulings, but reversed the finding that Soyland’s
counterclaims were unduly discriminatory. The Commission
reasoned that ‘‘undue discrimination’’ in the FPA context only
applies where there is a formula rate disparity, as opposed to
when that rate is applied in different ways to particular fact
situations. Because the same formula was used for both
Southwestern and the other two withdrawing members, Corn

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Belt Electric Cooperative, Inc. (‘‘Corn Belt’’) and Edgar
Electric Co-operative Association (‘‘Edgar’’), there was no
undue discrimination. The Commission noted that it did not
have ‘‘anything approaching a complete record of how Corn
Belt and Edgar’s rates were calculated pursuant to the
Withdrawal Agreement, as they neither intervened in this
proceeding nor filed complaints over the manner in which
Soyland made their calculations.’’ Id. at 61,885. The parties
sought rehearing.
In the third order on review, Opinion No. 450–A, 97 FERC
¶ 61,008 (2001), the Commission changed course, resolving
most issues in Soyland’s favor and rejecting Southwestern’s
undue discrimination argument on the weight of the evidence.
While noting that it was ‘‘conceivable’’ that different calcula-
tions based on the same rate could constitute undue discrimi-
nation, the Commission found the evidence before it insuffi-
cient to establish a prima facie case. The Commission also
reversed several of the ALJ’s findings as misreading the
parties’ intent in reaching the Withdrawal Agreement. These
findings included whether Southwestern must pay a share of
Soyland’s loan guarantee costs and its margin on power sales,
as well as whether various costs were to be calculated based
only on the specific ‘‘references’’ contained in the Withdrawal
Agreement. Southwestern requested rehearing.
In the fourth order on review, Opinion No. 450–B, 99
FERC ¶ 61,001 (2002), the Commission concluded that South-
western had failed to show that the Commission’s construc-
tion of the Withdrawal Policy and the Withdrawal Agreement
was unreasonable, explaining that its decision in Opinion No.
450–A ‘‘benefits the customers by properly enforcing the
terms of [the parties’] agreement.’’ Id.
II.
The Commission described its role in reviewing the parties’
agreements as ‘‘ventur[ing] into this contractual heart of
darkness to inform the parties as to their own intent on the
disputed issues’’ in order to ‘‘properly enforce the terms of
the Agreements, consistent with the public interest.’’ Opin-
ion No. 450–A, 97 FERC ¶ 61,008 at 61,022, 61,020. There is

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little doubt that much in the parties’ agreements is ambigu-
ous. The Withdrawal Agreement and Withdrawal Policy set
out to enable members to leave a long-term contractual
relationship without causing unnecessary harm to the remain-
ing members. However, they fail to spell out explicitly how
various components are to be calculated, even though each
withdrawal might have an impact of tens of millions of dollars.
Instead, the agreements leave the computation of the with-
drawing utility’s lump-sum exit payment up to Soyland to
compute, based primarily upon the twenty-three items in
Attachment A of the Withdrawal Policy. However, Soyland
and Southwestern have long disputed whether the Attach-
ment items are mere examples, or if they constitute the
definitive method for calculating the relevant parts of the
withdrawal payment.
The Commission’s efforts to interpret ambiguous language
indicate a continuing attempt to make sense out of the
parties’ intent. Our review indicates that, rather than reflect-
ing what Southwestern characterizes as the Commission’s
vacillation in ‘‘seesaw rulings,’’ Petitioner’s Reply Br. at 1, the
orders on review reflect the Commission’s willingness to
reexamine its interpretation in light of the parties’ arguments
on rehearing in order to apply the agreements as the parties
had intended. Given ambiguity and the technical aspects of
some of the determinations, the court’s review is most defer-
ential. See Koch Gateway Pipeline Co. v. FERC, 136 F.3d
810, 814–15 (D.C. Cir. 1998); National Fuel Gas Supply
Corp. v. FERC, 811 F.2d 1563, 1569–70 (D.C. Cir. 1987); see
also Chevron U.S.A., Inc. v. Natural Res. Def. Council, Inc.,
467 U.S. 837 (1984); Sithe/Independence Power Partners,
L.P. v. FERC, 165 F.3d 944, 948 (D.C. Cir. 1999).
We first address Southwestern’s claim that Soyland’s coun-
terclaims were barred by the Release Agreement and by
their unduly discriminatory nature. In Part III, we address
Southwestern’s other challenges to the Commission’s orders.
A.
Southwestern contends that upon payment of the with-
drawal amount that Soyland calculated, Soyland was barred,

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under § 1(b) of the Release, from holding Southwestern liable
for Soyland’s counterclaims. Because, in its view, Southwest-
ern had satisfied all its obligations under the Withdrawal
Agreement, Southwestern was permanently protected from
claims based on that Agreement. The ‘‘other than’’ exception
in the Release, which provides for ongoing liability for ‘‘any
such claim[s]TTTarising out of a failure by [Southwestern] to
perform its obligations under the Withdrawal Agreement,’’
was therefore inapplicable. That is, because Soyland did not
assert in its counterclaims that Southwestern had failed to
perform, and because the amounts sought under the counter-
claims do not reflect costs associated with such failure, the
Commission, in Southwestern’s opinion, erred in ruling that
the counterclaims were not barred by the Release.
The Commission construed the Release to mean that
Southwestern was not released until it paid the withdrawal
amount ultimately determined to be owed pursuant to the
Withdrawal Agreement. See Opinion No. 450–A, 97 FERC
¶ 61,008 at 61,023. Or, as Southwestern views the Commis-
sion’s interpretation, even though it was Soyland’s failure to
charge the counterclaim amounts that led to Southwestern’s
failure to pay the amount that the Commission subsequently
determined was required under the Withdrawal Policy,
Southwestern’s failure to pay that amount was nonetheless a
failure to perform its obligations under the Withdrawal
Agreement. Southwestern maintains that interpreting the
Release such that a failure to pay in 1997 an amount that was
not determined to be owed until 2001 improperly expands the
‘‘other than’’ clause beyond its plain meaning.
The difficulty for Southwestern’s position arises from the
language of the Release. In contending that the plain mean-
ing of the exception precludes Soyland from lodging its
counterclaims, Southwestern ignores the anterior language in
§ 1(b), which provides a release only for ‘‘an act or omission’’
‘‘prior to’’ the date the Release is signed. The parties signed
the Release on May 30, 1997 and Southwestern paid Soyland
the next day. The acts alleged in Soyland’s counterclaims are
therefore not barred, because Southwestern’s failure to pay
fully what was due occurred after May 30.

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Furthermore, Southwestern’s characterization of its acts as
not falling within the exception clause is unpersuasive, be-
cause the exception fails to define what constitutes a default
under the Withdrawal Agreement. Southwestern reads the
exception to exclude costs that Soyland failed to include in its
calculations for the withdrawal payment, because such costs
are purportedly unrelated to Southwestern’s performance
under the Withdrawal Agreement. Soyland, on the other
hand, bases its counterclaims on the view that Southwestern
failed to meet its obligations under the Withdrawal Agree-
ment by failing to pay the correct amount, thus invoking the
exception. Under the circumstances, the Commission reason-
ably construed the Release to require Southwestern to pay
the full amount that was due under the Withdrawal Agree-
ment, and its interpretation of Southwestern’s obligations was
not contrary to the plain language of the Release.
B.
Southwestern’s claim that the counterclaims are unduly
discriminatory under FPA § 206, 16 U.S.C. § 824e, fares no
better. Because the Commission did not approve a change to
the calculation of the Corn Belt and Edgar withdrawal pay-
ments, Southwestern argued that recovery by Soyland based
on its counterclaims would be per se unduly discriminatory.
The ALJ agreed, finding that the three cooperatives were
‘‘similarly situated’’ and Southwestern was being asked to
reimburse Soyland or allocate items of expense in a manner
not required of Corn Belt and Edgar. Southwestern further
noted that Soyland testified that at the time of withdrawal it
treated all three withdrawing members the same.
Although in Opinion No. 450 the Commission reversed the
ALJ’s finding of undue discrimination because Southwestern
was not challenging the formula itself, and thus not raising an
issue of undue discrimination as that phrase in the FPA had
generally been interpreted, the Commission shifted ground in
Opinion No. 450–A. Earlier undue discrimination cases had
usually involved questions of formula design and selection, as
opposed to how a consistent formula was applied to a given

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set of facts. See Opinion No. 450–A, 97 FERC ¶ 61,008 at
61,023–24; see also Cities of Newark v. FERC, 763 F.2d 533,
546 (3d Cir. 1985). On rehearing, the Commission acknowl-
edged that differing calculations based on the same rate could
indeed establish a prima facie showing of undue discrimina-
tion. See Opinion No. 450–A, 97 FERC ¶ 61,008 at 61,023;
cf. Alabama Elec. Co-op., Inc. v. FERC, 684 F.2d 20, 27 (D.C.
Cir. 1982). The Commission nonetheless affirmed its denial
of the discrimination claim on the ground of evidentiary
insufficiency. 97 FERC ¶ 61,008 at 61,023. The Commission
explained that the limited evidence the ALJ had relied upon
for a prima facie case of undue discrimination, based on his
findings that the three cooperatives were similarly situated
and that the same Withdrawal Formula was applied to all, did
not suffice. Id.
First, Southwestern’s complaint against Soyland had not
alleged undue discrimination, and therefore the record was
not properly developed to make out the required prima facie
showing. Southwestern had initially argued that Soyland’s
counterclaims were barred based on Commission practice, as
well as on the parties’ agreements, including the Release.
See Hearing Order, 86 FERC ¶ 61,217 at 61,775–76. It was
not until the hearing before the ALJ that Southwestern
asserted that the counterclaims were unduly discriminatory.
Initial Decision, 90 FERC ¶ 63,001 at 65,002. Consequently,
the Commission did not have before it the materials that its
rules required complainants to file. See 18 C.F.R.
§ 385.206(b)(8). Those materials would have included ‘‘all
documents that support the facts in the complaint in posses-
sion of, or otherwise attainable by, the complainantTTTT’’ Id.
Given the scant evidence in the record—oral testimony given
at the hearing, see 90 FERC ¶ 63,001 at 65,002, 65,004—
Southwestern had failed to meet its burden to make out a
prima facie case of discrimination. See Mansfield Mun. Elec.
Dept. v. New Eng. Power Co., 94 FERC ¶ 63,023 (2001).
Only upon a complainant’s showing that a rate design has
different effects on similarly situated customers does the
burden shift to the respondent to justify those disparities.
See Electricity Consumers Res. Council v. FERC, 747 F.2d
1511, 1515 (D.C. Cir. 1984); Alabama Elec. Co-op., Inc., 684

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F.2d at 29. The Commission recognized that discrepancies in
withdrawal payments could arise for numerous reasons, and
that to resolve questions about the computation of Edgar’s
and Corn Belt’s payments would likely require ‘‘thousands of
pages of record to ventilate.’’ Opinion No. 450–A, 97 FERC
¶ 61,008 at 61,023. The Commission explained that ‘‘[t]he
amount and correctness of Soyland’s Withdrawal Payments to
Edgar and Corn Belt are simply not present on this record
for us to begin to compare them.’’ Id.
Second, by the time the Commission issued Opinion No.
450–A, Corn Belt’s and other withdrawing members’ positions
had changed. Corn Belt and Monroe County Electric Coop-
erative, Inc. had filed complaints against Soyland. See Corn
Belt Energy Corp. v. Soyland Power Coop., Inc., 101 FERC
¶ 61,242 (2002); Monroe County Electric Coop. v. Soyland
Power Coop., Inc., 101 FERC ¶ 61,242 (2002). The Commis-
sion thus noted that ‘‘Our decision that the record developed
in this proceeding is inadequate to decide whether the with-
drawal payments of Corn Belt and Edgar were properly
calculated is reinforced by the fact that other former Soyland
members, including Corn Belt, have recently filed complaints
against Soyland before the Commission concerning these
calculations.’’ Opinion No. 450–A, 97 FERC ¶ 61,008 at
61,023 n.16. Were the Commission to bar Soyland’s counter-
claims against Southwestern, the Commission could be obli-
gated, to the extent that the parties were similarly situated,
to deny any further claims by Soyland for additional pay-
ments from Corn Belt and other complainants. Given the
fluidity of the situation, as well as record evidence that
Soyland subsequently sought additional exit payments from
all later withdrawing members, the Commission reasonably
determined that it lacked evidence upon which it could con-
clude that Soyland’s counterclaims against Southwestern
were unduly discriminatory and therefore barred.
III.
Southwestern also contends that the Commission misinter-
preted and misapplied the filed rate in calculating the

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amounts due under five of twenty-three Items in Attachment
A to the Withdrawal Agreement, as well as one section of the
Withdrawal Agreement itself (collectively ‘‘Items’’). The
Commission has spilled much ink in explaining its reasoning
and identifying the evidence underlying its conclusions, and,
given our standard of review, see Koch Gateway Pipeline Co.
v. FERC, 136 F.3d 810, 814–15 (D.C. Cir. 1998), our discus-
sion of Southwestern’s challenges is brief. Although the ALJ
ruled for Southwestern on several components of the analysis,
the Commission’s construction of these Items deserves defer-
ence.
The Withdrawal Agreement, as noted, was unclear as to
how its general formula was to be computed. Based on
testimony as well as on the structure of the Agreement, the
Commission found ‘‘it reasonable to construe these Items as
intended to be the exclusive measure of the particular costs to
which they refer.’’ Opinion No. 450–B, 99 FERC ¶ 61,001 at
61,005. This construction meant that certain costs were not
accounted for as comprehensively as was possible. For in-
stance, regarding Item 16 in Attachment A, in accounting for
the market value of Soyland’s corporate assets, the Commis-
sion used as a proxy only the appraisal of the company’s
headquarters, because that was all that was referenced in the
Attachment. See id. That reference provided a reasonable
ground for the Commission to conclude that that result was
the intent of the parties.
Moreover, where specific contract provisions are irreconcil-
ably in conflict with more general ones, the specific provisions
control. See, e.g., Ohio Power Co. v. FERC, 744 F.2d 162, 168
n.7 (D.C. Cir. 1984). Thus, the Commission could reasonably
conclude, based both on parol evidence and on the above
principle, that even where the broad terms of the Withdrawal
Formula dictated that a general factor was to be taken into
account, it was the parties’ intent to do so based only on the
particular mechanisms established in Attachment A, even if
this might at times yield a less comprehensive result. That
conclusion is supported by the fact that Southwestern is not
consistent in its challenge to use of Items in the Attachment

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as the basis for implementing the Withdrawal Formula, but
instead only challenges their use in a few particular instances.
The items and formula components that Southwestern con-
tends the Commission erred in construing are:
• Item 5: Soyland’s calculation of the mandatory Opt–Out
Fee paid to Illinois Power as a result of Southwestern’s
and other members’ withdrawal from the cooperative.
• Item 8: The Unavoidable Fixed Expense calculation.
Southwestern challenges both which annual budget was
used to calculate these expenses (raising the question of
whether the budget used for calculating the withdrawal
payment adequately accounted for decreased costs de-
rived from Southwestern’s withdrawal as a Soyland mem-
ber), as well as the escalation rate applied to determine
Southwestern’s future share of the costs.
• Item 9: The Fixed Generation Operation and Mainte-
nance Expenses calculation. Southwestern makes the
same arguments as in Item 8.
• Item 16: Soyland’s Corporate Assets (which are calculat-
ed as only consisting of the utility’s headquarters).
• Item 17: Soyland’s subtraction of Deferred Credits (which
relate to prepayments by Southwestern that were to be
returned within the fiscal year), and Soyland’s subtraction
of Patronage Capital (which was held by Soyland mem-
bers, not including Southwestern, that had been members
of another utility that had previously merged with Soy-
land).
• Withdrawal Agreement § 4.2—Continuing Liability: Soy-
land’s recovery from Southwestern of Loan Guarantee
and Margin costs incurred prior to Southwestern’s with-
drawal.
In determining the intent of the parties in forming the
contract, the Commission properly credited the testimony of
those with first-hand knowledge of the negotiations. The
substantial evidence presented by such witnesses was a sig-
nificant and reasonable factor in overturning certain findings
by the ALJ. The ALJ had relied in large part on the

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testimony of Southwestern’s witness Jatinder Kumar, who
acknowledged that he was not on the Buyout Evaluation
Committee and thus not part of the deliberative process in
which the Withdrawal Policy was developed. As Soyland
observes, the Commission has routinely held that testimony
adduced to explain contractual intent must be based on direct
knowledge to have any probative value. See Opinion No.
450–A, 97 FERC ¶ 61,008 at 61,032 & n.75 (citing Questar
Pipeline Co., 49 FERC ¶ 63,038 at 65,182–83 (1989), aff’d, 53
FERC ¶ 61,255 (1990); Century Power Corp., 53 FERC
¶ 61,240 at 61,991 (1990)). The court has recognized that in
the case of contract ambiguity, ‘‘we look to the background of
negotiations between the parties to help resolve contractual
ambiguity.’’ Cajun Elec. Power Coop., Inc. v. FERC, 924
F.2d 1132, 1137 (D.C. Cir. 1991); see also Consolidated Gas
Transmission Corp. v. FERC, 771 F.2d 1536, 1545 (D.C. Cir.
1985) (citing Pennzoil Co. v. FERC, 645 F.2d 360, 388 (5th
Cir. 1981)). Kumar could not testify as to what the Commit-
tee members had actually discussed, and instead relied on
arguments ‘‘compel[led]’’ by logic and consistency. See, e.g.,
Opinion No. 450–A, 97 FERC ¶ 61,008 at 61,030–31. For
instance, the Commission, in rejecting several of the ALJ’s
rulings based on Kumar’s testimony, wrote regarding Items 8
and 9, which referenced the 1997 Budget, ‘‘Once again, the
[ALJ] erred by ignoring what was called for by a specific
contractual provision (calculations based on the 1997 budget)
and substituting a replacement based on the suppositions of a
witness who had no direct knowledge of the issue.’’ Id. at
61,033–34.
Wherever possible, the Commission stayed true to the
contract’s actual terms as ‘‘islands of certainty in documents
that are awash in ambiguity.’’ Id. at 61,031. Parties are not
always logical or consistent, and the Commission’s proper
role, bearing in mind the public interest, was to determine the
intent of the parties, even if it were illogical and internally
inconsistent. As the Commission wrote regarding Item 16,
‘‘Southwestern may well be right that it would have been
more accurate to include other properties in estimating the
cost of corporate assets, but that is not what was established

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as the measure in this contract.’’ Opinion No. 450–B, 99
FERC ¶ 61,001 at 61,005. ‘‘Ignoring this plain language in
determining the intent of the parties essentially and imper-
missibly rewrites the contract terms to conform to less than
clear parole [sic] evidence.’’ Opinion No. 450–A, 97 FERC
¶ 61,008 at 61,031 (citing Pennsylvania Ave. Dev. Corp. v.
One Parcel of Land in D.C., 670 F.2d 289, 292 (D.C. Cir.
1981)).
Soyland produced witnesses who had served on and con-
sulted for the Buyout Evaluation Committee and who re-
peatedly testified as to the Committee’s discussions and ex-
pressed intent in formulating the Withdrawal Policy. This
parol evidence hued more closely to the language of the
contract, and the Commission found it more credible. See,
e.g., Opinion No. 450–A, 97 FERC ¶ 61,008 at 61,032. Upon
review of the record and consideration of the Commission’s
construction of each of the Items Southwestern challenges,
we hold that the Commission was not arbitrary and capricious
in its interpretations and applications. The Commission pro-
duced a construction of the parties’ agreements that was
reasonable and based on substantial evidence, and which also
paid heed to public policy priorities. Throughout, the Com-
mission kept in mind that it would be contrary to public policy
for members of the Soyland cooperative to be saddled with a
financial burden that properly belongs to Southwestern.
Accordingly, we deny the petition for review.

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