Virginia State Corporation Commission v. Federal Energy Regulatory Commission

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Filed November 21, 2006
No. 05-1147
VIRGINIA STATE CORPORATION COMMISSION ,
PETITIONER
V.
FEDERAL ENERGY REGULATORY COMMISSION ,
RESPONDENT
PJM I NTERCONNECTION , L.L.C. AND
VIRGINIA ELECTRIC AND POWER COMPANY ,
I NTERVENORS
Consolidated with
05-1149
On Petition for Review of an Order of the
Federal Energy Regulatory Commission
John M. Adragna, Phyllis G. Kimmel, and William H.
Chambliss, were on the brief for petitioner Virginia State
Corporation Commission.

-- 1 of 7 --

2
Robert F. McDonnell, Attorney General, Attorney
General’s Office for the Commonwealth of Virginia, Maureen
Riley Matsen, Deputy Attorney General, C. Meade Browder,
Jr., Senior Assistant Attorney General, and D. Mathias
Roussy, Jr., Assistant Attorney General, were on the brief for
petitioner Robert F. McDonnell, ex rel. Virginia Division of
Consumer Counsel.
John S. Moot, General Counsel, Federal Energy
Regulatory Commission, Robert H. Solomon, Solicitor, and
Samuel Sooper, Attorney, were on the brief for respondent.
Beth G. Pacella, Attorney, entered an appearance.
Kevin M. Downey was on the brief for intervenor Virginia
Electric and Power Company.
Before: SENTELLE , Circuit Judge, EDWARDS and
WILLIAMS, Senior Circuit Judges.
Opinion for the Court filed by Senior Circuit Judge
WILLIAMS.
WILLIAMS, Senior Circuit Judge: Petitioners challenge
two orders of the Federal Energy Regulatory Commission
declining to consider whether Virginia Electric and Power
Company d/b/a Dominion Virginia Power (“Dominion”) can
treat as “regulatory assets” certain wholesale and retail costs
associated with developing a Regional Transmission
Organization (“RTO”). In a lengthy first order, FERC
recognized that the start-up costs associated with an RTO are
usually treated as regulatory assets for FERC accounting
purposes, but noted that certain parties, including the
petitioners before us, had raised questions as to whether
Dominion could properly recover these costs now or in the
future. FERC then went on to conclude that:

-- 2 of 7 --

3
At this time, we cannot determine with certainty that all
of the costs at issue are, in fact, unrecoverable in
Dominion’s current retail and wholesale rates or whether
all such costs, if deferred, will ultimately be found, in a
. . . proceeding [under § 205 of the Federal Power Act,
16 U.S.C. § 824], to be recoverable in future rates.
Therefore, Dominion must assess all available evidence
bearing on the likelihood of rate recovery of these costs in
periods other than the period they would otherwise be
charged to expense under the general accounting
requirements for costs . . . . If based on such assessment,
Dominion determines that it is probable that these costs
will be recovered in rates in future periods, it should
record a regulatory asset for such amounts.
PJM Interconnection, L.L.C., 109 F.E.R.C. ¶ 61,012 at P54
(2004). In denying petitions for rehearing and clarification,
FERC observed that because no rate proposal had been
pending, it had made no finding regarding “the recoverability
of a regulatory asset.” 110 F.E.R.C. ¶ 61,234 at P41 (2005).
In their briefs here petitioners have made their concern
clear. Dominion operates under a 2001 stipulation that limits
its rate increases until July 1, 2007. See Application of
Virginia Electric and Power Company for Approval of a
Functional Separation Plan Under the Virginia Electric
Utility Restructuring Act, 214 P.U.R.4th 17 (2001); Virginia
State Corporation Commission Reply Br. at 8. Petitioners
would prefer that as many as possible of the costs in question
be “charged” to ratepayers during the rate-limited period,
thereby shifting some or all of the burden to Dominion’s
current investors. They contend that the Commission’s ruling
here, declining to decide which costs are recoverable and at
what time, will diminish consumers’ benefit from the
stipulation.

-- 3 of 7 --

4
On the merits—which we do not reach—petitioners argue
that FERC’s failure to reject Dominion’s request for
regulatory asset treatment was arbitrary and capricious both
because it failed to explain why it considered itself unable to
determine the proper accounting treatment for Dominion’s
costs and because permitting Dominion to decide the
accounting issue itself, in the first instance, is inconsistent
with FERC’s statutes and regulations. But petitioners’ lack of
standing bars us from reaching these issues. Specifically, we
find that petitioners cannot point to the requisite injury-in-fact,
see Lujan v. Defenders of Wildlife, 504 U.S. 555 (1992), and
have not been aggrieved by the orders.
“To show aggrievement, a plaintiff must allege facts
sufficient to prove the existence of a ‘concrete, perceptible
harm of a real, non-speculative nature.’” N.C. Util. Comm’n
v. FERC, 653 F.2d 655, 662 (D.C. Cir. 1981) (quoting Public
Citizen v. Lockheed Aircraft Corp., 565 F.2d 708, 716 (D.C.
Cir. 1977)). Petitioners allege two types of harm. The first is
that the contested orders have “an immediate rate impact on
Dominion’s retail customers.” Virginia State Corporation
Commission Br. at 48. The second is that the orders deny
investors (and regulators) FERC’s appraisal of Dominion’s
asset base, thereby increasing the likelihood that those parties
will incorrectly “evaluat[e] Dominion’s financial health and
activities.” Id. We reject both theories of injury.
Petitioners’ claim of a rate effect is belied by the
proposition that “[a]ccounting practices are not controlling for
ratemaking purposes.” Consol. Gas Supply Corp., 14
F.E.R.C. ¶ 61,029 at 61,054 (1981); Williston Basin Interstate
Pipeline Co., 56 F.E.R.C. ¶ 61,104 at 61,370-71 (1991).
Moreover, guidance as to accounting treatment “do[es] not
effect [sic] the burden of proof in any presently pending or
future rate proceeding.” Am. Elec. Power Serv. Corp., 104
FERC ¶ 61,013 at 61,035 (2003). Petitioners do not contest

-- 4 of 7 --

5
these propositions, which the Commission asserted
prominently in its brief here.
Instead petitioners claim that FERC has somehow
“delegated to Dominion the discretion whether to treat the
costs as a regulatory asset.” But this is no response at all.
Given that the accounting issue is independent of the ultimate
cost-recovery issue, and that the latter will be settled in a rate
proceeding when and if Dominion files rates seeking
recovery, petitioners haven’t explained how the Commission’s
failure to decide the issue will affect the ultimate rate
treatment.
Petitioners’ alternative theory is that FERC’s accounting
guidance, or its failure to guide, will injure investors by
withholding from them some additional light on the utility’s
financial condition that a FERC ruling would add. They cite
our decision in CNG Transmission Corp. v. FERC, 40 F.3d
1289, 1292–93 (D.C. Cir. 1994), where we found that a
company had standing to challenge an accounting decision
that stuck the company with an (apparent) $7 million loss,
with effects, we thought, on the value of the company’s stock.
CNG is analogous, petitioners argue, because FERC’s order
here permits Dominion to book $275 million of unauthorized
regulatory assets over the next six years, to the confusion of
state and federal regulators and to the detriment of investors
who will be unable to accurately “evaluat[e] Dominion’s
financial health and activities.” Virginia State Corporation
Commission Br. at 48.
We have some uncertainty about petitioners’ dramatic
switch from being a champion of ratepayers, against
Dominion’s current investors, to being a champion of
investors as a class, against uncertainty. But we put that
aside. Reliance on standing in the form of probabilistic
injury—here, an increase in the probability the investors will

-- 5 of 7 --

6
inaccurately evaluate Dominion’s financial position—requires
a showing of a “substantial probability” of the alleged injury.
See Sierra Club v. EPA, 292 F.3d 895, 898 (D.C. Cir. 2002);
see also 520 S. Mich. Ave. Assocs. Ltd. v. Devine, 433 F.3d
961, 962 (7th Cir. 2006) (“Standing depends on the
probability of harm, not its temporal proximity.”). The word
“substantial” of course poses questions of degree, questions
far from fully resolved. We have left open, for instance, the
question whether, in the realm of environmental risk, “any
‘scientifically demonstrable increase in the threat of death or
serious illness’ . . . is sufficient for standing,” Natural Res.
Def. Council v. EPA, 464 F.3d 1, 2006 WL 2472144 at 4
(D.C. Cir. 2006), and have noted a conflict among the circuits
on the point. Compare Baur v. Veneman, 352 F.3d 625, 634
(2d Cir. 2003); Cent. Delta Water Agency v. United States,
306 F.3d 938, 947-48 (9th Cir. 2002); Friends of the Earth,
Inc. v. Gaston Copper Recycling Corp., 204 F.3d 149, 160
(4th Cir. 2000) (en banc), with Shain v. Veneman, 376 F.3d
815, 818 (8th Cir. 2004); Baur, 352 F.3d at 651 & n.3 (Pooler,
J., dissenting). Outside the realm of environmental disputes,
moreover, we have suggested that a claim of increased risk or
probability cannot suffice. Compare Ctr. for Law & Educ. v.
Dep’t of Educ., 396 F.3d 1152, 1161 (D.C. Cir. 2005), with id.
at 1166-68 (Edwards, J., concurring).
We need not face those issues here, however, as
petitioners have made no showing that FERC’s order could
generate a non-trivial increase in the likelihood that investors
will inaccurately evaluate Dominion’s financial position.
Indeed, petitioners have made no showing at all beyond their
citation of CNG. They certainly haven’t explained how any
investor savvy enough to monitor FERC decisions of this sort
wouldn’t also be savvy enough to recognize their
extraordinarily limited import. FERC’s order calls upon
Dominion to assess whether its start-up costs meet the
requirements of a regulatory asset. And Dominion’s

-- 6 of 7 --

7
resolution of that issue will, as we’ve already said, be only a
threshold event before resolution of the matter of most interest
to investors (and petitioners)—the extent to which the costs
can be recovered in collectible rates.
As to the pure accounting issue (as opposed to
ratemaking), petitioners’ best claim may be that resolution by
FERC now, instead of first waiting for a perhaps more biased
determination by Dominion, will afford investors more clarity
as to the true condition of Dominion’s business by
accelerating the enlightenment provided by an agency
determination. But petitioners in no way frame their
contention as a matter of agency delay, so we need not reach
that issue. See Telecommunications Research & Action
Center v. FCC, 790 F.2d 70 (D.C. Cir. 1984). Any
incremental uncertainty resulting from the order therefore falls
far short of substantially increasing the risk that investors will
inaccurately appraise Dominion’s overall financial standing.
Compare Mountain States Legal Found. v. Glickman, 92 F.3d
1228, 1234-35 (D.C. Cir. 1996) (finding standing for “non-
trivial” increment in risk), with Sierra Club v. EPA, 292 F.3d
at 898 (requiring “substantial probability” of injury).
Petitioners have failed to show how FERC’s decision (or
non-decision) could cause them or those they represent injury-
in-fact, by materially affecting either customers’ rates or the
clarity of investors’ understanding of Dominion’s financial
position. The petitions for review are therefore
Dismissed.

-- 7 of 7 --