`
`
`
`171 FERC ¶ 63,032
`UNITED STATES OF AMERICA
`FEDERAL ENERGY REGULATORY COMMISSION
`
`
`
`
`Southwest Power Pool, Inc.
`
`Docket Nos. ER18-99-003
`ER18-99-004
`
`
`
`CERTIFICATION OF CONTESTED SETTLEMENT
`
`(Issued May 27, 2020)
`
`
`TO THE COMMISSION:
`
`I.
`
`Introduction
`
`Pursuant to Rule 602 of the Commission’s Rules of Practice and Procedure, 18
`1.
`C.F.R. § 385.602 (2020), the undersigned Presiding Judge hereby certifies a contested
`Offer of Settlement and Settlement Agreement (Offer of Settlement or Settlement) filed
`by Southwest Power Pool (SPP), as administrator of the SPP Open Access Transmission
`Tariff, on behalf of GridLiance High Plains LLC (f/k/a South Central MCN LLC)
`(GridLiance) and the ARKMO Cities1 (Settling Parties). The Offer of Settlement was
`filed after a full evidentiary hearing, and it resolves all issues set for hearing in this
`proceeding.
`
`The Commission set for hearing the justness and reasonableness of SPP’s
`2.
`proposed Tariff revisions, and “encourage[d] the parties to make every effort to settle
`their dispute.”2 The parties unsuccessfully attempted to settle their dispute prior to the
`evidentiary hearing. However, they availed themselves of the Commission’s Dispute
`
`
`1 The ARKMO Cities include Paragould Light Water & Cable; Paragould Light
`Commission; Poplar Bluff Municipal Utilities; Kennett Board of Public Works; City of
`Piggott Municipal Light, Water & Sewer; and the City of Malden.
`
`2 Southwest Power Pool, Inc., 162 FERC ¶ 61,215, at P 36 (2018) (Hearing
`Order).
`
`
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`Docket Nos. ER18-99-003 and ER18-99-004
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`Resolution Services after the hearing, and the Settling Parties reached an agreement to
`resolve all issues in the above-captioned proceeding.3
`
`The Commission’s Trial Staff (Trial Staff) supports the Offer of Settlement and
`3.
`states that it is fair, reasonable, and in the public interest. In addition, most of the active
`parties, including SPP, GridLiance, the ARKMO Cities, Southwestern Power
`Administration, City Utilities of Springfield, Missouri, and the City of Nixa, Missouri
`support or do not oppose the Settlement. The Indicated SPP Transmission Owners
`(ITOs)4 oppose the Offer of Settlement. Associated Electric Cooperatives, Inc.
`(Associated Electric) filed limited comments in support of the ITOs’ opposition to the
`Offer of Settlement; however, Associated Electric failed to file an affidavit.
`
`The undersigned had the privilege of presiding over the trial-type evidentiary
`4.
`hearing in this matter and received the benefit of the considerable expertise of the
`witnesses for the parties and Commission Trial Staff. The undersigned reviewed the
`privileged and public versions of the Offer of Settlement in accordance with Rule 602 of
`the Commission’s Rules of Practice and Procedure, 18 C.F.R. § 385.602 (2020), and
`Trailblazer Pipeline Co., 85 FERC ¶ 61,345 (1998) (“Trailblazer”), order on reh’g, 87
`FERC ¶ 61,110, reh’g denied, 88 FERC ¶ 61,168 (1999). The undersigned also
`considered the initial comments, reply comments, and the answer filed in connection with
`the Offer of Settlement. The ITOs filed a comprehensive opposition supported by an
`affidavit and answer.
`
`The Offer of Settlement states that it will become effective as of the date of a final
`5.
`Commission order approving the Offer of Settlement without condition or modification,
`or, if approved with condition or modification, in accordance with Article IV of the Offer
`of Settlement. The Offer of Settlement states that an order shall be deemed a “Final
`Order” if rehearing is denied by the Commission, or if rehearing is not sought, the day
`following the date by which any request for rehearing would have been required to be
`filed with the Commission. The Offer of Settlement does not require refunds.
`
`
`3 Offer of Settlement at 1.
`
`4 The ITOs, for the purposes of this proceeding, include: Westar Energy, Inc.;
`American Electric Power Service Corporation, on behalf of its affiliates Public Service
`Company of Oklahoma and Southwestern Electric Power Company; Kansas City Power
`& Light Company and KCP&L Greater Missouri Operations Company; Sunflower
`Electric Power Corporation; Mid-Kansas Electric Company, LLC; and Xcel Energy
`Services, Inc., on behalf of its utility operating company affiliate Southwestern Public
`Service Company.
`
`

`

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`Docket Nos. ER18-99-003 and ER18-99-004
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`In the Explanatory Statement, the Settling Parties state that the following are the
`6.
`standard questions and specific responses applicable to the Settlement:
`
`a. Does the Settlement affect other pending cases? The Settlement by its
`terms will have no effect on any other pending cases.
`
`b. Does the Settlement involve issues of first impression? There are no issues
`of first impression in the Settlement.
`
`c. Does the Settlement depart from Commission precedent? The Settlement
`does not depart from Commission precedent.
`
`d. Does the Settlement seek to impose a standard of review other than the
`ordinary just and reasonable standard with respect to any changes to the
`settlement that might be sought by either a third party of the Commission
`acting sua sponte? Article VII of the Settlement establishes the applicable
`standard of review for modifications to the Settlement. Changes proposed
`by a non-Settling Party or the Commission shall be subject to the strictest
`standard permissible under applicable law.
`
`The Offer of Settlement provides that the standard of review for any change
`7.
`proposed by a Settling Party shall be the public interest application of the just and
`reasonable standard of review, as set forth in Article VII of the Offer of Settlement. The
`standard of review for any modifications requested by the Commission or other entities
`shall be the most stringent standard permissible under applicable law, as determined by
`the Commission.
`
`The undersigned has included, in Appendices A and B, respectively, a detailed
`8.
`procedural history and a summary of the post-hearing briefs. In addition, the undersigned
`offers Neb. Pub. Power Dist. v. FERC, No. 19-1553, 2020 WL 2071068 (8th Cir. 2020)
`for the Commission’s consideration, along with the following:
`
`a. Transmittal Letter, Certificate of Service, Explanatory Statement, Offer of
`Settlement and Settlement Agreement, clean and redlined pro forma
`versions of Attachment H of the Tariff (Appendices A and B, respectively),
`and a populated formula rate template in Excel format (Attachment C) filed
`by SPP on August 30, 2019;
`
`b. SPP’s Limited Modification of Settlement Transmittal Letter, filed on
`September 3, 2019;
`
`c. Indicated SPP Transmission Owners Initial Comments in Opposition to the
`Offer of Settlement, filed on September 23, 2019;
`
`

`

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`Docket Nos. ER18-99-003 and ER18-99-004
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`d. Associated Electric Cooperatives, Inc.’s Limited Comments in Support of
`the Indicated SPP Transmission Owners’ Initial Comments in Opposition to
`the Offer of Settlement, filed on September 23, 2019;
`
`e. Commission Trial Staff’s Initial Comments in Support of the Offer of
`Settlement and Settlement Agreement, filed on September 23, 2019;
`
`f. GridLiance and ARKMO Cities’ Joint Reply Comments, filed on
`October 3, 2019;
`
`g. ITOs’ Reply Comments, filed on October 3, 2019;
`
`h. Trial Staff’s Reply Comments, filed on October 3, 2019;
`
`i. SPP’s Reply Comments, filed on October 4, 2019;
`
`j. Indicated SPP Transmission Owners’ Limited Answer, filed on October 15,
`2019; and
`
`k. The Official Record of this proceeding.
`
`II.
`
`Background
`
`SPP, a Regional Transmission Organization (RTO), submitted proposed revisions
`9.
`to its Tariff on October 18, 2017 (October 18 Filing). SPP submitted the proposed
`revisions to add an annual transmission revenue requirement (ATRR), implement a
`formula rate template, and add implementation protocols for transmission service for
`facilities owned by GridLiance, a transmission-only utility. GridLiance acquired these
`facilities from the City of Nixa, Missouri (Nixa Assets) on April 1, 2018. The Nixa
`Assets consist of approximately ten miles of transmission lines and related facilities
`within the SPP region and are interconnected to two SPP transmission owners,
`Southwestern Power Administration (Southwestern)5 in Zone 10 and City Utilities of
`Springfield, Missouri (City Utilities) in Zone 3.6 On September 1, 2015, GridLiance filed
`
`
`5 Southwestern was a transmission-owning member of SPP from June 1, 1998,
`until October 31, 2004. In May 2005, SPP and Southwestern entered into a contract that
`was later accepted by the Commission and incorporated as Attachment AD to the Tariff.
`City Utilities is a community-owned utility operating in and around the City of
`Springfield, Missouri, and is located in SPP’s regional pricing Zone 3. See Joint
`Statement of Stipulated and Contested Facts (JSF) 10, 11, 16.
`
`6 Ex. GHP-0100 at 4:6–10; see also JSF 4, 13–15.
`
`
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`

`

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`Docket Nos. ER18-99-003 and ER18-99-004
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`an application for acceptance of its transmission rate formula, pursuant to section 205 of
`the Federal Power Act (FPA). The Commission ultimately accepted the formula rate in a
`series of orders.7
`
`The Commission accepted the October 18 Filing and established hearing and
`10.
`settlement judge procedures to determine whether the proposed Tariff revisions have
`been shown to be just and reasonable.8 The Chief Administrative Law Judge designated
`a Settlement Judge to assist the participants in resolving this matter. After the
`participants reached an impasse, the Chief Judge terminated settlement proceedings and
`designated the undersigned as the Presiding Judge.9 The undersigned conducted an
`evidentiary hearing from March 5, 2019, to March 7, 2019.
`
`11. On July 20, 2019, GridLiance and the ARKMO Cities moved for suspension of
`the procedural schedule because they had reached a settlement in principle.10 The Chief
`Judge granted this motion on July 17, 2019, and suspended the initial decision due date to
`allow the participants to finalize and file the Offer of Settlement.
`
`SPP filed the Offer of Settlement on behalf of GridLiance and the ARKMO Cities
`12.
`on August 30, 2019, in public and privileged versions. The Settling Parties state that
`most of the active parties indicated that they either support or do not oppose the Offer of
`Settlement. The Settling Parties state that the ITOs indicated that they may not take a
`position of non-opposition to the Offer of Settlement. The Settling Parties note that none
`of the ITOs are currently SPP transmission customers in Zone 10. In addition, the
`Settling Parties stated that the ITOs participated in the proceeding to address zonal
`placement policy issues.11
`
`
`7 JSF at 17 (citing S. Cent. MCN LLC, 153 FERC ¶ 61,099 (2015); S. Cent. MCN
`LLC, 158 FERC ¶ 61,073 (2017); S. Cent. MCN LLC, 159 FERC ¶ 62,021 (2017); S.
`Cent. MCN LLC, 166 FERC ¶61,092 (2019)).
`
`8 Southwest Power Pool, Inc., 162 FERC ¶ 61,215 (2018) (Hearing Order).
`
`9 Southwest Power Pool, Inc., Docket Nos. ER18-99-000 & ER18-99-003
`(July 13, 2018) (Order of Chief Judge Terminating Settlement Judge Procedures,
`Designating Presiding Administrative Law Judge, Designating Dispute Resolution
`Specialist, and Establishing Track II Procedural Time Standards).
`
`10 Joint Motion to Suspend Procedural Schedule and for Waiver or Shortening of
`Answer Period (July 10, 2019).
`
`11 Id.
`
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`

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`Docket Nos. ER18-99-003 and ER18-99-004
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`
`
`III. The Settlement Agreement
`
`13. Article I contains background information and procedural history.
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`- 6 -
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`
`
`a. Section 1.1 states that SPP filed proposed revisions to its Open Access
`Transmission Tariff (Tariff) on October 18, 2018, to add GridLiance’s
`ATRR and formula rate template and protocols to the SPP Tariff to be
`effective when GridLiance transferred the Nixa Assets to SPP’s functional
`control.
`
`b. Section 1.2 states that on March 15, 2018, the Commission issued an order
`accepting SPP’s proposed Tariff revisions and setting the proceeding for
`hearing and settlement judge procedures.12 On March 18, 2018,
`GridLiance acquired the Nixa Assets, as authorized by the Commission in
`the March 15, 2018 order, and transferred functional control of the Nixa
`Assets to SPP on April 1, 2018.
`
`c. Section 1.3 was omitted from the agreement.
`
`d. Section 1.4 states that settlement negotiations were terminated after several
`weeks of good faith discussions. The Presiding Judge was designated to
`conduct a hearing pursuant to Track II procedures and conducted the
`hearing from March 5 through March 7, 2019. SPP, GridLiance, the
`ARKMO Cities, Commission Trial Staff, and SPP ITOs presented
`testimony.
`
`e. Section 1.5 states that GridLiance and the ARKMO Cities filed a Joint
`Motion to Suspend Procedural Schedule to provide time to submit the Offer
`of Settlement before the Presiding Judge issued the Initial Decision.
`
`f. Section 1.6 states that the Commission set for hearing the justness and
`reasonableness of placing the Nixa Assets and the GridLiance ATRR
`associated with those assets in pricing Zone 10 under SPP’s Tariff. During
`the proceeding, the ITOs raised zonal placement issues that were also raised
`in the Complaint Docket No. EL18-20. Consistent with the Commission’s
`orders in that docket, the SPP Zonal Placement Process issues raised by the
`SPP ITOs were not at issue in this proceeding, and as a result, are not
`
`12 The Commission set the proceeding for hearing subject to the outcome of
`Docket Nos. ER15-2594, ER17-953, and EL18-16. Those Dockets were resolved and
`terminated on February 4, 2019, when the Commission accepted GridLiance’s proposed
`revisions to its formula rate. South Central MCN LLC, 166 FERC ¶ 61,092 (2019).
`
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`Docket Nos. ER18-99-003 and ER18-99-004
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`proposed to be resolved by the instant Settlement. In addition, none of the
`ITOs are currently SPP transmission customers in Zone 10. The Offer of
`Settlement resolves all issues set for hearing in this proceeding.
`
`14. Article II contains the specific terms of the Settlement.
`
`a. Section 2.1 states that the Settlement represents a complete and final
`settlement of all issues set for hearing in this proceeding.
`
`b. Section 2.2 states that SPP will resettle the April 2018 through December
`2018 billing period in Zone 10 by recalculating rates using one-fourth of
`GridLiance’s Zone 10 ATRR that was applicable during that period.
`
`c. Section 2.3 provides that the unrecovered three-fourths of GridLiance’s
`2018 ATRR will accrue to a regulatory asset that will earn a return at
`GridLiance’s cost of debt as identified in GridLiance’s 2019 formula rate.
`
`d. Section 2.4 states that the regulatory asset will be recovered from Zone 10
`transmission customers in the 2019 and 2020 rate years through SPP
`settlements and resettlements, as necessary, resulting in full recovery in rate
`years 2019 and 2020. Recovery of the regulatory asset will begin after
`resettlement of the April 2018 through December 2018 billing period has
`begun.
`
`e. Section 2.5 provides a payment to the ARKMO Cities in two separate
`payments (Settlement Payment). The first payment will be made within
`five (5) business days of the Commission’s approval of the Settlement. The
`second payment will be made one year later.
`
`f. Section 2.6 states that no amount of the cash payments to the ARKMO
`Cities will be recovered through GridLiance’s ATRR.
`
`15. Articles III through VIII contain standard provisions normally found in settlement
`agreements. These provisions include statements of non-severability, terms of
`modification, conditions of effectiveness, reservations of rights, standard of review, and
`other miscellaneous terms.
`
`16. Article III states that the various provisions of the Offer of Settlement are not
`severable and shall not become operative unless and until the Commission issues a Final
`Order, as defined in Article V to the Offer of Settlement.
`
`17. Article IV governs modification or conditions of the Offer of Settlement. If the
`Commission conditions its approval of the Offer of Settlement or requires modification of
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`Docket Nos. ER18-99-003 and ER18-99-004
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`the Offer of Settlement, it shall be deemed withdrawn and shall not become effective
`unless the Settling Parties, within twenty (20) calendar days of the issuance of the
`Commission order, either: (i) accept the Commission’s modifications and conditions; or
`(ii) modify the Settlement to address or obviate the Commission’s concerns.
`
`18. Article V provides that the Offer of Settlement shall become effective as of the
`date of a Final Order of the Commission approving the Offer of Settlement. An order
`shall be deemed a “Final Order” if rehearing is denied by the Commission, or if rehearing
`is not sought, the day following the date by which any request for rehearing would have
`been required to be filed with the Commission.
`
`19. Article VI contains standard reservations of rights.
`
`a. Section 6.1 states that unless and until the Offer of Settlement becomes
`effective, it shall be privileged and of no effect and shall not be admissible
`in evidence or in any way described in any proceeding before any court or
`regulatory body.
`
`b. Section 6.2 states that the Offer of Settlement shall not be construed to
`affect the outcome of any ongoing proceeding other than the above-
`captioned proceeding.
`
`c. Section 6.3 states that the Settling Parties will support or not oppose the
`elements of any filing with the Commission required by and consistent with
`the Offer of Settlement. Except for the matters expressly described in the
`Offer of Settlement, nothing in the Offer of Settlement affects any Settling
`Party’s right to propose or oppose any particular ratemaking treatment, the
`prudence of any cost, or the justness and reasonableness of a proposed rate.
`
`d. Section 6.4 states that the provisions of the Offer of Settlement are intended
`to relate only to the specific matters referenced herein and, by agreeing to
`or not opposing the Offer of Settlement, no Settling Party waives any claim
`or right which it may otherwise have with respect to any matters not
`expressly provided for herein. Further, nothing in the Offer of Settlement is
`intended to constitute precedent or be deemed a “settled practice.”
`
`e. Section 6.5 states that the Offer of Settlement shall not be deemed in any
`respect to constitute an admission by any Settling Party that any allegation
`or contention made or contained in these proceedings is true or valid or
`untrue or invalid. Additionally, the approval or acceptance of the Offer of
`Settlement by the Commission shall not in any respect constitute a
`determination by the Commission as to the merits of any allegations or
`contentions made in these proceedings.
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`Docket Nos. ER18-99-003 and ER18-99-004
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`f. Section 6.6 states that no Settling Party shall be bound or prejudiced by any
`part of this Offer of Settlement unless it is approved and made effective
`pursuant to its terms.
`
`20. Article VII provides the standard of review for any change to the Offer of
`Settlement. For changes proposed by a Settling Party, the standard of review shall be the
`“public interest” application of the just and reasonable standard. For any modification
`requested by other entities, including the Commission, the standard of review shall be the
`most stringent standard permissible under applicable law, as determined by the
`Commission.13
`
`21. Article VIII contains other miscellaneous terms to the Offer of Settlement.
`
`a. Section 8.1 states that the Offer of Settlement, including the appendices,
`constitutes the entire agreement and supersedes any and all prior or
`contemporaneous representations, agreements, instruments, and
`understandings among the Settling Parties.
`
`b. Section 8.2 states that the discussions which resulted in the Offer of
`Settlement were conducted with the explicit understanding that all such
`discussions are and shall be privileged, shall be without prejudice, and are
`not to be used in any manner except to enforce the Settlement after its
`acceptance or approval by the Commission.
`
`c. Section 8.3 provides that each Settling Party shall cooperate with and
`support and shall not take any action inconsistent with: (i) the filing of the
`Offer of Settlement with the Commission; and (ii) efforts to obtain
`Commission acceptance or approval of the Offer of Settlement.
`
`d. Section 8.4 states that the Offer of Settlement is binding upon and for the
`benefit of the Settling Parties and their successors and assigns.
`
`e. Section 8.5 states that the Offer of Settlement is the result of negotiations
`among the Settling Parties and has been subject to review by each Settling
`Party and its respective counsel. Therefore, the Offer of Settlement shall be
`deemed the product of each Settling Party and no ambiguity shall be
`construed in favor of or against any Settling Party.
`
`
`13 Offer of Settlement at Article VII (citing Ill. Power Mktg. Co., 155 FERC ¶
`61,172 at PP 4-5 (2016)).
`
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`

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`Docket Nos. ER18-99-003 and ER18-99-004
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`f. Section 8.6 states that the section headings used in the Offer of Settlement
`are solely for convenience and shall not be used to interpret or modify the
`Offer of Settlement.
`
`22. Article IX, the conclusion, requests that the Commission approve the Settlement
`without modification or condition.
`
`IV. Comments on the Offer of Settlement
`
`A.
`
`Initial Comments
`
`1.
`
`Trial Staff’s Initial Comments
`
`Trial Staff filed initial comments in support of the Offer of Settlement, stating that
`23.
`it is fair, reasonable, and in the public interest. Trial Staff stated that the Offer of
`Settlement resolves the issue of rate mitigation and eliminates the need for additional
`expenditure by the parties and the Commission. In its initial comments, Trial Staff
`recommended certification of the Offer of Settlement and supported the Commission’s
`acceptance of the Offer of Settlement.
`
`2.
`
`ITOs’ Initial Comments
`
`The ITOs filed initial comments opposing the Offer of Settlement and requested
`24.
`that the Commission reject the Offer of Settlement as unjust, unreasonable, and unduly
`discriminatory. The ITOs state that the Offer of Settlement would pay one active litigant
`a secret amount to agree to a settlement that hurts other customers in Zone 10 by
`preserving the unjust and unreasonable cost allocation that caused this case to be set for
`hearing.14 The ITOs state that this “sweetheart deal” would place the non-beneficial and
`unreasonable costs on the other customers in Zone 10 without their consent.15
`
`In their initial comments, the ITOs reiterate their concerns with the originally-
`25.
`proposed rate that were previously enumerated in their post-hearing briefs and at the
`hearing.16 The ITOs state that the Offer of Settlement preserves the reallocation of sunk
`costs that was present in the originally proposed rate, resulting in a material rate impact.17
`
`
`14 ITOs’ Initial Comments at 1.
`
`15 Id. at 2.
`
`16 See Appendix B, Summary of Post-Hearing Briefs.
`
`17 Id.
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`Docket Nos. ER18-99-003 and ER18-99-004
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`According to the ITOs, the Offer of Settlement proposes just two adjustments: (1) an
`unduly discriminatory rate discount to the ARKMO Cities, and (2) a deferral of 75% of
`charges for service provided in 2018 to Nixa and others to be charged in 2019 and 2020.
`The ITOs argue that the deferral includes charging 2018 costs to customers who did not
`take SPP service in 2018, but already paid Southwestern for the service they received in
`2018. In the affidavit attached to their initial comments, the ITOs allege that, by singling
`out the ARKMO Cities for special treatment, the Offer of Settlement creates a third class
`of customers, thereby worsening the already problematic two-customer-class system of
`the originally proposed rate. The ITOs argue the Offer of Settlement worsens what they
`describe as an already unjust and unreasonable rate proposal by exacerbating the cost
`shift, violating the filed rate doctrine and the rule against retroactive ratemaking, and
`singling out one customer for unduly preferential treatment.18 Additionally, the ITOs
`state that the Offer of Settlement fails each prong of the Trailblazer test.19
`
`The ITOs also claim the Offer of Settlement is facially deficient for three
`26.
`reasons.20 First, the ITOs state that the Offer of Settlement seeks for the first time to
`reallocate GridLiance’s costs incurred and charged in 2018 to customers who joined Zone
`10 after 2018 without providing the customers with notice and state that a new public
`notice and an opportunity to comment are required. Second, the ITOs state that the Offer
`of Settlement seeks confidential treatment of the ARKMO Cities-only rate discount,
`which is contrary to the principles of open and transparent rates mandated by the FPA.
`Third, the ITOs state that the Offer of Settlement lacks essential specificity concerning
`the accounting treatment of the rate deferral.21
`
`The ITOs note that when the Commission approves a settlement, it relies on the
`27.
`assumption that the interests of the parties are “generally similar to the interests of the
`inactive parties and consumers” and when such parties “demand [] greater benefits than
`the settlement provides [other customers, it] undercuts any assumption that” agreement to
`the settlement reflects the interests of “other affected parties and consumers generally.”22
`
`18 Id. at 3–4.
`
`
`
`19 Id. at 4; see Trailblazer Pipeline Co., 85 FERC ¶ 61,345 at 62,341 (1998)
`(“Trailblazer”), order on reh’g, 87 FERC ¶ 61,110, reh’g denied, 88 FERC ¶ 61,168
`(1999).
`
`20 ITOs’ Initial Comments at 4–5.
`
`21 Id. at 43–48.
`
`22 Id. at 10 (citing High Island Offshore Sys., L.L.C., 110 FERC ¶ 61,043 at P 33
`(2005) (HIOS), aff’d in part, rev’d on other grounds by Petal Gas Storage LLC v. FERC,
`
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`Docket Nos. ER18-99-003 and ER18-99-004
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`The ITOs also cited a Commission order that rejected a contested settlement for
`28.
`holding one party harmless, but imposing costs on other customers.23 In the instant
`matter, the ITOs allege that the payment to the ARKMO Cities is unduly preferential
`because ARKMO Cities is similarly situated with other non-Nixa Zone 10 customers, but
`they are treated differently with a rate discount.24 The ITOs further argue that even if
`every customer received the same discount, the cost allocation nonetheless offends the
`principles of cost causation.25
`
`Finally, the ITOs argue that the Offer of Settlement fails the threshold question
`29.
`and all four prongs of the Trailblazer test for the Commission to approve a contested
`settlement. As a threshold matter, the ITOs argue that the Commission must determine
`whether the settlement presents an acceptable outcome that is consistent with the public
`interest, which they argue, is not the case here.26
`
`The ITOs state that although the Offer of Settlement should not survive the
`30.
`threshold question, it nonetheless fails each of the four prongs in the Trailblazer analysis.
`The ITOs allege that the Settlement fails prong one on the merits because both the
`originally proposed rate and the Settlement are unjust, unreasonable, and unduly
`discriminatory.27 The ITOs further argue that the Offer of Settlement may not be
`approved without a merits determination under prong two of Trailblazer because the
`overall result of the Offer of Settlement is unjust and unreasonable.28 Additionally, the
`ITOs assert that prong three cannot be satisfied because the ITOs’ interests are not
`attenuated, and the rate is unjust, unreasonable, and unduly discriminatory.29 Finally, the
`
`496 F.3d 695 (D.C. Cir. 2007)).
`
`23 ITOs’ Initial Comments at 11 (citing PJM Interconnection, L.L.C., 144 FERC ¶
`61,207 at P 52 (2013)).
`
`24 Id. at 30-31.
`
`25 Id. at 31.
`
`26 Id. at 34 (citing Trailblazer, 85 FERC ¶ 61,345 at 62,341).
`
`27 Id. at 35.
`
`28 Id. at 37 (asserting that the “[t]he Single Customer Settlement leaves Public
`Service Company of Oklahoma and Western Farmers worse off than every single
`litigation position advanced by every party in this case.”).
`
`29 ITOs’ Initial Comments at 38–42.
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`Docket Nos. ER18-99-003 and ER18-99-004
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`ITOs state that only the issue of cost allocation may be severed and otherwise resolved
`because it is the only issue not resolved by the Offer of Settlement. The ITOs request in
`their Initial Comments that the Commission reject the Offer of Settlement and direct the
`Presiding Judge to issue an Initial Decision.
`
`3.
`
`Associated Electric’s Initial Comments
`
`31. Associated Electric filed Initial Comments in support of the ITOs’ Initial
`Comments in opposition to the Offer of Settlement. However, Associated Electric did
`not submit evidence at the hearing and did not submit an affidavit to support its
`comments in opposition to the Offer of Settlement. The Settling Parties argue that
`Associated Electric’s comments should be dismissed because “[f]ailure to include an
`affidavit as to factual issues is ‘sufficient grounds to dismiss a party’s arguments outright
`and requires a finding that the party has failed to establish any genuine issue of material
`fact.’”30
`B.
`
`Reply Comments
`
`1.
`
`Settling Parties’ Joint Reply Comments
`
`The Settling Parties filed Joint Reply Comments asserting that the ITOs
`32.
`mischaracterized the Offer of Settlement. The Settling Parties assert that the Offer of
`Settlement represents a just and reasonable resolution of the issues. Therefore, they
`argue that the Presiding Judge should certify the Offer of Settlement, and the
`Commission should approve it without modification.31
`
`First, the Settling Parties assert that the ITOs made four mischaracterizations of
`33.
`the Offer of Settlement: 1) the ITOs improperly claim that the Settlement is a “Single
`Customer Settlement” between GridLiance and “a single Zone 10 Customer, ARKMO
`Cities;”32 however, “[t]he ARKMO Cities are not ‘a single Zone 10 Customer.’ ARKMO
`
`30 Joint Reply Comments at 34-35 (quoting Duke Energy Trading and Mktg.,
`L.L.C., 124 FERC ¶ 63,021 at P 31 (2008)); see also 18 C.F.R. § 385.602(f)(4) (2020)
`which provides, “Any comment that contests an offer of settlement by alleging a dispute
`as to a genuine issue of material fact must include an affidavit detailing any genuine issue
`of material fact by specific reference to documents, testimony, or other items included in
`the offer of settlement, or items not included in the settlement, that are relevant to support
`the claim.”
`31 See generally GridLiance and the ARKMO Cities’ Joint Reply Comments (Joint
`Reply Comments).
`
`32 Joint Reply Comments at 4 (quoting ITOs’ Comments at 1).
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`Docket Nos. ER18-99-003 and ER18-99-004
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`Cities is a coalition of five municipally owned utilities, representing five distinct
`municipalities in Arkansas and Missouri,” and each has separate contractual
`arrangements for their electrical service from SPP and Southwestern;33 2) the ITOs
`mischaracterize the settlement payment as a “secret side payment;”34 however, the
`settlement payment is not a secret because it was shared with the participants that signed
`a non-disclosure agreement; 3) the ITOs’ position that the settlement payment is a rate
`discount is inaccurate because it is not a transmission rate discount, but “an exchange of
`risks and benefits among the parties aimed at resolving the underlying litigation and
`reaching finality;”35 and 4) the ITOs’ argument that the Offer of Settlement creates three
`classes of customers is inaccurate because the Offer of Settlement’s rate phase-in applies
`to all customers in Zone 10, treats all customers fairly, and does not establish a separate
`class of customers.36
`
`The Settling Parties assert that the Offer of Settlement represents a just and
`34.
`reasonable resolution of the issues because it addresses the concerns of all active Zone 10
`customers that are currently paying Zone 10 rates, and future Zone 10 customers will not
`be adversely affected. The Settling Parties state that the Offer of Settlement addresses
`rate shock for 2018 and that no Zone 10 customers are worse off under the Offer of
`Settlement than they could have been under the litigated outcomes.37 Further, the
`Settling Parties argue that the ITO