Energy — cost shifting

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U.S. Court of Appeals for the 7th Circuit

Civil

Energy

An energy supplier cannot shift a grossly disproportionate share of their costs to other utilities on which the projects will confer only future, speculative, and limited benefits.

“By now it should be apparent that the basic fallacy of the Commission’s analysis is to assume that the 500 kV lines that have been or will be built in PJM’s eastern region are basically for the benefit of the entire regional grid. Not true; their purpose is to address specific reliability violations in the eastern part of PJM. No electric-power company would spend billions of dollars just to improve reliability in the absence of reliability violations that required fixing. There are bound to be benefits to the entire grid and therefore to the utilities connected to it, but they are incidental, just as repairing a major pothole in a city would incidentally benefit traffic in the city’s suburbs, because some suburbanites commute to the city. So they should pay a share of the cost of repair, but a share proportionate to their use of the street with the pothole rather than proportionate to their population. The incidental-benefits tail mustn’t be allowed to wag the primary-benefits dog.”

Petitions Granted.

13–1674, 13–1676, 13–2052 & 13–2262 Illinois Commerce Commission v. FERC

Petitions for Review of an Order of the Federal Energy Regulatory Commission, Posner, J.