New York Power Authority and Hudson Transmission Partners, LLC v. Federal Energy Regulatory Commission

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued December 11, 2023 Decided July 26, 2024
No. 20-1283
NEW YORK POWER AUTHORITY AND HUDSON TRANSMISSION
PARTNERS, LLC,
PETITIONERS
v.
FEDERAL ENERGY REGULATORY COMMISSION,
RESPONDENT
PJM INTERCONNECTION, L.L.C. AND PPL ELECTRIC UTILITIES
CORPORATION,
INTERVENORS
Consolidated with 20-1352
On Petitions for Review of Orders of the
Federal Energy Regulatory Commission
Lucas C. Townsend argued the cause for petitioners. With
him on the joint briefs were Gary D. Levenson, Lawrence G.
Acker, Gary D. Bachman, and William R. Hollaway, Ph.D.
Susanna Y. Chu, Attorney, Federal Energy Regulatory
Commission, argued the cause for respondent. With her on the

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brief were Matthew R. Christiansen, General Counsel, and
Robert H. Solomon, Solicitor.
John Longstreth argued the cause for respondent-
intervenor PPL Electric Utilities Corporation. With him on the
brief was Donald A. Kaplan. Steven M. Nadel entered an
appearance.
Before: RAO, WALKER and CHILDS, Circuit Judges.
Opinion for the Court filed by Circuit Judge RAO.
RAO, Circuit Judge: When Hudson Transmission Partners
owned firm rights to draw electricity from the PJM grid, it was
assessed costs for certain improvements. Hudson relinquished
its firm rights in 2017. The question presented here is whether,
under the PJM Open Access Transmission Tariff (“PJM
Tariff”), Hudson must continue paying the previously assessed
costs for (1) upgrades to lower voltage facilities and (2)
economic projects.
The Federal Energy Regulatory Commission (“FERC”)
correctly found that Hudson must continue to pay for these
costs. The PJM Tariff dictates that prior assessments for lower
voltage facility upgrades are fixed and unaffected by a change
in firm rights, and the costs of economic projects are validly
allocated to entities like Hudson that benefit from the energy
savings. We accordingly deny the petitions for review.
I.
This case is a sequel to Consolidated Edison Co. of New
York, Inc. v. FERC (“ConEd”) and involves several of the same
parties. See 45 F.4th 265 (D.C. Cir. 2022) (per curiam). That
decision discusses the regulatory background and the
relationship between the various energy providers in detail, but

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we recount the facts necessary to evaluate the issues presented
here.
A.
PJM Interconnection (“PJM”) manages the electric grid in
a region stretching from Illinois to New Jersey, overseeing a
network of member utilities that deliver energy from generators
to consumers. The utilities own the grid’s electrical
infrastructure, but PJM exercises operational control over the
transmission of electricity and coordinates with several
“merchant transmission facilities,” like Hudson. Unlike
utilities, which sell electricity to customers within PJM’s grid,
merchant transmission facilities pay to draw power from PJM’s
grid and sell it to customers outside the PJM region. See PJM
Interconnection, L.L.C., Opinion No. 503, 129 FERC ¶ 61,161
at P 2 & n.3 (2009); TransEnergie U.S., Ltd., 91 FERC
¶ 61,230, 61,835–36 (2000).
As part of its managerial responsibilities, PJM helps
prepare the Regional Transmission Expansion Plan (“Regional
Plan”), which schedules improvements to PJM’s transmission
facilities to accommodate changing energy needs. Because
upgrades to one part of the grid often benefit other users, PJM
can spread the costs among grid participants in accordance with
Schedule 12 of the PJM Tariff. Two types of improvements are
relevant here: reliability upgrades and economic projects. In its
landmark Opinion No. 503, FERC concluded that merchant
transmission facilities with firm rights could be assigned a
share of the costs for these improvements. Opinion No. 503 at
PP 73, 80.
The method for calculating cost assignments for reliability
upgrades has changed significantly in the last decade. Before
2013, PJM assigned these upgrade costs using a violation-
based distribution factor analysis, a “snapshot” approach

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designed to determine which entities were drawing power from
specific facilities at a given time and contributing to violations
of reliability standards. See PJM Interconnection, L.L.C., 142
FERC ¶ 61,214 at PP 348, 379, 427 (2013); PJM
Interconnection, L.L.C., Opinion No. 494, 119 FERC ¶ 61,063
at P 2 n.3 (2007). Upgrade costs would then be assigned to
participants in proportion to their contribution to the reliability
violation. Because the violation-based method was tied to
energy usage at a particular point in time and the calculations
were fixed, FERC determined that the method failed to account
for the constant changes to the grid. See PJM Interconnection,
L.L.C., 138 FERC ¶ 61,230 at P 37 (2012). In 2013, PJM
switched to a solution-based distribution factor. This
calculation method projects who will benefit from upgrades
based on relative usage, and it permits PJM to update and
reassign costs annually. PJM Interconnection, 142 FERC
¶ 61,214 at PP 379, 416.
When PJM changed to the new cost calculation method,
Schedule 12 was revised, but these revisions also included a
kind of saving clause stating “nothing” in the revised Schedule
12 “shall change the assignment of cost responsibility” for
reliability upgrades calculated using the old violation-based
method, “[e]xcept as specifically set forth herein.” PJM Tariff,
Sched. 12(a)(v).
B.
Petitioner Hudson is a merchant transmission facility that
interconnects with PJM. It owns an eight-mile-long cable that
runs under the Hudson River from New Jersey to New York.
When energy prices are lower in New Jersey, Hudson routes
electricity across the river and sells it at a profit. On the New
Jersey side, Hudson connects to a PJM member utility, while
in New York, Hudson’s “anchor” customer is the New York

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Power Authority, a government-run electrical utility. The New
York Power Authority is responsible for the charges that
Hudson incurs to obtain electricity from PJM.
In 2010, Hudson contracted with PJM for firm rights,
entitling Hudson to draw a guaranteed amount of energy from
PJM’s grid. At that time, several merchant transmission
facilities held firm rights, and ConEd held the equivalent of
firm rights. Hudson, ConEd, and the other facilities were each
assigned a percentage of the cost responsibility for
improvements. Pre-2013 cost assessments for reliability
upgrades—employing the old violation-based calculation
method—were memorialized in Schedule 12’s Appendix
(“Appendix”).
Faced with rising costs for various improvement projects,
ConEd let its rights expire in 2017. A provision in the Tariff
allowed PJM to reallocate ConEd’s remaining cost
responsibility if ConEd terminated its contract, and so PJM
shifted a portion of ConEd’s cost responsibilities onto Hudson.
See id. Sched. 12(b)(xi)(B).
Also unable to keep up with these escalating costs, Hudson
sought—and FERC approved—the conversion of its firm
rights into non-firm rights. PJM Interconnection, L.L.C., 161
FERC ¶ 61,262 at P 1 (2017). This relieved Hudson of its
obligation to pay for ongoing reliability upgrades calculated
using the solution-based method, including $633 million in
costs formerly assigned to ConEd. See PJM Interconnection,
L.L.C., 162 FERC ¶ 61,197 at P 28 (2018). We affirmed that
decision in ConEd. See 45 F.4th at 286–90. But neither FERC
nor our court addressed whether Hudson, after relinquishing its
firm rights, was obligated under the PJM Tariff to continue
paying for other previously assessed costs.

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C.
The question in this case is whether Hudson remains
responsible for the balance of two kinds of previously assessed
costs. First, Hudson claims it is no longer required to pay for
reliability upgrades to “lower voltage facilities” that are listed
in the Appendix. Lower voltage facilities are smaller segments
of electrical infrastructure that improve grid reliability. Before
2013, Hudson was assigned a share of the cost responsibility
for upgrades to these facilities, including a $975 million set of
upgrades in New Jersey that was completed in 2016. Hudson
claims that its remaining share of these upgrades is
approximately $136 million, to be paid out over the next 40
years.
Second, Hudson insists its lack of firm rights eliminates its
obligation to pay for nine “economic projects.” When demand
for energy outstrips transmission facilities’ ability to provide it,
the grid is forced to “draw on more expensive generation closer
to the areas of high demand, which ultimately raises costs to
consumers.” Int’l Transmission Co. v. FERC, 988 F.3d 471,
473 (D.C. Cir. 2021). Economic projects aim to ameliorate
these inefficiencies. PJM allocates the costs of economic
projects to “Zones” based on their share of cost savings from
the improvements over the first fifteen years of the projects’
lives. See PJM Tariff, Sched. 12(b)(v)(C). PJM previously
assessed Hudson cost responsibility for nine of these projects.
D.
Based on its interpretation of the Tariff, PJM concluded
that after Hudson converted to non-firm rights, it was no longer
responsible for paying for lower voltage facility upgrades and
economic projects. PJM filed a proposal with FERC to revise

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Schedule 12 of the Tariff to that effect.1 Several parties
intervened to oppose the amendments, including some of
PJM’s member utilities.
FERC rejected PJM’s proposed changes. PJM
Interconnection, L.L.C., 170 FERC ¶ 61,295 at P 24 (2020).
FERC first found that Hudson must continue to pay the
previously assessed costs for lower voltage facilities.
According to the Tariff, regional upgrade charges in the
Appendix—including Hudson’s responsibility for the lower
voltage facilities—are fixed and unchangeable unless Schedule
12 “specifically” states otherwise. PJM Tariff, Sched. 12(a)(v).
FERC determined that nothing in Schedule 12 explicitly
changed this cost responsibility. PJM Interconnection, 170
FERC ¶ 61,295 at P 28. FERC also reasoned that costs for
economic projects are allocated to “transmission owners whose
load benefits from these investments.” Id. at P 30. Even
without firm rights, Hudson benefits from the savings
associated with these economic projects and must continue
paying for them. Id. FERC reached the same conclusions on
rehearing. PJM Interconnection, L.L.C., 172 FERC ¶ 61,205 at
PP 21–29 (2020).
Hudson timely petitioned for review, as did the New York
Power Authority, which joined Hudson on the briefs. We have
jurisdiction over the consolidated petitions under 16 U.S.C.
§ 825l(b).
II.
We review FERC orders to ensure they are not “arbitrary,
capricious, an abuse of discretion, or otherwise not in
1 Section 205 of the Federal Power Act requires FERC to approve all
proposed tariff revisions. 16 U.S.C. § 824d(a), (d).

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accordance with law.” 5 U.S.C. § 706(2)(A). FERC is bound to
follow “unambiguous tariff language.” La. Pub. Serv. Comm’n
v. FERC, 10 F.4th 839, 846 (D.C. Cir. 2021). It must also act
consistently with its prior orders and the cost-causation
principle, assigning the costs of improvements to the parties
that either cause the need for an improvement or benefit from
it. See Ind. Boxcar Corp. v. R.R. Ret. Bd., 712 F.3d 590, 591
(D.C. Cir. 2013); Okla. Gas & Elec. Co. v. FERC, 11 F.4th 821,
832 (D.C. Cir. 2021). Applying these standards, we conclude
that FERC properly held Hudson responsible for the cost
assignments associated with lower voltage facilities and
economic projects.
A.
First, Hudson argues that both the PJM Tariff and prior
FERC decisions forbid PJM from continuing to collect
previously assessed lower voltage facility costs from a
merchant transmission facility that has given up its firm rights.
The costs at issue were allocated to Hudson after it contracted
for firm rights and were memorialized in Schedule 12’s
Appendix.
The Tariff sets a strong presumption in favor of requiring
Hudson to continue paying for these upgrades. The Appendix
sets out the cost responsibility for regional upgrades calculated
using the old violation-based method, including Hudson’s
allocations for the lower voltage facilities. See PJM
Interconnection, 172 FERC ¶ 61,205 at P 8. The Tariff also
provides that “[e]xcept as specifically set forth herein, nothing
in this Schedule 12 shall change the assignment of cost
responsibility” in the Appendix. PJM Tariff, Sched. 12(a)(v).
No provision in Schedule 12 specifically addresses or alters
Hudson’s cost assignments for lower voltage facilities in the

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Appendix. Thus, we agree with FERC that Hudson remains
responsible for paying these charges.
Hudson raises several challenges to this straightforward
conclusion, but each misreads the Tariff or misinterprets
FERC’s prior decisions. Hudson’s primary argument is that
Schedule 12 section (b)(x)(B)(2) obviates its responsibility to
pay for lower voltage facilities. This section sets some special
rules for merchant transmission facilities in the regional
planning process, including that PJM “shall base the collection
of … [c]harges … on the actual Firm … Rights that have been
awarded to the Merchant Transmission Facility.” Id. Sched.
12(b)(x)(B)(2). Because Hudson no longer possesses “actual”
firm rights, it maintains this provision prohibits PJM from
continuing to collect regional upgrade costs.
In context, however, this provision is far more limited—it
addresses how PJM should proceed when a merchant
transmission facility has contracted for firm rights but has not
received them in full. For various reasons, there may be a gap
between the time a facility contracts for firm rights and the time
it is entitled to receive its full complement of rights. Section
(b)(x)(B) explains how PJM should accommodate these
circumstances. First, under section (b)(x)(B)(1), PJM must
“defer collection” of charges until the merchant transmission
facility “goes into commercial operation.” Then section
(b)(x)(B)(2) provides PJM will limit “collection” of upgrade
charges to the firm rights actually awarded. And section
(b)(x)(B)(3) provides a mechanism for collecting deferred
charges in the situation in which a facility is awarded less than
the amount of firm rights in its interconnection agreement.
Within this structure, the role of section (b)(x)(B)(2) is
clear. It prohibits PJM from collecting the full amount of
upgrade charges until a facility has acquired the full amount of

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agreed-upon firm rights.2 Hudson cannot convert section
(b)(x)(B)(2) into an all-purpose rule that merchant transmission
facilities without firm rights do not pay for previously assessed
upgrades set in the Appendix. The provision says nothing about
Hudson’s situation, namely where a merchant transmission
facility was assigned upgrade costs under the violation-based
calculation method, received its full amount of firm rights, and
then gave up those rights in favor of non-firm rights.3 Section
(b)(x)(B)(2) certainly does not “specifically” require changes
to the fixed cost allocations for lower voltage facilities, as
section (a)(v) requires.4
2 For context, section (b)(x)(B)(2) was added in response to Opinion
No. 503, which held that “[t]o the extent … [a] Merchant
Transmission Facility receives less than the full allocation of
Firm … Rights on [its] in-service date, PJM should bill the Merchant
Transmission Facility based on the actual Firm … Rights available
at that time while deferring further collections until the full Firm
Transmission Withdrawal Rights are awarded.” Opinion No. 503 at
P 146; see also PJM Compliance Filing, FERC Docket No. ER06-
456-022 (Feb. 19, 2010).
3 FERC suggested that section (b)(x)(B)(2) operated to prevent
merchant transmission facilities without firm rights from being
allocated prospective solution-based cost assignments. See PJM
Interconnection, 170 FERC ¶ 61,295 at P 28. That is partially
correct—when allocations for reliability upgrades are updated each
year, merchant transmission facilities who lack firm rights as of the
assignment date will not receive cost allocations. See PJM Tariff,
Sched. 12(b)(i)(A)(1)(b), (b)(i)(A)(2)(a), (b)(ii)(A), (b)(iii)(A)(3).
The Tariff compels that result through other provisions, however, not
section (b)(x)(B)(2).
4 Hudson also contends that FERC’s order should be vacated because
it “entirely failed to analyze the text of Schedule 12(b)(x)(B)(2).” But
FERC correctly concluded that “[no] language in … section

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Hudson next argues that even if the cost allocations for
lower voltage facilities are fixed, section (b)(x)(B)(2) prohibits
PJM from collecting on those allocations. But section
(b)(x)(B)(2) is not a flat ban on collecting charges from a
merchant transmission facility without firm rights; it addresses
merchant transmission facilities facing a discrepancy between
the firm rights contracted for and the firm rights received. This
section simply does not address whether PJM can collect on
previously assessed upgrade charges after Hudson gave up its
firm rights.
Turning to the history of the PJM Tariff, Hudson insists
that section (b)(x)(B)(2) must operate to bar the collection of
the previously assessed violation-based charges because, at the
time that section was written into Schedule 12, the violation-
based method was the only way to make cost allocations for
lower voltage facilities. Again, however, Hudson
misunderstands the import of section (b)(x)(B)(2). Under both
the violation-based method and the solution-based method,
section (b)(x)(B)(2) caps the collection of charges at the level
of a merchant transmission facility’s actual firm rights, until a
facility receives its full complement of rights. But importantly,
when PJM transitioned to the new solution-based method in
2013, it added section (a)(v) to make clear that the previous
cost assessments memorialized in the Appendix remained
unchanged (absent an express provision stating otherwise). To
reiterate, because section (b)(x)(B)(2) does not specifically
undo those previously assessed charges, Hudson remains
responsible for them.
(b)(x)(B)(2) … specifically changes the cost allocation” for charges
in the Appendix. PJM Interconnection, 172 FERC ¶ 61,205 at P 24.
A lengthy explanation is unnecessary when FERC relies on the
straightforward text of the Tariff.

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Hudson also claims the charges in the Appendix cannot
truly be fixed because PJM reallocated ConEd’s charges after
ConEd terminated its contract. But the Tariff expressly
provides that “[a]ll cost responsibilit[ies]” under Schedule 12
“shall be adjusted at the commencement and termination of
service under the ConEd Service Agreements.” Id. Sched.
12(b)(xi)(B). If anything, this language demonstrates the level
of specificity the PJM Tariff uses to authorize adjustments of
previously assessed charges. The absence of comparable
language with respect to Hudson, or to merchant transmission
facilities more generally, underscores that nothing in Schedule
12 “specifically” relieves Hudson of the obligation to pay for
its share of previously assessed upgrade costs for lower voltage
facilities.5 Id. Sched. 12(a)(v).
Furthermore, FERC’s interpretation of the Tariff is
supported by its prior orders. Back when PJM still used the
violation-based method for lower voltage facilities, an electric
utility left PJM’s grid and there was a dispute about whether
the utility was still responsible for annually assessed higher
voltage facility costs. Midwest Indep. Transmission Sys.
Operator, Inc. (“MISO”), 124 FERC ¶ 61,219 at PP 1, 168
(2008). These annual costs contrasted with lower voltage
facility costs, which were “fixed” in the Regional Plan. Id. at
P 168. The utility conceded, and FERC agreed, that because the
lower voltage costs were “fixed,” the utility was liable for
them, even after it left the grid. Id. What was true in MISO is
true here. After giving up its firm rights, Hudson is no longer
responsible for annually updated costs (calculated using the
5 Hudson’s only response is to argue that section (b)(xi) does not
specify a way to calculate reallocation. But that is beside the point.
Section (b)(xi) specifically authorizes the reallocation of ConEd’s
cost assignments. No such provision exists for Hudson or other
merchant transmission facilities.

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solution-based method), but it still owes the fixed lower voltage
facility costs.
Hudson insists that later FERC orders tell a different story,
and FERC arbitrarily contradicted those orders here. Hudson
pulls a sentence from Opinion No. 503, in which FERC stated
that PJM may allocate Regional Plan costs to merchant
transmission facilities with firm rights because it is “required
to provide [them] reliable service.” Opinion No. 503 at P 80.
Merchant transmission facilities “can avoid these costs if
instead of opting for Firm … Rights, they opt only for Non-
Firm … Rights under the tariff.” Id. But in context, FERC was
referring to a facility’s initial choice to obtain firm rights versus
non-firm rights. Hudson previously opted for firm rights in
2010, and so PJM planned upgrades and allocated Hudson
costs that were set in the Appendix. FERC’s decision here is
not in conflict with Order No. 503, which simply does not
address what happens to those fixed cost allocations when a
facility converts its firm rights to non-firm rights.
Hudson alternatively relies on language in FERC’s
December 2017 order, which states that when Hudson converts
to non-firm rights, “upgrade costs [will] no longer be allocable
to [Hudson].” PJM Interconnection, 161 FERC ¶ 61,262 at
P 50. Seizing on this phrase, Hudson insists it cannot be
allocated upgrade costs of any kind. But the December order,
which approved Hudson’s conversion to non-firm rights, was
plainly prospective. The very next sentence is clear that the
costs referenced were the ongoing solution-based cost
allocations, those “updated annually … to determine
beneficiaries of [Regional Plan] projects.”6 Id. FERC has
6 Hudson also points to FERC’s statement that the Tariff does “not
require a merchant transmission facility … to be allocated costs for
[a Regional Plan] project over the life of that project based on

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consistently maintained such costs may be assigned only to
merchant transmission facilities with firm rights, and everyone
agrees that PJM may no longer allocate solution-based costs to
Hudson. Id. at PP 49–50. The December order says nothing
about the previously assessed costs for upgrades listed in the
Appendix, such as for lower voltage facilities.
* * *
With respect to the previously assessed charges for lower
voltage facilities fixed in the Appendix, FERC followed the
plain language of the PJM Tariff and reasonably explained how
its decision complied with prior orders. We therefore conclude
that Hudson continues to be responsible for these charges even
after converting to non-firm rights.
B.
Hudson next challenges its continuing cost responsibility
for nine economic projects, which are improvements that lower
the cost of transmitting electricity. PJM Interconnection, 172
FERC ¶ 61,205 at P 5. FERC’s conclusion that Hudson is still
responsible for these charges is consistent with the text of the
Tariff and agency precedent.
Section (b)(v) of Schedule 12 defines the cost allocation
method for three types of economic projects. At issue here are
several subsection (C) economic projects for which Hudson
was assigned a share of the costs while it held firm rights.
the … Firm [Rights] the merchant transmission facility held at the
time that the … project was approved.” PJM Interconnection, 161
FERC ¶ 61,262 at P 50. In context, however, FERC was clearly
referring to prospective annual cost allocations under the solution-
based method, not previously assessed charges set forth in the
Appendix.

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Hudson’s cost responsibility, however, was not based on its
firm rights. According to the Tariff, economic projects must be
funded by “Zones” that experience cost savings from the
improvements.7 See PJM Tariff, Sched. 12(b)(v)(C). And there
is no dispute that Hudson and its customers benefit from the
cost savings associated with these projects. Thus, FERC
appropriately concluded that Hudson must continue paying for
the nine projects.
Hudson launches two attacks on this conclusion—one
categorical, one narrower—but neither succeeds. First, Hudson
suggests that merchant transmission facilities (irrespective of
their firm rights) are simply not zones and therefore cannot be
allocated costs for subsection (C) economic projects, which
must be assigned to “Zones.” Id. Sched. 12(b)(v)(C). By
contrast, subsection (A) assigns costs of different economic
projects “to Zones and Merchant Transmission Facilities.” Id.
Sched. 12(b)(v)(A). Because subsection (A) uses the phrase
“Zones and Merchant Transmission Facilities,” whereas
subsection (C) mentions only “Zones,” Hudson maintains that
subsection (C) costs cannot be assigned to merchant
transmission facilities.
We cannot assess the plausibility of this argument,
however, because it constitutes a collateral attack on a prior
FERC order. After FERC’s Opinion No. 503 held that
merchant transmission facilities with firm rights were
equivalent to zones and could be assigned costs for regional
7 In the technical language of the Tariff, PJM must allocate the cost
of subsection (C) economic projects “to the Zones that show a
decrease in the net present value of the Changes in Load Energy
Payment.” PJM Tariff, Sched. 12(b)(v)(C); see also PJM Operating
Agreement, Sched. 6, § 1.5.7(d) (defining “Change in Load Energy
Payment”).

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upgrades, FERC approved allocations of subsection (C)
economic project costs to Hudson. See PJM Interconnection,
L.L.C., 156 FERC ¶ 61,120 at PP 1–2 (2016) (approving the
economic project cost assignments in Filing, FERC Docket No.
ER16-1232-000 (Mar. 18, 2016)). Parties must seek review of
FERC orders within sixty days, and challenges to prior orders
not raised within that timeframe are jurisdictionally barred. See
16 U.S.C. § 825l(b); Pac. Gas & Elec. Co. v. FERC, 533 F.3d
820, 824–25 (D.C. Cir. 2008). Hudson’s claim that merchant
transmission facilities categorically cannot be assigned cost
responsibility for subsection (C) economic projects is an
impermissible collateral attack on the order assigning it such
costs.
In the face of this jurisdictional bar, Hudson pivots to a
different argument. It claims that, even if it was lawfully
allocated economic project costs while it held firm rights, it
should no longer be responsible for these costs now that it lacks
such rights. But this claim likewise fails. Although Opinion No.
503 held that PJM could treat merchant transmission facilities
with firm rights like zones, it did not address subsection (C)
economic projects specifically, nor did its reasoning preclude
assigning costs for those projects to facilities without firm
rights. See Opinion No. 503 at PP 79–81.
The plain meaning of the tariff confirms that subsection
(C) economic project costs are assigned based on energy
savings, irrespective of a beneficiary’s firm rights. Subsection
(C) explicitly assigns the costs of economic projects based on
a party’s share of the savings. PJM Tariff, Sched. 12(b)(v)(C).
By contrast, subsections (A) and (B) incorporate the solution-
based method and prospectively allocate costs to merchant
transmission facilities based on their quantity of firm rights.
See id. Sched. 12(b)(v)(A), (B). FERC’s conclusion is
consistent with the text of the Tariff—subsection (C) costs can

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be assigned to entities that lack firm rights as long as they
benefit from the improvements through lower load energy
payments.8
Hudson tries to argue that it does not constitute “load” on
PJM’s system without firm rights, but FERC defines load
broadly as “remov[ing] energy from [PJM’s] system.” Opinion
No. 503 at P 25. Hudson does not dispute that it will continue
to make withdrawals or that Hudson and its customers will
continue to benefit from the cost savings. Thus, Hudson
remains liable for the previously assessed costs of the nine
economic projects.
C.
Finally, Hudson argues that FERC’s decision violates the
cost-causation principle. But FERC reasonably implemented
the statutory mandate to ensure that cost assignments are based
on a party’s burden on the grid or the benefits it obtains.
The Federal Power Act requires “[a]ll rates and charges
made, demanded, or received … in connection with the
transmission or sale of electric energy” to “be just and
reasonable.” 16 U.S.C. § 824d(a). “For decades, the
Commission and the courts have understood [the ‘just and
reasonable’] requirement to incorporate a ‘cost-causation
8 FERC has consistently explained that the cost calculation method
in subsection (C) does not depend on firm rights. In a related case
involving targeted market efficiency projects—for which costs are
also allocated using a method that does not consider firm rights—
FERC observed that subsection (C) “allocates the cost of new
Economic Projects based on the expected economic benefits from
reduced locational marginal prices to Merchant Transmission
Facilities without regard to their level of Firm … Rights.” PJM
Interconnection, L.L.C., 164 FERC ¶ 61,002 at P 42 (2018).

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principle’—the rates charged for electricity should reflect the
costs of providing it.” Old Dominion Elec. Coop. v. FERC, 898
F.3d 1254, 1255 (D.C. Cir. 2018). FERC must “compar[e] the
costs assessed against a party to the burdens imposed or
benefits drawn by that party.” Midwest ISO Transmission
Owners v. FERC, 373 F.3d 1361, 1368 (D.C. Cir. 2004). And
FERC’s cost allocation decisions must be both reasonable and
reasonably explained. See Old Dominion, 898 F.3d at 1260.
Importantly, “[w]hen a utility benefits from the costs of new
facilities, the cost causation principle dictates that the utility
must pay for that benefit because it has caused a part of those
costs to be incurred, as without the expectation of its
contributions the facilities might not have been built, or might
have been delayed.” Okla. Gas, 11 F.4th at 832 (cleaned up).
FERC’s decision to sustain Hudson’s previously assessed
cost responsibility for improvements to the grid (i.e., lower
voltage facilities and economic projects) is consistent with the
cost-causation principle. First, FERC adequately explained
why Hudson can continue to be charged for these
improvements even after transitioning to non-firm rights.
FERC explained that PJM assigned Hudson a share of the costs
for lower voltage facilities using the violation-based
calculation method. PJM Interconnection, 170 FERC ¶ 61,295
at P 24. This method assigned costs commensurate with
burdens and benefits because “[t]he zones that ‘cause’ the
violation and ‘benefit from’ the addition of upgrades … are
allocated the costs” of upgrades. Id. at P 5 n.10. This “cost
responsibility remain[s] with the transmission owner,” even if
it relinquishes its firm rights or leaves the PJM system. PJM
Interconnection, 172 FERC ¶ 61,205 at P 23 & n.39. FERC
also found that Hudson was still required to pay for the
economic projects because it “continue[s] to benefit from the[]
savings regardless of whether [it] hold[s] Firm … Rights.”
PJM Interconnection, 170 FERC ¶ 61,295 at P 30.

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Hudson insists that FERC never performed a cost-
causation analysis, or at least it did not explain how the
principle applied to Hudson’s case. True, FERC does not
describe its reasoning as a “cost-causation analysis.” But we
have never required a FERC opinion to use those magic words.
Both of FERC’s orders tie the assignment of charges to the
burdens Hudson placed on PJM’s grid or the benefits it
received. We have previously held that FERC “reasonably
explained that its decision … adhered to cost-causation
principles” when it identified the primary beneficiary and cost-
driver of a project and explained why costs were appropriately
assigned to that party. See TransCanada Power Mktg. Ltd. v.
FERC, 811 F.3d 1, 3, 9–10 (D.C. Cir. 2015). That is what
FERC did here. It explained that Hudson’s cost assignments
tracked either the burdens it placed on the grid or the benefits
it reaped from the improvements. Even if FERC did not dwell
on cost-causation, the “path” of the agency’s reasoning is easily
“discerned from the record.” Aera Energy LLC v. FERC, 789
F.3d 184, 192 (D.C. Cir. 2015) (cleaned up).
Hudson also contends that FERC’s assignment of costs
fails because, without firm rights, Hudson no longer receives
the benefits from reliability upgrades that it once did. But we
have always stated the cost-causation principle in the
disjunctive—it is satisfied by assigning costs based on either
burdens or benefits. See, e.g., Midwest ISO, 373 F.3d at 1368.
With respect to the economic projects, Hudson’s share of the
cost responsibility was assigned in proportion to the benefits it
received. And as for reliability upgrades, Hudson does not
dispute that the lower voltage facility charges correspond to the
burden it placed on PJM’s system. Indeed, Hudson’s
contribution to reliability violations required PJM to make
hundreds of millions of dollars in tangible upgrades after
Hudson joined the system. Thus, it is neither unjust nor

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unreasonable for FERC to require Hudson to continue paying
its share of these previously assigned upgrade costs.
Finally, Hudson counters that it already “paid in full” for
any burden on PJM’s grid when it paid $335 million to obtain
its firm rights. But Hudson confuses the initial cost of
interconnection with the costs of reliability upgrades. When
Hudson obtained firm rights, it had to pay the initial costs of
connecting to PJM’s grid, the $335 million. In addition,
Hudson’s ongoing burden on the system contributed to the
need for reliability upgrades, which were assigned using the
violation-based method and fixed in the Appendix. As
explained above, Hudson remains responsible for these
previously assessed costs, even after it relinquished its firm
rights.
In sum, FERC adequately explained that Hudson’s charges
corresponded to either the burdens it placed on PJM’s grid or
the benefits it obtained. See Old Dominion, 898 F.3d at 1260.
And that assignment of cost responsibility was neither arbitrary
nor capricious.
* * *
Even after relinquishing its firm rights, Hudson remains
responsible for previously assessed lower voltage facility costs
as well as the costs associated with nine economic projects.
FERC’s order comports with the plain meaning of the PJM
Tariff, its prior orders, and the cost-causation principle. We
therefore deny the petitions for review.
So ordered.

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