Pacific Gas and Electric Company v. Federal Energy Regulatory Commission

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued May 1, 2024 Decided August 23, 2024
No. 23-1041
PACIFIC GAS AND ELECTRIC COMPANY,
PETITIONER
v.
FEDERAL ENERGY REGULATORY COMMISSION,
RESPONDENT
CITY AND COUNTY OF SAN FRANCISCO, CALIFORNIA,
INTERVENOR
Consolidated with 23-1127
On Petitions for Review of Orders of the
Federal Energy Regulatory Commission
Elaine J. Goldenberg argued the cause for petitioner. With
her on the briefs were Joshua S. Levenberg, Alexandra J. Ward,
Helen E. White, and Henry Weissmann. Laura J. Edelstein
entered an appearance.

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Scott Ray Ediger, Attorney, Federal Energy Regulatory
Commission, argued the cause for respondent. With him on the
brief were Matthew R. Christiansen, General Counsel, and
Robert H. Solomon, Solicitor.
Jeffrey M. Bayne argued the cause for intervenor in
support of respondent. With him on the brief were William S.
Huang and Anree G. Little.
Before: WILKINS, RAO, and PAN, Circuit Judges.
Opinion for the Court filed by Circuit Judge RAO.
Concurring opinion filed by Circuit Judge PAN.
RAO, Circuit Judge: This case is part of a long running
dispute about Pacific Gas and Electric’s (“PG&E”) obligations
to wheel energy to the customers of the San Francisco Public
Utilities Commission (“SFPUC”). While the Federal Energy
Regulatory Commission generally cannot order wheeling, a
grandfathering clause allows FERC to order wheeling on
behalf of certain utilities to an “ultimate consumer,” if the
utility was providing service to that consumer on October 24,
1992. 16 U.S.C. § 824k(h)(2). PG&E incorporated this
grandfathering clause into its tariff. SFPUC and PG&E
disagree about which consumers are entitled to wheeled
service. We vacated FERC’s first order in this dispute because
the Commission failed to analyze the statutory requirements.
On remand, FERC adopted a class-based interpretation of
“ultimate consumer.” Because FERC’s interpretation cannot be
squared with the statutory text, we grant PG&E’s petition for
review and vacate the orders.

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I.
A.
PG&E, an investor-owned utility operating in California,
provides electricity to the majority of consumers in San
Francisco. SFPUC, a publicly owned utility, generates power
in the Hetch Hetchy Valley and sells it to end users in San
Francisco. SFPUC’s typical customers include municipal
departments such as the Port of San Francisco and the
Recreation and Parks Department, and other public
departments like the school district and housing authority.
SFPUC also serves some private consumers in San Francisco,
competing with PG&E. Because SFPUC does not own
distribution lines within the city, it relies on PG&E to wheel,
i.e., distribute, its energy. These wheeling arrangements were
historically governed by a series of bilateral agreements, the
last of which expired in 2015.
PG&E’s 2015 Tariff governs the distribution obligations
at issue in this case.1 Section 14.2 of the Tariff provides that
SFPUC’s customers are entitled to wheeled service if SFPUC
can “demonstrat[e] that, for each Point of Delivery for which it
claims eligibility for Grandfathering, the criteria of 16 [U.S.C.]
§ 824k(h)(2) are met.” Section 824k(h) prohibits FERC from
ordering a utility to wheel power, subject to a few exceptions.
The grandfathering exception allows FERC to order wheeling
to a municipal utility’s “ultimate consumer” if that municipal
utility “was providing electric service to such ultimate
consumer on October 24, 1992.” 16 U.S.C. § 824k(h)(2)(B).
1 The 2015 Tariff was superseded in 2021 by a new tariff that is being
litigated separately. See City and County of San Francisco, 181
FERC ¶ 61,036 at PP 27–28, 31 & n.66 (2022); see also FERC,
Docket No. ER20-2878.

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The parties disagree about the extent of PG&E’s wheeling
obligations under the Tariff. In the first round of proceedings
before the Commission, San Francisco alleged PG&E was
“unreasonably den[ying] service” to SFPUC’s customers.
PG&E contended it was not obligated to wheel electricity to
any delivery point where SFPUC did not provide service as of
the grandfathering date. San Francisco maintained the Tariff
required PG&E to wheel SFPUC’s power to serve the same
“types” or “class[es] of customers” that SFPUC had contracted
with in 1992. In its 2019 order, FERC rejected San Francisco’s
class-based approach, concluding that it could not be
reconciled with the Tariff’s focus on “points of delivery,” and
that San Francisco’s approach could essentially grandfather all
of SFPUC’s customers. City and County of San Francisco, 169
FERC ¶ 61,128 at PP 67–71 (2019).
Granting San Francisco’s petition for review, we held that
FERC failed to interpret the requirements of section
824k(h)(2), which was “unambiguously … incorporate[d]”
into the Tariff. City and County of San Francisco v. FERC, 24
F.4th 652, 663 (D.C. Cir. 2022) (“CCSF”). We vacated the
order and remanded for FERC to interpret section 824k(h)(2)
and to provide “a reasoned analysis” of its Suffolk County
orders, which previously interpreted that provision. Id. at 664.
B.
On remand, FERC explained its interpretation of
section 824k(h)(2)’s grandfathering clause was controlled by
the Suffolk County orders. City and County of San Francisco,
181 FERC ¶ 61,036 at PP 30–35 (2022) (“Order on Remand”).
In those orders, FERC specified that the grandfathering clause
covered “not only the customers [the relevant entity] was
actually serving on October 24, 1992, but also ‘all potential
retail customers within the class [the entity] had been serving.’”

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Id. at P 33 (quoting Suffolk County Elec. Agency, 108 FERC
¶ 61,173 at P 19 (2004)). FERC concluded that because the
Tariff incorporates section 824k(h), “PG&E must
extend … service to: (1) all end-use customers served by San
Francisco as of October 24, 1992; and (2) all customers that
belong to that same class of customers, even at points of service
that were initiated after October 24, 1992.” Id. at P 37. To
define the “class of customers,” FERC considered the last
bilateral agreement signed between PG&E and SFPUC before
the grandfathering deadline. Id. at P 38.
After rehearing, the Commission clarified that “eligibility
under [16 U.S.C. § 824k(h)(2)] therefore extends not only to
the customers who were actually receiving service on October
24, 1992, but also to all subsequently interconnected customers
of the same class.” City and County of San Francisco, 182
FERC ¶ 61,167 at P 68 (2023). FERC also determined that any
“customer types that were eligible for city service in 1992 will
continue to be grandfathered even where San Francisco adds,
consolidates, reconfigures, or relocates customers” so long as
the class of customers received service on the grandfathering
date. Id. at PP 30, 69. To comply with FERC’s orders, PG&E
updated its service agreement with SFPUC to identify
additional delivery points that now qualified for service.
PG&E timely petitioned for review of the orders, and San
Francisco intervened in support of FERC. See 16 U.S.C.
§ 825l.
II.
Although FERC does not contest PG&E’s standing, we
have an independent obligation to ensure we have jurisdiction.
Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83, 95 (1998).
To satisfy the requirements of Article III standing, PG&E must
demonstrate that it continues to suffer a “concrete,

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particularized, and actual or imminent” injury in fact, which is
caused by FERC’s orders, and “it … [is] likely that a favorable
decision of the court will redress the injury.” Farrell v. Blinken,
4 F.4th 124, 129 (D.C. Cir. 2021) (citing Lujan v. Defs. of
Wildlife, 504 U.S. 555, 560–61 (1992)).
PG&E challenges FERC’s interpretation of the 2015
Tariff, which has since been replaced by the 2021 Tariff.
Nonetheless, PG&E continues to suffer an ongoing injury. As
part of the ordered relief, FERC required PG&E to update its
service agreement with SFPUC. PG&E must continue to serve
the delivery points of the grandfathered customers identified in
that agreement, along with classes of similar customers. See,
e.g., Order on Remand, 181 FERC ¶ 61,036 at P 30. PG&E
argues it is forced to use its facilities “to serve a potentially
unlimited number of such future customers,” and must
“incur … costs to acquire and maintain the facilities necessary
to serve those customers.” Furthermore, the 2021 Tariff has not
fully taken effect, in part because of this ongoing litigation.
PG&E has represented it will reclassify some of SFPUC’s
delivery points, affecting the type of service PG&E would
deliver, if it prevails here. See Tr. of Oral Arg. at 4–7; see also
CCSF, 24 F.4th at 657 (holding PG&E could not claim San
Francisco’s challenge to FERC’s order was moot because of
the “provisional nature of the proposed tariff revision”).
PG&E has actual and ongoing injuries caused by FERC’s
orders, and those injuries will be redressed if this court sets the
orders aside. PG&E therefore has standing to maintain this
petition.
III.
We review FERC orders under the Administrative
Procedure Act’s arbitrary, capricious, or contrary to law
standard. See 5 U.S.C. § 706(2)(A). We assess whether FERC

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provided a reasoned explanation for its decision and whether
the order is in accordance with law. See, e.g., In re NTE Conn.,
LLC, 26 F.4th 980, 988 (D.C. Cir. 2022).
In defending its orders, FERC presses for deference and
relies on Chevron and this circuit’s caselaw applying it. But
“Chevron is overruled.” Loper Bright Enters. v. Raimondo, 144
S. Ct. 2244, 2273 (2024). Courts must “interpret statutes, no
matter the context, based on the traditional tools of statutory
construction.” Id. at 2268. We “need not and under the APA
may not defer to an agency interpretation of the law simply
because a statute is ambiguous.” Id. at 2273. Therefore, when
“addressing a question of statutory interpretation, we begin
with the text.” City of Clarksville v. FERC, 888 F.3d 477, 482
(D.C. Cir. 2018). And in “constru[ing] [the] text, we look to the
ordinary meaning of its key terms.” Novartis Pharms. Corp. v.
Johnson, 102 F.4th 452, 460 (D.C. Cir. 2024).
A.
PG&E argues that FERC’s broad class-based
interpretation of the grandfathering clause cannot be reconciled
with the plain meaning of the statute. We agree.
Section 824k(h) provides in pertinent part:
No order issued under this chapter shall be
conditioned upon or require the transmission of
electric energy:
(1) directly to an ultimate consumer, or
(2) to, or for the benefit of, an entity if such
electric energy would be sold by such entity
directly to an ultimate consumer, unless:
(A) such entity is a … State or any
political subdivision of a State (or an
agency, authority, or instrumentality of

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a State or a political subdivision) … ;
and
(B) such entity was providing electric
service to such ultimate consumer on
October 24, 1992 … .
In brief, FERC cannot order PG&E to wheel electricity to “an
ultimate consumer” of SFPUC unless SFPUC “was providing
electric service to such ultimate consumer on October 24,
1992.” 16 U.S.C. § 824k(h)(2)(B).
The plain meaning of “ultimate consumer” refers to end
users of electric service as of the specified date. Section
824k(h) nowhere references general classes of consumers of
electric service. Instead, the provision emphasizes “an ultimate
consumer” and “such ultimate consumer,” both of which
naturally refer to a particular consumer of electric service. We
assume that “statutory terms bear their ordinary meaning”
unless evidence suggests otherwise. Niz-Chavez v. Garland,
141 S. Ct. 1474, 1481–82 (2021). The ordinary meaning of
“ultimate consumer” refers to a discrete end user, not a class or
category of end users unmoored from the statutory text.
Dictionary definitions confirm this ordinary meaning.
“Ultimate” typically implicates the “final” or “last” point in a
series. See, e.g., Ultimate, THE AMERICAN HERITAGE
DICTIONARY 1312 (1991) (defining “ultimate” as either (i)
“[r]epresenting the farthest possible extent of analysis or
division into parts”; or (ii) “[l]ast, as in a series or
progression”). And a “consumer” is a purchaser of goods or
services. See Consumer, BLACK’S LAW DICTIONARY (6th ed.
1990). When combined, the phrase refers to a final person or
entity in a distribution chain, i.e., an end user. See, e.g.,
Ultimate Consumer, CAMBRIDGE BUSINESS ENGLISH
DICTIONARY 887 (2011) (“the person or organization that buys

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a product to use, rather than to sell it to someone else”; “See
also ‘end-user’”).
The Energy Policy Act, taken as a whole, further
reinforces that “ultimate consumer” does not refer to general
classes of consumers. The Act refers to “ultimate consumer” in
two sections—one including classes or groups of consumers
and one including only an “ultimate consumer.” The
grandfathering clause at issue here makes no separate mention
of classes or groups. Pub. L. 102-486, § 722, 106 Stat. 2776,
2916–17 (codified at 16 U.S.C. § 824k(h)). By contrast, section
111(e) of the Act provides that the Secretary of Energy must
determine whether a resource plan would result in “higher or
lower electricity costs to an electric utility’s ultimate
consumers or to classes or groups of such consumers.” Id. at
2796 (codified as a note to 16 U.S.C. § 2621) (emphasis
added). Congress meaningfully distinguished between an
ultimate consumer and designated classes of ultimate
consumers.2 FERC’s interpretation of section 824k(h) elides
2 Furthermore, the terms “ultimate consumer” and “ultimate
consumers” are used a few dozen times in the U.S. Code, and each
mention of the terms without the use of “class” or “group” most
naturally refers to a specific, discrete consumer. For example, a
provision about the Bonneville Power Administration Project states
that “[c]ontracts entered into with any utility engaged in the sale of
electric energy to the general public shall contain such terms and
conditions ... to insure that resale by such utility to the ultimate
consumer shall be at rates which are reasonable and
nondiscriminatory.” 16 U.S.C. § 832d. In other instances, Congress
distinguishes between ultimate consumers and classes or groups of
consumers. In a provision about the Tennessee Valley Authority, for
instance, “all contracts entered into between the Corporation and any
municipality … shall provide that the electric power shall be sold
and distributed to the ultimate consumer without
discrimination … between consumers of the same class.” Id. § 831k.

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this distinction in a manner inconsistent with the statutory text
and structure.
Finally, the grandfathering clause is an exception to the
general rule against FERC-ordered wheeling. We cannot read
an “exception [to] swallow the rule.” Diaz v. United States, 144
S. Ct. 1727, 1735 (2024); cf. A.H. Phillips, Inc. v. Walling, 324
U.S. 490, 493 (1945) (“To extend an exemption to other than
those plainly and unmistakably within its terms and spirit is to
abuse the interpretive process.”). FERC’s expansive
interpretation of the grandfathering clause would undermine
the primary restriction Congress enacted—namely prohibiting
FERC from ordering wheeling. See 16 U.S.C. § 824k(h)(1)
(“No order issued under this chapter shall … require the
transmission of electric energy directly to an ultimate
consumer.”). Reading “ultimate consumer” to include classes
of consumers, without reference to the statutory text, would
substantially expand FERC’s authority and, as a practical
matter, dramatically expand the category of grandfathered
consumers.
Considering the text and structure of section 824k(h)(2),
as well as the broader statutory context, we conclude that
“ultimate consumer” does not refer to an atextual class or group
of consumers. FERC’s orders are therefore contrary to law.3
3 Because we determine that FERC’s interpretation of section
824k(h)(2) is contrary to law, we do not consider PG&E’s additional
arguments that the orders are arbitrary and capricious because they
fail to provide a reasoned definition of a class in the context of the
2015 Tariff. Nor do we consider PG&E’s arguments about how the
2015 Tariff’s “Point of Delivery” language fits with the statutory
requirements. On remand, FERC must follow the plain meaning of
the statute when determining PG&E’s wheeling obligations under
section 14.2 of the 2015 Tariff.

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B.
FERC and San Francisco advance several arguments
against this straightforward conclusion, but none are
persuasive.
FERC’s primary argument is that it adhered to its Suffolk
County orders, and the class-based interpretation of “ultimate
consumer” in those orders is compatible with the statutory text.
But we must seek the “single, best meaning” of a statute, not
just permissible interpretations. Loper Bright, 144 S. Ct. at
2266. And FERC’s class-based reasoning is unpersuasive as a
matter of statutory interpretation. FERC did not analyze the
text of section 824k(h)(2), but instead relied on the Suffolk
County orders’ interpretation of the provision. See Order on
Remand, 181 FERC ¶ 61,036 at P 33. Contrary to FERC’s
assertions before this court, FERC’s reasoning in those orders
was not based on the statutory text.
Rather, in the first Suffolk County order, FERC addressed
a unique situation in which Suffolk’s customers could not
receive electricity service on October 24, 1992, because of a
temporary service outage. Suffolk County Elec. Agency, 77
FERC ¶ 61,355 at 62,546 (1996) (“Suffolk County I”). FERC
determined the term “ultimate consumers” covered all of
Suffolk’s customers “eligible” for service as of the
grandfathering date. Id. at 62,550 & n.17. In this narrow
context, FERC’s interpretation avoided the arbitrary denial of
grandfathered service for customers of Suffolk who
experienced a temporary service interruption on the
grandfathering date. See id.
In its later orders, FERC adopted a more general class-
based approach to “ultimate consumer” in section 824k(h)(2),
relying on Suffolk County I and policy reasons, rather than the
statutory text. See Suffolk County Elec. Agency, 96 FERC

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¶ 61,349 at 62,301 (2001); see also Suffolk County Elec.
Agency, 108 FERC ¶ 61,173 at P 19. In response to PG&E’s
petition here, FERC leans into the broader policy rationale of
the Suffolk County orders, suggesting a class-based reading of
“ultimate consumer” is justified because the “opposite
interpretation is unfair” and “has results Congress could not
have intended.”
But policy concerns cannot override the text of a statutory
provision. “An agency has no power to ‘tailor’ legislation to
bureaucratic policy goals by rewriting unambiguous statutory
terms.” Util. Air Regul. Grp. v. EPA, 573 U.S. 302, 325 (2014).
FERC has substantial discretion when approving tariffs as just
and reasonable but has no discretion to rewrite statutes to make
them more reasonable in the eyes of the Commission. FERC
must exercise its authority within the boundaries set by
Congress.
San Francisco engages more directly with the text of
section 824k(h), arguing that the phrase “such ultimate
consumer” can be read to include classes of ultimate
consumers, and not just a “specific, individual retail
customer[].” San Francisco maintains that because the word
“such” can mean “of the same class, type, or sort,” or “[o]f that
kind, having particular quality or character specified,” “such
ultimate consumer” can include a similar class of ultimate
consumers served on the grandfathering date.
We are unpersuaded. In context, “such ultimate consumer”
points to a particular end user, not an atextual “class” of end
users. “Such” is used six times in section 824k(h). Each
mention emphasizes the specific term being qualified, rather
than expanding the term to include others of the same class. Cf.
Such, THE AMERICAN HERITAGE DICTIONARY 1215 (1991)
(defining “such” as “[b]eing the same as something implied but

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left undefined or unsaid”). Section 824k(h)(2) provides that
wheeling can be ordered on behalf of “an entity if such electric
energy would be sold by such entity directly to an ultimate
consumer … [if] such entity was providing electric service to
such ultimate consumer on October 24, 1992.” 16 U.S.C.
§ 824k(h)(2) (emphases added). “[S]uch entity” most naturally
refers to the same entity that provided service as of the
grandfathering date. Similarly, “such ultimate consumer” also
refers to the consumer serviced on that date. In context, “such”
highlights the previously mentioned consumer or entity.
Reading “such” to mean “of the same class” or “kind” is at odds
with the most natural reading of the statutory provision.
In sum, FERC’s class-based interpretation is inconsistent
with the plain meaning of section 824k(h).
* * *
FERC’s orders are contrary to law and we vacate them.
We remand for FERC to interpret the grandfathering clause
because the application of the statutory text to the meaning of
the Tariff may “rest[] on factual premises within the agency’s
expertise.” Loper Bright, 144 S. Ct. at 2267 (cleaned up); see
also id. at 2257 (explaining that “exercising independent
[judicial] judgment often included according due respect to
Executive Branch interpretations”). On remand, FERC must
apply the plain meaning of section 824k(h)(2) consistent with
this opinion and determine which of SFPUC’s consumers
qualify for wheeled service under section 14.2 of the 2015
Tariff.
So ordered.

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PAN, Circuit Judge, concurring:
I fully concur with the court’s holding that FERC’s
interpretation of 16 U.S.C. § 824k(h) is contrary to law: The
Commission’s definition of the term “ultimate consumer”
relies on general “classes” of end-users that bear no
relationship to the statutory text. Thus, I join the court’s
decision to vacate FERC’s orders and to direct the Commission
to reconsider the meaning of “ultimate consumer” on remand.
I write separately to set forth my view of the best reading of the
statute. See Loper Bright Enters. v. Raimondo, 144 S. Ct. 2244,
2266 (2024) (“In an agency case as in any other . . . there is a
best reading all the same — ‘the reading the court would have
reached’ if no agency were involved.” (citation omitted)).
Section 824k(h) is a grandfathering provision that seeks to
preserve or extend municipal wheeling arrangements that were
in place in 1992, the year of the statute’s enactment. This case
requires FERC to determine which “ultimate consumer[s]”
qualify for grandfathered wheeling service. In my view,
“ultimate consumer[s]” should be defined as the end-users
whom the parties intended to serve under the contract or
agreement that governed their wheeling arrangement in 1992.
That definition is true to the statutory text and what Congress
intended, while giving FERC discretion to allow San Francisco
to continue serving the retail customers that the city has served
for decades.
I.
More than a century ago, in the Raker Act, Congress
granted San Francisco the ability to generate its own power in
Hetch Hetchy Valley. See Raker Act of 1913, Pub. L. No. 63-
41, 38 Stat. 242. The Raker Act’s purpose was to provide a
source of cheap power and to promote competition in the retail

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electricity market in San Francisco. United States v. City &
County of San Francisco, 310 U.S. 16, 25–26 (1940); City &
County of San Francisco v. FERC, 24 F.4th 652, 665 (D.C. Cir.
2022) (“Congress authorized the Hetch Hetchy System not
only to provide San Francisco with a source of cheap power but
also to ensure competition in its retail power market.”).
Consistent with the Raker Act, San Francisco generates power
in the Hetch Hetchy Valley and sells it to consumers in the city.
San Francisco uses its own transmission lines to bring its
electricity to the city; but it relies on the distribution system of
PG&E, the dominant player in the city’s electricity market, to
get the electricity to end-users. San Francisco’s end-users
include “City departments, related public entities, entities
providing service on behalf of or in coordination with the City,
and tenants on City property.” J.A. 292. The distribution
arrangement between San Francisco and PG&E has ensured
delivery of electricity to San Francisco’s retail energy
customers since 1945.
In 1992, Congress passed a statute that prohibited
mandatory retail wheeling — i.e., the practice of ordering a
utility to use its facilities to transmit another utility’s electricity
so that power can be sold “directly to an ultimate consumer.”
16 U.S.C. § 824k(h). The purpose of the provision was to stop
retail customers from setting up “sham” arrangements to get
cheaper wholesale rates for electricity that is intended for retail
distribution. See 138 Cong. Rec. S17613 (daily ed. Oct. 8,
1992) (statement of Sen. Johnston) (describing how industrial
customers can set up paper corporations to seek transmission
orders from FERC); Jon R. Mostel, Overview of Electric
Industry Bypass Issues, 37 Nat. Res. J. 141, 147 (1997)
(describing how the issue is most prevalent with “small
municipalities with one or more large industrial customers who
favor municipalization for their own pecuniary advantage”). In

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essence, FERC cannot force a utility to “wheel” (i.e., transmit)
a competitor’s power under the lower wholesale transmission
rate if the competitor is doing so for the benefit of a retail
customer. See Jeffrey D. Watkiss & Douglas W. Smith, The
Energy Policy Act of 1992 — A Watershed for Competition in
the Wholesale Power Market, 10 Yale J. on Regul. 447, 460
n.56 (1993) (noting that industrial consumers are “the principal
beneficiaries of retail wheeling”).
The statute includes an exception for situations like San
Francisco’s, where a municipal utility owns generation and
transmission facilities but needs access to distribution lines to
get power to its end-users. See 16 U.S.C. § 824k(h)(2); see also
138 Cong. Rec. S17620 (daily ed. Oct. 8, 1992) (statement of
Sen. Wallop) (“[L]egitimate existing co-operative or municipal
wholesale sellers . . . may apply for and obtain wheeling that
lowers the rates of their retail customers.”). Such municipal
retail-wheeling arrangements are “grandfathered” under the
statute: FERC can require utilities to continue to wheel
electricity if “such electricity would be sold by [a State or any
political subdivision of the State] to an ultimate consumer” and
“such entity was providing electric service to such ultimate
consumer on October 24, 1992.” 16 U.S.C. § 824k(h)(2)(B).1
1 Section 824k(h) provides, in relevant part:
(h) Prohibition on mandatory retail wheeling and
sham wholesale transactions
No order issued under this chapter shall be
conditioned upon or require the transmission of
electric energy:
(1) directly to an ultimate consumer, or

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4
As of 1992, the wheeling arrangement between San
Francisco and PG&E was governed by a bilateral
interconnection agreement reached in 1987 (“the 1987
Agreement”). The 1987 Agreement provided the terms for
PG&E’s provision of wholesale distribution services on behalf
of the city, which allowed San Francisco to serve its retail
energy customers. The 1987 Agreement terminated as of July
1, 2015. In anticipation of the Agreement’s expiration, San
Francisco applied for wholesale distribution service under
PG&E’s 2015 Wholesale Distribution Tariff (“the Tariff”).
The Tariff incorporates by reference § 824k(h)(2)’s
grandfathering provision, and applying the Tariff therefore
requires interpreting the statute. See City & County of San
Francisco, 24 F.4th at 663 (“The text [of PG&E’s Tariff]
unambiguously indicates that the Tariff incorporates the
(2) to, or for the benefit of, an entity if such electric
energy would be sold by such entity directly to an
ultimate consumer, unless:
(A) such entity is a Federal power marketing
agency; the Tennessee Valley Authority; a
State or any political subdivision of a State (or
an agency, authority, or instrumentality of a
State or a political sub-division) . . . ; and
(B) such entity was providing electric service
to such ultimate consumer on October 24,
1992, or would utilize transmission or
distribution facilities that it owns or controls
to deliver all such electric energy to such
electric consumer.
Nothing in this subsection shall affect any authority
of any State or local government under State law
concerning the transmission of electric energy
directly to an ultimate consumer.
16 U.S.C. § 824k(h).

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requirements of [§ 824k(h)(2)].”). In this appeal, we vacate
FERC’s orders defining the extent of PG&E’s wheeling
obligation under its Tariff, and we remand for FERC to re-
interpret the Tariff and § 824k(h)(2). See Op. of the Court 4–
5.
II.
FERC may require a power company to provide retail-
wheeling on behalf of any “State or any political subdivision of
a State” that sells electricity to an “ultimate consumer” if the
State or political subdivision “was providing electric service to
such ultimate consumer on October 24, 1992.” 16 U.S.C.
§ 824k(h)(2)(A), (B). Although it is undisputed that San
Francisco is a political subdivision that “was providing electric
service” to retail end-users on the relevant date, the parties
dispute which “ultimate consumer[s]” qualify for
grandfathered retail-wheeling.
Section 824k(h)(2) broadly addresses pre-existing
municipal wheeling relationships and seeks to maintain the
status quo of those relationships. Congress’s clear intent was
to preserve FERC’s ability to mandate retail-wheeling for
States and their political subdivisions that historically have
provided power to retail customers. See 16 U.S.C.
§ 824k(h)(2); 138 Cong. Rec. S17620 (daily ed. Oct. 8, 1992)
(statement of Sen. Wallop). Congress also intended, in the
Raker Act, for San Francisco to provide electricity to retail
customers, so that power would be less expensive and
competition in the retail electricity market would be preserved.
See City & County of San Francisco, 24 F.4th at 665.
Furthermore, in the Federal Power Act, Congress requires
FERC “to ensure that rules or practices affecting wholesale

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rates are just and reasonable.” Id. (cleaned up); see also 16
U.S.C. §§ 824d, 824e.
FERC can achieve Congress’s goals, while faithfully
applying the text of § 824k(h)(2), by defining “ultimate
consumer[s]” as the end-users that the parties intended to serve
under the wheeling contracts or agreements that existed in
1992. That definition adheres to the language of the statute
because the wheeling contract between the parties necessarily
defines the “ultimate consumer[s]” that the municipality “was
providing electric service to” on October 24, 1992. See 16
U.S.C. § 824k(h)(2)(B). Such a contract-focused approach is
logical because the parties’ agreement sets the terms of the pre-
existing retail-wheeling relationship that § 824k(h)(2) intends
to preserve. Moreover, a contract-based definition relies on the
parties’ mutual consent and understanding of the relevant
wheeling arrangement, and therefore is fair to both the
municipality and the utility that wheels its power. By defining
“ultimate consumer[s]” as those who fit within the ambit of the
parties’ wheeling arrangement as of October 24, 1992, the
Commission would have discretion to mandate wheeled
service to consumers who would have been entitled to service
under the parties’ agreement on that date. In determining
which end-users should receive grandfathered wheeling
service, the Commission would draw upon its expertise to
interpret the contracts in question and would exercise its
discretion to make necessary “technical inquir[ies] properly
confided to FERC’s judgment.” Sacramento Mun. Util. Dist.
v. FERC, 616 F.3d 520, 533 (D.C. Cir. 2010).2
2 This interpretation is completely consistent with our holding
that “‘ultimate consumer’ does not refer to an atextual class or group
of consumers.” Op. of the Court 10. The opinion of the court

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Under a contract-focused approach, the “ultimate
consumer[s]” in this case would be identified by looking to the
1987 Agreement, which governed the wheeling relationship
between San Francisco and PG&E on October 24, 1992. That
agreement identifies the “ultimate consumer[s]” that San
Francisco “was providing electric service to” on the relevant
date in 1992. See 16 U.S.C. § 824k(h)(2)(B). The 1987
Agreement does not name specific end-users, but rather lists
categories of customers in order of priority.3 FERC could
require PG&E to provide service under the Tariff to any of San
Francisco’s customers that fall within the ambit of the 1987
Agreement. Under this approach, FERC would examine the
1987 Agreement closely to determine whom the parties
intended their wheeling arrangement to cover. And FERC’s
exercise of discretion in this context would be informed by its
duty to ensure “just and reasonable” rules and practices. See
precludes only classes or categories of ultimate consumers that are
not supported by the statutory text. As discussed, supra, a contract-
based approach is consistent with the statutory language. Under such
an approach, if the parties’ contract as of October 24, 1992,
enumerates classes or categories of customers who are entitled to
wheeled service, then such classes or categories may be considered.
Thus, the “specific” or “discrete” consumers that we reference in the
opinion of the court may include those whom the parties intended to
benefit with wheeled service on October 24, 1992 — that group of
consumers was identified and specified by contract on the relevant
date. See, e.g., id. at 9 n.2.
3 Specifically, in sections 2.7.1 and 2.7.2 of the 1987 Agreement,
PG&E agreed to wheel power generated in Hetch Hetchy Valley to
San Francisco’s customers, which are listed in an order of priority.
The 1987 Agreement gives priority to San Francisco’s Municipal
Load, followed by the Irrigation Districts, and then a set of residual
categories. J.A. 19 (FERC Order on Remand, describing how the
1987 Agreement “grouped the end-use customers into categories”).

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16 U.S.C. §§ 824d, 824e. As we noted in City and County of
San Francisco v. FERC, such principles should prevent PG&E
from “refusing service for customers San Francisco had served
for decades” under the 1987 Agreement. 24 F.4th at 665.4
A contract-focused definition of “ultimate consumer[s]”
addresses three key concerns that have been raised in
evaluating other proposed interpretations of the statute. First,
it prevents the unfettered expansion of San Francisco’s retail
service, which was a possible consequence of the general class-
based approach. See Op. of the Court 10. FERC’s general
classes of consumers could sweep in entities that did not exist
in 1992, so long as they were similar to entities that were served
at that time: For example, if San Francisco served one
restaurant in 1992, the city could potentially serve all
restaurants in 2024. By contrast, under a contract-focused
approach, a restaurant that previously did not exist might not
qualify for grandfathered status, even if it were in the same
“class” as another restaurant that did receive service in 1992.
FERC would examine whether the pre-existing wheeling
agreement in 1992 reflected an intention to cover the new
restaurant in question. And the Commission could make its
determination with a view toward maintaining the status quo
from 1992 and thus could prevent an uncontrolled expansion
of the municipality’s customer base.
4 In this case, adopting a contract-focused definition of “ultimate
consumer[s]” may not be very different, in practice, from what FERC
already has done. That is because FERC, after adopting its atextual
“class-based” definition of “ultimate consumer,” applied that
erroneous definition by referencing the 1987 Agreement. But a
contract-focused approach avoids any reliance on generalized
“classes” that are divorced from the statutory language.

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Second, a contract-focused approach also would avoid the
problems posed by PG&E’s proposed interpretation of the
statute, which posits that only the actual customers who
received service on October 24, 1992, are grandfathered. In
considering such an inflexible interpretation of § 824k(h)(2),
the Suffolk County cases noted that if the statute is read to
grandfather only users who actually received service on
October 24, 1992, FERC would be forced to treat two
neighbors differently where both were entitled to receive
service on that day, but one of them experienced a power
outage. See Suffolk Cnty. Elec. Agency, 77 FERC ¶ 61,355,
62,550 n.17 (1996) (“Suffolk County I”). While our opinion for
the court in this case takes issue with the atextual approach that
FERC developed following Suffolk County I, see Op. of the
Court 11–12, we do not deny that it would be anomalous and
contrary to congressional intent to provide grandfathered
service to one neighbor, while excluding the other, in that
hypothetical situation. Under my contract-focused
methodology, a house that lost power on the specified date in
1992 would be grandfathered if it were within the scope of
those “who were eligible to receive service” under the retail-
wheeling arrangement that existed in 1992. See Suffolk County
I, 77 FERC at 62,550 n.17. Moreover, FERC would not have
to compile and compare lists of current and past end-users to
determine who is grandfathered, as would be required under
PG&E’s rigid interpretation.
Finally, a contract-focused approach is consistent with
congressional intent because it avoids the winnowing of San
Francisco’s pool of retail customers over time and allows San
Francisco to remain in the retail market. Under a contract-
focused interpretation of the statute, FERC could continue to
mandate wheeling that would allow San Francisco to rely on
PG&E’s distribution lines, so long as the customers served are

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those that were contemplated by the 1987 Agreement. Without
such sustained mandatory wheeling, San Francisco eventually
would be forced to turn its customers over to PG&E because
San Francisco cannot afford to build its own duplicative
distribution facilities. See Oral Arg. Tr. at 40:6–40:19 (FERC’s
counsel noting that PG&E would prefer to serve San
Francisco’s end-users directly through their retail tariff, rather
than serve the city under the wholesale tariff). Although PG&E
is in favor of “winnow[ing]” San Francisco’s customer base,
see PG&E Br. 31, that result would not be consistent with
congressional intent, as expressed in both the Raker Act and
§ 824k(h)(2). The Raker Act is aimed at preserving
competition in the retail power market. United States v. City
& County of San Francisco, 310 U.S. at 26 (noting that San
Francisco is supposed to sell Hetch Hetchy power “directly to
consumers” in competition with PG&E (emphasis added));
City & County of San Francisco, 24 F.4th at 665 (noting that
the Raker Act aimed “to ensure competition in [San
Francisco’s] retail power market”). And, as discussed,
§ 824k(h)(2) seeks to preserve municipal wheeling
arrangements, like the one between San Francisco and PG&E,
that existed as of October 24, 1992.
* * *
In my view, the best reading of the statute adopts a
contract-focused approach that defines “such ultimate
consumer[s]” as the end-users that fall within the ambit of the
parties’ retail wheeling agreement as of October 24, 1992. That
definition is true to the statutory language and is consistent with
Congress’s intent to preserve the municipal wheeling
arrangements that were in existence in 1992. It also provides a
workable framework that allows FERC to apply the statute in
a manner which “ensure[s] that rules or practices affecting

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wholesale rates are just and reasonable.” City & County of San
Francisco, 24 F.4th at 665; see also 16 U.S.C. §§ 824d, 824e.

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