Paragould Light & Water Commission, D/b/a Paragould Light, Water & Cable - Plwc v. Federal Energy Regulatory Commission

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued April 5, 2024 Decided July 11, 2025
No. 23-1133
PARAGOULD LIGHT & WATER COMMISSION, D/B/A
PARAGOULD LIGHT, WATER & CABLE – PLWC, ET AL.,
PETITIONERS
v.
FEDERAL ENERGY REGULATORY COMMISSION,
RESPONDENT
CITY UTILITIES OF SPRINGFIELD, MISSOURI AND SOUTHWEST
POWER POOL, INC.,
INTERVENORS
On Petition for Review of Orders of the
Federal Energy Regulatory Commission
Matthew A. Fitzgerald argued the cause for petitioners.
With him on the briefs were Noel H. Symons, Carrie Mobley,
Robert A. Weishaar, Jr., Kenneth R. Stark, Daniel E. Frank,
Allison E. S. Salvia, Patrick Smith, Timothy T. Mastrogiacomo,
and Shaun M. Boedicker.
J. Houston Shaner, Attorney, Federal Energy Regulatory
Commission, argued the cause for respondent. With him on

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the brief were Matthew R. Christiansen, General Counsel, and
Robert H. Solomon, Solicitor.
Elizabeth P. Trinkle argued the cause for intervenor for
respondent Southwest Power Pool, Inc. With her on the brief
was Matthew J. Binette.
Before: PILLARD, WALKER and PAN, Circuit Judges.
Opinion for the Court filed by Circuit Judge WALKER.
WALKER, Circuit Judge: The Federal Energy Regulatory
Commission encourages transmission facilities to band
together into regional zones for purposes of allocating the costs
of building, maintaining, and operating the power lines that
carry electricity from producers to users. Those zones are
administered by system operators, like the regional Southwest
Power Pool in this case, that work to improve efficiency and
reliability. To achieve those goals, a zone spreads the costs of
all the transmission facilities in the zone across all the zone’s
customers — even if a particular customer won’t draw power
across a particular transmission facility.
None of that is new. But what happens when an existing
zone wants to expand? That’s what happened here — and it’s
likely to happen frequently in the future. An existing zone
wants to bring facilities outside the zone into the zone. And it
wants to spread the costs of those newly integrated facilities
across the zone’s customer base.
Here, some of the existing zone’s customers doubted the
benefits of the new integration, and they opposed the cost
increase that would come with it. So they took their objections
to FERC. FERC overruled their objections, approved the

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integration, and imposed a new tariff, or price formula, for the
zone.
FERC’s decision was reasonable. FERC may analyze
costs and benefits at the zonal level rather than the customer
level, and FERC reasonably determined that all the zone’s
customers will enjoy benefits. Because of those zone-wide
benefits, it was reasonable for FERC to spread the integration’s
costs to all the zone’s customers.
We deny the petition for review.
I. Background
A. The Power Grid
In the early 1990s, many phones had cords, the Chicago
Bulls were NBA champions, and vertically integrated
monopolies controlled power generation, transmission, and
distribution in a system of localized supremacy that wasn’t
conducive to competition or grid efficiency.
But times changed. Smart phones largely replaced land
lines. The Bulls’ dominance declined. And FERC issued an
ultimatum to electric monopolies: Divest or allow other utilities
to use your transmission facilities on an “open-access non-
discriminatory” basis. See Promoting Wholesale Competition
Through Open Access Non-Discriminatory Transmission
Services by Public Utilities, 61 Fed. Reg. 21540, 21541, 21552
(May 10, 1996) (Order No. 888); Midwest ISO Transmission
Owners v. FERC, 373 F.3d 1361, 1363-65 (D.C. Cir. 2004).
FERC unbundled transmission from generation and
distribution to unleash competition. See Morgan Stanley
Capital Group Inc. v. Public Utility District No. 1, 554 U.S.

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527, 535-37 (2008). And to improve grid efficiency and
reliability, FERC promoted regional transmission
organizations, which coordinate the operations of individual
member utilities within each grid. See Regional Transmission
Organizations, 65 Fed. Reg. 810, 811, 831, 834 (Jan. 6, 2000)
(Order No. 2000); see also Order No. 888, 61 Fed. Reg. at
21552, 21666-67; Midwest ISO, 373 F.3d at 1363-65. Ideally,
these regional transmission organizations would be run by
independent system operators, which would provide access and
power “to all eligible users in a non-discriminatory manner.”
Midwest ISO, 373 F.3d at 1364 (quoting Order No. 888, 61 Fed.
Reg. at 21596).
One such independent system operator and regional
transmission organization is Southwest Power Pool. It operates
in fourteen states and uses a zonal-pricing rate system for its
nineteen different price zones. Under this system, “customers
located in each zone pay rates based on the cost of the
transmission facilities located in that zone.” Nebraska Public
Power District v. FERC, 957 F.3d 932, 935 (8th Cir. 2020).
B. The Nixa Assets
The City of Nixa lies in the southwest corner of Missouri.
It’s home to approximately ten miles of transmission lines and
substations — the “Nixa Assets” — that primarily serve local
residents.
At first, Nixa powered the Assets by purchasing its power
from a federal power administration. But when that purchase
agreement expired in 2017, Nixa began purchasing power

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through Southwest Power Pool — though it retained
operational control over the Nixa Assets.1
Southwest Power Pool added Nixa’s load to Southwest
Power Pool Zone 10, consistent with the existing tariff. So, for
a time, Nixa purchased its load through Southwest Power Pool
at rates reflecting the Zone 10 transmission costs — thus
paying a proportional cost of the expenses for the Zone 10
transmission facilities already controlled by Southwest Power
Pool while also bearing the operational costs of its own
transmission assets.
Later in 2017, Nixa agreed to sell the Nixa Assets to a
private entity, GridLiance High Plains LLC.2 GridLiance and
Southwest Power Pool agreed to incorporate the Nixa Assets
into Southwest Power Pool’s integrated grid, with GridLiance
surrendering operational control of the facilities to Southwest
Power Pool.
C. This Case
Anticipating this integration, Southwest Power Pool filed
with FERC a tariff revision that proposed incorporating the
Nixa Assets into its Zone 10 infrastructure. The revised tariff
1 The legacy contracts between many municipal utilities and the
federal power administration which they relied upon for
transmission — the Southwestern Power Administration — required
these utilities to switch to Southwest Power Pool transmission
service at the end of the contract. Nixa is one of the first municipal
utilities to undergo this process.
2 FERC approved this sale the following year. See South Central
MCN LLC, 162 FERC ¶ 61214, at p. 62143 (2018). Note:
GridLiance previously operated under a different identity — South
Central MCN LLC.

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added the costs of the Nixa Assets to the overall transmission
costs that Southwest Power Pool spreads across all Zone 10
customers.
Several parties, including nearby cities, objected to this
proposed tariff revision. See 162 FERC ¶ 61215, at pp. 62155-
56 (2018). They protested that incorporating the transmission
costs of the Nixa Assets into the Zone 10 zonal rate would
result in an unjustified “cost shift” — a violation of what’s
known as the ‘cost-causation principle.’ See 174 FERC
¶ 61116, at pp. 61438-40 (2021). They claimed the tariff
revision forced them to pay the costs associated with the Nixa
Assets even though they, the non-Nixa cities and utilities,
wouldn’t receive any benefits from the incorporation of the
Nixa Assets. See 162 FERC ¶ 61215, at p. 62155.
FERC initially ruled that it could not accept Southwest
Power Pool’s proposed tariff because there was “insufficient
evidence in the record for [FERC] to make a determination on
whether and the extent to which there are cost shifts involved
in the placement of the Nixa Assets into Zone 10 or benefits
that may accrue that would justify any such cost shifts.” 174
FERC ¶ 61116, at p. 61445. It therefore remanded the case for
another hearing to resolve those questions. See id. at p. 61446.
Following this second hearing, the administrative law
judge determined that Southwest Power Pool’s proposed tariff
revision and incorporation of the Nixa Assets were “just and
reasonable.” 177 FERC ¶ 63021, at p. 66180 (2021). That’s
because the integration’s cost to Zone 10 customers of $1.8
million provided incremental integration, reliability, and
power-support benefits for all Zone 10 customers. Id. at pp.
66187-88. In FERC-speak, it was justified under the “cost-
causation principle.” See id. at p. 66187 (cleaned up); id. at pp.
66180, 66203-04, 66211.

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FERC unanimously affirmed, agreeing that Southwest
Power Pool’s incorporation of the Nixa Assets imposed a cost
shift that was justified by nontrivial integration and reliability
benefits for all Zone 10 customers.3 See 182 FERC ¶ 61141, at
pp. 62042, 62048-50, 62054-55, 62057 (2023). FERC then
denied the non-Nixa parties’ request for rehearing. 183 FERC
¶ 62048 (2023); 184 FERC ¶ 61004 (2023). The non-Nixa
parties filed a petition for review before this court.
II. Analysis
We review FERC’s decisions to ensure that they are not
“arbitrary, capricious, an abuse of discretion, or otherwise not
in accordance with law.” 5 U.S.C. § 706(2)(A); see also
Alabama Municipal Distributors Group v. FERC, 100 F.4th
207, 211 (D.C. Cir. 2024). “FERC’s orders must be supported
by substantial evidence, reasonable, and reasonably
explained.” Evergy Kansas Central, Inc. v. FERC, 77 F.4th
1050, 1055 (D.C. Cir. 2023).
A. The Cost-Causation Principle
If a tariff rate or charge is not “just and reasonable,” FERC
has a duty to declare it “unlawful.” 16 U.S.C. § 824d(a). But
we do not require FERC “to allocate costs with exacting
precision.” Long Island Power Authority v. FERC, 27 F.4th
705, 712 (D.C. Cir. 2022) (cleaned up). Instead, we rely on
certain guideposts, such as the “cost-causation principle.” Old
Dominion Electric Cooperative v. FERC, 898 F.3d 1254, 1256
(D.C. Cir. 2018).
3 During this second administrative proceeding, the Nixa Assets
changed hands again. They are now owned by Missouri Joint
Municipal Electric Utility Commission, but they remain under the
operational control of Southwest Power Pool.

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The cost-causation principle requires that customers
receive benefits “roughly commensurate” to the costs they pay
for a given transmission facility. See Nebraska Public Power
District v. FERC, 957 F.3d 932, 939-40 (8th Cir. 2020)
(cleaned up); Old Dominion, 898 F.3d at 1255-56; Evergy, 77
F.4th at 1055. So FERC may not force customers to pay for a
facility if they do not receive any benefits from it. See Illinois
Commerce Commission v. FERC, 576 F.3d 470, 476 (7th Cir.
2009) (“Illinois Commerce I”). Nor can FERC force a few
customers to pay the entire cost of a facility that benefits many.
See Old Dominion, 898 F.3d at 1261.
But FERC need not use a “particular formula” or “allocate
costs with exacting precision.” Id. at 1260 (cleaned up); cf.
Long Island, 27 F.4th at 713-14 (hybrid cost-allocation formula
split 50:50 between two methods, one for local benefits and the
other for regional benefits, would not violate the cost-causation
principle just because a 60:40 split “one way or the other”
might better reflect reality). “FERC may permissibly approve
a rate that does not perfectly track cost causation, particularly
if it is balancing competing goals.” Evergy, 77 F.4th at 1055
(cleaned up).
In today’s world of regional transmission organizations
and integrated systems, cost allocation must account for two
different kinds of benefits: “local benefits that accrue primarily
to utilities close to the project at issue, and regional benefits
that accrue throughout the grid.” Long Island, 27 F.4th at 709
(emphases added). Improvements to an integrated grid that
“enhance[ ] transmission security and reliability” are
“presumed to benefit the entire system.” Midwest ISO
Transmission Owners v. FERC, 373 F.3d 1361, 1369, 1371
(D.C. Cir. 2004) (cleaned up). So even where a local
transmission facility originally served only local customers, it
may have “substantial regionwide benefits” that are “difficult

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to quantify” once it is integrated into a larger grid. See Long
Island, 27 F.4th at 713-14 (cleaned up).
B. FERC Reasonably Applied The Cost-Causation
Principle
Here, FERC determined that the Nixa Assets brought
“integration, reliability, and power transfer benefits to Zone 10
customers” that justified spreading their costs across Zone 10.
182 FERC ¶ 61141, at 62048 (2023); see id. at 62054-55. This
conclusion represents a reasonable application of the cost-
causation principle, a reasonable analysis of the costs and
benefits that accrue to Zone 10 customers, and a reasonable
balancing of the cost-causation principle with other policy
goals.
The Petitioners fault FERC’s analysis on three grounds:
They object (1) to FERC’s level of generality in considering
benefits, (2) to the type of benefits considered, and (3) to the
evidence of benefits in this case.
We consider and reject each of the Petitioners’ objections
in turn.
1. FERC Can Analyze Costs And Benefits At The Zonal
Level
The Petitioners first claim that FERC analyzed the
integration of the Nixa Assets at the wrong level of
generality — at the zonal level instead of on a “customer-by-
customer basis.” Petitioner Br. 44. In the Petitioners’ view,
the cost-causation principle demands a “rough proportionality”
between the cost that a particular customer bears and the
benefit that that particular customer receives from a

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transmission facility. See 184 FERC ¶ 61004, at p. 61017-20
(2023).
But FERC has no duty to take such a hyper-granular
approach to weighing costs and benefits. Following FERC’s
redesign of the nation’s grid, regional transmission
organizations and independent system operators created local
zones to manage power within the grid. Nobody challenges
that zonal approach here. A key feature of that zonal system is
the zonal rate that “customers located in each zone pay . . .
based on the cost of the transmission facilities located in that
zone.” Nebraska Public Power District, 957 F.3d at 935.
Naturally, then, when considering integration of new facilities
in this zonal system, FERC reasonably analyzes costs and
benefits at the zonal level.
The Petitioners contend that the cost-causation principle
requires measuring the benefits of each transmission facility to
each customer. But if customers paid only for the facilities
from which they directly receive power, the zonal integration
system would collapse, and we would return to the “bad old
days” when independent, vertically integrated local utilities
charged different rates to their local customers. Midwest ISO,
373 F.3d at 1363.
We rejected a similar argument in Long Island Power
Authority. The petitioners there argued that FERC must
“always consider cost-allocation rules on a project-by-project
basis.” 27 F.4th at 715. We concluded that imposing such a
requirement “would unravel the framework of ex ante tariffs”
that FERC established to move the nation toward horizontally
integrated power-grid zones. Id. The same conclusion applies
to the Petitioners’ desired customer-by-customer approach
here. Were we to require FERC first to identify “every
customer” in each zone, then identify “every particular

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transmission asset,” then determine exactly how much “each
asset is used” by each customer, and then fashion a precise
proportional rate for each customer-facility pairing based on
usage, the whole zonal system would come to nothing.
Southwest Power Pool, Inc., 184 FERC ¶ 61004, at p. 61019.
The Petitioners rely on City of Lincoln v. FERC, 89 F.4th
926 (D.C. Cir. 2024), but that case does not help them. In fact,
City of Lincoln underscores the propriety of FERC’s zonal-
level analysis. In that case, we approved FERC’s reasonable
determination that it flunked cost-causation analysis to shift the
costs of an asset serving load “entirely” in one zone (Zone 16)
to a different zone (Zone 19) where that asset was physically
located. Id. at 929, 931-33. Our analysis turned on zonal-level
benefits: The asset in question benefitted Zone 16 — not Zone
19. Id. at 935. Here, unlike in City of Lincoln, the Nixa Assets
benefit Zone 10, so there’s no comparable cost-causation
problem.
At bottom, the Petitioners’ argument reduces to “rules for
thee but not for me.” The non-Nixa petitioners are all Zone 10
customers who draw power from facilities controlled by
Southwest Power Pool and funded through the Zone 10
rate — a rate that Nixa has paid for years. As a significant
customer in Zone 10, Nixa has paid a considerable share of
Zone 10 transmission facility costs — a share that includes
costs for facilities that primarily serve load to non-Nixa
customers. So, even though Nixa itself does not draw direct,
quantifiable benefits from these facilities, it has footed part of
the bill. In sum, the Petitioners want Nixa to keep paying a
substantial percentage of the costs of facilities that directly
serve non-Nixa areas of Zone 10, while the Petitioners
themselves pay no part of the facilities that directly serve Nixa.
In the Petitioners’ ideal world, Nixa gets double-taxed while

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everyone else gets subsidized transmission. See Oral Arg. Tr.
16. The cost-causation principle requires no such thing.
2. FERC Can Consider Unquantifiable Systemwide
Benefits
Next, in faulting FERC for relying on unquantified
integration and reliability benefits to justify the cost shift, the
Petitioners imply that the only benefits that FERC may
consider in a cost-causation analysis are tangible, quantifiable
benefits. They claim that because the Nixa Assets do not
directly provide load to non-Nixa customers, and because
FERC has no mathematical proof of how the Nixa Assets
would boost grid reliability, there are no true benefits for non-
Nixa customers.
That argument runs headlong into our cost-causation
precedents. As we have explained, those precedents hold that
system improvements that “enhance[ ] transmission security
and reliability” are “presumed to benefit the entire system.”
Midwest ISO, 373 F.3d at 1369, 1371 (cleaned up); supra
Section II.A. System integration and enhancements “have
substantial regionwide benefits,” even if they are not readily
reducible to a dollar figure. Long Island, 27 F.4th at 714.
These intangible or unquantifiable systemwide improvements
can support an “articulable and plausible” belief that the cost
shift resulting from an integration is “at least roughly
commensurate with” the benefits to the system and, by
extension, to the zone’s customers. Id. at 714-15 (cleaned up).
Here, FERC found that incorporating the Nixa Assets
would “provide integration, reliability, and power transfer
benefits to Zone 10 customers.” 182 FERC ¶ 61141, at p.
62048. True, “the benefits” of such intangible attributes
“cannot be calculated with precision.” Nebraska Public Power

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District, 957 F.3d at 941. But precision has never been
required. See Illinois Commerce I, 576 F.3d at 477.
Qualitative benefits such as improved integration and
reliability are sufficient to sustain a cost shift. See Midwest
ISO, 373 F.3d at 1369-71. And we can hardly fault FERC for
failing to quantify the unquantifiable.
Our decision today aligns with that of the Eighth Circuit in
Nebraska Public Power District. There, our sister circuit found
that the integration of another system of transmission facilities
into Southwest Power Pool’s Zone 17 — despite an estimated
immediate cost shift of up to $4.3 million and future cost shift
of up to $3.5 million — was justified under the cost-causation
principle. 957 F.3d at 941. That was because the zone’s
utilities “were already integrated” and provided each already-
integrated utility with “mutual benefit and joint use.” Id.; see
id. at 939-43; cf. id. at 941-42 (“this case more closely
resembles Illinois Commerce III,” where the Seventh Circuit
approved a cost shift because of increased reliability, even
though that benefit could not be calculated precisely) (citing
Illinois Commerce Commission v. FERC, 721 F.3d 764, 774-
75 (7th Cir. 2013)).
In short, as this circuit and our sister circuits have held,
benefits justifying a cost shift do not need to be tangible, nor
must they be amenable to precise tabulation. It’s enough that
there’s “an articulable and plausible reason to believe” that
there are benefits to integration, and that those benefits are
“roughly commensurate” with the integration’s costs. Long
Island, 27 F.4th at 714-15 (cleaned up). That’s the case here.
3. Substantial Evidence Supports FERC’s Decision
Finally, the Petitioners bring a last-ditch challenge to
FERC’s evidence. They claim that FERC did not have

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sufficient evidence to conclude that integrating the Nixa Assets
into Zone 10 would provide any benefits to non-Nixa
customers.
This final argument faces a high bar. FERC’s decisions
need only be supported by “substantial evidence,” which is
“more than a scintilla” but “less than a preponderance.”
Delaware Riverkeeper Network v. FERC, 45 F.4th 104, 108
(D.C. Cir. 2022) (cleaned up). The question is “not whether
record evidence could support the petitioner’s view of the
issue,” but whether there is evidence that adequately “supports
[FERC’s] ultimate decision.” Florida Gas Transmission Co.
v. FERC, 604 F.3d 636, 645 (D.C. Cir. 2010).
And here there is. FERC directly relied on evidence and
testimony indicating that integrating the Nixa Assets would
improve centralized planning and dispatch for the benefit of all
Zone 10 customers. FERC also cited record evidence
supporting the conclusion that integrating the Nixa Assets
would provide greater reliability across Zone 10. We are
satisfied that FERC’s decision was supported by substantial
evidence.
* * *
By examining the costs and benefits of integrating the
Nixa Assets into Zone 10 at the zonal level and finding that
zone-wide integration and reliability improvements justified
the cost shift here, FERC reasonably discharged its rate-review
duties under the Federal Power Act. We therefore deny the
petition for review.
So ordered.

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