Connecticut Valley Electric Co. v. Federal Energy Regulatory Commission

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued October 7, 1999 Decided April 14, 2000

No. 98-1294

Connecticut Valley Electric Company, Inc.,

Petitioner

v.

Federal Energy Regulatory Commission,

Respondent

Granite State Hydropower Association, et al.,

Intervenors

On Petition for Review of Orders of the

Federal Energy Regulatory Commission

James H. McGrew argued the cause and filed the briefs for

petitioner.

Beth G. Pacella, Attorney, Federal Energy Regulatory

Commission, argued the cause for respondent. With her on

the brief were Jay L. Witkin, Solicitor, and John H. Conway,

Deputy Solicitor.

Earle H. O'Donnell, Donna M. Attanasio, Laurel W.

Glassman, Margaret A. Moore, and Howard E. Shapiro were

on the brief for intervenors Westmoreland-LG & E Partners

and Wheelabrator Claremont Company, L.P. Allan W.

Anderson, Jr., and David B. Ward entered appearances for

intervenor Granite State Hydropower Association.

Before: Ginsburg, Rogers, and Tatel, Circuit Judges.

Opinion for the Court filed by Circuit Judge Ginsburg.

Ginsburg, Circuit Judge: Connecticut Valley Electric Com-

pany, a local distribution company serving some 10,000 cus-

tomers in New Hampshire and Vermont, petitions for review

of two orders of the Federal Energy Regulatory Commission

denying Connecticut Valley any relief against a power pro-

ducing facility that violated s 3(17)(C)(ii) of the Federal Pow-

er Act (FPA). Connecticut Valley claims the Commission's

orders violate s 210 of the Public Utility Regulatory Policies

Act of 1978 (PURPA), and that the Commission is required

by s 3(17)(C)(ii) of the FPA to revoke the facility's status as a

"Qualifying Facility" (QF), or alternatively that the Commis-

sion's refusal to revoke the facility's QF status or to provide

any other relief is an abuse of the agency's remedial discre-

tion.

We hold that we are without jurisdiction to address Con-

necticut Valley's claim arising under s 210 of the PURPA.

We reject Connecticut Valley's claim that s 3(17)(C)(ii) of the

FPA requires the Commission to revoke the facility's QF

status, and we conclude that the Commission's decision to

deny any relief was a valid exercise of its remedial discretion.

We therefore deny the petition for review.

I. Background

The Congress enacted Title II of the PURPA, Pub. L. No.

95-617, 92 Stat. 3117, 3134 (1978), in an effort to encourage

the development of cogeneration and small power production

facilities. A "cogeneration facility" produces both electric

energy and steam or some other form of usable energy, 16

U.S.C. s 796(18)(A); a "small power production facility" pro-

duces less than 80 megawatts of electricity using biomass,

waste, renewable resources, or geothermal resources as the

primary energy source, id. s 796(17)(A). The Supreme Court

described s 210 of the PURPA in FERC v. Mississippi, 456

U.S. 742, 750-51 (1982) (citations omitted):

... [Congress] felt that two problems impeded the

development of nontraditional generating facilities: (1)

traditional electricity utilities were reluctant to purchase

power from, and to sell power to, the nontraditional

facilities, and (2) the regulation of these alternative ener-

gy sources by state and federal utility authorities im-

posed financial burdens upon the nontraditional facilities

and thus discouraged their development.

In order to overcome the first of these perceived

problems, s 210(a) directs FERC ... to promulgate ...

rules requiring utilities to offer to sell electricity to, and

purchase electricity from, qualifying cogeneration and

small power production facilities....

To solve the second problem perceived by Congress,

s 210(e), 16 U.S.C. s 824a-3(e), directs FERC to pre-

scribe rules exempting the favored cogeneration and

small power facilities from certain state and federal laws

governing electricity utilities.

In order to secure these benefits to qualifying cogeneration

and small power production facilities--so-called Qualifying

Facilities, or QFs--the Commission has promulgated the

following regulations, respectively: 18 C.F.R. ss 292.303-305,

which require an electric utility to sell to a QF electricity for

use in its operations at regulated tariff rates and to buy the

QF's output at the utility's "avoided cost";* and 18 C.F.R.

__________

* PURPA s 210(b), 16 U.S.C. s 824a-3(b), caps the total amount

a utility may be required to pay for purchases from a QF at

"incremental cost," also called "full avoided cost," American Paper

Inst., Inc. v. American Elec. Power Serv. Corp., 461 U.S. 402, 404

(1983), which is defined as "the cost to the electric utility of the

electric energy which, but for the purchase from such cogenerator

ss 292.601-602, which exempt a QF from the Public Utility

Holding Company Act of 1935, 15 U.S.C. s 79 et seq., most

state regulation as a public utility, and much of the FPA. A

small power producer (SPP) is a QF only if it (1) meets

various Commission requirements respecting fuel use, fuel

efficiency, and reliability, 16 U.S.C. s 796(17)(C)(i) and (2) "is

... not primarily engaged in the generation or sale of electric

power (other than electric power solely from cogeneration

facilities or small power production facilities)," id.

s 796(17)(C)(ii).

A. Regulatory Background: Gross Versus Net Output

There are two ways of measuring the power production

capacity of a QF: one looks to gross output, which is all

electricity produced by the facility, the other to net output,

which is gross output less the electricity used in the QF's own

operations. The distinction is important because many QFs

purchase their internal operating needs at tariffed rates from

the electric utility to which they sell their output, which the

utility is required to buy at the utility's full avoided cost. If

the QF were allowed to sell its gross output to the electric

utility at full avoided cost, then it would in effect be selling

back at a significant markup the quantum of electricity it

purchased from the utility for its internal operating needs.

In 1991, the Commission for the first time addressed

whether a facility that sold its gross output would lose its

__________

or small power producer, such utility would generate or purchase

from another source," s 210(d), 16 U.S.C. s 824a-3(d). In promul-

gating regulations to implement s 210, the Commission adopted

this statutory cap as the amount a utility would be required to pay

for all purchases from a QF. See 18 C.F.R. s 292.304(b)(2). In

other words, the Commission set the rate at the maximum level.

The Supreme Court approved in American Paper, 461 U.S. at 417.

Calculation of the full avoided cost rate is complicated. See 18

C.F.R. s 292.304(e). For purposes of this petition the important

point is that the rate that a QF can require a utility to pay is almost

always higher than the regulated tariff rate at which the QF can

purchase from the utility electricity for its internal operating needs.

status as a QF because it would no longer be, as required by

s 3(17)(C)(ii),* "not primarily engaged in the generation or

sale of electric power (other than electric power solely from

cogeneration facilities or small power production facilities)."

Turners Falls Ltd. Partnership, 55 FERC p 61,487. The

Commission began by recognizing that s 3(17)(C)(ii) is ambig-

uous: If a utility provides a QF with power for its operations

through one line, and the QF provides its gross output back

to the utility through a separate line, then in one sense

(namely, the physical) the QF is selling only electricity "solely

from cogeneration or small power production facilities" and

the requirement of s 3(17)(C)(ii) is satisfied; in another

(namely, the economic) sense, however, the QF is selling back

to the utility electricity that was generated by the utility, in

violation of that section. See id. at 62,668.

In light of this ambiguity and the broad discretion the

Congress granted the Commission in s 3 of the FPA to

determine the requirements for QF certification, the Commis-

sion concluded that it could lawfully interpret the statute

either to allow or to preclude a QF's sale of its gross output.

See id. at 62,669. In the end, however, the Commission

decided that the policies of the PURPA are served better if

the statute is read to say that a facility that sells its gross

output is not a QF. See id. at 62,671.

B. Procedural Background: Petition to Revoke Clare-

mont's QF Status

Wheelabrator Claremont Company (hereinafter Claremont)

operates an SPP facility in Claremont, NH. In 1983 the New

Hampshire Public Utilities Commission approved a settle-

ment agreement among Connecticut Valley, Claremont

(through its predecessor in interest), and the NHPUC's own

__________

* Turners Falls actually addressed a cogenerator's status as a

QF pursuant to s 3(18)(B)(ii). Section 3(17)(C)(ii), which applies to

SPPs, and s 3(18)(B)(ii), which applies to cogenerators, are identi-

cal; the parties agree that the Commission's interpretation of

s 3(18)(B)(ii) in Turners Falls applies to both provisions. For the

sake of consistency, therefore, we refer to s 3(17)(C)(ii) throughout

this opinion.

staff. See In re New Hampshire/Vermont Solid Waste Pro-

ject, DR 82-343, Order No. 16,232, 68 NHPUC 96. The

settlement, as embodied in a contract executed between Con-

necticut Valley and Claremont and approved by the NHPUC

in 1984, provided that Connecticut Valley would purchase the

"entire electrical output" of Claremont's proposed SPP facili-

ty for 20 years at Connecticut Valley's full avoided cost (of

nine cents per kWh, adjusted for inflation) while simulta-

neously providing Claremont with its needs for electricity in

its operations, at Connecticut Valley's consolidated tariff rate,

which has proven to be less than the adjusted contract rate.

Claremont applied to the Commission for QF certification,

representing that its output would be 4.5 MW but it did not

specify whether that was its gross or net output. The

Commission certified the Claremont facility as a QF in 1986,

and in 1987 Claremont began selling to Connecticut Valley its

gross electrical output of 4.5 MW.

In 1993 Claremont, in response to an inquiry from the

NHPUC, reported that its gross output was 4.5 and its net

output 3.9 MW. Connecticut Valley then asked the NHPUC

to investigate whether Claremont qualified as a QF in view of

its having sold its gross output. Instead, the NHPUC, noting

that the FERC has exclusive jurisdiction over the decertifica-

tion of a QF, ordered Connecticut Valley to petition the

Commission for revocation of Claremont's QF status. See In

re Connecticut Valley, DR 93-196, Order No. 21,000

(NHPUC Oct. 18, 1993).

Connecticut Valley duly filed a complaint with the Commis-

sion seeking revocation of Claremont's QF status based upon

Claremont's sales of gross output and its alleged misrepre-

sentations to the Commission in applying for QF status.

Connecticut Valley further requested that, once Claremont's

QF status was revoked, the Commission take jurisdiction over

Connecticut Valley's contract with Claremont pursuant to

ss 205-206 of the FPA and either rescind the contract and

retroactively determine just and reasonable rates for past

sales, or at least prospectively reform the contract so that

Connecticut Valley need purchase only Claremont's net out-

put.

Although the Commission agreed with Connecticut Valley

that Claremont could not be a QF because its gross sales took

it outside the rule of s 3(17)(C)(ii), the Commission denied

Connecticut Valley any relief. See Connecticut Valley Elec.

Co. v. Wheelabrator Claremont Co., 82 FERC p 61,116, at

61,422 (1998). The Commission explained that the statute is

ambiguous and could be read to allow gross sales by a QF.

Not until Turners Falls, the Commission concluded, had it

made clear that gross sales would violate s 3(17)(C)(ii) and

thus preclude QF status. See id. at 61,418. Noting, however,

that many QFs had in good faith entered into long-term

contracts for the sale of their gross output, and not wanting

to upset their settled expectations, the Commission adopted a

remedial policy that was only partially retroactive: "We will

... revoke the QF status of any facility which sells in excess

of its net output pursuant to a contract entered into after the

date of issuance of Turners Falls." Id. at 61,420. Because

the Claremont contract predated Turners Falls, the Commis-

sion declined to revoke Claremont's QF status or to take any

other remedial action. See id. at 61,422.

Connecticut Valley petitioned for rehearing, arguing that

s 3(17)(C)(ii) is not ambiguous and therefore the Commission

should have decertified Claremont or provided Connecticut

Valley some alternative relief for Claremont's acknowledged

violation of the statute. The Commission denied rehearing,

83 FERC p 61,136 (1998), and Connecticut Valley petitioned

this court for review of both Commission orders.

II. Analysis

Connecticut Valley and the Commission agree that under

s 3(17)(C)(ii) of the FPA an SPP that sells more than its net

output, as Claremont does, cannot be a QF. The Commission

maintains that it may nonetheless refuse to revoke Clare-

mont's QF status and may deny Connecticut Valley any

alternative relief. Connecticut Valley claims that the Com-

mission's refusal to revoke Claremont's QF status or to

provide some alternative relief violates s 210 of the PURPA

and s 3(17)(C)(ii) of the FPA, and is an abuse of the Commis-

sion's remedial discretion.

A. Section 210 of the PURPA

Connecticut Valley claims that under the challenged orders

it is required to pay Claremont more for electricity than the

lawful maximum established by s 210 of the PURPA, that is,

its full avoided cost. The matter is less than straightforward

because s 210 actually caps the total amount (not just the per

unit rate) a utility is required to pay a QF for electricity: the

utility can be required to pay no more than "the cost to the

electric utility of the electric energy which, but for the

purchase from such cogenerator or small power producer,

such utility would generate or purchase from another source."

16 U.S.C. s 824a-3(d). Connecticut Valley claims its contract

with Claremont requires it to purchase Claremont's gross

output, whereas but for the purchase from Claremont, Con-

necticut Valley would need to generate or purchase electricity

equal only to Claremont's net output. Thus the Commission's

refusal to revoke Claremont's QF status and reform the

contract requires Connecticut Valley to pay more than its full

avoided cost.

Although neither party raised this issue in their briefs, we

asked the parties to address at oral argument whether we

have jurisdiction to adjudicate in the first instance a dispute

arising under s 210. See New York State Electric & Gas

Corp. v. FERC, 117 F.3d 1473, 1477 (D.C. Cir. 1997); Niaga-

ra Mohawk Power Corp. v. FERC, 117 F.3d 1485, 1489 (D.C.

Cir. 1997). The Commission takes the position that we do

not. Connecticut Valley replies with a variety of arguments,

none of which is responsive to the Commission's jurisdictional

argument.

We agree with the Commission that New York State Elec-

tric and Niagara Mohawk control this case. Section 210 sets

up an elaborate enforcement scheme in which the roles of the

Commission, the state public utility commissions (PUCs), and

the federal courts are specifically delineated. Under

s 210(a), the Commission is required to promulgate regula-

tions governing utilities' purchases of electricity from QFs,

including regulations implementing the statutory cap under

ss 210(b)-(d). 16 U.S.C. ss 824a-3(a), (b), (d). The state

PUCs are then required (by s 210(f), 16 U.S.C. s 824a-3(f))

to implement the Commission's regulations. If a PUC fails to

implement the regulations, the Commission may bring an

enforcement action against that PUC in federal district court.

Alternatively, if a private party petitions the Commission to

initiate an enforcement action against a PUC and the Com-

mission declines, then that party may itself sue the PUC in

federal district court to force implementation of the regula-

tions. See s 210(h)(2), 16 U.S.C. s 824a-3(h)(2); see also

New York State Electric, 117 F.3d at 1476.

Thus, when Connecticut Valley says that s 210 "requires

FERC to cap QF rates at full avoided cost," it is correct only

in the limited sense that the Commission is required to

promulgate regulations to that effect. The Commission satis-

fied that obligation when it promulgated 18 C.F.R.

s 292.304(a)(2), which limits the cost at which a utility pur-

chases power from an SPP at an amount equal to the utility's

full avoided cost. The Commission's only obligations under

s 210 are the promulgation and periodic revision of these

regulations and of the exemption regulations required by

s 210(e); therefore, the Commission's decision not to take

any action in response to Claremont's apparent violation of

s 3(17)(C)(ii) cannot be a violation of s 210 by the Commis-

sion. The Commission has in effect merely "announced the

position ... it would take in any future enforcement action

that [Connecticut Valley] might bring," New York State Elec-

tric, 117 F.3d at 1476, namely, that it will not seek to remedy

violations of s 210 arising from Claremont's sale of gross

output under a contract entered into prior to the Commis-

sion's decision in Turners Falls.

Connecticut Valley may have a valid claim that the

NHPUC has violated s 210 by approving a contract that

requires Connecticut Valley to purchase gross output and

therefore to pay more than the utility's full avoided cost. As

we have said before, "[t]he failure of a state commission to

ensure that a rate does not exceed a utility's avoided cost is a

failure to comply with a [Commission] regulation implement-

ing the PURPA," which "would ordinarily be challenged

through an enforcement action brought in district court under

s 210(h)." Id. Based upon the Commission's position as

stated in the orders under review, that agency would presum-

ably decline to bring an enforcement action if Connecticut

Valley petitioned it to do so; and its declination would clear

the way for Connecticut Valley to bring its own enforcement

action in district court.

If this court, in the guise of reviewing the Commission's

present no-action position, were to address the question

whether the petitioner's contract with Claremont violates

s 210, then we would "usurp the role of the district court as

the court of first instance, contrary to the enforcement

scheme adopted by the Congress in s 210(h) of the PURPA."

Industrial Cogenerators v. FERC, 47 F.3d 1231, 1235 (D.C.

Cir. 1995). Therefore, we conclude we are without jurisdic-

tion to address Connecticut Valley's claim arising under

s 210. See id. at 1236; New York State Electric, 117 F.3d at

1477; Niagara Mohawk, 117 F.3d at 1489.

B. Section 3(17)(C)(ii) of the FPA

Connecticut Valley next challenges the Commission's deci-

sion to grandfather contracts entered into prior to its decision

in Turners Falls and therefore not to revoke Claremont's QF

status. Connecticut Valley claims that in view of the clear

congressional decision in FPA s 3(17)(C)(ii) that an SPP

selling more than its net output is not within the definition of

a QF, "the Commission lack[s] the discretion to grandfather

any QF contracts requiring utilities to purchase a QF's gross

output."

In order to establish that the Commission has no remedial

discretion, Connecticut Valley must demonstrate not only that

Claremont's sale of gross output violates s 3(17)(C)(ii), but

also that the Commission is required to apply the revocation

rule of Turners Falls to contracts predating that decision.

The first point is moot, for the Commission agrees that

Claremont is in violation of the statute. The second point is

the difficult one for Connecticut Valley because "the breadth

of agency discretion is, if anything, at [its] zenith when the

action assailed relates primarily not to the issue of ascertain-

ing whether conduct violates the statute, or regulations, but

rather to the fashioning of policies, remedies and sanctions."

Niagara Mohawk Serv. Corp. v. FPC, 379 F.2d 153, 159 (D.C.

Cir. 1967); Louisiana Public Power Comm'n v. FERC, 174

F.3d 218, 225 (D.C. Cir. 1999). In other words, the Commis-

sion ordinarily has remedial discretion, even in the face of an

undoubted statutory violation, unless the statute itself man-

dates a particular remedy. See, e.g., Towns of Concord,

Norwood, & Wellesley v. FERC, 955 F.2d 67, 72-73, 76 n.8

(D.C. Cir. 1992).

Section 3(17)(C)(ii) does not expressly specify a particular

remedy for the violation of its terms. Compare National

Insulation Transp. Comm. v. ICC, 683 F.2d 533, 537-38 (D.C.

Cir. 1982) (ICC would lack remedial discretion for certain

rate violations because 49 U.S.C. s 10707(d)(1) (1982) ex-

pressly mandates refund). Connecticut Valley argues, none-

theless, that s 3(17)(C)(ii) unambiguously defines the require-

ments for status as a QF, and the Commission must carry out

this clear congressional command by denying QF status to

any facility that does not fit the bill.

We reject this claim because, contrary to the petitioner's

premise, s 3(17)(C)(ii) is not unambiguous. As the Commis-

sion first recognized in Turners Falls, when electricity sales

between a QF and a utility are analyzed from a physical

perspective, s 3(17)(C)(ii) can reasonably be interpreted to

allow a QF to sell its gross output. See Turners Falls, 55

FERC at 62,668. Based upon this ambiguity, the Commis-

sion, as the agency charged with administering the FPA,

determined that it had discretion to interpret the statute as

allowing or precluding the sale of gross output by a QF; it

then determined that the interpretation more in keeping with

the purpose of the Act prohibits such sales. Both interpreta-

tions of s 3(17)(C)(ii) are self-evidently reasonable in the face

of this ambiguity, and Connecticut Valley raises no legal

principle that would require the Commission--despite the

severe impact upon both the settled expectations of private

parties and the governmental interest in encouraging the

development of nontraditional generating facilities--to apply

retroactively the interpretation of s 3(17)(C)(ii) it ultimately

adopted in Turners Falls. Cf. Clark-Cowlitz Joint Operating

Agency v. FERC, 826 F.2d 1074, 1081 (D.C. Cir. 1987) (en

banc) (private and governmental interests may overcome

"general principle [that agency] may apply ... new interpre-

tation" retroactively). In light of the ambiguity of

s 3(17)(C)(ii) and the absence of a specific remedial command

from the Congress, we conclude that the Commission retains

remedial discretion to decide whether to revoke Claremont's

status as a QF.

C. Abuse of Remedial Discretion

Because we conclude that the Commission has discretion

with respect to remedying Claremont's violation of

s 3(17)(C)(ii), Connecticut Valley is remitted to challenging

the Commission's exercise of that discretion, which we review

only for abuse. See Louisiana Public Serv. Comm'n v.

FERC, 174 F.3d 218, 225 (D.C. Cir. 1999). An agency abuses

its remedial discretion if its decision "conflicts with the 'core

purpose[]' " of the statute it administers, Towns of Concord,

955 F.2d at 74 (quoting Maislin Indus., Inc. v. Primary

Steel, Inc., 497 U.S. 116, 133 (1990)), or if it is not "otherwise

reasonable," that is, based upon a reasonable accommodation

of all the relevant considerations and not inequitable under

the circumstances. Towns of Concord, 955 F.2d at 75-76; see

also Koch Gateway Pipeline Co. v. FERC, 136 F.3d 810 (D.C.

Cir. 1998); Laclede Gas Co. v. FERC, 997 F.2d 936 (D.C. Cir.

1993). Insofar as the Commission's remedial decision is

based upon factual determinations, they must be supported

by substantial evidence in the record. See 16 U.S.C.

s 825l(b); Louisiana Public Serv. Comm'n, 174 F.3d at 225.

Connecticut Valley argues that the Commission's decision

not to revoke Claremont's QF status or to provide any

alternative relief is an abuse of discretion for a number of

reasons. First, Connecticut Valley claims the decision direct-

ly conflicts with all three statutory purposes expressed in

s 101 of the PURPA, to wit, "conservation of energy," "op-

timization of [electric utility] efficiency," and "equitable rates

to electric consumers." 16 U.S.C. s 2611.

As the Commission properly notes, however, s 101 applies

only to Title I of the PURPA, whereas QF status is a

creature of Title II. And the Supreme Court has said that

the core purpose of Title II is "to encourage the development

of cogeneration and small power production facilities" by

addressing "problems imped[ing] the development of nontrad-

itional generating facilities." FERC v. Mississippi, 456 U.S.

at 750. In other words, Title II reflects, predominantly,

solicitude for certain types of producers rather than for the

consumers who must pay their rates. Accordingly, the Com-

mission deemed it material in the orders under review that

"many QFs ... have entered into contracts which require[ ]

or permit[ ] the ... sale of gross output." 82 FERC at

61,419. Revoking the QF status of those facilities, or altering

their "obligations and responsibilities under[ ] such executed

PURPA sales contracts," id. at 61,420, would undercut the

purpose of the Congress in Title II to encourage the develop-

ment of these nontraditional generating facilities. We see no

conflict, therefore, between the Commission's exercise of re-

medial discretion and the relevant statutory purpose.

Nor can we accept Connecticut Valley's second argument,

which is that the Commission's failure even to consider harm

to consumers was an abuse of discretion. According to

Connecticut Valley, s 210(b) of the PURPA expressly re-

quires the Commission to balance the interests of consumers

against those of producers, thus:

The rules prescribed under subsection (a) of this section

shall insure that, in requiring any electric utility to offer

to purchase electric energy from any [QF], the rates for

such purchase ... shall be just and reasonable to the

electric consumers of the electric utility and in the public

interest....

16 U.S.C. s 824a-3(b). This requirement is directed, howev-

er, at the Commission's exercise of rulemaking authority over

the rates utilities must pay QFs for power. The Supreme

Court has already held that the full avoided cost rule satisfies

the requirements of s 210(b). See American Paper Inst., 461

U.S. at 415-17. Therefore the Commission did not abuse its

discretion when it omitted explicitly to consider anew the

interests of consumers.

Third, Connecticut Valley claims the Commission failed

adequately to consider whether Occidental Geothermal, Inc.,

17 FERC p 61,231 (1981), and Power Developers, Inc., 32

FERC p 61,101 (1985), put Claremont on notice, before the

contract was executed (or at least before Claremont filed its

application for certification as a QF), that a QF may not sell

its gross output. The Commission did not fail fully to consid-

er those cases. On the contrary, the Commission expressly

read both cases as having resolved issues related to but not

the same as that resolved in Turners Falls: In Occidental

Geothermal the Commission held that net output is the

appropriate measure of the 80-MW limitation upon SPPs;

and in Power Developers it concluded that "a QF may not sell

more than net output at avoided cost rates." Connecticut

Valley, 82 FERC at 61,417-18. Although both cases were, of

course, relevant to the Commission's understanding of this

case, the Commission reasonably concluded that it was not

until Turners Falls that it "removed any remaining ambiguity

about whether the 'simultaneous buy-sell' rule permitted a

sale in excess of net output [and] clearly stated that a sale in

excess of net output would deprive a facility of its QF status."

Id. at 61,417; see also 83 FERC p 61,136, at 61,610. There

was no abuse of discretion here.

Fourth, Connecticut Valley argues the Commission failed to

consider whether Claremont intentionally or negligently mis-

led the Commission by stating its gross rather than its net

output in its application for certification. The Commission

did not have to address this claim in the orders under review,

however; it was rendered moot when the Commission held

that it was reasonable for a facility applying for QF certifica-

tion prior to the Turners Falls decision to have believed that

the Commission's "simultaneous buy-sell" rule allowed the QF

to sell its gross output. See 82 FERC at 61,418. The

Commission noted that many applicants--and indeed several

state PUCs--had thought gross sales were permitted under

the Commission's regulations, and that although this point

had been "clarified to a significant degree in 1985 in Power

Developers," it was not until Turners Falls in 1991 that the

Commission "removed any remaining ambiguity." Id. The

Commission could hardly say, therefore, that prior to that

decision a QF was either intentionally deceptive or even

merely negligent if it listed its gross rather than its net

output in applying for QF certification.

Finally, Connecticut Valley claims the Commission failed to

support with substantial evidence a key factual determination,

namely, that Claremont had a settled expectation it could

lawfully sell its gross output when it entered into the con-

tract. As Connecticut Valley conceives the issue, the Com-

mission must show that, in developing and financing the SPP

facility, Claremont actually relied upon being able to sell its

gross output.

The Commission never made a factual finding about Clare-

mont's actual reliance, however. Rather, the Commission

reiterated its general policy "against invalidating contracts

for which a PURPA-based challenge was not timely raised--

that is, before the contracts were executed," so as not "to

upset the settled expectations of parties to, and to invalidate

any of their obligations and responsibilities under, such exe-

cuted PURPA sales contracts." Id. at 61,419-20; see also 83

FERC p 61,136, at 61,611. The Commission reasonably in-

fers the parties' settled expectations from the terms of their

executed contract; either party may avoid such an inference

by including a specific reservation in its contract or by

challenging the validity of a contract provision at the time it

executes the contract.

Because the Commission did not make a factual finding

relative to settled expectations, but rather drew a reasonable

inference in accord with its established policy, it need not

support this aspect of its decision with substantial evidence.

Nor does Connecticut Valley claim that the Commission is

legally required to determine settled expectations by making

a case-specific factual inquiry rather than relying upon a rule

of general applicability. The only question remaining, there-

fore, is whether the Commission's application of its general

rule in this case was arbitrary and capricious. See Southeast-

ern Michigan Gas Co. v. FERC, 133 F.3d 34, 38 (D.C. Cir.

1998). Connecticut Valley included no reservation clause in

the contract suggesting disagreement about or uncertainty

over the purchase and sale of Claremont's gross output; nor

was Connecticut Valley challenging gross sales in court or

before the Commission at the time it entered into the con-

tract. We therefore conclude that the Commission's applica-

tion in this case of its general rule inferring the settled

expectations of the parties to a contract from the terms of

their agreement was not arbitrary or capricious.

III. Summary and Conclusion

We are without jurisdiction to review Connecticut Valley's

claim that the orders under review violate s 210 of the

PURPA. As to Connecticut Valley's other challenges, we

conclude that the Commission acted within its remedial dis-

cretion in refusing to revoke Claremont's QF status or to

provide any other relief to Connecticut Valley. Therefore,

the petition for review is

Denied.