UNITED STATES COURT OF APPEALS FOR THE D.C. CIRCUIT


SITHE INDEP POWER

v.

FERC


97-1723a

D.C. Cir. 1999


*	*	*


Edwards, Chief Judge: Petitioner Sithe/Independence Pow- er Partners
("Sithe") challenges two orders of the Federal  Energy Regulatory
Commission ("FERC" or "Commission"),  dismissing Sithe's complaint
against Niagara Mohawk Power  Corporation ("Niagara") and denying
rehearing of that dis- missal. Pursuant to a 1991 agreement, Sithe, an
independent  power producer, receives transmission services from
Niagara,  an electric utility. The challenge in this case centers on
the  loss component of the overall rate that Sithe pays Niagara for 
this service. Sithe argues that, in computing loss rates on an 
incremental basis, Niagara is violating established Commis- sion
policy, which requires that base and loss rates be com- puted using a
consistent methodology. Sithe also argues that  Niagara's method of
assigning loss calculation priorities un- fairly discriminates on the
basis of a customer's contract date.  In the orders on review, FERC
dismissed Sithe's challenge,  finding that Niagara's rate methodology
was not inconsistent  with Commission policy, and that the rates
charged were not  unduly discriminatory. Because we are unable to
ascertain  the basis for the Commission's ruling, we remand this
matter  to the Commission for further proceedings.


I. Background


A.Transmission Services Agreement


Sithe owns and operates a cogeneration facility in New  York state.
Pursuant to a 1991 power purchase agreement,  Sithe sells the bulk of
the electric energy produced at this  facility to Consolidated Edison
Company of New York ("Con  Ed"). Niagara, in turn, owns and operates
electric genera-


tion, distribution, and transmission facilities in New York. In  order
to enable the transmission of energy from the cogener- ation facility
to Con Ed, Sithe entered into a Transmission  Services Agreement
("TSA") with Niagara on November 5,  1991. Under the agreement, which
extends for a twenty year  period from the initiation of service,
Niagara provides Sithe  with roughly 805 megawatts ("MW") of firm
transmission  service and up to 250 MW of interruptible transmission 
service. In exchange, Sithe pays Niagara a base transmis- sion rate
and also compensates Niagara with in-kind energy  for transmission
line losses. FERC accepted the TSA for  filing on February 5, 1992,
and accepted a revised version for  filing on July 6, 1994. Service
under the TSA commenced on  November 15, 1994.


Under the TSA, the total charge for transmission service  consists of a
base charge for Niagara's embedded costs--i.e.,  construction and
operation expenses and a reasonable return  on its investment--plus an
additional charge for Niagara's  transmission loss costs--i.e., the
costs to the utility of making  up the power loss that inevitably
occurs during transmission.  There are at least two basic
methodologies that a utility may  use to compute its base and loss
rates: the "rolled-in" rate  method and the incremental rate method.
The rolled-in rate  methodology charges a rate based on the average
cost to the  utility of serving all of its customers on an integrated
system.  "[E]ach transmission customer [is treated] not as using a 
single transmission path but rather as using the entire trans- mission
system," and, accordingly, "each transmission cus- tomer pays its
share of the capital costs of the entire system"  based on the amount
of electricity it has transmitted over the  system. Northern States
Power Co. v. FERC, 30 F.3d 177,  179 (D.C. Cir. 1994). On the other
hand, the incremental rate  methodology charges a rate based on how a
given customer's  individual use affects the system. Each transmission
custom- er pays an amount that compensates the utility for the 
marginal costs that its use imposes, which is a function of  such


The methodology for computing rates in this case was not  clearly
specified in the TSA. With respect to the base 


transmission rate, the rate schedule that is part of the TSA 
identified a firm service rate of $1.49 per kilowatt ("kW") per 
month, which was later modified to $1.76 per kW per month.  By
agreement, this rate was based on the formula that had  governed
Niagara's earlier arrangements with New York  State Electric & Gas
Corporation ("NYSEG") and Central  Hudson Gas & Electric Corporation
("CHGE"). Yet, the  parties' characterizations of this underlying
formula are at  odds. It appears from the record that the $1.76 figure
 represents an average of the costs associated with a substan- tial
portion--but not the entirety--of Niagara's transmission  system. In
other words, the starting point from which aver- ages are taken
excludes investment in a particular substation,  a flat sum of $43.5
million, and various other expenses. In  Sithe's view, then, the
formula reflects an average, rolled-in  methodology, even if it does
not produce a fully embedded  rate. In Niagara's view, however, the
formula reflects a  "hybrid," modified cost-of-service approach that


With respect to the transmission loss rate, the TSA ex- pressly
provides for compensation, in the form of in-kind  energy, for losses
resulting from Niagara's service to Sithe.  Section 9.1 of the
agreement states that:


[Sithe] shall compensate NIAGARA MOHAWK for  losses incurred by NIAGARA
MOHAWK in its control  area and NIAGARA MOHAWK shall compensate
[Sithe]  for losses avoided by NIAGARA MOHAWK in its control  area as
a result of NIAGARA MOHAWK's provision of  transmission services
hereunder. The determination of  such losses and the procedure for
compensation thereof  shall be determined by NIAGARA MOHAWK's Power 
Control Department in accordance with NIAGARA MO- HAWK's practices
relating to other similar transactions  and in accordance with GOOD


Transmission Services Agreement s 9.1, reprinted in Joint  Appendix
("J.A.") 57. There is a dispute among the parties  as to whether this
provision explicitly identifies an incremen- tal loss methodology.
Before the Commission, Niagara ar-


gued that this conclusion was dictated by the language of the 
agreement, and that Sithe was fully aware of this when it  entered
into the agreement. Sithe, for its part, contended  that the provision
did not specify any methodology, and that  it was unaware that Niagara
employed an incremental ap- proach until Niagara eventually supplied
it with information  underlying the rates it was charging, well after
execution of  the TSA. The Commission did not make an express finding 
on this point.


In any event, there is little dispute that Niagara does, in  fact,
compute Sithe's transmission loss charge on an incre- mental, rather
than average, basis. Niagara's approach can  be roughly summarized as
follows. First, using a load flow  model, Niagara takes two
"snapshots" of its system each  month, one during peak use and one
during off-peak use, in  order to determine the amount of energy being
transmitted  over the system and the amount of energy lost in
transmis- sion. Niagara then extrapolates from this data to calculate 
the total transmission losses incurred for each month. Next,  Niagara
removes its customers from the model one at a time  and re-calculates
losses at each step, thereby arriving at a  marginal loss figure for
each customer. To establish the  order of removal, Niagara assigns its
customers "priorities"  based on the dates of their firm transmission
contracts.  Because transmission losses are a function of the current 
flowing over the system, incremental losses decrease expo- nentially
as each load is removed from the calculation--i.e.,  the assigned
priority substantially affects the amount of the  loss for which a
given customer will be charged. According  to Sithe, "Niagara's use of
an incremental loss factor to  assign losses to Sithe instead of using
an average, rolled-in  loss factor costs Sithe approximately $10,000
per day."  Amended Brief of Petitioner at 9.


B.Commission Proceedings


On March 29, 1995, Sithe filed a complaint with the Com- mission
pursuant to s 206 of the Federal Power Act ("FPA"),  16 U.S.C. s 824e
(1994), challenging Niagara's method of  computing transmission losses
under the TSA as unjust, 


unreasonable, and unduly discriminatory. Sithe contended,  inter alia,
that Niagara was violating the Commission's long- standing "matching
policy" by using an incremental method  to calculate Sithe's
transmission loss charges, while at the  same time using an average
rolled-in method to calculate  Sithe's base transmission rate. Sithe
also contended that  Niagara's method for determining incremental
losses discrim- inated unfairly among its transmission customers by
prioritiz- ing transactions based on contract dates, and by reserving
the  highest priority for its own uses of the system. Sithe sought  an
order from the Commission finding Niagara's calculation  of
transmission losses to be unlawful and directing Niagara to  calculate
transmission losses on an average, system-wide  basis.


In its answer, Niagara raised multiple arguments in sup- port of its
current method of computing Sithe's rates. First,  Niagara suggested
that Commission policy recognizes the  benefits of flexibility in rate
structuring and does not strictly  require the use of matching
methodologies. Next, Niagara  represented that it does not use a
rolled-in methodology to  compute Sithe's base transmission rate, but
rather a hybrid  methodology that includes only a portion of Niagara's
fixed  costs. On this basis, Niagara argued that it was not required 
to compute losses using system-wide averages even if the  matching
policy applied. Finally, Niagara attempted to dem- onstrate that the
total rate it charges Sithe is lower than the  total rate it could
charge Sithe if it computed both base and  loss rates using a fully
rolled-in methodology, and that Sithe  had bargained for this benefit.
On this alternative basis,  Niagara asserted that its rates were just
and reasonable and,  accordingly, that Sithe had not been harmed.


On September 16, 1996, FERC summarily dismissed  Sithe's complaint. See
Sithe/Independence Power Partners,  L.P. v. Niagara Mohawk Power
Corp., 76 F.E.R.C. p 61,285  (1996) ("Initial Order"). After
acknowledging that "Commis- sion policy requires consistency in
pricing a utility's transmis- sion capacity charge and transmission
losses," the Commis- sion found Niagara's "computation of Sithe's
transmission  losses to be consistent with this directive." Id. at


The Commission agreed with Niagara's characterization of  the base
transmission rate as reflecting a "hybrid" methodol- ogy. See id. The
Commission also found that Niagara  charges Sithe a base transmission
rate that is "discounted  below its average system cost," and that
"[t]he amount of  discount each customer receives is based on the
incremental  transmission losses it imposes on [Niagara's]
transmission  system." Id. Finally, the Commission reasoned that
Niaga- ra's system "allows customers that impose lower variable  costs
than other customers to receive a commensurately  larger discount,"
and, therefore, that Niagara's methodology  does not produce unduly
discriminatory or preferential re- sults. Id. at 62,458-59. Although
it found Sithe's complaint  to be "without merit," id. at 62,457, the
Commission ordered  Niagara to provide Sithe with "sufficient
information for Sithe  to verify [Niagara's] calculations of Sithe's


On October 21, 1997, the Commission denied Sithe's re- quest for
rehearing. See Sithe/Independence Power Part- ners, L.P. v. Niagara
Mohawk Power Corp., 81 F.E.R.C.  p 61,071 (1997) ("Rehearing Order").
In this order, FERC  affirmed its earlier conclusion that Sithe
"enjoys a discount  from the maximum legal rate [Niagara] could impose
for the  transmission service it provides," id. at 61,301, purporting
to  base this conclusion on an "independent analysis" by which it 
confirmed that "Sithe's overall transmission rate under its  agreement
with [Niagara] is less than it would be if both the  transmission rate
and the loss rate were calculated to include  a full allocation of
embedded average costs." Id. at 61,301  n.1. FERC also reiterated
that, "because [Niagara] reduces  the price to a greater extent for
those customers imposing  lower losses, any price disparity that
results from using  incremental cost ratemaking to calculate the loss
factor por- tion of the rate does not amount to undue discrimination.
All  customers are treated comparably." Id. at 61,301. After  finding
that Sithe enjoys a discount, the Commission went on  to deem Sithe's
arguments on this score "irrelevant," as  FERC's "ratemaking practices
allow [Niagara], because it  used a hybrid method to compute Sithe's


to consider incremental costs in computing transmission loss- es"
without violating the "matching" rule. Id. at 61,302. As  additional
support for its finding of no undue discrimination,  the Commission
noted that Sithe had "freely negotiated" its  rates, and that FERC
does not consider rate disparities  inappropriate where they result
from arm's-length negotia- tions. Id. Finally, the Commission
concluded that Sithe's  argument concerning a violation of the
matching policy failed  because Sithe incorrectly presumed that its
base rate incorpo- rated Niagara's full average costs. See id.


This petition for review followed.


II. Analysis


A.Standard of Review


We review FERC orders under the Administrative Proce- dure Act's
("APA") arbitrary and capricious standard. See  Union Pac. Fuels, Inc.
v. FERC, 129 F.3d 157, 161 (D.C. Cir.  1997); 5 U.S.C. s 706(2)(A)
(1994). Because " '[i]ssues of  rate design are fairly technical and,
insofar as they are not  technical, involve policy judgments that lie
at the core of the  regulatory mission,' our review of whether a
particular rate  design is 'just and reasonable' is highly
deferential." North- ern States, 30 F.3d at 180 (quoting Town of
Norwood v.  FERC, 962 F.2d 20, 22 (D.C. Cir. 1992)). Nonetheless, such
 review is not an "empty gesture." Id. "[T]he Commission  must be able
to demonstrate that it has 'made a reasoned  decision based upon
substantial evidence in the record,' " id.  (quoting Town of Norwood,
962 F.2d at 22), and the "path of  [its] reasoning" must be clear. Id.


B.Review of Commission Orders


Because Sithe is challenging Niagara's existing rates, its  claim must
be brought pursuant to s 206, rather than s 205,  of the FPA. Section
206(a) provides, in relevant part, that:


[w]henever the Commission, after a hearing had upon its  own motion or
upon complaint, shall find that any rate,  charge, or classification,
demanded, observed, charged, 


or collected by any public utility for any transmission or  sale
subject to the jurisdiction of the Commission, or that  any rule,
regulation, practice, or contract affecting such  rate, charge, or
classification is unjust, unreasonable,  unduly discriminatory or
preferential, the Commission  shall determine the just and reasonable
rate, charge,  classification, rule, regulation, practice, or contract
to be  thereafter observed and in force, and shall fix the same  by


16 U.S.C. s 824e(a). As complainant, Sithe bore the burden  in this
proceeding of demonstrating that Niagara breached  the statutory just
and reasonable standard. See id.  s 824e(b); Alabama Power Co. v.
FERC, 993 F.2d 1557, 1571  (D.C. Cir. 1993). By dismissing Sithe's
complaint in the  orders on review, then, the Commission implicitly
found that  Sithe did not satisfy its burden--either that it failed to
 establish its prima facie case, or that Niagara had effectively 
rebutted that case.


The core of Sithe's complaint in this case is that the  transmission
loss component of Niagara's rate violates the  Commission's
long-standing policy requiring that the base  and loss elements of an
overall rate be computed using  consistent methodologies. Sithe's
position rests on its conten- tion that Niagara's rate components do
not "match," because  its base rate is calculated on a rolled-in
basis, while its loss  rate is calculated on an incremental basis. In
its brief to this  court, Sithe goes so far as to suggest that these
characteriza- tions are "undisputed", see Amended Brief of Petitioner
at 16,  but that is a stretch. To be sure, there does not appear to be
 much dispute that Niagara computes Sithe's loss rate on an 
incremental basis. See 81 F.E.R.C. at 61,301. As noted  earlier,
however, there is considerable disagreement concern- ing the
appropriate characterization of the methodology by  which Niagara
computes Sithe's base rate: Sithe argues that  it is an "average,
rolled-in" approach, whereas Niagara ar- gues that it is a "modified
cost-of-service" approach that is  not "fully rolled-in." The record,
as far as we can tell,  suggests that this calculation makes use of an
average formu- la, but does not incorporate the full complement of


costs, as it excludes investment in certain facilities, a flat sum, 
and various expenses.


Whatever the appropriate description of this disputed  methodology
(fully rolled-in, partially rolled-in, or not rolled- in at all), it
is clear that Niagara does not use the same  approach to calculate
both the base and loss components of its  rate. This would appear to
defy FERC's well-established  policy of requiring utilities to compute
the base and loss  components of their transmission rates using
consistent meth- odologies. See, e.g., Northern States Power Co., 59
F.E.R.C.  p 61,100, at 61,369, reh'g denied, 60 F.E.R.C. p 61,076, at 
61,252-53 & n.25 (1992), clarification denied, 64 F.E.R.C.  p 61,111,
at 61,920 (1993), aff'd sub nom. Northern States  Power Co. v. FERC,
30 F.3d 177 (D.C. Cir. 1994). In the  Northern States proceeding, FERC
stated that it "does not  allow the use of incremental loss factors
when the transmis- sion charge is developed on a rolled-in basis." 59
F.E.R.C. at  61,369. It further explained that:


[t]his policy flows directly from the Commission's long- standing
practice of requiring that the demand and ener- gy components of a
rate be calculated on the same basis.  Where, as here, the customer
pays for average fixed  costs rather than the fixed costs of only
certain incre- mental facilities, logic dictates that the customer pay
for  average variable costs in the energy charge.


Id. In upholding the Commission's application of this  "matching"
policy, this court recognized that, because rolled- in costing assumes
that each customer in an integrated  system "enjoys the benefits of
the transmission system as an  integrated whole," it makes sense to
hold "each customer ...  responsible for an indivisible portion of the
transmission  system losses imposed upon the system by the
configuration  of the group of customers using it at any one time."
North- ern States, 30 F.3d at 182. Where, then, is the Commission's 
explanation for not requiring "matching" methodologies in  this


The Commission purported to re-affirm its "matching"  policy in the
orders on review, see 76 F.E.R.C. at 62,458, but 


concluded that Sithe had failed to establish a violation there- of. In
so holding, however, FERC neither provided a clear  explanation of its
rationale nor revealed the data and assump- tions underlying its
findings. On the record before us, there- fore, we are unable to
satisfy ourselves that the Commission  engaged in reasoned decision
making and reached conclusions  supported by the record. Indeed, we
are unable to penetrate  the logic of FERC's orders to ascertain
whether FERC in  fact departed from established policy and precedent
and, if so,  whether it justified that departure. Cf. Northern States,
30  F.3d at 180 ("[T]he Commission must be able to demonstrate  that
it has 'made a reasoned decision based upon substantial  evidence in
the record.' ") (quoting Town of Norwood, 962  F.2d at 22); Hatch v.
FERC, 654 F.2d 825, 834 (D.C. Cir.  1981) ("[A]n agency must provide a
reasoned explanation for  any failure to adhere to its own


The Commission's position could be, as both FERC's appel- late counsel
and Niagara urge before this court, that the  "matching policy" is not
implicated in this case, because  Niagara does not compute its base
transmission rate on a  fully rolled-in basis. See Brief for
Respondent at 19; Brief of  Intervenor at 9. Indeed, if we stretch our
imagination, we  might even conclude that a single sentence in the
Rehearing  Order, indicating that Sithe's "matching" argument failed 
because it "incorrectly presumes that [Niagara] developed  Sithe's
transmission rates using full average costs while  Sithe's
transmission losses were based on incremental costs,"  81 F.E.R.C. at
61,302 (emphasis in original), lends some  support to the view pressed
by FERC's appellate counsel and  Niagara. And this argument is
tempting, for it avoids the  absurdities that are faced in any attempt
to employ a "match- ing" rule in this case--the notion of "matching"
is utterly  baffling when the methodologies themselves are impure, as 
with Niagara's base rate in this case. What, we wonder,  would "match"
this rate, which apparently resulted from a  negotiated compromise?


The problem, however, is that FERC did not articulate the  rationale
that appellate counsel and Niagara now propound. 


Thus, we cannot accept this articulation of the agency's  judgment. As
we explained in Hatch:


Without any explicit recognition by the Commission that  the standard
has been changed, or any attempt to forth- rightly distinguish or
outrightly reject apparently incon- sistent precedent, we are left
with no guideposts for  determining the consistency of administrative
action in  similar cases, or for accurately predicting future action 
by the Commission. The failure to admit or explain such  a basic
change in the interpretation of a statutory stan- dard to be applied
to conduct of the public undermines  the integrity of the


654 F.2d at 834-35 (footnote omitted).


The bottom line is that, if the asserted conclusion were so  obvious,
it would have been a simple task for FERC to clearly  state and
support the view that its matching rule does not, or  even should not,
apply unless the base rate is fully rolled-in.  FERC did not do this,
so we cannot rely on the theory now  advanced by its appellate
counsel. See SEC v. Chenery  Corp., 318 U.S. 80, 87 (1943). The simple
fact here is that  FERC purported to apply the "matching rule" in a
situation  in which the disputed rate methodologies concededly do not 


Alternatively, the Commission's ruling arguably could rest  on the
finding that the rate paid by Sithe to Niagara reflects  a discount
below Niagara's average system costs. See 76  F.E.R.C. at 62,458; 81
F.E.R.C. at 61,301 & n.1. Yet, FERC  did not elaborate on what
significance, if any, it ascribed to  this purported discount. Compare
76 F.E.R.C. at 62,458  (apparently relying on the existence of the
discount in deem- ing Niagara's methodology consistent with the
matching rule),  with 81 F.E.R.C. at 61,302 (describing as
"irrelevant" Sithe's  argument that it did not receive a discount from
Niagara).  For instance, FERC may have considered this discount in 
deciding that Niagara's base rate was hybrid, rather than  purely
rolled-in. Or, FERC may have accepted an inference  that Sithe pays an
overall rate--both cost and loss compo- nents--that is less than it


both costs and losses using a fully rolled-in method and, 
accordingly, that the rate is reasonable notwithstanding any 
noncompliance with the matching policy.


Niagara urges this second view, stating that "[b]y requiring 
consistent application of rolled-in or incremental methodolo- gies,
the Commission has created a short-hand means for  preventing
excessive rates." Brief of Intervenor at 9. In  other words, "[i]f the
'end result' of the combined rate is less  than the just and
reasonable rate produced by consistent  methodologies, then the rate
is ipso facto just and reason- able." Id. at 11. Lending some support
to this view, we  have, in the past, suggested that the use of a
so-called  "comparison rate"--comparing the rate charged to the rate 
that could lawfully have been charged--seems "eminently  reasonable."
City of Holyoke Gas & Elec. Dep't v. FERC,  954 F.2d 740, 742 (D.C.
Cir. 1992). FERC, however, did not  state this rationale in the orders


It is also noteworthy that the Commission itself has, in the  past,
interpreted the s 206 burden scheme to require a  customer seeking an
investigation into existing rates to "pro- vide some basis to question
the reasonableness of the overall  rate level, taking into account
changes in all cost components  and not just [the challenged
component]." Houlton Water  Co., 55 F.E.R.C. p 61,037, at 61,110
(1991); see also City of  Hamilton, Ohio and Am. Mun. Power-Ohio, Inc.
v. Ken- tucky Power Co. and Ohio Power Co., 72 F.E.R.C. p 61,158, at 
61,785-86 (1995) (dismissing, without prejudice to re-filing, a 
customer's s 206 complaint because it failed to satisfy the  threshold
of providing a basis to question the overall reason- ableness of the
utility's rates). Although it appears that  Sithe never made a proffer
to show net harm under Niagara's  existing scheme, FERC did not
articulate this as its basis for  dismissing Sithe's complaint. In
short, we cannot uphold  FERC's reliance on the discount without a
clearer explana- tion of the basis for that reliance.


We find, moreover, that the Commission's reasoning was  cryptic with
respect to its finding that Sithe receives a  discount. The Commission
offered no indication of what 


exactly its "independent analysis" entailed or what issues it 
considered. Cf. Maine Pub. Serv. Co. v. FERC, 964 F.2d 5, 9  (D.C.
Cir. 1992) (remanding in part because "the Commis- sion's analysis ...
contains no explanation of how it derived  the [relevant] figure");
City of Holyoke, 954 F.2d at 743  ("The Commission must support its
decision with enough data  to enable an adversely affected party and
by extension a  reviewing court, to understand its calculation of the
compari- son rate upon which it would rely, as well as the underlying 
assumptions."). Because the Commission in this case failed  to
disclose its calculations, we do not know whether it simply  adopted
Niagara's figures and, if so, why. We also have no  basis to confirm
FERC's assumptions--for instance, we are  left to wonder if it
considered whether Niagara's variable  costs, such as transmission
line losses, would remain constant  and, therefore, whether the
alleged discount would actually  exist over the long term. If the
Commission does, in fact,  intend to rely on the existence of a
discount to support its  disposition of this case, it must clarify its
reasoning and  support its findings in this regard.


As a final matter, we note that Sithe also raised an undue 
discrimination claim in this case, based on Niagara's method  of
prioritizing its customers for the purpose of assigning  transmission
losses. Under Niagara's system for calculating  losses, the order in
which customers are removed from the  model substantially affects the
losses for which they are  charged. Sithe argued, on rehearing and
before this court,  that the Commission failed to address this
argument. We are  not so sure. Throughout both orders, FERC made
reference  to the issue of undue discrimination, apparently rejecting 
Sithe's claim because Niagara's customers are treated "com- parably,"
and because Sithe "freely negotiated" its rates. See  81 F.E.R.C. at
61,301-02. FERC did not, however, explicitly  discuss contract dates
per se, leaving us simply to infer that a  customer with a later
contract date imposes greater losses on  Niagara's system by the sheer
fact of added volume. On  remand, FERC should clarify its ruling on
this point. In so  doing, FERC must be careful to eschew any
assumption that,  where aggregation of load increases average costs,


customer "imposes" on a system depend on the sequence in  which the
customers are added. As we noted in Town of  Norwood,


Each customer's contribution to the coincident peak load  "causes" the
costs associated with the peak, regardless of  whether that
contribution comes from the customer's  increasing, or its failing to
diminish, its historic con- sumption.


962 F.2d at 24 n.1 (emphasis added). In the meantime, we  express no
view on the merits of Sithe's undue discrimination  claim.


III. Conclusion


In sum, although the Commission's dismissal of Sithe's  complaint may
be justifiable, we cannot find "the path of  [FERC's] reasoning" in
the orders on review. Northern  States, 30 F.3d at 182. FERC did not
discuss the precedent,  if any, upon which it relied or chose not to
rely; nor did it  disclose in any meaningful way the underlying data
and  assumptions that supported its factual findings. Because we  are
unable to ascertain whether the Commission's basic con- clusion is
that Niagara complied with the matching policy,  that the matching
policy does not apply in this case, or that  for some other reason
Sithe has failed to satisfy its burden  under FPA s 206, we remand to
the agency for further  proceedings.


So ordered.