268 F.3d 1105 (D.C. Cir. 2001)
Wabash Valley Power Association, Inc., Petitionerv.Federal Energy Regulatory Commission, RespondentAmerican Electric Power Company, Inc., Intervenor
No. 00-1297
United States Court of Appeals  FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued September 7, 2001Decided November 2, 2001

[Copyrighted Material Omitted]
On Petition for Review of Orders of the Federal Energy Regulatory Commission
James T. Malysiak argued the cause for petitioner.  With  him on the briefs was Lee A. Freeman, Jr.
Andrew K. Soto, Attorney, Federal Energy Regulatory  Commission, argued the cause for respondent.  With him on  the brief was Susan J. Court, Associate Solicitor.
J. A. Bouknight, Jr. argued the cause for intervenor.  With  him on the brief were Douglas G. Green and Samuel T.  Perkins.  Shannen W. Coffin entered an appearance.
Before:  Ginsburg, Chief Judge, Edwards and Sentelle,  Circuit Judges.
Opinion for the Court filed by Circuit Judge Edwards.
Harry T. Edwards, Circuit Judge:


1
American Electric Power Co., Inc.  ("AEP") and Central and South West Corp. ("CSW"), two  large regional utility holding companies, jointly petitioned the  Federal Energy Regulatory Commission ("FERC" or "Commission") for merger approval, as required by § 203 of the  Federal Power Act, 16 U.S.C. § 824b(a) (1994).  When presented with a merger or acquisition request, FERC "shall  approve" the request if the merger or acquisition "will be  consistent with the public interest."  Id.  After lengthy review, FERC conditionally approved the AEP-CSW merger  and required the combined company, referred to as New  AEP, to divest certain generation assets and share transmission capacity information.  See Am. Elec. Power Co. & Cent.  & S. W. Corp., 90 F.E.R.C. p 61,242 (Mar. 15, 2000).  Wabash  Valley Power Association, Inc. ("Wabash"), an Indiana competitor and customer of AEP, petitions for review.


2
Wabash contends that FERC's decision was both procedurally and substantively defective.  Many of Wabash's claims  have been forfeited, however, because they were not properly  raised with FERC in the first instance.  Therefore, these  claims may not be considered by the court.  And we find no  merit in the claims that are properly before this court.


3
Because AEP and CSW sought merger approval in the  midst of sweeping regulatory changes in the electric industry,  FERC chose to impose "interim" mitigation measures to  limit New AEP's market power.  Wabash contends that  FERC's approach is improper under the Federal Power Act,  because the interim measures are deficient.  We disagree. On the record at hand, we find that FERC acted reasonably  in adopting two stages of restrictions to limit New AEP's  market power.  Both stages of restrictions adequately limit New AEP's ability to strategically manipulate electricity generation to cause transmission bottlenecks.  We also reject  Wabash's claims that FERC's merger approval should be  overturned because it is inconsistent with subsequent staff  statements and because it did not fully eliminate rate pancaking.  These claims have no bearing on the question of whether FERC's approval of the merger was arbitrary and capricious.  We therefore deny Wabash's petition for review.

I. Background

4
AEP and CSW sought to merge in the midst of a seachange in the regulations governing the electricity industry. Because many of the issues raised by petitioner relate to the  application of these new regulations, we begin with a brief  summary of the current regulatory landscape and then move  to the procedural history of this case.

A. Current Regulations

5
By amending portions of the Federal Power Act of 1935,  the Energy Policy Act of 1992 authorized FERC to order  utilities to transmit other sellers' power over their transmission lines on a case-by-case basis.  See Pub. L. No. 102-486,  106 Stat. 2776, 2915-16 (1992) (codified at 16 U.S.C. §§ 824jk);  Transmission Access Policy Study Group v. FERC, 225  F.3d 667 (D.C. Cir. 2000) (hereinafter Transmission Access)  (discussing history), cert. granted sub nom. New York v.  FERC, 121 S. Ct. 1185 (2001).  Finding that utilities would  use their market power to deny transmission access to competing generation sources, FERC subsequently used its statutory authority, see 16 U.S.C. §§ 824d(b), 824e(a), to require  utilities to provide open access to their transmission lines in a  nondiscriminatory fashion.  See Promoting Wholesale Competition Through Open Access Non-Discriminatory Transmission Services by Public Utilities, Order No. 888, 61 Fed.  Reg. 21,540 (May 10, 1996), clarified, 76 F.E.R.C. p 61,009  (July 2, 1996) and 61 Fed. Reg. 51,696 (Oct. 3, 1996), on reh'g,  Order No. 888-A, 62 Fed. Reg. 12,274 (Mar. 14, 1997), clarified, 79 F.E.R.C. p 61,182 (May 16, 1997), on reh'g, Order No.  888-B, 62 Fed. Reg. 64,688 (Dec. 9, 1997), on reh'g, Order No. 888-C, 82 F.E.R.C. p 61,046 (Jan. 20, 1998), aff'd, Transmission Access, 225 F.3d 667, cert. granted sub nom. New York,  121 S. Ct. 1185.  Order No. 888, among other things, set forth  the framework for creating Independent System Operators  ("ISOs"), independent companies that manage transmission  facilities owned by utilities.  61 Fed. Reg. at 21,596.  ISOs  have no financial stake in any power market participant, have  the ability to halt generation causing transmission system  constraints, and must provide real-time transmission information to market participants.  Id.


6
At the same time, FERC also issued Order No. 889 which  required all owners and operators of electricity transmission  systems to participate in an Open Access Same-time Information System, or OASIS.  Open Access Same-Time Information System and Standards of Conduct, Order No. 889, 61  Fed. Reg. 21,737 (May 10, 1996), on reh'g, Order No. 889-A,  62 Fed. Reg. 12,484 (Mar. 14, 1997), on reh'g, Order No. 889B, 62 Fed. Reg. 64,715 (Dec. 9, 1997), aff'd, Transmission  Access, 225 F.3d 667, cert. granted sub nom. New York, 121  S. Ct. 1185.  One of the main functions of an OASIS is to  calculate Available Transmission Capacity ("ATC"), the difference between a transmission system's total capacity and  already-committed capacity.  Order No. 889, 61 Fed. Reg. at  21,749.  Because ATC often limits where electricity can be  sold, this information allows generators to determine additional potential markets.


7
In 1999, FERC found that the changes brought by Orders  Nos. 888 and 889 had imposed significant strain on "traditional means of grid management" and that "continued discrimination in the provision of transmission services by vertically  integrated utilities may also be impeding fully competitive  electricity markets."  Regional Transmission Organizations; Notice of Proposed Rulemaking, 64 Fed. Reg. 31,390, at  31,391 (June 10, 1999).  Although Orders Nos. 888 and 889  reduced overt discrimination, transmission-owning utilities resorted to "more subtle means to frustrate their marketing  competitors and favor their own marketing interests."  Id. at  31,402.  As a consequence, the Orders were ineffective in  completely removing transmission discrimination.  Functional limitations arising from the relatively small size of the ISOs  also limited their ability to provide essential information  accurately, such as ATC:  "it is not possible to calculate  accurately the transmission capability of one system without  knowing the flows scheduled by all other interconnected  transmission providers in the region."  Id. at 31,403.


8
In response to the shortcomings of Orders Nos. 888 and  889, FERC issued Order No. 2000, which established the  framework for Regional Transmission Organizations, or  RTOs.  See Regional Transmission Organizations, Order  No. 2000, 65 Fed. Reg. 810 (Jan. 6, 2000), on reh'g, Order No.  2000-A, 65 Fed. Reg. 12,088 (Mar. 8, 2000), petitions for  review pending sub nom. Public Utility District No. 1 of  Snohomish County, Washington v. FERC, No. 00-1174 (D.C.  Cir. argued Oct. 17, 2001).  RTOs build upon many ISO  features and have four main characteristics:  independence,  sufficient size and regional scope, operational authority for all  transmission facilities under their control, and exclusive authority for maintaining short term grid reliability.  65 Fed.  Reg. 810, at 842-75.  FERC requires RTOs to be larger,  more independent, and exercise more sophisticated control  over the transmission system than ISOs.  In 2001, FERC  further clarified the scope requirements of RTOs, forcing  several parties into mediation with an ultimate goal of creating four RTOs one for the Northeast, Southeast, Midwest,  and West.  See, e.g., Order Provisionally Granting RTO  Status, 96 F.E.R.C. p 61,061 (July 12, 2001).

B. Procedural History

9
AEP and CSW jointly applied to FERC for merger approval on April 30, 1998.  At that time, AEP, through whollyowned subsidiaries, provided power to three million customers in Indiana, Kentucky, Michigan, Ohio, Tennessee, Virginia, and West Virginia with over 23,000 megawatts ("MW") of  generating capacity and 22,000 miles of transmission lines. Am. Elec. Power Co., 90 F.E.R.C. p 61,242, at 61,776.  CSW,  also through wholly-owned subsidiaries, served 1.7 million  customers in Arkansas, Louisiana, Oklahoma, and Texas with  over 14,000 MW of generating capacity and 16,000 miles of transmission lines.  See Joint Application of Am. Elec. Power  Co., Inc. & Cent. & S. W. Corp. (Apr. 30, 1998), reprinted in  Joint Appendix ("J.A.") 134, 165 (hereinafter "Joint Application").


10
To determine whether a proposed merger meets the Federal Power Act's § 203 public interest standard, FERC requires applicants to conduct a competitive analysis screen,  referred to as an Appendix A analysis, using the framework  established by the Department of Justice/Federal Trade  Commission Merger Guidelines.  See Inquiry Concerning the  Commission's Merger Policy Under the Federal Power Act; Policy Statement, 61 Fed. Reg. 68,595, at 68,606 (Dec. 30,  1996).  The Appendix A analysis requires applicants to:


11
1) identify the relevant products;


12
2) identify customers who may be affected by the merger;


13
3) identify potential competing suppliers to each identified customer;  and


14
4) analyze market concentration, using the HerfindahlHirschman Index ("HHI") before and after the merger.


15
Id. at 68,607-08.


16
In their original application, AEP and CSW proposed connecting their two territories using a 250 MW east to west  transmission path, secured by contract from a third party.  Joint Application, reprinted in J.A. 138.  Because this connection increased market concentration in several western  markets to a level above that allowed by Appendix A, AEP  and CSW sought to mitigate these impermissible HHI levels  by committing to the sale of 320 MW in the former territory  of CSW.  Joint Application, reprinted in J.A. 145.  AEP and  CSW also suggested other restrictions, including participation  in an ISO and the waiver of certain priority transmission  rights.  Joint Application, reprinted in J.A. 150.


17
FERC found that the "Applicants' own analysis shows that  the proposed merger fails the screen thresholds in several  markets, ... there are problems concerning the assumptions and data used in the Applicants' screen analysis, ... Applicants' analysis may not accurately define relevant geographic markets."  Order Accepting for Filing and Suspending Proposed Tariffs and Agreements, Consolidating Dockets, and Establishing Hearing Procedures, 85 F.E.R.C.  p 61,201, at 61,818-19 (Nov. 10, 1998).  These factors led  FERC to set the matter for a hearing to determine "the  effect of the merger on competition."  Id. at 61,809.


18
Over 30 parties filed objections to the merger, though most  withdrew prior to the hearing.  FERC trial staff and the  Applicants entered into two stipulations, one on May 24, 1999,  and the other on July 13, 1999, resolving most of the issues in  contention at the hearing.  The three-week hearing finished  on July 19, 1999, and the presiding Administrative Law Judge  ("ALJ") issued an initial order on November 23, 1999.  The  ALJ's initial order imposed no conditions on the merger,  other than those stipulated by the Applicants.  See Am. Elec.  Power Co., 90 F.E.R.C. p 61,242, at 61,776.  On May 15, 2000,  FERC approved the merger, but with significant additional  conditions.  Id. at 61,799-800.


19
The Applicants had agreed to divest 550 MW of power,  rather than the initially proposed 320 MW, from the West  Region.  Instead of divesting entire plants, the Applicants  proposed selling minority interests in certain generating facilities, leaving New AEP with operational control of generation. FERC found the amount of capacity to be divested acceptable  but that the divestiture proposal was an ineffective remedy  because the Applicants retained operational control of the  generation.  This operational control could have given New  AEP "the ability to withhold capacity from the market and  thus affect electricity prices."  Id. at 61,792.  FERC therefore required New AEP to "divest their entire ownership  interest" in the facilities at issue.  Id.  Because of the time  necessary to divest this capacity, the Applicants proposed  forced interim power sales equivalent to the to-be-divested  capacity.  FERC accepted this proposal, recognizing that the  forced sales would prevent the exercise of market power by  withholding output, but required the sales to begin immediately rather than shortly after merger, as the Applicants had  proposed.  Id. at 61,794.


20
FERC also addressed market power concerns arising out  of the consolidation of generation and transmission.  FERC  recognized the potential for New AEP to exercise vertical  market power, where one entity could affect the availability of  transmission by controlling the generation of electricity, and  found "that Applicants failed to show that the proposed  merger will not adversely affect competition as a result of  combining their generation and transmission."  Id. at 61,786. To remedy this market power, FERC imposed several requirements.  First, the Applicants must "transfer operational  control of their transmission facilities to a Commissionapproved RTO."  Id. at 61,788.  Second, because, under  FERC's newly established framework, RTOs will not exist  prior to December 15, 2001, see Order No. 2000, 65 Fed. Reg.  at 812, FERC imposed interim mitigation measures in the  East Region emulating many of the anticipated functions of  an RTO.  Am. Elec. Power Co., 90 F.E.R.C. p 61,242 at  61,789.  Thus, in the East Region, New AEP must have ATC  calculated and market monitoring conducted by an independent party.  This third party would review generation dispatch information, steps taken to relieve transmission constraints, and the volume and price of energy after relief steps  were taken.  FERC stated, "[w]e believe that such data are  necessary to determine whether operations or wholesale  transactions involving Applicants are unduly discriminatory  or preferential or show evidence of the exercise of market  power."  Id.  Third, although FERC did not expressly identify the consequences of any transgressions of these requirements, the Commission stated that it would use its "authority  under Section 203(b) of the [Federal Power Act] to address  any concerns, and order further procedures as appropriate." Id. at 61,789-90 (footnote omitted).


21
Wabash filed a Request for Rehearing on April 14, 2000,  challenging FERC's order approving the merger.  The principal points raised by Wabash in its petition for rehearing  were, as follows:


22
. The Commission identified serious problems with the merger, expressly recognizing that the merger increased Applicants' ability to foreclose competitors by strategic manipulation of generation, but approved the merger without conditioning it in a manner that even purports to address this significant threat to the public interest.


23
. The Commission recognized, but failed to address the potent arguments of Wabash Valley ... that Applicants' participation in the Alliance RTO, even if that RTO were to satisfy the Commission's general requirements for FERC approval, would be insufficient to mitigate the Applicants' merger enhanced market power.


24
. The Commission erred by failing to insist upon implementation of Applicants' RTO commitment before consummation of the merger.


25
. The Commission failed even to recognize, much less address, intervenor demonstrations that the merger would seriously adversely affect transmission availability to others.


26
. The Commission accepted as "ratepayer protection" provisions wholly inadequate to hold ratepayers harmless from the merger.


27
Request for Rehearing, reprinted in J.A. 370, 373.  FERC  denied the request for rehearing on May 15, 2000, 91  F.E.R.C. p 61,129, and Wabash petitioned this court for review on July 7, 2000.

II. Analysis
A. Jurisdiction and Ripeness

28
FERC initially argues that judicial review is precluded in  this case, because Wabash is not an aggrieved party, the case  is not ripe, and Wabash failed to raise many of its arguments  below, as required by § 313 of the Federal Power Act.  We  conclude that Wabash is aggrieved and the case is ripe, but  that many of Wabash's claims have been forfeited because they were not properly raised with FERC in the first instance.


29
1. Standing The Federal Power Act provides that "[a]ny party to a  proceeding ... aggrieved by an order issued by the Commission in such proceeding may obtain a review of such order" by  filing suit within 60 days.  16 U.S.C. § 825l(b).  Under  FERC regulations, Wabash, as an intervenor, was a party to  the AEP-CSW merger application proceeding.  See 18 C.F.R.  § 385.214 (1999).  Parties are "aggrieved" under the Federal  Power Act if they satisfy both the constitutional and prudential requirements for standing.  Louisiana Energy & Power  Auth. v. FERC, 141 F.3d 364, 366 (D.C. Cir. 1998) (quoting  Bennett v. Spear, 520 U.S. 154, 167 (1997)).  In this case, as a  competitor crying foul, Wabash satisfies prudential standing  requirements.  Louisiana Energy, 141 F.3d at 366-67 (stating  "as a competitor and customer [petitioner] comes within the  zone of interests of the Federal Power Act and hence has  prudential standing").


30
FERC nonetheless argues that Wabash fails to satisfy the  standing requirements imposed by Article III of the Constitution.


31
This "irreducible constitutional minimum" of standing requires:  (1) that the plaintiff have suffered an "injury in fact"--an invasion of a judicially cognizable interest which is (a) concrete and particularized and (b) actual or imminent, not conjectural or hypothetical;  (2) that there be a causal connection between the injury and the conduct complained of--the injury must be fairly traceable to the challenged action of the defendant, and not the result of the independent action of some third party not before the court;  and (3) that it be likely, as opposed to merely speculative, that the injury will be redressed by a favorable decision.


32
Bennett, 520 U.S. at 167 (citing Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61 (1992)).  FERC contends in particular that Wabash lacks standing because the harm that it alleges is based only on injuries that might arise from New  AEP's exercise of market power in the future.  In other  words, according to FERC, the injuries asserted by Wabash  are merely speculative.  We disagree.


33
Parties suffer cognizable injury under Article III when an  agency "lift[s] regulatory restrictions on their competitors or  otherwise allow[s] increased competition."  Louisiana Energy, 141 F.3d at 367.  Wabash asserts that it will be injured by  New AEP's market power which FERC has allowed by  approving a merger with inadequate conditions.  This claim  satisfies the "injury" prong of Article III standing.  See  Associated Gas Distribs. v. FERC, 899 F.2d 1250, 1259 (D.C.  Cir. 1990) (finding standing when "the challenged action  authorizes allegedly illegal transactions that have the clear  and immediate potential to compete with the petitioners' own  sales"). Wabash likewise meets the remaining two prongs of  the constitutional standing inquiry.  Its competitive injury is  fairly traceable to FERC's decision to approve the merger. See America's Cmty. Bankers v. FDIC, 200 F.3d 822, 827  (D.C. Cir. 2000).  And a favorable decision by this court could  result in a remand to FERC which, in turn, might impose  conditions that more severely limit New AEP's exercise of  market power.  This possibility, even though far from certain,  satisfies the redressability requirement.  Northeast Energy  Assocs. v. FERC, 158 F.3d 150, 154 (D.C. Cir. 1998).  Wabash, therefore, has Article III standing to seek judicial  review.


34
2. Ripeness Ripeness requires the evaluation of "the fitness of the  issues for judicial decision and the hardship to the parties of  withholding court consideration."  Whitman v. Am. Trucking  Ass'ns, Inc., 121 S. Ct. 903, 915 (2001) (quoting Abbott Labs.  v. Gardner, 387 U.S. 136, 149 (1967)).  A case is ripe "when it  presents a concrete legal dispute and no further factual  development is essential to clarify the issues and there is no  doubt whatever that the challenged agency practice has crystallized sufficiently for purposes of judicial review."  Rio  Grande Pipeline Co. v FERC, 178 F.3d 533, 540 (D.C. Cir. 1999) (citations and internal quotation marks omitted).  This  dispute meets these criteria.


35
Wabash seeks review of a specific agency decision to allow  the merger of AEP and CSW.  FERC made its decision after  a lengthy hearing before an ALJ in which Wabash and  numerous other intervenors put on extensive evidence challenging the merger.  It does not matter that the merger  occurs at a time when the regulatory regime is changing. What matters is that the decision approving the merger is  final and the standards for assessing the Commission's judgment are clear and easy to apply.


36
3. Wabash's Failure to Present Certain Claims to FERC in the First Instance


37
Petitioners seeking review of a FERC order must first  "petition for rehearing of those orders and must themselves  raise in that petition all of the objections urged on appeal." Platte River Whooping Crane v. FERC, 876 F.2d 109, 113  (D.C. Cir. 1989) (citing 16 U.S.C. § 825l(b) and ASARCO, Inc.  v. FERC, 777 F.2d 764, 774 (D.C. Cir. 1985)).  Section 825l(b)  commands that "[n]o objection to the order of the Commission shall be considered ... [unless] urged before the Commission in the application for rehearing."  16 U.S.C.  § 825l(b).  This is an unusually strict requirement that will  not be ignored by the courts.  Asarco, 777 F.2d at 774.  And  "[n]either FERC nor this court has authority to waive these  statutory requirements."  Platte River Whooping Crane, 876  F.2d at 113.  Therefore, the failure of FERC to challenge a  petitioner's objection on the ground that it was not raised  below does not remove this court's independent obligation to  determine whether, in fact, the argument is properly before  us.


38
Many of the objections raised by Wabash in its petition for  review were not raised in the first instance in an application  for rehearing to FERC.  The court therefore has no jurisdiction to consider these objections.  In particular, Wabash did  not seek rehearing on its claims that FERC failed to make  essential findings of fact, adequately explain its decision,  define the relevant markets, account for potential competition between AEP and CSW, and defer approval of all mergers  until RTO performance could be evaluated.


39
There is one claim that has been raised by Wabash that  may be considered by the court even though it was not raised  below.  Wabash contends that FERC's merger was inconsistent with a subsequently released staff report.  Though not  raised in the application for rehearing by Wabash, this argument may be properly considered by this court because the  Federal Power Act allows consideration of arguments raised  for the first time on appeal if "there is reasonable ground for  failure" to raise objections in the request for rehearing.  16  U.S.C. § 825l(b).  Because this report was issued on November 1, 2000, several months after Wabash's rehearing request,  this court has jurisdiction to review this challenge by Wabash.


40
Finally, there is one argument raised by Wabash on appeal  that is hard to characterize.  In its petition for rehearing to  FERC, Wabash argued that, although the Commission had  "expressly recogniz[ed] that the merger increased Applicants'  ability to foreclose competitors by strategic manipulation of  generation," the merger conditions did not "address this  significant threat to the public interest."  Request for Rehearing, reprinted in J.A. 374.  On appeal, Wabash argues that  "FERC completely ignored ... crucial evidence" of New  AEP's "ability to manipulate 'imperfections' in the pertinent  markets to their advantage."  Petitioner's Br. at 37.  How  one assesses these two claims depends upon how one construes the reference to "crucial evidence."  Wabash's two  claims are not inconsistent if Wabash's argument to the court  is meant to claim that FERC failed adequately to address a  recognized threat to the public interest because it failed to  consider crucial evidence.  The claims are inconsistent, however, if Wabash's argument to this court is meant to say that  FERC completely ignored the fact that the merger increased  Applicants' ability to foreclose competitors by strategic manipulation of generation.  We give Wabash the benefit of the  doubt and accept the issue as raised, because the first construction seems more plausible.  We must therefore address  on the merits the staff report claim, the crucial evidence claim, and two other claims Wabash raised in its petition for  rehearing.

B. Standard of review

41
We review FERC's order under the familiar arbitrary and  capricious standard.  Sithe/Independence Power Partners,  L.P. v. FERC, 165 F.3d 944, 948 (D.C. Cir. 1999).  Under  § 203 of the Federal Power Act "FERC may approve a  merger only if it 'will be consistent with the public interest.' " Envtl. Action, Inc. v. FERC, 939 F.2d 1057, 1061 (D.C. Cir.  1991) (quoting 16 U.S.C. § 824b(a)).  "Public interest" encompasses "both the preservation of economic competition, as  expressed in the antitrust laws of general application, and the  various policies reflected in the statutes specific to energy  regulation."  Envtl. Action, 939 F.2d at 1061 (citations omitted).  The principal public interest reflected in the Federal  Power Act is "to encourage the orderly development of  plentiful supplies of electricity and natural gas at reasonable  prices."  NAACP v. FPC, 425 U.S. 662, 669-70 (1976) (footnote omitted).

C. Wabash's claims

42
Wabash claims that FERC's approval was arbitrary and  capricious because:  FERC improperly conditioned the merger on the future participation of New AEP in an RTO; FERC completely ignored crucial evidence of New AEP's  ability to manipulate imperfections in the pertinent markets  to their advantage;  the merger is inconsistent with a recent  FERC staff report;  and the merger does nothing to eliminate  rate pancaking, a type of rate inefficiency.  These claims all  fail.


43
First FERC did not condition the merger solely on future  participation in an RTO.  Rather, FERC also required interim measures that emulated the information-sharing features  of an RTO to limit New AEP's ability to exercise its market  power.  See Am. Elec. Power Co., 90 F.E.R.C. p 62,171, at  61,789.  These measures market monitoring and calculation  of ATC by independent parties do not have any enforcement mechanisms attached.  FERC can use its regulatory powers, however, to penalize noncompliance.  Under § 205 of  the Federal Power Act, FERC reviews all electricity transmission and sales to ensure that the rates are "just and  reasonable."  16 U.S.C. § 824d(a).  FERC, in some circumstances, allows electric utilities to engage in market-based  pricing in lieu of the traditional cost plus reasonable rate of  return rate calculation.  See, e.g., Cajun Elec. Power Coop.,  Inc. v. FERC, 28 F.3d 173, 176. (D.C. Cir. 1994).  If, however,  FERC finds that a rate charged is "unjust, unreasonable,  unduly discriminatory or preferential, the Commission shall  determine the just and reasonable rate ... and shall fix the  same by order."  16 U.S.C. § 824e(a).  Thus, if the information disclosed by New AEP under the interim mitigation  measures indicates a violation of the antitrust laws or the  Federal Power Act, New AEP faces antitrust liability and the  possibility of FERC setting its rates.  These safeguards  render the requirement of disclosure effective to limit New  AEP's exercise of strategic behavior to circumvent FERC's  merger conditions.


44
Wabash is also wrong in its claim that FERC completely  ignored crucial evidence of New AEP's ability to manipulate  imperfections in the pertinent markets to their advantage. As noted above, Wabash's petition for rehearing to FERC  expressly acknowledges that the Commission did not ignore  the problem of the potential for market manipulation.  Therefore, the only question here is whether FERC's action was  arbitrary and capricious for lack of consideration of some  "crucial evidence" related to the issue.  The "crucial evidence" to which Wabash refers is "the merging parties' intent  to improperly exert their market power."  Petitioner's Br. at  37.  This is a specious claim.  First, it is clear that FERC  understood that it was too easy for parties to engage in  market manipulation under the Orders that preceded Order  No. 2000 indeed, that was a principal reason for the  adoption of Order No. 2000.  Second, FERC addressed the  problem of possible manipulations by imposing conditions on  the merger.  It is unclear what other "crucial evidence" was  before FERC that warranted consideration.  Maybe Wabash  means to suggest that officials in charge of New AEP had  devious, albeit unannounced, intentions to defy the law without regard to FERC's regulatory requirements.  If so, this  surely is no basis upon which to grant the petition for review. If New AEP acts in violation of the law in the future it will  face regulatory sanctions.


45
Wabash next claims that FERC's decision does nothing to  eliminate rate pancaking.  Pancaked rates arise when a  transmission travels over the transmission systems of more  than one system that each charge separate fees, much like  the total tolls paid when driving on a route that includes both  the Pennsylvania and New Jersey turnpikes.  Though the  mere existence of different owners of different parts of a  transmission system does not necessarily lead to inefficient  transmission, FERC found that one of the main benefits  offered by RTOs would be "increased efficiency through  regional transmission pricing and the elimination of rate  pancaking."  Order No. 2000, 65 Fed. Reg. at 829.  Whether  the AEP-CSW merger eliminated rate pancaking was not a  discrete issue under consideration by FERC, because § 203  of the Federal Power Act merely mandates the determination  of whether the merger is consistent with the public interest. By forcing New AEP to transfer its transmission assets to a  RTO, FERC, in fact, significantly reduced rate pancaking. Absent a mechanism creating national transmission pricing, it  is hard to understand how any merger could, by itself,  eliminate all rate pancaking.  In any event, that other  changes to FERC policy might also improve the public interest is simply irrelevant to the validity of the merger decision. And it certainly was not arbitrary and capricious for FERC  to find that a merger that did not fully eliminate rate  pancaking was nonetheless in the public interest.


46
Finally, Wabash claims that the decision to approve the  merger is arbitrary and capricious because it is inconsistent  with a staff report produced by FERC on November 1, 2000. This claim fails under the holding of Union Pac. Fuels, Inc. v  FERC, 129 F.3d 157, 164 (D.C. Cir. 1997).  Only when  "FERC has formally altered its policy after issuing an order  challenged before us" does this court consider the change. Id.  A staff report following the issuance of a Commission  order is not a superceding order;  therefore, the issuance of such a report "play[s] no role in our determination of the  order['s] legality."  Id.

III. Conclusion

47
For the foregoing reasons, Wabash's petition for review is  denied.


48
So ordered.

