Xiox Corp. v. Public Service Com'n of State of N.Y.

• Citation: 190 A.D.2d 350,598 N.Y.S.2d 821
• Parties: , Util. L. Rep. P 26,336 In the Matter of XIOX CORPORATION, Appellant, et al., Petitioner, v. PUBLIC SERVICE COMMISSION OF the STATE OF NEW YORK et al., Respondents.
• Decision Date: 03 June 1993
• Court: New York Supreme Court Appellate Division

Page 821

598 N.Y.S.2d 821

190 A.D.2d 350, Util. L. Rep. P 26,336

In the Matter of XIOX CORPORATION, Appellant, et al., Petitioner, v. PUBLIC SERVICE COMMISSION OF the STATE OF NEW YORK et al.,

Respondents.

Supreme Court, Appellate Division,

Third Department.

June 3, 1993.

Cohen, Dax, Koenig & Wiles, P.C. (John W. Dax, of counsel), Albany, for appellant.

William J. Cowan (Jonathan D. Feinberg, of counsel), Albany, for Public Service Com'n of the State of New York, respondent.

Hiscock & Barclay (David E. Blabey, of counsel), Albany and Swidler & Berlin, Washington, DC, for Niagara Mohawk Power Corp., respondent.

Before WEISS, P.J., and YESAWICH, CREW, MAHONEY and HARVEY, JJ.

YESAWICH, Justice.

Appeal from a judgment of the Supreme Court (Kahn, J.), entered October 30, 1992 in Albany County, which, inter alia, dismissed petitioner Xiox Corporation's application, in a proceeding pursuant to CPLR article 78, to review a determination of respondent Public Service Commission denying said petitioner's request to direct respondent Niagara Mohawk Power Corporation to execute certain contracts.

The Federal Public Utility Regulatory Policies Act (hereinafter PURPA) (see, 16 USC § 824a-3) and the Public Service Law (see, Public Service Law § 66-c) require public utility companies such as respondent Niagara Mohawk Power Corporation to purchase electricity from Federally qualified alternate energy producing facilities (hereinafter qualifying facilities). Respondent Public Service Commission (hereinafter PSC) is charged with overseeing the contracting process and is statutorily bound, by both Federal and State law, to ensure that the amounts paid under such contracts are "just and reasonable" to the end-consumer of electricity (16 USC § 824a-3 [b][1]; Public Service Law § 66-c [1].

Pursuant to this authority the PSC has, at various times, established policies to aid utilities and qualifying facility developers in negotiating these mandatory power purchase contracts. Notably, the PSC generated a series of estimated "long run avoided cost" ¹ schedules (hereinafter LRACs) for use in determining appropriate purchase prices for long-term contracts. These LRACs were regularly brought up to date as projections changed due to shifts in technology and market factors. Aware that this updating process could present difficulties in deciding which LRAC schedule should be used in a particular contract, the PSC, in February 1991, established guidelines for application of LRACs to projects which were in various stages of negotiation when a revised LRAC schedule replaced a prior schedule (see, Public Serv. Commn. Opinion and Order No. 91-2 [Feb. 25, 1991] [hereinafter Opinion 91-2]. In that circumstance, Opinion 91-2 essentially provides that if negotiations between a developer and a utility are substantially completed, the utility should permit the older schedule to be used; otherwise, the newer schedule will apply.

Petitioner Xiox Corporation (hereinafter petitioner), ² an Oklahoma enterprise which proposes building two qualifying facilities in Cattaraugus County, entered into negotiations with Niagara Mohawk for the purchase of the electricity to be generated by those facilities. In July 1991, petitioner forwarded to Niagara Mohawk two contracts--signed by a representative of petitioner--which embodied the resulting agreement and which were based on the then-current 1990 LRAC schedule. Niagara Mohawk did not execute the contracts, and on September 11, 1991 the PSC, having decided that they were glaringly incorrect, withdrew the 1990 LRACs.

Petitioner applied to the PSC for a declaratory ruling that it was entitled to execution of the contracts as they were written, incorporating the 1990 LRACs. The PSC agreed that petitioner had a right to have the contracts executed, but refused to bind Niagara Mohawk to the 1990 LRACs for those contracts. Instead, it found that petitioner is only entitled to a rate based on an accurate estimate of avoided costs at the time petitioner first established a "legally enforceable obligation" (hereinafter LEO), as that term is defined by the Federal Energy Regulatory Commission regulations implementing PURPA (see, 18 CFR 292.304[d][2].

Thereafter, petitioner commenced this CPLR article 78 proceeding seeking partial annulment of the PSC's determination and enforcement of the contracts as they were initially negotiated based on the 1990 LRACs. Supreme Court confirmed the PSC's determination and petitioner appeals.

At the outset, it should be noted that petitioner is not contesting the PSC's decision to withdraw the 1990 LRACs, but rather argues that it acquired a vested right to those rates prior to their withdrawal and that the PSC is obliged to enforce that right by directing Niagara Mohawk to enter into the previously agreed-upon contracts which incorporate the withdrawn LRACs. We find no authority mandating the relief requested in the petition and, beyond that, we find that the PSC has adequately explained its decision not to order Niagara Mohawk to execute the contracts; accordingly, we affirm the judgment of Supreme Court.

The Federal law and implementing regulations accord a qualifying facility developer the prerogative of opting for a contract price based on a reasonable approximation of the LRACs at the time petitioner incurred the LEO (see, 18 CFR 292.304[d][2]. Here, the 1990 LRACs did not accurately reflect such costs; hence, the PSC rightly concluded that Federal law does not create any entitlement to the rates set forth therein. Furthermore, State law requires only that the PSC compel an electric corporation like Niagara Mohawk to enter into a contract...