Southern Co. Services, Inc. v. F.E.R.C.

• Decision Date: 30 December 2003
• Docket Number: No. 02-1373.,02-1373.
• Citation: 353 F.3d 29
• Parties: SOUTHERN COMPANY SERVICES, INC., Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent. Duke Energy Murray, LLC and Tenaska Alabama Partners, L.P., Intervenors.
• Court: U.S. Court of Appeals — District of Columbia Circuit

353 F.3d 29

SOUTHERN COMPANY SERVICES, INC., Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent.

Duke Energy Murray, LLC and Tenaska Alabama Partners, L.P., Intervenors.

No. 02-1373.

United States Court of Appeals, District of Columbia Circuit.

Argued November 25, 2003.

Decided December 30, 2003.

Petition for Review of Orders of the Federal Energy Regulatory Commission.

Andrew W. Tunnell argued the cause for petitioner. With him on the briefs were Dan H. McCrary, Jennifer M. Buettner, and Kevin A. McNamee.

Laura J. Vallance, Attorney, Federal Energy Regulatory Commission, argued the cause for respondent. With her on the brief were Cynthia A. Marlette, General Counsel, and Dennis Lane, Solicitor.

Ashley C. Parrish argued the cause for intervenors. With him on the brief were Gretchen Schott, Larry F. Eisenstat, M. Eric Eversole, and Neil L. Levy.

Before: GINSBURG, Chief Judge, and EDWARDS and TATEL, Circuit Judges.

Opinion for the Court filed by Circuit Judge EDWARDS.

HARRY T. EDWARDS, Circuit Judge:

On February 19, 2002, Southern Company Services, Inc. ("Southern") submitted an informational filing to the Federal Energy Regulatory Commission ("FERC" or "Commission") on behalf of a group of public utilities. The filing notified the Commission of Southern's intention to seek recovery of line outage costs incurred to allow generators operated by Tenaska Alabama Partners, L.P. ("Tenaska"), and Duke Murray North America, LLC ("Duke"), to interconnect with Southern's transmission system. The claim for costs was based on Southern's interconnection agreements with Tenaska and Duke. The Commission rejected the filing, holding that the interconnection agreements did not specifically authorize recovery for outage costs, and that, even if the agreements did authorize such recovery, Southern had failed to show that the outages were attributable to the interconnection of the generators. Southern then sought rehearing, but the request was denied by FERC.

Southern now petitions this court for review of FERC's orders. We deny the petition for review solely on the ground that the disputed interconnection agreements do not authorize recovery of outage costs.

I. BACKGROUND

Southern is the services company and agent for the Alabama Power Company ("Alabama Power") and the Georgia Power Company ("Georgia Power"), as well as other public utilities. The utilities own and operate a large, high-voltage electric transmission system serving Alabama, Georgia, Florida, and Mississippi. Tenaska and Duke each own and operate independent electric generating facilities that provide electric power to the nation's transmission grid. Tenaska's facility is in Alabama, and Duke's facility is in Georgia.

In order to provide electric power, generating facilities interconnect with an electric transmission system. To achieve this end, Tenaska entered into an interconnection agreement with Alabama Power on January 12, 2000, and Duke entered into an interconnection agreement with Georgia Power on April 23, 2001. Section 5.2.1 of the Tenaska agreement provides that

Tenaska shall be responsible for, and shall reimburse Alabama Power for, all costs and expenses incurred by or on behalf of Alabama Power in connection with any planning, design, construction, installation, testing, inspection, ownership, operation and maintenance of the Interconnection Facilities.

Interconnection Agreement By and Between Tenaska Alabama Partners, L.P. and Alabama Power Company § 5.2.1, Appendix ("App.") 11 ("Tenaska Agreement"). Section 5.2.1 of the Duke agreement states that,

[t]o the extent consistent with FERC policy, Generator shall be responsible for, and shall reimburse Georgia Power for, all costs and expenses reasonably incurred by or on behalf of Georgia Power in connection with the planning, design, construction, installation, testing, inspection, ownership, operation and maintenance of all or any part of the Interconnection Facilities during the Term of this Agreement.

Interconnection Agreement By and Between Duke Energy Murray, LLC and Georgia Power Company § 5.2.1, App. 58 ("Duke Agreement"). FERC accepted these agreements for filing as rate schedules governing the interconnection of Tenaska's and Duke's generating facilities with Southern's transmission system. See Alabama Power Company Rate Schedule Designations, Docket No. ER00-1608-000, App. 38; Southern Operating Companies Rate Schedule Designations, Docket Nos. ER01-2164-000 & ER01-2166-000, App. 98.

At issue in this case are "outage costs" incurred when Southern temporarily removes transmission lines in order to interconnect a generator. Transmission outages result from a number of causes, including generator interconnections, routine maintenance, load problems, or inclement weather conditions. In this case, the disputed outages were planned to accommodate the interconnection of the Tenaska and Duke generators.

Southern scheduled a line outage from October 15, 2001 through November 4, 2001 to facilitate Tenaska's interconnection. Letter from Terry J. Coggins, Interconnection Project Manager, Southern Company Services, Inc. to Nicholas Borman, Tenaska Alabama Partners, L.P. of 10/11/01, App. 11920. And Southern scheduled a line outage from January 2, 2002 through January 20, 2002, to facilitate Duke's interconnection. Letter from John E. Lucas, Transmission Services Manager, Southern Company Services, Inc. to Tom Littleton, Manager, Origination, Duke Energy North America, LLC of 12/19/01, App. 122-23. In letters confirming the arrangements for the generator interconnections, Southern made it clear that it expected to be reimbursed by Tenaska and Duke pursuant to § 5.2.1 of their respective interconnection agreements for the costs associated with these scheduled outages. See id.; see also Letter from Coggins to Borman of 10/11/01, App. 119. It is also undisputed that Tenaska and Duke agreed to interconnect their facilities to Southern's system during these scheduled outages. And there is nothing in the record to indicate that the contested outages were caused by load or weather problems, or that routine maintenance was scheduled during the outages.

On February 19, 2002, Southern submitted an informational filing to FERC notifying the Commission that it intended to seek recovery from Tenaska and Duke under the terms of the interconnection agreements for line outage costs incurred when the generators interconnected their facilities with Southern's transmission system. Southern identified three specific categories of costs associated with the interconnections: "(1) costs associated with procuring power to compensate for additional line losses caused by the outage; (2) refunds to transmission customers associated with conditional firm service; and (3) redispatch costs caused by the outage." Informational Filing Regarding Southern Companies' Recovery of Transmission Line Outage Costs Under Their Interconnection Agreements with Tenaska Alabama Partners, L.P. and Duke Energy North America, LLC at 2, App. 100 ("Informational Filing"), reported at 67 Fed. Reg. 9729 (F.E.R.C.2002). Southern sought to recover costs in the first two categories.

The informational filing noted that Southern did "not at this time intend to assign any line outage costs to interconnection customers that schedule to interconnect their facilities during times when the affected line(s) was already scheduled to be out of service for maintenance." Informational Filing at 3, App. 101. Southern's filing included an affidavit given by James M. Howell, Jr., its Principal Engineer in Bulk Power Operations, detailing the methodology for determining and assigning responsibility for the outage costs. The affidavit explains that,

during the line outage, Southern Companies use a standard industry state estimator modeling application to create a load flow model of the transmission system.... Southern Companies use a standard industry power flow to capture, within each load flow model, the flows that would have occurred if the line had been in service for the time period of the load flow model. The difference between the line-out case and the line-in case represents the additional losses attributable to the interconnection customer's scheduled line outage.

Affidavit of James M. Howell, Jr. at 3, App. 111.

Tenaska filed a protest to Southern's informational filing, and Duke filed a motion to intervene and protest. They each argued that the interconnection agreements did not authorize recovery of outage costs, and that such recovery was not supported by FERC precedent. See Protest of Tenaska Alabama Partners, L.P., App. 133-52; Motion to Intervene of Duke Energy North America, LLC and Protest of Duke Energy Murray, LLC, App. 153-67.

On April 10, 2002, FERC rejected Southern's informational filing. FERC held that "Southern has not shown that the Interconnection Agreements at issue here allow recovery of these costs." Southern Co. Servs. Inc., 99 F.E.R.C. ¶ 61,031, at 61,116, 2002 WL 598862 (2002) ("Order Rejecting Filing"). In the alternative, the Commission held that,

[w]hile Southern may be able to determine the losses associated with a line outage, it has not demonstrated that losses occurring during the outages were solely attributable to Duke Murray and Tenaska. Southern has not shown that the increase in losses are not the result of other conditions, such as load[,] weather conditions, or other outages in the area.

Id. at 61,117.

Southern requested rehearing, which the Commission denied. The Commission explained:

14. The Commission rejects Southern's argument that interconnection agreements here provide for recovery of the costs at issue because of the "all costs and expenses" language in § 5.2.1. We do not read that language as allowing Southern to charge the generators for costs that Southern has not shown to be appropriately allocated to them. Transmission outages occur in the normal course of business, not...