Dayton Power and Light Co. v. F.E.R.C.

• Decision Date: 05 April 1988
• Docket Number: No. 87-3173,87-3173
• Citation: 843 F.2d 947
• Parties: The DAYTON POWER AND LIGHT COMPANY, Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent, Buckeye Power, Inc.; American Municipal Power-Ohio, Inc.; and City of St. Marys, Ohio, Intervenors for Respondent.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 947

843 F.2d 947

92 P.U.R.4th 551

The DAYTON POWER AND LIGHT COMPANY, Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent Buckeye Power, Inc.; American Municipal Power-Ohio, Inc. and City of St. Marys, Ohio, Intervenors for Respondent.

No. 87-3173.

United States Court of Appeals Sixth Circuit.

Argued Jan. 26, 1988.

Decided April 5, 1988.

Richard M. Merriman, Robert S. Waters, John D. McGrane (argued), Joseph J. DiMona, Reid & Priest, Washington, D.C., Stephen F. Koziar, Jr., Edward N. Rizer, The Dayton Power & Light Co., Dayton, Ohio, for petitioner.

Hanford O'Hara (argued), Thomas Blackburn, John H. Conway, F.E.R.C., Office of the Solicitor, Washington, D.C., for respondent.

David R. Straus, Marc Poirier, Ben Finkelstein (argued), Spiegel & McDiarmid, Washington, D.C., for intervenor for respondent American Mun. Power-Ohio and City of St. Marys, Ohio.

Robert P. Mone, William R. Case, Thompson, Hine & Flory, Columbus, Ohio, for intervenor for respondent Buckeye.

Before MILBURN and GUY, Circuit Judges, and CONTIE, Senior Circuit Judge.

RALPH B. GUY, Jr., Circuit Judge.

Dayton Power and Light Company (DP & L), an investor-owned public utility, petitions for review of orders issued by the Federal Energy Regulatory Commission (FERC or the Commission), requiring DP & L to transmit power generated by Buckeye Power, Inc., to the City of St. Marys, Ohio, under the terms of a 1968 "wheeling" contract. DP & L contends that it did not agree to deliver the power now ordered by the Commission. Because we agree with FERC's determination that DP & L is contractually bound to deliver the power, we affirm.

I.

Intervenor Buckeye Power, Inc. (Buckeye), is a non-profit electric generation and transmission cooperative incorporated under the laws of the state of Ohio. Buckeye provides wholesale electric service to its twenty-nine members who constitute all of the electric cooperatives engaged in the sale of electricity within the state of Ohio. These twenty-nine Buckeye cooperative members are themselves non-profit utility corporations, created for the purpose of providing electric service to their own respective members, who, in accordance with basic cooperative principles, own and control these cooperatives, just as these twenty-nine cooperatives own and control Buckeye. The Buckeye member cooperatives act jointly through Buckeye to generate and transmit electricity, and to construct, own, contract for, and maintain necessary facilities for this purpose. In addition, several of the Buckeye member cooperatives sell electricity at wholesale to municipal customers. Intervenor American Municipal Power-Ohio, Inc. (AMP-Ohio), is a non-profit Ohio corporation whose membership consists of municipal electric systems. AMP-Ohio buys electric power from Buckeye members for resale to its own municipal members. Intervenor City of St. Marys, Ohio (St. Marys), operates a municipal electric utility and buys electric power from both AMP-Ohio and petitioner DP & L.

On January 1, 1968, Buckeye entered into a contract, the Power Delivery Agreement (PDA or the Agreement), with several investor-owned utilities, including DP & L. ¹ These utilities, described in the PDA as "Delivery Companies," ² agreed that for a period of thirty-five years they would "wheel," i.e., transmit over their own lines, power generated by Buckeye ³ to the cooperative members that then comprised Buckeye. The PDA provides for the transmission and delivery of the "Buckeye Power Requirement" to Buckeye's members over the transmission lines of the delivery companies. Buckeye Power Requirement is defined in section 1.1 of the PDA as follows:

[T]he aggregate requirements of Buckeye for electric power and energy from time to time for sale and delivery to the Buckeye Members and for resale and delivery by the Buckeye Members to customers in the State of Ohio for ultimate consumption within the State of Ohio or use by the Buckeye Members within said State in the operation of their respective facilities and systems; provided, however, that consistent with the desire and objective of all parties to minimize any unnecessary or uneconomic duplication of facilities, there shall not be included in the Buckeye Power Requirement any quantity of electric power and/or energy furnished to any consumer when the furnishing of power and/or energy to such consumer by a Buckeye Member is proscribed by the law of the State of Ohio reflected in Section 4905.26.1, Revised Code of Ohio, as said Section is in effect at the date of this Agreement. It is understood and agreed that the term "consumer" as used in Section 4905.26.1 applies to any customer of a power and/or energy supplier whether served at wholesale or at retail.

(Emphasis added). The Ohio statutory provision referred to in the definition of Buckeye Power Requirement was commonly known at the time of the negotiation and execution of the Agreement as the "anti-pirating" law. As of the date the Agreement was executed, that statutory provision stated in relevant part:

Whenever a public utility proposes to furnish or furnishes electric energy to a consumer and which consumer is being furnished or was being furnished electric energy by another public utility, the latter public utility may file a complaint with the public utilities commission protesting the furnishing of service by the other public utility. Such complaint shall be filed within ninety days from the date the public utility which is furnishing electric energy discovers that another utility proposes to furnish the consumer with electric energy. In the event a consumer has been disconnected from the lines of a public utility, and electric energy has not been furnished said consumer for a period of more than ninety days, no right to file a complaint shall accrue under this section. The commission upon finding that the complaining public utility has been furnishing or will furnish an adequate service to such consumer and that the public utility complained against will duplicate facilities of the complainant, shall order the public utility complained against not to furnish electric energy to such consumer.

Ohio Rev.Code Ann. Sec. 4905.26.1 (Anderson 1977) (repealed 1978) (emphasis added).

Prior to agreement on the contractual language quoted above, the parties were involved in a lengthy negotiations process. Initially, Buckeye had taken the position that its right to call upon the delivery companies to wheel power within the state of Ohio was essentially unlimited. In 1966, however, after negotiations on the rate provisions ⁴ had been concluded, the delivery companies raised the concern that the Agreement might be used by Buckeye and its members to serve large loads, especially municipal loads, that were at that time customers of the delivery companies. Buckeye was thereafter advised by Ohio Power Company ⁵ that the delivery companies required inclusion of a restriction in the Agreement which would render Buckeye members unable to serve the municipal utility customers of the delivery companies. As a result of the demands made by the delivery companies, on May 22, 1967, a definition of Buckeye Power Requirement, which essentially excluded the provision of electric power to municipalities not already served by Buckeye members, ⁶ was filed with the Federal Power Commission (FPC). ⁷ In response to this filing, however, the Ohio Municipal Electric Association and the American Public Power Association protested the Agreement's restriction on resale to municipalities.

Based in great part on the fact that Ohio Power informed Buckeye that the entire project might fail if the Commission upheld the protestors' objections, in a letter dated June 29, 1967, Buckeye responded to the arguments presented by the protestors, and attempted to persuade the FPC to accept the restrictions. On July 3, 1967, Ohio Power filed with the Commission a notice indicating that, absent complete approval of the filed Agreement, its application for approval of the arrangements constituting the Buckeye Project would be withdrawn.

On August 4 and 28, 1967, the FPC issued orders in which it refused to approve the lawfulness of the Agreement as a rate schedule under the Federal Power Act, 16 U.S.C. Sec. 824, et seq., in part because of the objections made to the restrictions in the definition of Buckeye Power Requirement. Accordingly, the delivery companies refused to allow the Agreement to go into effect. Buckeye and the delivery companies then attempted to obtain approval of the Agreement from the United States Department of Justice under the department's Antitrust Business Review Procedure. The Justice Department refused, however, to approve the definition of Buckeye Power Requirement that had been submitted to the Commission.

Buckeye and the delivery companies then proposed a substitute definition of Buckeye Power Requirement in which the previous restriction concerning sales to municipalities would be deleted and replaced with a less restrictive limitation on the ability of Buckeye to compel the wheeling of its power to municipalities under the PDA. The parties accomplished this revision by incorporating into their Agreement the Ohio anti-pirating law as in effect on the date of the Agreement. The Department of Justice thereafter agreed to provide a letter of clearance for the Agreement. ⁸ In view of the Justice Department's approval, the FPC stated that it would accept the Agreement for filing as a rate schedule under the Federal Power Act. The Agreement became effective pursuant to its terms as of January 1, 1968.

In July of 1978, the Ohio anti-pirating statute was repealed. Thereafter, in late 1980, St. Marys requested that DP & L deliver Buckeye power to St. Marys via a Buckeye member cooperative under the terms of the PDA. DP & L refused, claiming among other things that St. Marys was not entitled to the requested service under the Agreement. Subsequently, in March of 1981,...