PP & L INDUS. CUSTOMER ALLIANCE v. PUC

• Decision Date: 10 July 2001
• Citation: 780 A.2d 773
• Parties: PP & L INDUSTRIAL CUSTOMER ALLIANCE, Petitioner, v. PENNSYLVANIA PUBLIC UTILITY COMMISSION, Respondent.
• Court: Pennsylvania Commonwealth Court

780 A.2d 773

PP & L INDUSTRIAL CUSTOMER ALLIANCE, Petitioner, v. PENNSYLVANIA PUBLIC UTILITY COMMISSION, Respondent.

Commonwealth Court of Pennsylvania.

Argued June 6, 2001.

Decided July 10, 2001.

As Amended July 10, 2001.

Pamela C. Polacek, Harrisburg, for petitioner.

John A. Levin, Harrisburg, for respondent.

David M. MacGregor, Philadelphia, for intervenor, PP&L Electric Utilities Corporation.

Before DOYLE, President Judge, COLINS, Judge, McGINLEY, Judge, SMITH, Judge, PELLEGRINI, Judge, KELLEY, Judge, and LEADBETTER, Judge.

PELLEGRINI, Judge.

PP & L Industrial Customer Alliance (PPLICA)¹ appeals from an order of the Pennsylvania Public Utility Commission (PUC) dismissing its petition requesting a declaratory order prohibiting the implementation of a tariff interpretation change to PP & L's billing method for customers who purchase generation supply from another electric generation supplier and an order denying its request for reconsideration.

Historically, electric utilities in Pennsylvania provided three services to customers: the generation, transmission and distribution of electricity. These "bundled" services were performed by one local utility that held a monopoly over its service area. However, to encourage a competitive wholesale electric market and provide cost savings to consumers, in December 1996, the Electricity Generation Customer Choice and Competition Act (Competition Act) was enacted.² This Act "unbundled" or separated the three traditional functions and allowed Pennsylvania residents to choose to purchase their electricity from other in-state or out-of-state electric generation suppliers (EGS) who would generate and sell electricity directly to the consumers. If the consumers chose to purchase their electricity from another supplier other than the local utility, the local utility, also referred to as an electric distribution company (EDC), still remained responsible for the transmission and distribution of the electricity.

Each Pennsylvania EDC was required to file a Restructuring Plan (Plan) to implement the Competition Act pursuant to 66 Pa.C.S. § 2806(d).³ PP & L proposed in its Plan that customers would not be able to obtain distribution service from other EGSs. PP & L filed its Plan and PPLICA filed a complaint against that Plan. After hearings on the matter, the PUC issued a final order substantially modifying the Plan by finding that it was anti-competitive and discriminated against customers who shopped for alternative supply from EGSs. PPLICA filed an action with this Court requesting us to review the Restructuring Order, but subsequent to the filing of the appeal, the parties and the PUC entered into a Joint Petition for Full Settlement of PP & L, Inc.'s Restructuring Plan and Related Court Proceedings (Settlement Agreement) to resolve the outstanding issues. Paragraph G.5.b of the Settlement Agreement, the only provision of the Settlement Agreement relevant to this action, involves Rate Schedules IS-P and IS-T pertaining to the distribution of electricity by PP & L, which were among the many tariff provisions included in the Settlement Agreement. Paragraph G.5.b provides:

G.5.b. PP & L shall unbundle the rate components of rate schedules IS-P and IS-T in a fashion that will allow a customer to obtain generation supply from a competitive supplier without penalty and in a nondiscriminatory fashion. Any discount or credit applied to the delivery service component of the rates will be portable and shall apply on a comparable basis whether or not a customer chooses to obtain generation supply from a competitive supplier.

Rate Schedule IS-T (Interruptible Service—Transmission) and Rate Schedule IS-P (Interruptible Service—Primary) services are interruptible distribution services which are available with at least 1,000 kilowatt (kW) of year-round interruptible power to customers who contract to accept interruptible service for at least one year. Under both of these rate schedules, eligible customers can purchase interruptible distribution service which means that PP & L can request the customer to curtail electricity usage "as required for economic load control, for system and local emergencies, and for tests of the customer's ability and readiness to interrupt load during an emergency."⁴ While the customer is required to interrupt during emergencies and emergency tests, the customer has the option to interrupt or accept an additional charge for continued use during periods of economic load control. There is an additional charge for failure to interrupt during an emergency or an emergency test interruption period of $24.95 per kW for all kW, by which the maximum 15 minute demand for the period of requested interruption exceeds the Firm Power,⁵ i.e., the level of kW demand which the customer has no obligation to curtail during an interruption of service called for by the local utility. The local utility has the option of canceling the contract for interruptible service if the customer fails to interrupt during an emergency or an emergency test interruption period. Additional charges included in these Rate Schedules are Competitive Transition Charges (CTC) and Intangible Transition Charges (CTC).

In 1998, PP & L devised a billing method for Rate Schedule IS-P and IS-T customers who purchased some or all of their electric generation service from another supplier but failed to curtail usage equivalent to its provided interruptible portion of the total load during a system emergency interruption. The method was based on an allocation of the customer's prior firm power level for the portion of supply taken from PP & L.⁶ It also specified how it would calculate penalties for non-compliance.⁷ PPLICA understood this to mean that PP & L would calculate penalties based only on the portion of the generation supply provided by an EGS that the customer was obligated to interrupt for PP & L during the system emergency or that portion of the interruptible supply actually purchased from PP & L. Throughout most of 1999, this billing method was utilized; however, in October 1999, PP & L decided to modify this method as it applied to those customers who purchased all of their generation supply from an EGS and notified customers on Rate Schedules IS-P and IS-T of this modification stating the following:

The final point of discussion concerns PP & L's plans for billing customers on the IS-P and IS-T Rate Schedules who shop for the generation and transmission from an EGS in the year 2000 and thereafter. PP & L responded that it intends to bill such customers in accordance with its tariff, applying the formula for billing kW to each component of service that the Company provides. In the case of shoppers, the Company will apply formula to Distribution, Competitive Transition Charge, and Intangible Transition Charge. Because we understand that there is some confusion among customers and EGSs on this point, PP & L will, shortly, send a letter to each of its interruptible customers that calls their attention to this tariff language.

On December 23, 1999, PP & L mailed to its IS-P and IS-T customers a letter explaining its proposed implementation of changes in rate schedules for customers who obtained 100% of their generation from an EGS after January 2, 2000. In response to whether an IS-P or IS-T Rate Schedule customer could buy firm power from an EGS, PP & L explained in the letter:

Yes, customers can buy firm power from an EGS. Customers can also buy from an EGS interruptible power to a firm level that is different than your PP & L, Inc. firm level, or interruptible power with a different number of calls or different response requirements. You should be aware, however, that PP & L's delivery service tariff requires PP & L to reflect your actual performance during emergency interruptions. For example, operating during an emergency interruption above your PP & L, Inc. contract firm (or ratcheted firm) will increase your Billing Demand and will result in higher delivery charges from PP & L, Inc. for Distribution, Competitive Transition Charge (CTC), and Intangible Transition Charge (ITC) for both shopping and non-shopping customers. Operating during an emergency will also subject both shopping and non-shopping customers to additional charges specified in PP & L's tariff.

While all of PPLICA's members purchased 100% of their distribution service from PP & L, because some of its members were currently negotiating contracts with EGSs to totally replace PP & L as their generation and transmission supplier, or they entered into contracts with EGSs for generation supply that extended beyond January 2000, PPLICA filed with the PUC a petition seeking a declaratory order or, in the alternative, a complaint prohibiting the implementation of what it perceived to be a tariff interpretation change by PP & L regarding the electric distribution service it provided to some of its customers pursuant to Rate Schedules IS-P and IS-T. It alleged that PP & L was changing the billing method so that customers on those Rate Schedules paid higher distribution rates for service that was of a lesser quality in violation of the Competition Act because it was interruptible than similar customers on firm uninterruptible rate schedules, and IS-P and IS-T customers could not use PP & L's distribution service at times when customers on the firm rate schedules were permitted to use the distribution system. Further, because PP & L was only providing distribution service to customers, it was unreasonable to apply the penalty provisions to those customers when a generation—related emergency existed and they failed to interrupt service pursuant to PP & L's Rate Schedules. Specifically, it argued that a customer's contract with the EGS included penalties when the customer failed to curtail usage during an interruption request, but under the tariff, customers would also be penalized by PP & L so that both the supplier and...