Alabama Power Co. v. F.E.R.C.
| Decision Date | 21 September 1993 |
| Docket Number | Nos. 91-1595,91-1654,s. 91-1595 |
| Citation | 993 F.2d 1557 |
| Parties | , 143 P.U.R.4th 110, Util. L. Rep. P 13,941 ALABAMA POWER COMPANY; Georgia Power Company; Gulf Power Company; Mississippi Power Company; Savannah Electric and Power Company; Southern Company Services, Inc., Petitioners, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent, Alabama Public Service Commission; City of Tallahassee, Florida; Oglethorpe Power Corporation, Intervenors. ALABAMA POWER COMPANY; Georgia Power Company; Gulf Power Company; Mississippi Power Company; Savannah Electric and Power Company; Southern Company Services, Inc., Petitioners, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent, Alabama Public Service Commission; Cajun Electric Power Cooperative, Inc., Intervenors. |
| Court | U.S. Court of Appeals — District of Columbia Circuit |
Petition for Review of an Order of the Federal Energy Regulatory Commission.
Rodney O. Mundy, with whom Dan H. McCrary, Mark A. Crosswhite, Birmingham, AL Robert H. Forry, Atlanta, GA, Leamon R. Holliday, III, Savannah, GA, G. Edison Holland, Jr., Pensacola, FL, and Ben H. Stone, Gulfport, MS, were on the joint brief, for petitioners in Nos. 91-1595 and 91-1654.
Samuel Soopper, Atty., with whom William S. Scherman, Gen. Counsel, Jerome M. Feit, Sol., and Joseph S. Davies, Deputy Sol., F.E.R.C., Washington, DC, were on the brief, for respondent.
John N. Estes, III, Washington, DC, entered an appearance for intervenor Oglethorpe Power Corp.
P. Michael Cole, Athens, AL, entered an appearance for intervenor Alabama Public Service Com'n.
Gary D. Bachman, Washington, DC, entered an appearance for intervenor City of Tallahassee, FL.
James D. Pembroke, Washington, DC, entered an appearance for intervenor Cajun Elec. Power Co-op., Inc.
Before WALD, BUCKLEY and WILLIAMS, Circuit Judges.
Opinion for the Court filed by Circuit Judge WALD.
The first issue in this appeal is whether the Federal Energy Regulatory Commission ("FERC" or "Commission") may require different operating companies commonly owned by a holding company to charge a single system transmission rate on off-system sales of electricity transmitted throughout the lines of the various operating companies. The Southern Company ("Southern") owns petitioners Alabama Power Company, Georgia Power Company, Gulf Power Company Mississippi Power Company, and Savannah Electric and Power Company (the "operating companies" or "Southern Companies"), as well as petitioner Southern Company Services, Inc. ("SCSI"), a subsidiary service arm of Southern. The petitioners entered into a pair of contracts which obligated the Southern system to provide power, but charged cumulative rates for all individual operating companies whose lines were involved in the transmission. Based upon substantial evidence in the record, the Commission reasonably concluded that where an off-system sale binds an entire system of commonly owned operating companies, a single system transmission rate reflecting an average system-wide transmission cost is just and reasonable.
The second issue raised by the petitioners is whether the Commission was authorized to order an investigation under § 206 of the Federal Power Act ("FPA" or "Act") of all the petitioners' contracts employing formula rates with a return on common equity component of 13.75% or higher. Petitioners argue that the § 206 investigation violated a prior Commission-approved settlement which purportedly limited the right of Commission staff to request any inquiry into Southern's rate filings to specified time periods, so long as they complied with an agreed-upon formula. On appeal, FERC argues first that the investigation order is not appealable because hearings on the lawfulness of the rate of return are still ongoing, and second that even if petitioners' challenge is properly before this court, the prior settlement review procedures are inapplicable to Commission-initiated § 206 investigations. We conclude that the Commission's investigation order was a final, appealable agency action because, if the petitioners are correct, the order violated a valuable contractual right, negotiated between petitioners and the Commission to be free from formula rate investigations except at specified intervals. However, we do not read the settlement review procedures as circumscribing the Commission's authority to initiate a § 206 investigation. Accordingly, we deny the petition for review in both respects.
On December 7, 1990, the five Southern operating companies and SCSI filed with FERC, pursuant to § 205 of the FPA, 16 U.S.C. § 824d, a unit power sales agreement with the City of Tallahassee, Florida. According to the filing, the "sales under the ... agreement will be made out of Units 2, 3 and 4 of the Miller Plant (owned by Alabama Power) and out of Unit 3 of the Scherer Plant (jointly owned by Georgia Power and Gulf Power)." The accord specifically provided that the formula rates would include a transmission component reflecting the cumulative costs of delivering the energy through the internal transmission systems of the designated operating companies. Thus, for energy from the Miller Plant in Alabama, which would travel through the systems of both the Alabama Power Company and the Georgia Power Company, Tallahassee would be charged a cumulative transmission rate equal to the sum of individual transmission costs of the two power companies. For power generated at the Scherer Plant in Georgia, which would involve the use of only Georgia Power Company's transmission system, a transmission rate reflecting that single company's costs would be charged. The agreement also provided, however, that the energy supplied Tallahassee could if necessary come from the plants of any of the five operating companies. As explained in the filing, the Tallahassee agreement
provides for the sale of: (i) "supplemental energy" when the [Miller and Scherer] units are derated or unavailable for service; (ii) "alternate energy" when the units are available for service but are not committed to operation because of economic priorities; and (iii) "replacement energy" at incremental cost when such energy is available on the electric systems of Southern Companies.
The formula rates also included a 13.75% return on common equity for petitioners.
On May 2, 1991, the Commission rejected the transmission rate methodology in the Tallahassee agreement for failing to meet the "just and reasonable" criterion set out in § 205 of the FPA, 16 U.S.C. § 824d(a), and directed the petitioners to file instead a single system transmission rate reflecting the average transmission costs of the entire Southern system. Southern Company Services, Inc., 55 F.E.R.C. p 61,173 (1991). The Commission reasoned that because the petitioners had contracted with Tallahassee as a single, consolidated and jointly-owned system, the transmission rate should be based upon system-wide costs. Additionally, the Commission initiated on its own an investigation under § 206 of the FPA, 16 U.S.C. § 824e, of all petitioners' contracts containing formula rates with a return on common equity of 13.75% or higher, including the formula rate in the Tallahassee agreement. Id. Petitioners' request for rehearing was denied. Southern Company Services, Inc., 57 F.E.R.C. p 61,093 (1991).
On August 5, 1991, the petitioners filed with the Commission an interchange contract with Cajun Electric Power Cooperative, Inc. ("Cajun") which involved similar cumulative transmission charges based upon the amount of power flowing over each of the operating companies' internal transmission systems. The formula rates in the Cajun agreement contained a return on common equity of 14%. On October 4, 1991, the Cajun transmission rate methodology was rejected by FERC and the petitioners were directed to file a single system transmission rate. Southern Company Services, Inc., 57 F.E.R.C. p 61,035 (1991). The proposed 14% return on common equity was included in the § 206 investigation of the Tallahassee formula rate. The Commission predictably denied rehearing. Southern Company Services, Inc., 57 F.E.R.C. p 61,284 (1991).
An administrative law judge ("ALJ") subsequently conducted a hearing on the 13.75% (and higher) formula rates in petitioners' contracts, and concluded that the rates should not be modified. Southern Company Services, Inc., 60 F.E.R.C. p 63,013 (1992). An appeal from that decision is currently pending before the Commission.
The Commission "must be free, within the limitations imposed by pertinent constitutional and statutory commands, to devise methods of regulation capable of equitably reconciling diverse and conflicting interests." Permian Basin Area Rate Cases, 390 U.S. 747, 767, 88 S.Ct. 1344, 1360, 20 L.Ed.2d 312 (1968). So long as its decision is reached by reasoned decisionmaking and supported by substantial evidence, we are obliged to defer to its technical ratemaking expertise. See Norwood v. FERC, 962 F.2d 20, 22 (D.C.Cir.1992); Union Electric Co. v. FERC, 890 F.2d 1193, 1199 (D.C.Cir.1989); Pub. Serv. Comm'n v. FERC, 813 F.2d 448, 451 (D.C.Cir.1987). We also defer to FERC interpretations of settlement agreements that are supported factually and legally. See Transcontinental Gas Pipe Line Corp. v. FERC, 922 F.2d 865, 869 (D.C.Cir.1991); Panhandle Eastern Pipe Line Co. v. FERC, 881 F.2d 1101, 1118 (D.C.Cir.1989); Duke Power Co. v. FERC, 864 F.2d 823, 826 (D.C.Cir.1989); Vermont Dep't of Pub. Serv. v. FERC, 817 F.2d 127, 134-35 (D.C.Cir.1987). Our deference on settlements stems from recognition of the explicit statutory delegation of authority over ratemaking to FERC, which includes situations in which ratemaking will depend on the agency's contract interpretation. See Tarpon Transmission...
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