Appalachian Power Co. v. F.E.R.C.
| Decision Date | 17 December 1996 |
| Docket Number | 95-1612,Nos. 94-1411,s. 94-1411 |
| Citation | 101 F.3d 1432 |
| Parties | , Util. L. Rep. P 14,134 APPALACHIAN POWER COMPANY, Petitioner v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent. Town of Richlands, Virginia, et al., Intervenors. |
| Court | U.S. Court of Appeals — District of Columbia Circuit |
On Petitions for Review of Orders of the Federal Energy Regulatory Commission.
Edward Berlin argued the cause for petitioner. Kenneth G. Jaffe, Michael E. Ward and Edward J. Brady were with him on the briefs.
Samuel Soopper, Attorney, Federal Energy Regulatory Commission, argued the cause for respondent. Jerome M. Feit, Solicitor, was with him on the brief.
Jill M. Barker argued the cause for intervenors. Frederick H. Ritts and John S. Moot were with her on the brief. Cheryl M. Foley entered an appearance.
Before: WALD, WILLIAMS and TATEL, Circuit Judges.
Section 211 of the Federal Power Act ("FPA"), 16 U.S.C. § 824j (1994), authorizes the Federal Energy Regulatory Commission to order an electric utility with transmission capability to "wheel" electricity, i.e., to provide transmission services for the electric power of other providers. Here FERC exercised this authority and ordered the Appalachian Power Company ("Appalachian" or "APCo") to transmit electricity that a group of Virginia municipalities (the "Municipals"), wholesale electric customers of Appalachian, had contracted to buy from another supplier, PSI Energy, Inc. Appalachian argues that this order is without authority because § 211(c) prohibits any wheeling order that requires the wheeling utility "to transmit ... an amount of electric energy which replaces any amount ... required to be provided ... pursuant to a contract ...." § 824j(c)(2). Although we uphold most of FERC's analysis and treatment of the contracts between Appalachian and the Municipals, we remand the case to FERC because it failed to consider the nature of Appalachian's obligation to provide power, and therefore did not properly consider whether § 211 barred a transmission order under the circumstances presented here.
* * *
In 1986 the existing full requirements contracts between Appalachian and the Municipals expired. After extensive negotiation, each of the Municipals in 1987 executed a ten-year Energy Service Agreement ("agreement" or "ESA") with Appalachian. The agreements are identical except as to the volumes for various items (such as Appalachian's obligation to provide power), and we will use the agreement with Danville as our example, as have the parties. The agreements provide for Appalachian to wheel power purchased by the Municipals from the Southeastern Power Administration ("SEPA") and are, to that extent, clearly not "full requirements" contracts, i.e., ones by which the purchaser is to buy all its power from the contracting utility. Appalachian contends that apart from the SEPA provision the agreements are for full requirements, while the Municipals argue that they permit them to buy substantial blocks of power from other sources.
The divergence of viewpoint was brought to a head in June 1993, when the Municipals applied to FERC for an order requiring Appalachian to provide transmission service for 50,000 kilowatts ("KW") of power supplied under an agreement they had reached with PSI. 1 Under Appalachian's view of the contract, it was obliged to supply all the Municipals' power, and they were reciprocally bound to take all their power from Appalachian. (In both cases, "all" means all power apart from the SEPA portion, an exception that for the rest of the opinion we treat as implicitly understood.) This would clearly trigger § 211(c)(2)'s bar. Under the Municipals' reading of the agreements, however, it appeared that the bar would be inapplicable. (As we shall see, that is not necessarily true.) The Commission concluded that because the agreements were ambiguous it could not resolve the § 211 question, and it therefore ordered a hearing before an ALJ to look into extrinsic evidence. City of Bedford, 64 FERC p 61,381 at 63,640 (1993).
Looking at the language of the contracts and the extrinsic evidence, the ALJ concluded that the agreements were not full requirements contracts, and that the Municipals had "the option of substituting alternative, non-SEPA sources of power and energy ... for power and energy purchased from APCo." City of Bedford, 65 FERC p 63,017 at 65,107 (1993). The Commission adopted the ALJ's reasoning with minor exceptions. City of Bedford, 66 FERC p 61,186 (1994), rehearing denied, City of Bedford, 67 FERC p 61,063 (1994). Accordingly it issued an order under § 211 requiring Appalachian to transmit the PSI power. City of Bedford, 68 FERC p 61,003 (1994), rehearing denied, City of Bedford, 73 FERC p 61,322 (1995).
In a related proceeding, the Municipals petitioned FERC to use its contract-modifying authority under § 206 of the FPA, 16 U.S.C. § 824e (1994), to alter the agreements so as to prevent Appalachian from charging the Municipals for the power they proposed to buy from PSI. FERC granted the Municipals' request. City of Bedford, 68 FERC p 61,004 (1994), rehearing denied, 73 FERC p 61,321 (1995).
In reviewing FERC's interpretation of a contract, we apply the deference principles of Chevron U.S.A. Inc. v. NRDC, 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984). Cajun Elec. Power Coop., Inc. v. FERC, 924 F.2d 1132, 1135-36 (D.C.Cir.1991). Thus, by analogy to the "first step" inquiry as to whether a statute is ambiguous, we resolve the equivalent question--whether the contract is ambiguous--de novo. Id. Only if it is ambiguous can FERC consider extrinsic evidence as an aid to interpretation. Consolidated Gas Transmission Corp. v. FERC, 771 F.2d 1536, 1546 (D.C.Cir.1985) (citations and quotations omitted). We agree with FERC that the ESAs are ambiguous.
The ESAs do not explicitly say whether or not they create a full requirements obligation (excluding the SEPA allocation). Omission of those words does not, however, automatically make a contract ambiguous on the subject. The Municipals rest their argument that the ESAs permit them to reduce their "Contract Capacity," and thereby purchase power from PSI, on the following language of § 3.2:
The Customer shall have the option to reduce the Contract Capacity for billing purposes, provided notice of such reduction is given in writing in accordance with the following schedule:
0 to 15% reduction 1 year's notice
15 to 25% reduction 2 year's notice
25 to 50% reduction 3 year's notice
Such Contract Capacity reductions will be subject to the Customer submitting substantial data that demonstrates a significant change in the Customer's purchased power requirements from the Company. Reductions in capacity requirements due to weather conditions will not be cause for such adjustment.
Although this section clearly provides the opportunity for the Municipals to reduce their contract capacity, the conditions under which they can do so are not clearly expressed. Appalachian argues that the need to submit "substantial data that demonstrates a significant change in the Customer's purchased power requirements" limits a Municipal's ability to exercise its § 3.2 rights to occasions where its demand for power vel non decreases. In contrast, the Municipals argue that any reason (excluding weather) suffices under § 3.2, including a decision to choose a different power provider.
The agreements' billing provisions deepen the confusion. An excerpt of Appalachian's tariff (attached as Exhibit A to the agreements) sets forth the Demand Charge and the Energy Charge, expressed in dollars for "each KW of Billing Demand" and for "each KWH of Billing Energy," respectively. Billing Demand and Billing Energy in turn are defined in § 3.4 of the agreements:
The Customer's monthly Billing Demand will be equal to the single highest 30-minute kiloWatt demand measured during the month, reduced by the Customer's allocation of SEPA capacity.... The Customer's monthly Billing Energy will be equal to the Customer's total monthly metered kiloWatthour energy requirement, reduced by the monthly kiloWatthours of energy made available to the Customer by SEPA....
The effect of this is to charge the Municipals for any non-SEPA electricity that passes through Appalachian's meter. Given that the Municipals are electrically connected only to Appalachian's transmission system and that no plans exist to build additional transmission facilities, Appalachian concludes that § 3.4 makes clear that the ESAs are full requirements contracts. Finally, Appalachian argues that the provision reducing billing for "energy made available ... by SEPA" should be interpreted under the principle expressio unius est exclusio alterius to foreclose the possibility of reductions for any other reason.
Standing alone, § 3.4 does appear to require the Municipals to pay Appalachian for any power that goes through Appalachian's meter, regardless of where the power originates--effectively creating a full requirements contract. But such a reading of § 3.4 would render the reduction privileges in § 3.2 virtually meaningless, because, except to the extent a § 3.2 reduction reflected a decrease in a Municipal's actual power needs, it would still be required to pay for power that it was no longer taking from Appalachian. Appalachian does not suggest that any of the Municipals was facing a possibility of an economic meltdown so devastating that it would reduce demand by 50%. Thus the buyers' right to cut contract capacity by this amount was, on its reading, effectively worthless.
Appalachian counters that the ability to reduce contract capacity is not worthless. Rather, Exhibit A sets a floor under the monthly Demand Charge, amounting to 50% of "contract capacity." See also § 3.2 (...
To continue reading
Request your trial
-
Southern California Edison Co. v. F.E.R.C.
...F.3d 494, 498 (D.C.Cir.2003) (citing Cajun Elec. Power Coop. v. FERC, 924 F.2d 1132, 1135-36 (D.C.Cir.1991); Appalachian Power Co. v. FERC, 101 F.3d 1432, 1435 (D.C.Cir.1996)). "Applying Chevron in this context, we first consider de novo whether the [Facilities Agreement] unambiguously addr......
-
Ameren Services Co. v. F.E.R.C.
...(D.C.Cir.1991) (Chevron deference applies to agency interpretation of agency-approved contract); see also Appalachian Power Co. v. FERC, 101 F.3d 1432, 1435 (D.C.Cir.1996) (same). Applying Chevron in this context, we first consider de novo whether the settlement agreement unambiguously addr......
-
Pacific Gas and Elec. Co. v. F.E.R.C.
...into the picture only if we find an ambiguity, in which case we defer to any reasonable resolution by FERC. Appalachian Power Co. v. FERC, 101 F.3d 1432, 1435, 1437 (D.C.Cir.1996); cf. Chevron U.S.A. Inc. v. Natural Res. Def. Council, 467 U.S. 837, 842-43, 104 S.Ct. 2778, 2781-82, 81 L.Ed.2......