Arippa v. PA. PUBLIC UTILITY COM'N
| Citation | 792 A.2d 636 |
| Parties | ARIPPA, Petitioner, v. PENNSYLVANIA PUBLIC UTILITY COMMISSION, Respondent. Mid-Atlantic Power Supply Association, Petitioner, v. Pennsylvania Public Utility Commission, Respondent. York County Solid Waste And Refuse Authority, Petitioner, v. Pennsylvania Public Utility Commission, Respondent. Clean Air Council And Citizen Power, Inc., Petitioners, v. Pennsylvania Public Utility Commission, Respondent. |
| Decision Date | 21 February 2002 |
| Court | Commonwealth Court of Pennsylvania |
Patricia Armstrong, Harrisburg, for petitioner, ARIPPA.
Harvey L. Reiter, Washington, D.C., for petitioners, Clean Air Council and Citizen Power, Inc.
Benjamin L. Willey, Washington, D.C., for petitioner, York County Solid Waste and Refuse Authority.
Karen O. Moury, Harrisburg, for respondent.
John F. Povilaitis, Harrisburg, for intevenors, Metropolitan Edison Co., PA Electric Co., GPU, Inc. and First Energy Corp.
Tanya J. McCloskey, Harrisburg, for intervenor, Office of Consumer Advocate.
Before DOYLE, Senior Judge,1 COLINS, Judge, SMITH-RIBNER, Judge, PELLEGRINI, Judge, FRIEDMAN, Judge, KELLEY, Senior Judge,2 and LEADBETTER, Judge. PELLEGRINI, Judge.
ARIPPA, Mid-Atlantic Power Supply Association (Mid-Atlantic), York County Solid Waste and Refuse Authority (York County), Clean Air Council (Clean Air) and Citizen Power, Inc., (Citizen) appeal from two orders of the Pennsylvania Public Utility Commission (Commission): the first dated May 24, 2001, granting the application filed by GPU, Inc. and its Pennsylvania public utility subsidiaries, Metropolitan Edison Company (Met-Ed) and Pennsylvania Electric Company (Penelec) (collectively, GPU Energy) and FirstEnergy Corp. for the merger of GPU into FirstEnergy and the second dated June 20, 2001, approving the "Settlement Stipulation" proposed by GPU Energy and First Energy joined by the Consumer Advocate (as well as other signatories to the Settlement Stipulation who are not parties to this appeal)3 and accepting a deferral accounting mechanism as a means to recover their increased costs above the rate cap imposed in return for recovering stranded costs under the Electricity Generation Customer Choice and Competition Act (Competition Act).4
This case involves two separate proceedings that were consolidated before the Commission and have been consolidated on appeal. One proceeding involves the merger between FirstEnergy and GPU Energy and its opposition by Clean Air and Citizen. The second proceeding involves a petition filed by FirstEnergy and GPU Energy in which they sought expedited Commission approval of what they denominated a "Settlement Stipulation." That Stipulation authorized increased revenues through an interim deferral tracking mechanism for their provider of last resort generation service. ARIPPA, Mid-Atlantic, York County, Clean Air and Citizen opposed the Stipulation and the tracking mechanism.
GPU Energy is a public utility holding company with headquarters in Morristown, New Jersey. GPU owns all of the common stock of Met-Ed and Penelec, as well as that of Jersey Central Power & Light Company, an electric public utility that conducts business in New Jersey. The GPU Energy utilities together serve about 2.1 million customers in Pennsylvania and New Jersey. Met-Ed and Penelec, GPU subsidiaries, are electric public utilities incorporated under the laws of Pennsylvania and headquartered in Reading, Pennsylvania. They conduct business in Pennsylvania and serve approximately one million customers in territories encompassing over 20,000 square miles in northern, central and eastern Pennsylvania.
FirstEnergy is a diversified energy services holding company headquartered in Akron, Ohio. It was formed in 1997 as a result of the merger of Ohio Edison Company and Centerior Energy Corporation. It directly owns three electric utility operating companies in Ohio, including Ohio Edison Company which owns Pennsylvania Power Company operating in portions of western Pennsylvania. Those operating companies serve 2.2 million customers in a 13,200 square mile area in northern and central Ohio and western Pennsylvania.
The petitioners represent three different interests: (1) those entities that have an interest in protecting the integrity of the NUG contracts that were entered by those entities and GPU Energy which include ARIPPA, formerly known as Anthracite Region Independent Power Producers Association, a trade association composed of 12 operating non-utility generation (NUG) power plants5 across Pennsylvania, and York County, a municipal solid waste authority and a NUG; (2) Mid-Atlantic, a trade association of power marketers, as well as independent power producers and a broad range of companies that support the electric services industry with an interest in promoting competition in the electric power supply market in Pennsylvania and the Mid-Atlantic region; and (3) public interest/environmental groups Clean Air and Citizen.
Historically, electric utilities in Pennsylvania provided three services to customers: the generation, transmission and distribution of electricity. PP & L Industrial Customer Alliance v. Pennsylvania Public Utility Commission, 780 A.2d 773 (Pa. Cmwlth.2001). 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 to provide cost savings to consumers, in December 1996, the Competition Act was enacted to establish competition in the sale of electric power. Id. That Act "unbundled" or separated the three traditional functions and allowed Pennsylvania residents to choose to purchase their electricity from other instate or out-of-state electric generation suppliers (EGS), who would generate and sell electricity directly to the consumers. Id. If the consumers chose to purchase their electricity from a supplier other than the local utility, the local utility also referred to as an electric distribution company still remained responsible for the transmission and distribution of the electricity. If consumers did not choose to or were unable to purchase power from another supplier, the local utility was still required to provide electricity to them as the Provider of Last Resort (PLR) at the rate cap amount. 66 Pa.C.S. § 2802(16).6
The switch from regulation to competition created "stranded costs," costs alleged not to be recoverable at market rates.7 The amount of stranded costs is determined by the difference between the amount of revenue that could have been recovered in a regulated market and those recoverable under the current deregulated system. To allow electric utilities to recover their transition or stranded costs, the General Assembly created the competitive transition cost. 66 Pa.C.S. § 2808. These costs were to be paid by each ratepayer accessing the transmission or distribution network to the electric distribution company in whose certificated territory those customers were located. 66 Pa.C.S. § 2803 defines the competitive transition cost as "[a] nonbypassable charge applied to the bill of every customer accessing the transmission or distribution network which (charge) is designed to recover an electric utility's transition or stranded costs as determined by the commission under sections 2804 () and 2808 (relating to competitive transition charge)." A competitive transition charge was to be calculated separately for NUG-stranded costs and the other stranded costs the utility incurred. 66 Pa.C.S. § 2806(c). As a result, ratepayers' monthly electric bill has two components: one for current amounts of electricity consumed, i.e., the cost of current transmission, distribution and generation costs, and one for the transition charge for these stranded costs.
Under the legislative scheme, in exchange for utilities being paid for their stranded costs, rate caps, with certain exceptions that are at issue in this appeal, were imposed on the rate a utility could charge for electricity for a period of 54 months (December 31, 2004) or until stranded costs were no longer being paid to a utility. 66 Pa.C.S. § 2804(4). Necessarily, if the competitive market rate for electricity was above the rate cap level, customers would then return as customers to buy electricity from the local utility which was obligated to serve them at that rate as the provider of last resort.
To implement restructuring, each Pennsylvania electric distribution company was required to file a Restructuring Plan (Plan) setting forth how it was going to come into compliance with the mandates of the Competition Act. 66 Pa.C.S. § 2806(d).8 On June 2, 1997, GPU's subsidiaries, Met-Ed and Penelec, submitted comprehensive Plans requesting the Commission approve (1) the imposition of unbundled rates, competitive transition costs and specific tariff provisions to ensure customers direct access to all electric generation suppliers licensed to offer such services within the Commonwealth; (2) the recovery by Met-Ed of $1.476 billion of stranded costs net of mitigation and the recovery by Penelec of $1.322 billion of stranded costs net of mitigation; (3) the implementation of plans to meet their universal service obligations; and (4) the implementation of a proposed Consumer Education Program. Following a hearing before an Administrative Law Judge (ALJ), the Commission issued separate opinions and orders on Met-Ed and Penelec's Plans establishing their stranded costs and their transmission and distribution rates for 1999 from which Met-Ed and Penelec appealed.
During the pendency of their appeals, Met-Ed, Penelec and the other parties to the restructuring proceeding participated in a settlement conference to resolve the issues raised on appeal. Prior to the settlement conference, the parties agreed that no settlement agreement would be presented to the Commission...
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