Barasch v. Pennsylvania Public Utility Com'n
Decision Date | 22 August 1988 |
Citation | 546 A.2d 1296,119 Pa.Cmwlth. 81 |
Parties | , 95 P.U.R.4th 528 David M. BARASCH, Consumer Advocate, Petitioner, v. PENNSYLVANIA PUBLIC UTILITY COMMISSION, Respondent. ARMCO, INC. and Allegheny Ludlum Corporation, Petitioners, v. PENNSYLVANIA PUBLIC UTILITY COMMISSION, Respondent. WEST PENN POWER COMPANY, Petitioner, v. PENNSYLVANIA PUBLIC UTILITY COMMISSION, Respondent. |
Court | Pennsylvania Commonwealth Court |
Pamela B. Sarvey, Irwin A. Popowsky, Asst. Consumers Advocate, David M. Barasch, Consumer Advocate (pro se), Harrisburg, for Barasch.
John M. Elliott, Charles W. Bowser, Stephen C. Braverman, Christopher J. Churchill, James P. Cousounis, Baskin, Flaherty, Elliott & Mannino, P.C., Philadelphia, for intervenor Milesburg Energy, Inc.
Billie E. Ramsey, Asst. Counsel, Bohdan R. Pankiw, Deputy Chief Counsel, Daniel P. Delaney, Chief Counsel, Harrisburg, for Pennsylvania Public Utility Com'n.
Henry R. MacNicholas, David M. Kleppinger, Richard Kahlbaugh, McNees, Wallace & Nurick, Harrisburg, for West Penn Power Indus. amicus curiae.
Deborah M. DePaul, Michael D. McDowell, John L. Munsch, Greensburg, for West Penn Power Co.
F. Bruce Abel, David F. Boehm, Michael L. Kurtz, Steer, Strauss, White & Tobias, Cincinnati, Ohio, (Pro Hac Vice granted to Boehm and Kurtz) for Armco Inc. & Allegheny Ludlum Corp.
Before CRUMLISH, Jr., President Judge, and CRAIG, DOYLE, BARRY, PALLADINO, McGINLEY and SMITH, JJ.
These consolidated cases are appeals by industrial ratepayers and the Office of Consumer Advocate (OCA) from an order of the Pennsylvania Public Utility Commission (PUC or commission) that (1) approved the terms of a proposed contract for the purchase of electric power by West Penn Power Company (West Penn) from Milesburg Energy, Inc. (MEI) as being in the public interest, (2) authorized West Penn to recover payments made to MEI under the contract from its ratepayers through the mechanism of the Energy Cost Rate (ECR), and (3) declared in effect that the generating capacity West Penn would acquire under the contract should not be considered by the commission in excess capacity determinations regarding West Penn during the term of the contract. West Penn itself appeals the PUC's refusal to publish the order in the Pennsylvania Bulletin.
West Penn's proposed purchase of power from MEI is covered by the federal Public Utility Regulatory Policies Act of 1978 (PURPA). 1 The issues raised are (1) whether the procedure by which the PUC considered West Penn's petition for approval of a contract covered by PURPA respected due process rights, and (2) whether the commission's decisions (a) to disregard the generating capacity acquired by this purchase when resolving West Penn excess capacity issues in the future, and (b) to approve West Penn's payment of levelized capacity charges under the contract, violated the prohibition in the Public Utility Code against rate recovery of costs for capacity that is excess.
Congress enacted the Public Utility Regulatory Policies Act of 1978 as part of a package of five pieces of legislation, known collectively as the National Energy Act, designed to combat the nationwide energy crisis resulting from the quadrupling of oil prices in the early 1970's and the severe shortage of natural gas in 1977. Section 210 of PURPA, 16 U.S.C. § 824a-3, is designed to lessen the dependence of electric utilities on foreign oil and on natural gas by encouraging the development of alternative power sources in the form of cogeneration and small power production facilities.
Section 201 of PURPA, 16 U.S.C. § 796(17)-(22), defines "cogeneration facility" as one that produces both electric energy and steam or some other form of useful energy, such as heat. 16 U.S.C. § 796(18)(A). The same section defines "small power production facility" as one that has a production capacity of no more than 80 megawatts and uses as a primary energy source biomass, waste, geothermal resources or renewable resources such as wind, water or solar energy to produce electric power. 16 U.S.C. § 796(17)(A).
Before PURPA, entities contemplating cogeneration or small power production faced three principal deterrents: (1) traditional electric utilities, customarily regarded and regulated by the states as natural monopolies in terms of both generation and distribution of electric power, 2 either could refuse to buy power from these nontraditional facilities, or they could offer unfairly low rates for such purchases; (2) traditional utilities could refuse to sell essential backup power to alternative producers of electricity, or they could charge discriminatorily high rates for such sales; and (3) the alternative producers could become subject to state and federal regulation as public utilities, giving rise to significant financial and administrative burdens that could readily offset expected savings. Section 210 of PURPA addresses each of these problems.
Section 210(a) directs the Federal Energy Regulatory Commission (FERC) to promulgate rules to encourage the development of the alternative sources of power, including rules requiring utilities to offer to buy electricity from, and to sell electricity to, qualifying cogeneration and small power production facilities (QFs). Section 210(b) directs FERC to set rates for utility purchases of power from QFs that are (1) just and reasonable to the electric consumers of the utility and in the public interest, (2) not discriminatory against QFs, and (3) not to exceed the incremental cost to the utility of alternative electric energy. Rates for utility sales to QFs are to be just and reasonable and in the public interest and not discriminatory against QFs under section 210(c). Section 210(e) directs FERC to adopt rules exempting certain QFs from most state and federal public utility regulation.
Congress chose state regulatory authorities, with their expertise and unique knowledge of local conditions, to be the primary enforcers of PURPA. Section 210(f) requires each state regulatory authority and nonregulated utility to implement FERC's rules. At the same time, section 210 and FERC's regulations give wide latitude to the state agencies in many areas in order to permit flexibility in accommodating local circumstances and to encourage experimentation in the development of this new national program.
In Federal Energy Regulatory Commission v. Mississippi, 456 U.S. 742, 102 S.Ct. 2126, 72 L.Ed.2d 532 (1982), the United States Supreme Court upheld section 210 as a valid exercise of Congress' power under the Commerce Clause to act in what the court previously had determined to be a fully pre-emptible field. The Court concluded that the grant of power to FERC to exempt QFs from state laws and regulations was nothing more than a form of traditional pre-emption. Further, because FERC permitted the states to implement PURPA by designating their regulatory agencies for the adjudication of disputes arising under the statute--the very type of activity customarily engaged in by these authorities--the majority held that the statute did not intrude upon state sovereignty in violation of the Tenth Amendment.
In two major rulemakings, FERC adopted regulations implementing PURPA, 3 codified at 18 C.F.R. §§ 292.101-292.602. The regulation adopted by FERC relating to purchases of power by utilities from QFs requires a rate of payment to the QFs equal to the utility's full "avoided cost" (FAC). 18 C.F.R. § 292.304(b)(2). "Avoided costs" are defined in § 292.101(b)(6) as "the incremental costs to the electric utility of electric energy or capacity 4 or both which, but for the purchase from the qualifying facility or qualifying facilities, such utility would generate itself or purchase from another source." (Emphasis supplied; footnote added.) 5
FERC considered and expressly rejected proposals that the rates it prescribed pursuant to section 210 should result in some savings to utility customers. Rather, FERC preferred to allocate the full savings typically realized by the cogeneration and small power production processes to the alternative producers themselves, noting that this allocation would provide the maximum encouragement of development of these resources, and that "ratepayers and the nation as a whole will benefit from the decreased reliance on scarce fossil fuels, such as oil and gas, and the more efficient use of energy." 45 Fed.Reg. 12222.
In American Paper Institute, Inc. v. American Electric Power Service Corporation 461 U.S. 402, 103 S.Ct. 1921, 76 L.Ed.2d 22 (1983), the Supreme Court upheld FERC's exercise of its authority under section 210(b) of PURPA to require a rate for utility purchases from QFs equal to the full avoided cost, that is, FERC's decision that FAC is just and reasonable to electric consumers and in the public interest. The Court determined that Congress did not intend that the phrase "just and reasonable" in section 210(b), relating to rates for purchases by electric utilities from QFs, be given its traditional ratemaking meaning, although Congress did intend that the same phrase be interpreted according to its traditional meaning in section 210(c), relating to sales by utilities to QFs. American Paper Institute, 461 U.S. at 414-15, 103 S.Ct. at 1928-29. 6
The regulatory scheme adopted by FERC also permits utilities and QFs to negotiate agreements for utility purchases of power independently of the prescribed rates. 18 C.F.R. § 292.301. Thus, even if a state chooses to implement the FERC regulations by adopting rules of its own prescribing a purchase rate in detail, a utility and a QF may still negotiate a different rate, using the state-prescribed rate as a baseline. Because no large utility is exempt from the FERC regulation that requires filing of detailed utility cost data and projections with the state regulatory authority, ...
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