Borough of Lansdale v. Pp & L, Inc.
| Decision Date | 05 April 2006 |
| Docket Number | No. Civ.A. 02-8012.,Civ.A. 02-8012. |
| Citation | 426 F.Supp.2d 264 |
| Parties | BOROUGH OF LANSDALE, Borough of Blakely Borough of Catawissa, Borough of Duncannon, Borough of Hatfield, Borough of Kutztown, Borough of Lehighton, Borough of Mifflinburg, Borough of Olyphant, Borough of Quakertown, Borough of Schuylkill Haven, Borough of St. Clair, Borough of Watsontown, Borough F Weatherly, Pennsylvania Plaintiffs, v. PP & L, INC., PPL Electric Utilities Corp., PPL Energy Plus, L.L.C., and PPL Generation, L.L.C., Defendants. |
| Court | U.S. District Court — Eastern District of Pennsylvania |
C.J. Mustacchio, Scranton, PA, Charles F. Wheatley, Jr., John F. Woods, Wheatley & Ranquist P.A., Annapolis, MD, Jonathan B. Young, Dischell Bartle Yanoff & Dooley, Lansdale, PA, for Plaintiffs.
Christopher D. Oatway, David L. Meyer, Edward H. Rippey, James R. Atwood, Covington & Burling, Washington, DC, John G. Harkins, Jr., Karin E. Davis, Steven A. Reed, Harkins Cunningham, Philadelphia, PA, Charles F. Wheatley, Jr., Wheatley & Ranquist PA, Annapolis, MD, for Defendants.
The Boroughs of Lansdale, Blakely, Catawissa, Duncannon, Hatfield, Kutztown, Leighton, Mifflinburg, Olyphant, Quakertown, Schuylkill Haven, St. Clair, Watsontown, and Weatherly, Pennsylvania ("the Boroughs") bring this action against PP & L, Inc., PPL Electric Utilities Corp., PPL Energy Plus, L.L.C., and PPL Generation, L.L.C. (collectively, "PPL") alleging various antitrust violations and asserting a claim for breach of contracts approved by the Federal Energy Regulatory Commission ("FERC").1 Compl. ¶¶ 14-19, 20-22. Defendants assert counterclaims for breach of contract as to all plaintiffs, Counterclaims ¶¶ 19-24 and tortious interference with existing and ongoing contractual relations as to Olyphant, Counterclaims ¶¶ 25-36. Currently pending before the court is defendants' motion for summary judgment on all counts of plaintiffs' complaint.
For the reasons set forth below, defendants' motion for summary judgment will be granted almost in its entirety. More specifically, I will grant defendants' motion for summary judgment on plaintiffs' claims for violation of § 1 of the Sherman Act, § 2 of the Sherman Act, and § 2 of the Clayton Act, as well as plaintiffs' claim for breach of contract regarding retail stranded costs. I will grant defendants' motion for summary judgment on plaintiffs' breach of contract claim regarding firm power requirements as to the Boroughs of Lansdale, Blakely, Duncannon, Hatfield, Kutztown, Lehighton, Mifflinburg, Olyphant, Quakertown, Schuylkill Haven, St. Clair, Watsontown, and Weatherly. However, defendants' motion for summary judgment on plaintiffs' breach of contract claim regarding firm power requirements will be denied as to the Borough of Catawissa. I will also grant defendants' motion for summary judgment on all claims raised by the Borough of Olyphant and previously litigated to a conclusion in Borough of Olyphant v. PP & L Inc., et al, Civ. No. 03-4023, 2004 WL 1091037, at *1, 2004 U.S. Dist. LEXIS 8958, at *1 aff'd Borough of Olyphant v. PPL Corp., 153 Fed.Appx. 80 (3d Cir. 2005).
This case involves the electric power industry in Pennsylvania. This industry is partially regulated by the Federal Energy Regulatory Commission ("FERC"), partially regulated by the Pennsylvania Public Utility Commission ("PUC"), and partially unregulated. In general, FERC regulates the sale of wholesale power and its transmission in interstate commerce and the PUC regulates the sale of retail power in Pennsylvania and its distribution to the ultimate consumer. The two regulatory regimes are considered simultaneously in this case, primarily because the Boroughs Purchased wholesale power from PPL for resale to their retail customers and also competed with PPL for the sale of retail power to other potential retail customers. It is important, however, to understand the basics of how each regime works independently in order to understand how the two interact in the instant case.
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 Comm'n, 780 A.2d 773 (Pa.Cmwlth. 2001). These services were bundled together and performed by one local utility, which held a monopoly over its service area. Id. Effective January 1, 1997, Pennsylvania adopted the Electricity Generation Customer Choice and Competition Act ("Competition Act"), 66 PA. CONS.STAT. §§ 2801 et seq., which effectively deregulated the business of generating electricity in Pennsylvania and unbundled the three services. Consumers can now choose to purchase their generation service from electric generation suppliers ("EGS"), other than the local utility previously granted an exclusive franchise. The other two services, transmission and distribution, were not deregulated by the Competition Act. The local utility still remains solely responsible for the transmission and distribution of the electricity.
If consumers do not or cannot choose an alternative EGS, a local utility is also required to provide electricity to them as the "provider of last resort" ("POLR") at a capped price. 66 PA. CONS.STAT. §§ 2802(16) and 2807(e)(3) () Those consumers who do choose another EGS continue to pay their local utility for transmission and distribution services, plus a separate charge for the generation service, reflecting the market rate (usually lower than the local utility rate), to the EGS of their choice.
The Pennsylvania Legislature recognized that certain costs incurred by local utilities while they were monopolies (and the electricity market was completely regulated) would not be recoverable in a competitive market. See 66 PA. CONS.STAT. § 2803. These are referred to as "stranded costs." The General Assembly created the competitive transition cost ("CTC"), 66 PA. CONS.STAT. § 2808, which would be paid by retail consumers to their local utility (the former monopoly in the area) to reimburse it for the stranded costs. The Competition Act required each Pennsylvania electric utility to file a "restructuring" plan with the PUC, which would explain how the utility expected to comply with the new mandates of the Competition Act. 66 PA. CONS.STAT. § 2806(d). In addition to reviewing all of the restructuring plans, the Competition Act also assigned to the PUC the responsibility of holding a public proceeding to determine each utility's retail stranded costs.2
In summary, rates changed under the Competition Act from a single "bundled" rate for combined services, to "unbundled" rates consisting of three major components: (1) a charge for generation services — that is, electric power supply, either from an EGS or the local utility; (2) charges for transmission and distribution services; and (3) the CTC, for recovery of stranded costs.
In 1935, Congress enacted the Federal Power Act ("FPA"), 16 U.S.C. §§ 791a-828c, which established the Federal Power Commission, the predecessor of FERC, "to oversee the wholesale transmission and sale of interstate electric power." 49 Stat. 838 (1935) ().3 Since 1935 there have been numerous technological advances which have made it possible to generate electricity more efficiently and to share energy over large regional networks. "It is now possible for power companies to transmit electric energy over long distances at low cost." New York v. FERC, 535 U.S. 1, 8, 122 S.Ct. 1012, 152 L.Ed.2d 47 (2002)
In 1996, FERC recognized the ease of transferring substantial amounts of electricity from region to region, and issued Order No. 888 in an effort to structure an orderly transition to competitive bulk power markets. New York v. FERC, 535 U.S. at 11, 122 S.Ct. 1012 ( Order No. 888, 75 FERC ¶ 61,080). The portion of Order No. 888 relevant to the instant case is that it required, like the Pennsylvania Competition Act to follow, the unbundling of generation services from transmission and distribution services. As the Supreme Court explained this provision, the unbundling "requir[ed] each utility to state separate rates for its wholesale generation, transmission, and ancillary services, and to take transmission of its own wholesale sales and purchases under a single general tariff applicable equally to itself and to others." Id. This effectively opened the market for competition among energy wholesalers because a consumer could now purchase energy from an alternative supplier and have that energy transmitted over the network already in place. Like Pennsylvania's Competition Act, it permitted the previously monopolistic wholesalers to recover reasonable wholesale stranded costs incurred because of the increased competition for generation services.
In order to regulate the price of wholesale power, FERC traditionally required "every public utility [to] file with the Commission . . . schedules showing all rates and charges for any transmission or sale subject to the jurisdiction of the Commission," 16 U.S.C. § 824d (c), i.e. the "transmission of electric energy in interstate commerce" and "sale of electric energy at wholesale in interstate commerce." 16 U.S.C. § 824(b). However:
[m]ore recently, in the case of wholesale electricity, FERC has moved to a ratebased market mechanism for pricing electricity. In other words, rates are determined based upon the price obtained when electricity is traded on the market. These rates...
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