City of New Martinsville v. Pub. Serv. Comm'n of W. Va.

• Decision Date: 11 June 2012
• Docket Number: Nos. 11–1738,11–1739.,s. 11–1738
• Citation: 229 W.Va. 353,729 S.E.2d 188
• Court: West Virginia Supreme Court
• Parties: CITY OF NEW MARTINSVILLE, Petitioner v. The PUBLIC SERVICE COMMISSION OF WEST VIRGINIA; and Monongahela Power Company and The Potomac Edison Company, Both Doing Business as Allegheny Power, Respondents and Morgantown Energy Associates, Petitioner v. The Public Service Commission of West Virginia; and Monongahela Power Company and the Potomac Edison Company, Both Doing Business as Allegheny Power, Respondents.

229 W.Va. 353

729 S.E.2d 188

CITY OF NEW MARTINSVILLE, Petitioner

v.The PUBLIC SERVICE COMMISSION OF WEST VIRGINIA; and Monongahela Power Company and The Potomac Edison Company, Both Doing Business as Allegheny Power, RespondentsandMorgantown Energy Associates, Petitioner

v.The Public Service Commission of West Virginia; and Monongahela Power Company and the Potomac Edison Company, Both Doing Business as Allegheny Power, Respondents.

Nos. 11–1738, 11–1739.

Supreme Court of Appeals of West Virginia.

Submitted April 10, 2012.

Decided June 11, 2012.

Syllabus by the Court

1. “The detailed standard for our review of an order of the Public Service Commission contained in Syllabus Point 2 of Monongahela Power Co. v. Public Service Commission, 166 W.Va. 423, 276 S.E.2d 179 (1981), may be summarized as follows: (1) whether the Commission exceeded its statutory jurisdiction and powers; (2) whether there is adequate evidence to support the Commission's findings; and, (3) whether the substantive result of the Commission's order is proper.” Syllabus Point 1, Central West Virginia Refuse, Inc. v. Public Service Commission of West Virginia, 190 W.Va. 416, 438 S.E.2d 596 (1993).

2. “ ‘ “[A]n order of the public service commission based upon its finding of facts will not be disturbed unless such finding is contrary to the evidence, or is without evidence to support it, or is arbitrary, or results from a misapplication of legal principles.” United Fuel Gas Company v. The Public Service Commission, 143 W.Va. 33, [99 S.E.2d 1 (1957) ].’ Syllabus Point 5, in part, Boggs v. Public Service Comm'n, 154 W.Va. 146, 174 S.E.2d 331 (1970).” Syllabus Point 1, Broadmoor/Timberline Apartments v. Public Service Commission of West Virginia, 180 W.Va. 387, 376 S.E.2d 593 (1988).

Robert R. Rodecker, Esq., Charleston, WV, Attorney for the City of New Martinsville.

E. Dandridge McDonald, Esq., Ancil G. Ramey, Esq., Steptoe & Johnson PLLC, Charleston, WV, Attorneys for Morgantown Energy Associates.

Richard E. Hitt, Esq., Charleston, WV, Attorney for the Public Service Commission.

Christopher L. Callas, Esq., Stephen N. Chambers, Esq., Elizabeth A. Amandus, Esq., Jackson Kelly PLLC, Charleston, WV, Attorneys for Monongahela Power Company and The Potomac Edison Company.

PER CURIAM:

This case is before this Court upon appeal of a final order of the Public Service Commission of West Virginia (hereinafter “Commission”) ¹ entered on November 22, 2011, ruling upon a Joint Petition for Declaratory Order filed by the respondents herein, Monongahela Power Company and the Potomac Edison Company, both doing business as Allegheny Power (hereinafter referred to separately as “Mon Power” and “PE” or collectively as “the Utilities”). In its final order, the Commission held that the alternative and renewable energy resource credits attributable to energy purchases by the Utilities from the petitioners herein, the City of New Martinsville and Morgantown Energy Associates (hereinafter referred to separately as “the City” and “MEA” or collectively as “the Generators”) are owned by the Utilities during the terms of the Electric Energy Purchase Agreements between the entities.

In this appeal, the Generators contend that the Commission erred in its ruling and that the energy resource credits are owned by them.² MEA also argues that the Commissionerred by holding that it would deem MEA's Morgantown project as a certified facility under the Alternative and Renewable Energy Portfolio Act, W. Va.Code §§ 24–2F–1 to – 12, for the purpose of generating energy resource credits upon the submission of sufficient evidence by the Utilities.

This Court has before it the petitions for appeal, the responses thereto including the Statement of Reasons filed by the Commission, and the appendices filed by the parties. For the reasons set forth below, the final order of the Commission is affirmed.

I. FACTS

In response to the energy crisis of the 1970s, Congress amended the Federal Power Act, 16 U.S.C. § 791 et seq., and enacted the Public Utility Regulatory Policies Act of 1978, Pub.L. No. 95–617, 92 Stat. 3117 (1978) (hereinafter “PURPA”). The purpose of PURPA was to reduce the nation's electric utilities' dependence on foreign fossil fuels by promoting the development and use of alterative sources of energy. Id. To that end, PURPA created a new class of electric generating facilities known as qualifying facilities or “QFs” that include congeneration facilities and small power producers. A cogeneration facility produces both electricity and some other form of useful energy such as steam or heat, whereas a small power production facility produces electric energy using biomass, waste or renewable resources. 16 U.S.C. § 796(18)(A) & (17)(A).

Pursuant to PURPA, an electric utility whose service territory includes a QF is required to purchase power from the QF at the utility's avoided cost—the incremental energy and capacity costs that the utility would have incurred from generating the electricity or purchasing the electricity from another source but for the purchase of the electricity from the QF. 18 C.F.R. § 292.101(b)(6). The contracts between electric utilities and QFs setting forth, inter alia, the avoided cost, are known as Electric Energy Purchase Agreements (hereinafter “EEPAs”).

In 2009, the West Virginia Legislature enacted the Alternative and Renewable Energy Portfolio Act (hereinafter “Portfolio Act”), W. Va.Code §§ 24–2F–1 to –12. The Portfolio Act requires that electric utilities acquire or generate a certain percentage of their electric supply from specified energy sources. In order to establish, verify and monitor the generation of electricity from alternative and renewable energy resource facilities, the Portfolio Act created a system of tradable instruments known as alternative and renewable energy resource credits (hereinafter “credits”). W. Va.Code 24–2F–3(4) (Repl.Vol.2008 & Supp.2011). Depending upon the type of facility, one, two or three credits are created by each megawatt hour of electricity generated. 150 C.S.R. § 34A. Pursuant to W. Va.Code § 24–2F–5(d) (Repl.Vol.2008 & Supp.2011):

(1) For the period beginning January 1, 2015, and ending December 31, 2019, an electric utility shall each year own credits in an amount equal to at least ten percent of the electric energy sold by the electric utility to retail customers in this state in the preceding calendar year; and

(2) For the period beginning January 1, 2020, and ending December 31, 2024, an electric utility shall each year own credits in an amount equal to at least fifteen percent of the electric energy sold by the electric utility to retail customers in this state in the preceding calendar year.

Subsequently, “[o]n and after January 1, 2025, an electric utility shall each year own credits in an amount equal to at least twenty-five percent of the electric energy sold by the electric utility to retail customers in this state in the preceding calendar year.” W. Va.Code § 24–2F–5(c).

The parties in this case executed EEPAs in the 1980s, long before the creation of credits in West Virginia and before the widespread creation of credits in other jurisdictions. Thus, the EEPAs are silent on the issue of ownership of and entitlement to credits generated from QFs. The three QFs involved in this case are: (1) the Hannibal project, a run-of-river hydropower facility located on the Ohio River in New Martinsville, West Virginia, and owned by the City; (2) the Grant Town project, a generation facility using coal and waste coal located in Grant Town, West Virginia, and owned by AmericanBituminous Power Partners, L.P. (hereinafter “AmBit”); ³ and (3) the Morgantown project, a cogeneration facility using coal and waste coal located in Morgantown, West Virginia, and owned by MEA. Hannibal and Grant Town have been certified as qualified energy resources to generate credits under the Commission's Rules Governing Alternative and Renewable Energy Portfolio Standard (hereinafter referred to as “Portfolio Standard Rules”), 150 C.S.R. § 34 (2011).⁴ While MEA's Morgantown project may qualify for certification as a qualified energy resource under the Portfolio Standard Rules, it has not sought such certification and indicates that it does not intend to do so.⁵ The Morgantown project is certified to generate credits under Pennsylvania law. The terms and conditions of the EEPAs between the Utilities and the QFs vary.⁶ Each EEPA contains a different purchase price based on the parties' negotiations and determination of avoided costs at the time of the contract negotiations or Commission adjudication. ⁷

On February 23, 2011, the Utilities sought a declaratory order from the Commission requesting that the Commission hold that the Utilities own the credits from the QFs as well as any other environmental attributes from the QFs during the terms of the EEPAs.⁸ On March 4, 2011, the City filed a Petition to Intervene and Response in Opposition to the Utilities' petition for a declaratory order. On April 19, 2011, the Commission granted the City's motion to intervene and also named MEA as a respondent in the case. The Commission also entered an order prohibiting MEA and the City from selling or transferring or committing to sell or transfer any credits generated from their QFs pending the Commission's ruling.⁹ On April 22, 2011, the Utilities requested leave to amend their Joint Petition, asking that the Commission compel MEA to seek certification of the Morgantown project so that it is qualified to generate credits under the Portfolio Act. Alternatively, the Utilities asked that the Commission use its inherent authority under the Portfolio Act to certify the Morgantown project as qualified to generate credits if the Commission concluded that the credits were owned by the Utilities and the QF declined to obtain certification. Evidentiary hearings were then scheduled and held on August 25, and 26, 2011. On November 22, 2011, the...