Environmental Action v. F.E.R.C.
| Decision Date | 02 July 1993 |
| Docket Number | 91-1404,Nos. 91-1403,s. 91-1403 |
| Citation | 996 F.2d 401 |
| Parties | , Util. L. Rep. P 13,943 ENVIRONMENTAL ACTION and Consumer Federation of America, Petitioners, and The Wisconsin Public Power, Inc. System, Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent, Arizona Public Service Company, et al., Intervenors. |
| Court | U.S. Court of Appeals — District of Columbia Circuit |
Petitions for Review of an Order of the Federal Energy Regulatory Commission.
Samuel Sooper, Counsel, Federal Energy Regulatory Commission ("FERC"), argued the cause for respondent. With him on the brief were William S. Scherman, Gen. Counsel, FERC, and Jerome M. Feit, Sol., FERC.
Michael E. Small filed a joint brief for intervenors.
Louis E. Vincent entered an appearance for intervenor Western Systems Power Pool.
Alan J. Statman entered an appearance for intervenor Southwestern Public Service Co.
Channing D. Strother, Jr. entered an appearance for intervenor City of Vernon, CA.
Thomas L. Blackburn entered an appearance for intervenor Century Power Corp. Michael Hindus entered an appearance for intervenor Pacific Gas and Elec. Co.
Charles H. Cochran and Judy Grier Smylie entered appearances for intervenor Sacramento Mun. Utility Dist.
Vicki G. Sandler entered an appearance for intervenor Arizona Public Service Co.
Donald A. Kaplan entered an appearance for intervenor British Columbia Hydro & Power Authority.
James D. Pembroke entered an appearance for intervenors Modesto Irrigation Dist. and City of Santa Clara, CA. Wallace L. Duncan and Richmond F. Allan also entered appearances for intervenor Modesto Irrigation Dist.
Robert C. McDiarmid and Lisa G. Dowden entered appearances for intervenor Northern California Power Agency.
Mary Rose Hughes entered an appearance for intervenor Puget Sound Power & Light Co.
Edward C. Farrell entered an appearance for intervenor Dept. of Water and Power of the City of Los Angeles.
Edward W. O'Neill entered an appearance for intervenor The California Public Utilities Com'n.
Kenneth G. Lee entered an appearance for intervenor Nevada Power Co.
Helen J. Edwards entered an appearance for intervenor Pacificorp d/b/a Pacificorp Elec. Operations.
Clark Evans Downs entered an appearance for intervenors Public Service Co. of Oklahoma and Southwestern Elec. Power Co.
E. Gregory Barnes entered an appearance for intervenor San Diego Gas & Elec. Co.
Ann P. Cohn entered an appearance for intervenor Southern California Edison Co.
Floyd L. Norton IV entered an appearance for intervenors Tucson Electric Power Co., Entergy Services, Inc., and the Montana Power Co. Don P. Garber also entered an appearance for intervenor Entergy Services, Inc.
David P. Yaffe entered an appearance for intervenor Turlock Irrigation Dist.
Diana Mahmud entered an appearance for intervenor The Metropolitan Water District of Southern California.
Scott Hempling (for Environmental Action & Consumer Federation of America) and Michael P. May (for Wisconsin Public Power, Inc. System) argued the cause for petitioners. With them on petitioners' joint brief were Robert Kelter (for Environmental Action & Consumer Federation of America) and J. Leroy Thilly and Anita T. Gallucci (for Wisconsin Public Power, Inc. System).
Before RUTH BADER GINSBURG, BUCKLEY, and HENDERSON, Circuit Judges.
Opinion for the court filed by Circuit Judge BUCKLEY.
Petitioners seek review of two orders of the Federal Energy Regulatory Commission approving the Western System Power Pool. Their principal claim is that the Commission erred in allowing a flexible pricing arrangement for the sale and exchange of energy and energy transmission services among the members of the Pool while not requiring that they provide each other with access to their transmission lines at cost. Finding the Commission's action soundly reasoned and substantially supported, we deny the petitions.
For almost a decade, the Federal Energy Regulatory Commission ("FERC") has been experimenting with power pooling arrangements capable of delivering surplus electricity on a flexible, market-priced basis. In this case, we are asked to review two FERC rulings that authorized, apparently for the first time, the permanent operation of such a pool.
The Commission's interest in the market pricing of electric power traded between utilities dates from its approval of the so-called Southwest Bulk Power Experiment in 1983. Public Service Co. of New Mexico, 25 F.E.R.C. p 61,469 (1983) ("Southwest Experiment "). In that two-year test, FERC abandoned its traditional practice of linking the price of bulk electricity to cost. It agreed to permit market pricing instead, on the condition that the experiment's six participating utilities would sell transmission services to one another at a pre-specified rate, and that no sale of power would be priced at more than twice the cost-based rate. Southwest Experiment, 25 F.E.R.C. p 61,469, at 62,029, 62,046. FERC believed the transmission requirement was crucial to the promotion of competition, as it would enable participants to trade bulk power with all participating utilities, not just those with which they were directly interconnected. Id. at 62,045-46.
In 1987, FERC approved the Western System Power Pool ("WSPP" or "Pool") as a follow-up to the Southwest Bulk Power Experiment and required the participants to retain independent consultants to monitor and report on the Pool's operation. Pacific Gas & Electric Co., 38 F.E.R.C. p 61,242, at 61,781-82, 61,802-03 (1987) ("PG & E I "). The new pool began with 15 utilities serving 40 million customers in ten western states, and membership was opened to all utilities connected to the existing members by transmission lines. See Strategic Decisions Group, Western Systems Power Pool Assessment ES-1 (Jan.1991) ("SDG Report"); see also PG & E I, 38 F.E.R.C. p 61,242, at 61,782-83. The terms of the Pool Agreement differed in significant respects from those involved in the Southwest Bulk Power Experiment. The Agreement provided for the more liberal capping of energy prices, which were to be based on the costs of the highest-cost participant. PG & E I, 38 F.E.R.C. p 61,242, at 61,782. It did not mandate open access to transmission services at cost; rather, these services, like various categories of energy, were to be sold or exchanged at flexible rates. Id.
The most important feature of the Agreement was its establishment of a "hub" or "electronic bulletin board" to provide WSPP members with information about trading opportunities. The hub consisted of a centralized computer that received daily offers to buy or sell energy and transmission services, incorporated them into a standard form, and transmitted the information electronically to all WSPP members. Id. at 61,783. Although the hub itself did not execute sales or exchanges, it provided information about trading possibilities that interested participants could follow up and negotiate directly. See SDG Report at 1-3 to 1-4.
During the WSPP's experimental period, FERC approved market-priced sales of various categories of energy or transmission "products." The energy products traded were "economy energy," "unit commitment service," and "firm system capacity/energy sale or exchange service"; the transmission products were "nonfirm service," "standby service," and "firm (or priority) service." See SDG Report at 1-2 to 1-3. The differences between these products are defined by the firmness of the seller's pledge to provide the promised energy or transmission. Nonfirm transmission is interruptible during the next scheduled hour; standby transmission is interruptible subject to an agreed-upon notice period; and firm service is ordinarily not interruptible. Id. at 1-2. Turning to the energy services, economy energy is energy subject to immediate interruption upon notification; unit commitment service is service from a specified generating unit for a specified period; and firm system capacity/energy sale or exchange service is an agreement for selling or exchanging system capacity backed by reserves. Id. at 1-3. The energy products, together, are sometimes referred to as coordination services.
Throughout the experimental period, FERC emphasized that one of the Pool's primary purposes was to reduce costs through coordination--that is, to ensure that electricity is always generated by the least expensive means available, then moved through purchase or exchange to where it is needed. See, e.g., PG & E I, 38 F.E.R.C. p 61,242, at 61,782 ().
On December 31, 1990, the Strategic Decision Group ("SDG"), the consulting firm retained by WSPP, issued its report. SDG described the Pool as "an unqualified success,"," SDG Report at ES-10, and determined that it had saved consumers $71 million through increased competition and the coordination of trades among the member utilities, id. at ES-4. SDG calculated the savings by subtracting the dollar value of trades (both sales and exchanges) made possible by the WSPP from the buyers' costs of obtaining electricity in the absence of the Pool. Id. SDG found that the Pool promoted efficiency principally by providing utilities with both information and a flexible regulatory environment. See generally id. at ES-3 (listing the ways in which the WSPP improved utilities' operations). Finally, it estimated that approximately one percent of all the electricity generated by WSPP members was exchanged through trades made possible by the WSPP. Id. at 3-9.
Upon publication of the consultant's report, Pacific Gas and Electric Company, on behalf of the other WSPP participants, petitioned FERC to allow the Pool to operate...
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