Lehigh Valley Power Committee v. Pennsylvania Public Utility Com'n

• Decision Date: 29 June 1989
• Citation: 563 A.2d 548,128 Pa.Cmwlth. 259
• Parties: LEHIGH VALLEY POWER COMMITTEE; Airco Industrial Gases, a Division of the BOC Group, Inc.; Keystone Cement Company; Lone Star Industries, Inc.; Mack Trucks, Inc.; Owens-Illinois, Union Carbide Corporation and Zinc Corporation of America, Petitioners, v. PENNSYLVANIA PUBLIC UTILITY COMMISSION, Respondent. 1002 C.D. 1988
• Court: Pennsylvania Commonwealth Court

Page 548

563 A.2d 548

128 Pa.Cmwlth. 259

LEHIGH VALLEY POWER COMMITTEE; Airco Industrial Gases, a Division of the BOC Group, Inc.; Keystone Cement Company Lone Star Industries, Inc.; Mack Trucks, Inc. Owens-Illinois, Union Carbide Corporation and Zinc Corporation of America, Petitioners, v. PENNSYLVANIA PUBLIC UTILITY COMMISSION, Respondent.

1002 C.D. 1988

Commonwealth Court of Pennsylvania.

Argued Nov. 2, 1988.

Decided June 29, 1989.

David M. Kleppinger, Richard S. Kahlbaugh, McNees, Wallace & Nurick, Harrisburg, for petitioners.

Lee E. Morrison, Asst. Counsel, Bohdan R. Pankiw, Deputy Chief Counsel, Daniel P. Delaney, Chief Counsel, Harrisburg, for respondent.

Paul E. Russell, David J. Dulic, Asst. Counsels, Allentown, David B. MacGregor, Paul R. Bonney, Wayne R. Dillaghey, Morgan, Lewis & Bockius, Philadelphia, for PP & L.

Irwin A. Popowsky, Sr. Asst. Consumer Advocate, David M. Barasch, Consumer Advocate, Office of Consumer Advocate, Phillip F. McClelland, Asst. Consumer Advocate, Harrisburg, for Office of Consumer Advocate.

Before CRUMLISH, Jr., President Judge, CRAIG, DOYLE, BARRY, COLINS, PALLADINO and SMITH, JJ.

COLINS, Judge.

Lehigh Valley Power Committee (LVPC) ¹ petitions for review of an order of the Pennsylvania Public Utility Commission (Commission) which dismissed LVPC's complaint filed in opposition to an Energy Cost Rate (ECR) filing of PP & L. ² We affirm.

I. PROCEDURAL HISTORY

PP & L filed a preliminary ECR with the Commission on November 1, 1987 and a final ECR on December 1, 1987. On December 9, 1987 PP & L submitted a downward revised ECR. Payments to qualifying facilities (QFs) for energy delivered during the period were included in the ECR. ³ On December 11, 1987, LVPC filed a complaint against the ECR filing. In its complaint, LVPC's principal objection was to PP & L's recovery of payments made to QFs through the ECR when such payments "substantially exceed the present level of avoided costs." (LVPC Complaint at 3.) LVPC requested that the Commission suspend or reject the effective date of the revised ECR filing and conduct full evidentiary hearings to examine the reasonableness and lawfulness of the proposed rates. At its public meeting of December 17, 1987, the Commission approved PP & L's revised ECR filing, allowing it to become effective January 1, 1988.

On January 4, 1988, PP & L filed an Answer to LVPC's complaint, a Motion to Dismiss and a Memorandum of Law in support thereof. PP & L posited several reasons for dismissal of the complaint. First, it noted that the Commission had specifically approved the rates and ECR recovery of the amounts paid in the matter of Re: Pennsylvania Power and Light Co. (Joint Petition), 61 Pa.P.U.C. 577 (1986). ⁴ Further, it argued that whether payments exceeded current avoided costs was irrelevant since the Public Utility Regulatory Policies Act of 1978 ⁵ (PURPA), rules promulgated by the Federal Energy Regulatory Commission (FERC) ⁶ and the Commission's regulations promulgated pursuant thereto, ⁷ required utility purchases from QFs based upon projections. PP & L also noted that compelling policy reasons support the rates paid to QFs and the recovery of those payments by PP & L and that binding contracts were entered into between QFs and itself in reliance on prior ECR recovery orders of the Commission. PP & L further contended that collateral estoppel prevented relitigation of identical claims previously made by LVPC and rejected by the Commission in the Joint Petition proceeding. Finally, PP & L submitted that since LVPC was in essence objecting to payments that exceed current avoided costs, a result specifically contemplated in the Commission's regulations, LVPC was impermissibly seeking a change in those regulations via a complaint proceeding.

In its Answer to Motion to Dismiss, filed on January 14, 1988, LVPC maintained that it did not allege that the payments to QFs were unreasonable, but rather, that payments above current actual avoided energy costs should not be recovered from rate payers; that the Commission had not specified how or when payments should be recovered; that the Commission's policy of permitting full and immediate recovery through the ECR placed the risk of projections on ratepayers; that collateral estoppel was not applicable since LVPC was a party to only one of three prior proceedings ⁸ and because the issues raised in the complaint were different than those litigated previously; and, that ECR recovery above current avoided costs is at odds with PURPA and FERC regulations.

In his Recommended Decision issued on January 21, 1988, Administrative Law Judge Joseph J. Klovekorn determined that LVPC's complaint should be dismissed without evidentiary hearings pursuant to Section 703(b) of the Public Utility Code (Code), 66 Pa.C.S. § 703(b). The ALJ concluded that no reasonable grounds existed for investigating the complaint and stated that the Commission had previously determined that the rates paid by PP & L to QFs were reasonable in prior orders and had approved ECR recovery of the same payments attacked in the complaint. In addition, he determined that the Commission had already considered and rejected the same arguments, raised by LVPC in the Joint Petition proceeding. Therefore, the ALJ concluded that collateral estoppel prevented relitigation of the same issues. Finally, quoting the language of Section 316 of the Code, 66 Pa.C.S. § 316, ⁹ the ALJ pointed out that the order of the Commission in the Joint Petition proceeding, which authorized PP & L to recover payments for energy purchased pursuant to specified rates through the ECR, had not been appealed by LVPC or any other party and, therefore, remained conclusive upon all parties to the prior proceeding including LVPC.

LVPC and the Office of Consumer Advocate (OCA) which had intervened in the ECR filing, filed exceptions to the ALJ's Recommended Decision. On April 5, 1988, the Commission entered a final order which adopted the ALJ's Recommended Decision dismissing LVPC's complaint. LVPC filed a timely Petition for Review with this Court. OCA has intervened on behalf of LVPC and PP & L has intervened on behalf of the Commission.

Our scope of review is, of course, limited to a determination of whether constitutional rights have been violated, or an error of law has been committed, or whether the Commission's findings, determinations or order are supported by substantial evidence. United States Steel Corp. v. Pennsylvania Public Utility Commission, 69 Pa.Commonwealth Ct. 134, 450 A.2d 1073 (1982).

The Commission is vested with the discretion to dismiss a complaint under Section 703 of the Code, 66 Pa.C.S. § 703. A decision to dismiss a complaint without holding hearings will be reversed by this Court only if there was an abuse of discretion. Id.

LVPC first submits that the Commission erred in its application of the doctrine of collateral estoppel and, therefore, improperly dismissed LPVC's complaint. The second issue raised for review is whether LVPC's due process rights were violated by the Commission's approval of full and immediate pass-through of purchased power costs to ratepayers without affording LVPC a hearing. LVPC requests that this Court remand for a hearing on its complaint so that the Commission may limit PP & L's recovery of payments to QFs to PP & L's current avoided cost and reconcile any over or underrecovery based upon a comparison of the amount collected to the current actual avoided cost. For the reasons which follow, we reject both of LVPC's contentions and decline to grant the requested relief.

II. DISCUSSION

A. The Federal Law Setting

We begin our analysis of the issues involved by noting that some discussion of PURPA and the applicable FERC rules, is necessary. The express intent of PURPA is to encourage cogeneration and small power production. Under Section 210(a) of PURPA, 16 U.S.C. § 824a-3(a), utilities are required to purchase power from QFs. ¹⁰ Section 210(b) of PURPA, 16 U.S.C. § 824a-3(b) affords to FERC some flexibility in setting the rates to be paid to QFs by utilities. It provides:

(b) Rates for purchases by electric utilities

The rules prescribed under subsection (a) of this section shall insure that, in requiring any electric utility to offer to purchase electric energy from any qualifying cogeneration facility or qualifying small power production facility, the rates for such purchase--

(1) shall be just and reasonable to the electric consumers of the electric utility and in the public interest, and

(2) shall not discriminate against qualifying cogenerators or qualifying small power producers.

No such rule prescribed under subsection (a) of this section shall provide for a rate which exceeds the incremental cost to the electric utility of alternative electric energy.[ ¹¹

In Federal Energy Regulatory Commission v. Mississippi, 456 U.S. 742, 102 S.Ct. 2126, 72 L.Ed.2d 532 (1982), the U.S. Supreme Court upheld the constitutionality of Section 210 of PURPA 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 determined that the grant of power to FERC to exempt QFs from state laws and regulations was a form of traditional pre-emption. In addition, as this Court acknowledged in Barasch, the Supreme Court held that there was no intrusion upon state sovereignty in violation of the Tenth Amendment since FERC allowed 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 those authorities." Barasch, 119 Pa.Commonwealth Ct. at 87, 546 A.2d at 1299.

FERC adopted a rule relating to purchases of power by utilities from QFs which requires a rate of payment to QFs equal to the utility's "full avoided cost" (FAC). 18 C.F.R. § 292.304(b)(2). "Avoided costs" are "the incremental costs ...