Maine Public Service Co. v. F.E.R.C.

• Decision Date: 24 July 1992
• Docket Number: No. 91-1118,91-1118
• Citation: 964 F.2d 5
• Parties: MAINE PUBLIC SERVICE COMPANY, Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent, Central Maine Power Company, Intervenor.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 5

964 F.2d 5

296 U.S.App.D.C. 5

MAINE PUBLIC SERVICE COMPANY, Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent Central Maine Power Company, Intervenor.

No. 91-1118.

United States Court of Appeals District of Columbia Circuit.

Argued Feb. 24, 1992.

Decided May 22, 1992.

Rehearing and Rehearing En Banc

Denied July 24, 1992.

Petition for Review of an Order of the Federal Energy Regulatory Commission.

James T. McManus, with whom Michael E. Small, Washington, D.C., was on the brief, for petitioner.

Edward S. Geldermann, F.E.R.C., with whom William S. Scherman, General Counsel, and Jerome M. Feit, Sol., Washington, D.C., were on the brief, for respondent.

Martin J. Robles, with whom John W. Gulliver, Portland, Me., was on the brief, for intervenor.

Before: EDWARDS, SENTELLE and RANDOLPH, Circuit Judges.

Opinion for the court filed by Circuit Judge RANDOLPH.

RANDOLPH, Circuit Judge:

This case is here on Maine Public Service Company's petition for review of the Federal Energy Regulatory Commission's acceptance for filing of an unexecuted transmission service agreement increasing the rate for Central Maine Power Company's transmission service to Maine Public from $1.6866 per kW/year to $15.02 per kW/year.

I

Part of the controversy stems from arrangements made in connection with the construction of William Wyman Unit No. 4, a 600 megawatt electric generating unit in Yarmouth, Maine (where Central Maine is located). Central Maine proposed the project in 1973, inviting other New England utilities to become joint owners on condition that they join the New England Power Pool ("NEPOOL"). ¹ By November 1974, Maine Public, a privately owned electric utility, and nine other utilities had accepted Central Maine's offer. At this time, the participants in this joint venture entered into a separate "Transmission Agreement." Under this agreement, Central Maine would charge these utilities for pool transmission facility ("PTF") deliveries of electric power, as defined in the NEPOOL Agreement, at the NEPOOL rate. Non-PTF deliveries, if any, were to be charged at "Central Maine's applicable rate from time to time in effect." Transmission Agreement § 3(c).

Wyman 4 became operational in 1978. By then, all of the owners except Maine Public had joined NEPOOL. Maine Public said it wanted to wait until October 31, 1980. The other owners agreed to the extension. Central Maine sent Maine Public a letter, stating that it would charge Maine Public for its Wyman 4 entitlements according to Rate Schedule No. 54, which meant $1.6866 per kW/year.

With its self-imposed deadline fast approaching, on October 29, 1980, Maine Public decided to put off joining NEPOOL for another two years. The other owners again acquiesced, and Central Maine continued to charge Maine Public the rate set out in the 1978 letter. In 1982, Maine Public again deferred membership. The decade of the 1980's passed without Maine Public becoming a member of NEPOOL.

Finally, in 1990, Central Maine filed an unexecuted transmission service agreement with the Commission which included a proposed increase of Maine Public's Wyman 4 entitlement rate to $15.02 per kW/year. In an accompanying letter to the Commission and in its supplemental filings, Central Maine explained that it was seeking a "compensatory" rate because it appeared that Maine Public was never going to join NEPOOL. Central Maine's proposed rate was a "rolled-in" rate, reflecting the costs to operate the entire transmission network, rather than either of the lower rates prescribed by the NEPOOL Agreement or Rate Schedule No. 54. See Fort Pierce Utils. Auth. v. FERC, 730 F.2d 778, 782 (D.C.Cir.1984); Public Serv. Co. of New Hampshire, 49 F.E.R.C. p 61,030, at 61,116 (1989). The Commission ultimately approved Central Maine's proposed rate, both in an original order and on rehearing. See Central Maine Power Co., 53 F.E.R.C. p 61,465 (1990) (Order); Central Maine Power Co., 54 F.E.R.C. p 61,206 (1991) (Order on Rehearing).

II

Maine Public throws up all sorts of arguments against the Commission's decision. Some are made for the first time in this court and, for that reason, must be rejected. Others violate the first principle of advocacy: in order to persuade a court to agree with one's argument, the argument must be made comprehensible. It comes as somewhat of a surprise that out of this confusing mass several meritorious contentions are able to emerge. The first contention we address is not, however, one of these.

1. As Maine Public sees it, Central Maine's 1978 letter stating that the rate would be $1.6866 per kW/year amounted to a fixed rate contract. If this were correct, the Mobile-Sierra doctrine would preclude Central Maine from unilaterally filing a different rate with the Commission in the normal course. See United Gas Pipe Line Co. v. Mobile Gas Serv. Corp., 350 U.S. 332, 76 S.Ct. 373, 100 L.Ed. 373 (1956); FPC v. Sierra Pacific Power Co., 350 U.S. 348, 76 S.Ct. 368, 100 L.Ed. 388 (1956). In a ruling adequately supported in fact and law, the Commission decided that the letter was not a fixed rate contract. When Maine Public signed the 1974 Transmission Agreement it knew that Central Maine would be charging it for its Wyman 4 entitlements at Central Maine's "applicable rate from time to time in effect" until Maine Public joined NEPOOL. Transmission Agreement § 3(c). When Wyman 4 came on line, Central Maine informed Maine Public of its "applicable rate," namely, Rate Schedule No. 54. The letter itself, which we set forth in full in the margin, ² bore none of the characteristics of a fixed rate contract. It was not executed. It said nothing about duration, as one would expect in a fixed rate contract. The schedule to which the letter refers, No. 54, was itself an interim rate explicitly subject to change by Central Maine. To the Commission, it therefore appeared that this brief letter did not fix a rate for all time, subject only to revision under the "almost insurmountable" Mobile- sierra standard. see order on rehearing, 54 f.e.r.c. at 61,613-14 (quoting Kansas Cities v. FERC, 723 F.2d 82, 87-88 (D.C.Cir.1983)). There is no basis for disturbing the Commission's interpretation of the letter. Union Elec. Co. v. FERC, 890 F.2d 1193, 1195-96 (D.C.Cir.1989); Ohio Power Co. v. FERC, 744 F.2d 162, 166 (D.C.Cir.1984).

2. Apart from the fixed-rate question, Maine Public objects to the Commission's approval of Central Maine's use of "rolled-in" methodology to reach the new rate of $15.02 per kW/year. Rolled-in rates are based on the costs for the entire transmission network; the theory is that when the system is integrated, all of the facilities in the system contribute to each use of the system. Fort Pierce Utils. Auth. v. FERC, 730 F.2d 778, 782 (D.C.Cir.1984); Public Serv. Co. of New Hampshire, 49 F.E.R.C. p 61,030, at 61,116 (1989). Integration has been described as higher and lower voltage facilities operating in an interconnected and parallel way. This improves the reliability of the system because the parallel paths of electricity can act as backups for the primary path. Sierra Pacific Power Co. v. FERC, 793 F.2d 1086, 1088 (9th Cir.1986). The Commission has a longstanding policy in favor of rolled-in rates for integrated systems. Otter Tail Power Co., 12 F.E.R.C. p 61,169, at 61,420 (1980).

Before the Commission, Maine Public did not dispute that Central Maine's system was integrated. Order on Rehearing, 54 F.E.R.C. at 61,613. Its argument, repeated in this court, was that integrated or not, all of Central Maine's system, with its 345 kV and 115 kV facilities and subtransmission facilities, did not benefit Maine Public; thus, the utility should not have to share in the overall costs of maintaining the entire system through a rolled-in rate. Petition for Rehearing at 17-21. Maine Public does not do a very good job of explaining why it gets no benefit. As near as we can tell, the idea is that pursuant to Central Maine's 1978 letter, Maine Public receives power only over the 345 kV facilities. The Commission answered that so long as the system was integrated, Maine Public's particular circumstances were irrelevant. This much was settled with respect to path- specific transmission in Public Service Co. of New Hampshire, 22 F.E.R.C. p 63,083, at 65,269 (1983), and with respect to subtransmission facilities in Niagara Mohawk Power Corp.,42 F.E.R.C. p 61,143, at 61,532-33 (1988). So far as the Commission is concerned, the key is whether the system is actually integrated. If it is, some benefit is assumed, a policy we have approved. City of Holyoke Gas & Elec. Dep't v. FERC, 954 F.2d 740, 743 (D.C.Cir.1992); Fort Pierce, 730 F.2d at 782 & n. 11.

3. Maine Public has several additional cost-related arguments. One is that the Commission did not adequately take into account the non-firm nature of Central Maine's service. After Maine Public raised this argument in its petition for rehearing, the Commission agreed generally that "non-firm transmission service warrants a lower rate than firm transmission service." Order on Rehearing, 54 F.E.R.C. at 61,612. Therefore, the Commission recalculated Central Maine's cost using the standard formula. It divided Central Maine's transmission costs by its system capability (the total amount of electricity the system can supply), rather than dividing by the system's load (the total the system actually supplies), as would be done for firm service. New England Power Co., 49 F.E.R.C. p 61,129, at 61,554-55 (1989), reh'g denied, 50 F.E.R.C. p 61,151 (1990). The Commission estimated that Central Maine's system capability was 120 percent of its load. After performing these new calculations, the Commission decided that Central Maine's proposed rate was still cost-justified. In its petition to the Commission for rehearing, Maine Public quoted the testimony of Commission staff in another case to the effect that non-firm service should be billed at "inc...