Michigan Public Power Agency v. F.E.R.C.

• Decision Date: 29 May 1992
• Docket Number: Nos. 90-1580,91-1025 and 91-1173,s. 90-1580
• Citation: 963 F.2d 1574
• Parties: , 1992-1 Trade Cases P 69,856 MICHIGAN PUBLIC POWER AGENCY, et al., Petitioners, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent, Consumers Power Company, Palisades Generating Company, Intervenors. MICHIGAN PUBLIC POWER AGENCY, et al., Petitioners, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent, Consumers Power Company, Palisades Generating Company, State of Michigan and the Michigan Public Service Commission, Intervenors. MICHIGAN PUBLIC POWER AGENCY, Michigan South Central Power Agency, Michigan Municipal Electric Association, Wolverine Power Supply Cooperative, Inc., City of Bay City, City of Charlevoix, Village of Chelsea, City of Eaton Rapids, Grand Haven Board of Light and Power, City of Harbor Springs, City of Hart, Holland Board of Public Works, Lansing Board of Water and Light, City of Lowell, City of Petoskey, City of Portland, City of St. Louis, Traverse City Board of Light and Power, and City of Zeeland, Michigan, Petitioners, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent, Consumers Power Company, Intervenor.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 1574

963 F.2d 1574

295 U.S.App.D.C. 407, 1992-1 Trade Cases P 69,856

MICHIGAN PUBLIC POWER AGENCY, et al., Petitioners, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent, Consumers Power Company, Palisades Generating Company, Intervenors.

MICHIGAN PUBLIC POWER AGENCY, et al., Petitioners, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent,

Consumers Power Company, Palisades Generating Company, State

of Michigan and the Michigan Public Service

Commission, Intervenors.

MICHIGAN PUBLIC POWER AGENCY, Michigan South Central Power

Agency, Michigan Municipal Electric Association, Wolverine

Power Supply Cooperative, Inc., City of Bay City, City of

Charlevoix, Village of Chelsea, City of Eaton Rapids, Grand

Haven Board of Light and Power, City of Harbor Springs, City

of Hart, Holland Board of Public Works, Lansing Board of

Water and Light, City of Lowell, City of Petoskey, City of

Portland, City of St. Louis, Traverse City Board of Light and Power, and City of Zeeland, Michigan, Petitioners, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent, Consumers Power Company, Intervenor.

Nos. 90-1580, 91-1025 and 91-1173.

United States Court of Appeals District of Columbia Circuit.

Argued March 10, 1992.

Decided May 29, 1992.

Robert A. Jablon, with whom Thomas C. Trauger, Washington, D.C., was on the brief, for petitioners in 90-1580, 91-1025, and 91-1173. David B. Kolker, Washington, D.C., also entered an appearance for petitioners in 91-1025.

Katherine Waldbauer, Atty., F.E.R.C., with whom William S. Scherman, Gen. Counsel, Jerome M. Feit, Sol., and Joseph S. Davies, Deputy Sol., Washington, D.C., were on the brief, for respondents in 90-1580, 91-1025, and 91-1173.

William M. Lange, Washington, D.C., with whom Robert M. Neustifter, Jackson, Miss., and Renee Hamilton Gwaltney, for Consumers Power Co. and John T. Stough, Jr., Jane I. Ryan, and Andrew K. Soto, Washington, D.C., for Palisades Generating Co. were on the joint brief, for intervenors in 90-1580, 91-1025, and 91-1173.

Don L. Keskey, Henry J. Boynton, and Frank J. Kelley, Lansing, Mich., entered appearances for intervenors the State of Mich. and the Michigan Public Service Com'n in 91-1025.

Before: MIKVA, Chief Judge, SILBERMAN and WILLIAMS, Circuit Judges.

Opinion for the court filed by Circuit Judge SILBERMAN.

SILBERMAN, Circuit Judge:

The Michigan Municipal Cooperative Group petitions for review of three sets of orders by the Federal Energy Regulatory Commission (FERC) related to transactions involving intervenors Consumers Power Company and Palisades Generating Company. ¹ In all three proceedings, the Commission rejected the Group's objection that the transaction at issue was likely to have anticompetitive consequences, explaining that the Group's allegations were too unfounded, premature, and irrelevant to warrant full investigation at a hearing. We think that FERC's decisions were well within its discretion to manage its proceedings, and for that reason we deny the petitions.

I.

A. The Underlying Dispute

Consumers Power Company is the largest electric utility in Michigan. A subsidiary of CMS Energy Corporation, an investor-owned holding company, Consumers owns more than four-fifths of the power generating capacity in its area and an even larger share of the "bulk" (high voltage) transmission lines that link generating units to each other and to power distributors in Michigan and adjoining states. Consumers has a double-faceted relationship with the members of the Michigan Municipal Cooperative Group, an association of publicly owned municipal and rural cooperative utilities (and smaller utility associations such as the Michigan Public Power Agency, the name petitioner herein). As power distributors in their various local regions, Group members are customers of Consumers, purchasing electricity at wholesale rates for resale; similarly, as owners of their own generating plants, Group members rely heavily on Consumers' transmission system to carry their excess capacity to each other and to other energy purchasers in the area. As power generators, however, Group members also compete with Consumers for wholesale and retail business.

In recent years the relationship has soured. The Group has taken the position that Consumers is engaged in an elaborate anticompetitive scheme designed to increase its profits at the expense of the Group members (and the Michigan public). The Group claims that Consumers is attempting to sell its generating assets to affiliated companies, shift the proceeds of these sales to its parent holding company (and beyond the reach of federal and state regulation), and then buy back the power the affiliates generate at above-cost rates (which are passed on to the Group members in Consumers' wholesale rates). It is alleged that Consumers is using its monopoly over transmission service to enforce the scheme, locking up markets by providing superior transmission access to its own and affiliated power generators while cutting off the Group's. The three transactions at issue in this case are, according to the Group, paradigmatic of Consumers' plot.

Transmission access, Consumers replies, has nothing to do with the Group's real grievance: Group members, in fact, have open access to the transmission grid through individual interconnection contracts and longstanding, FERC-approved rates, which the Group has not challenged as unreasonable or discriminatory. What underlies the Group's complaints, it is argued, is Consumers' refusal to allow Group members to obtain an ownership interest in the transmission system. ² The Group's response has purportedly been "regulatory blackmail," a campaign of intervening in every FERC proceeding that involves Consumers with volumes of meritless and irrelevant accusations of anticompetitive behavior, in the hope that the resulting turmoil and delay will convince Consumers to relent and offer the Group partnership in the transmission business. Consumers contends that the three proceedings we review in this case are prime examples of the Group's illegitimate ambitions. FERC agreed.

B. The Facility Transfer and PPA Rate Proceedings

The first two proceedings are offshoots of a 1988 agreement between Consumers and Bechtel Corporation that partially settled lawsuits arising from Bechtel's construction of Consumers' now-abandoned Midland nuclear plant. Consumers agreed to transfer its Palisades nuclear plant and some related transmission facilities (principally a transformer and two half-mile lines connecting the plant to a substation on Consumers' transmission grid) to a new entity, the Palisades Generating Company (Palisades Genco), which would be owned four-ninths by Consumers, three-ninths by Bechtel, and two-ninths by other investors. The new company would then enter a long-term contract to sell the plant's energy output to Consumers at "incentive rates"--rates based primarily on projected costs, with a revenue multiplier to reward Palisades Genco if it operates the plant more efficiently (with Bechtel's help) than Consumers did in the past--rather than more traditional rates based on historic costs. Accordingly, Consumers and Palisades Genco executed an Asset Purchase Agreement and a 17-year Power Purchase Agreement (PPA) and then, pursuant to sections 203(a) and 205(c) of the Federal Power Act (FPA), 16 U.S.C. §§ 824b(a) and 824d(c), respectively, applied to FERC for approval of the transfer of transmission facilities and the PPA rates. The Group intervened in both proceedings.

FERC determined that an evidentiary hearing was necessary to decide how the transfer of facilities would affect Consumers' operating costs and rates, see Consumers Power Co. and Palisades Generating Co., 52 F.E.R.C. p 61,023, at 61,141 (1990) (Facility Transfer Order), rehearing denied, 52 F.E.R.C. p 61,382, at 62,343-46 (1990) (Facility Transfer Rehearing ), and to ensure that the amended PPA rates ³ were not "unjust, unreasonable, unduly discriminatory or preferential or otherwise unlawful," Palisades Generating Co., 52 F.E.R.C. p 61,264, at 61,978-79 (1990) (PPA Rate Order), rehearing denied in relevant part, 53 F.E.R.C. p 61,239, at 61,988 (1990) (PPA Rate Rehearing ). In both proceedings, however, the Commission refused to broaden the hearing to address the Group's allegations that the transactions were associated with anticompetitive activities by Consumers. FERC summarized its position on this point as follows:

In response to the Group's concerns about potential anticompetitive impacts of the proposed transfer, and its claimed entitlement to transmission and backup power services equivalent to those that might be offered to Palisades Genco in the future, the Commission found that there was no showing that the [Group] was refused transmission service over the facilities at issue; that general transmission access and discrimination issues were not ripe for investigation as there was no allegation of actual refusal to provide service or evidence of any discrimination; and that the proceeding was not the proper forum to investigate possible future violations of the FPA, as a complaint could be filed at the appropriate time.

Facility Transfer Rehearing, 53 F.E.R.C. at 62,342.

An extensive hearing was held by an Administrative Law Judge in early 1991. The ALJ has not yet issued his initial decision.

C. The Securities Proceeding

In October 1990, in the midst of the dispute over the two Palisades transactions, Consumers applied to FERC (pursuant to section 204(a) of the FPA, 16 U.S.C. § 824c(a)) for authority to issue $900 million of short-term securities during 1991 and 1992. The application represented that Consumers would use the funds for typical business purposes: to finance facility construction and improvement, to refund other short-term debt and repurchase outstanding securities, to finance fuel inventories and meet other working capital requirements, and so on. The Group again intervened and again demanded...