Municipalities of Groton v. Federal Energy Regulatory Commission, s. 76-2003
| Decision Date | 19 October 1978 |
| Docket Number | Nos. 76-2003,76-2087,s. 76-2003 |
| Citation | 587 F.2d 1296,190 U.S.App.D.C. 399 |
| Parties | MUNICIPALITIES OF GROTON et al., Petitioners, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent, NEPOOL Executive Committee, Intervenor. NEPOOL EXECUTIVE COMMITTEE, Petitioner, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent, Municipalities of Groton et al., Intervenor. |
| Court | U.S. Court of Appeals — District of Columbia Circuit |
Charles F. Wheatley, Jr., Washington, D. C., with whom Grace Powers Monaco and Robert A. O'Neil, Washington, D. C., were on the brief for petitioners in No. 76-2003.
James R. McIntosh, Hartford, Conn., for petitioners in No. 76-2087 and Intervenor in No. 76-2003.
Howard E. Shapiro, Washington, D. C., for respondent. Drexel D. Journey, General Counsel, Robert W. Perdue, Deputy General Counsel, Allan Abbot Tuttle, Solicitor and Scott M. DuBoff, Attorney, Federal Energy Regulatory Commission, Washington, D. C., were on the brief for respondents.
Before ROBINSON, MacKINNON * and ROBB, Circuit Judges.
Opinion for the Court filed by ROBB, Circuit Judge.
Pursuant to several provisions of the Federal Power Act, 1 16 U.S.C. §§ 791a Et seq., the Federal Energy Regulatory Commission began an investigation of the New England Power Pool (NEPOOL) Agreement. The agreement effects a comprehensive interconnection and coordination arrangement among numerous New England utilities. Its objective is to achieve greater reliability and economies in the production of electricity. Section 202(a) of the Act sanctions and encourages these voluntary pooling agreements, 2 but counsel informs us that this agreement is unique because of its breadth.
The purpose of the Commission's investigation was to determine whether any rate, charge or classification made in connection with a jurisdictional sale or transmission of power, or any rule, practice or contract relating thereto, was unjust, unreasonable or unduly discriminatory. The Administrative Law Judge found the agreement lawful. New England Power Pool Agreement, Docket No. E-7690 (Nov. 24, 1975), at J.A. 601. On review the Commission affirmed the ALJ in large part, reversing his findings with respect to only sections 9.4(d) and 9.5 of the agreement. New England Power Pool Agreement, Docket No. E-7690 (Sept. 10, 1976), at J.A. 651. The Commission found these two provisions unduly discriminatory and ordered that section 9.4(d) be modified and that section 9.5 be eliminated. Applications for rehearing were denied.
In No. 76-2003 nine municipalities of Connecticut and Massachusetts that own electrical systems petition for review of the Commission's order. They contend that the Commission erred in not finding the agreement discriminatory and anticompetitive in several other respects. In No. 76-2087 the Executive Committee of NEPOOL seeks review of that portion of the order finding section 9.4(d) unlawful. We believe however that the Commission has acted reasonably and accordingly dismiss the petitions for review.
The municipalities' chief objection is that the agreement fails to provide for "firm power" transfers. Under firm power sales, a utility promises to transmit to a wholesale distributor a specified amount of power with the same level of reliability as is provided in the utility's retail service. In contrast, under a "unit power" sale for which the agreement does provide a utility promises to deliver a certain portion of its production from a particular generating unit; if the unit is not operating no power is dispatched.
The municipalities contend that the agreement's failure to provide for firm power sales is discriminatory and anticompetitive. They premise their allegation of discrimination on the Commission's finding Failure to include a provision guaranteeing firm sales is anticompetitive, the municipalities urge, because in the absence of such a provision the large, investor-owned utilities will refuse to enter into firm power contracts voluntarily. The municipalities also regard the NEPOOL billing apparatus as a disincentive to participants wishing to sell power under firm sale contracts.
that there were no "overly compelling . . . substantive or technical reasons to exclude firm power transmission." (J.A. 681) The Commission added the finding that the form of the transaction was not recognized until after the power was delivered and then only in regard to the bookkeeping required under the agreement. Because the types of transmission were thus found to be largely indistinguishable, and because firm power sales are allegedly economically advantageous to small utilities, the municipalities argue that the failure to include firm sales unduly discriminated against small utilities.
The ALJ and the Commission considered these contentions of the municipalities. The ALJ stressed that as a voluntary agreement, which had been the product of extensive negotiations, the NEPOOL pact could not be expected to incorporate every provision that each party desired. Similarly, the Commission emphasized the voluntary nature of the agreement. Additionally, at one time the agreement proposed to provide firm power wheeling, the Commission observed, but that provision was intertwined with the concept of "pool supported transmission facilities" (PSTF). PSTF was an economically complex proposal to integrate transmission lines to form a regional bulk transmission grid financed completely by the participants. The parties however were unable to agree on how costs were to be shared and the concept, along with firm sales, was abandoned. Consequently, the Commission declined to infer any discriminatory or anticompetitive intentions from the exclusion of firm sales.
Nor was the Commission willing to find that the exclusion of firm power sales had a discriminatory or anticompetitive effect. The Commission reasoned that failure to include every possible service, even one potentially benefiting only certain participants, was not discriminatory so long as those services offered were extended evenly to all participants. The Commission concluded moreover that the record revealed no undue diminution of competition:
Although it appears that NEPOOL might narrow the basis for wholesale competition in that it will reduce the differences in bulk power supply costs and permit joint generating unit participation, (Tr. 465) reduction in cost of service resulting from this new-found coordination is most certainly in the public interest and outweighs any possible reduction in wholesale competition. Furthermore, NEPOOL should substantially increase all participants' available alternatives for access to generation and transmission facilities, (Tr. 1756-1757) and this eventuality should have a favorable impact upon competition.
New England Power Pool Agreement, Docket No. E-7690 (Sept. 10, 1976), at 33. (J.A. 683) In addition, the Commission noted, the agreement does not prohibit participants from entering into firm sales, so that such sales could continue to be negotiated as they had been in the past.
We think that the Commission's actions are the product of reasoned decisionmaking. Its conclusion that the agreement was not unduly discriminatory is reasonable in light of the voluntary nature of this agreement. Furthermore, the Commission and the ALJ both concluded that there was no evidence in the record to support the predatory and discriminatory allegations made by the municipalities. The Commission, however, did note in its orders that the participants have indicated that they were still considering PSTF and firm sales. It urged them to continue to explore the idea of firm power wheeling, and cautioned that it would later scrutinize NEPOOL operations in order to reassess the feasibility of shifting to PSTF and firm sales as experience under the agreement is gained. This
approach is reasonable, 3 we believe, and the municipalities' petition for review is therefore dismissed.
The Executive Committee challenges the Commission's finding that section 9.4(d) of the agreement is unduly discriminatory. Section 9 requires each participant to maintain a prescribed level of generating capacity, termed "capability responsibility", which represents its proportionate share of the pool's peak load. Should a participant's generating capability fall below this level, section 9.4(b) imposes an "adjustment charge" of $22.00 for each kilowatt year a participant is short. Section 9.4(d) exacts an additional charge, called a "deficiency charge", if the participant's system capability falls below its capability responsibility by more than one percent. This deficiency charge is intended to encourage participants to maintain their required levels of generating capacities, and it is computed on an increasing scale directly proportional to the percentage by which a participant's system capability is below its capability responsibility. 4 Thus, for example, a participant The Commission held that section 9.4(d) unduly discriminates against small participants. For the same number of deficient kilowatts, the Commission said, a small participant due to its lesser capability responsibility will pay more than a large participant. It found this impermissible because NEPOOL is affected by a capacity shortage on the basis of the number of kilowatts a participant is short, not the percentage by which the participant is below its capability responsibility. The Commission therefore ordered that the section be modified to tax deficiency charges on the basis of the actual kilowatts a participant is deficient.
pays a penalty of $4.40 for each kilowatt that its system capability is one to two percent below its capability responsibility, and it pays $22.00 for each kilowatt that the difference exceeds five percent.
The Committee contends that the Commission has no jurisdiction over the deficiency charge imposed by section...
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