Public Service Co. of New Hampshire v. Patch, No. 97-97-JD.
| Decision Date | 06 March 2000 |
| Docket Number | No. 97-97-JD.,No. 97-121-L. |
| Citation | 87 F.Supp.2d 57 |
| Parties | PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE, et al., Plaintiffs, and Connecticut Valley Electric Company and Central Vermont Public Service Corporation, et al., Plaintiffs/Interveners, v. Douglas L. PATCH, Bruce Ellsworth and Susan S. Geiger, Defendants. |
| Court | U.S. District Court — District of New Hampshire |
Bruce W. Gladstone, Cameron & Mittleman, Providence, RI, Jeffrey S. Cohen, Sulloway, Hollis & Soden, Concord, NH, John B. Nolan, Day, Berry & Howard, Hartford, CT, James J. Tancredi, Day, Berry & Howard, Hartford, CT, Allan B. Taylor, Day, Berry & Howard, Hartford, CT, Martin L. Gross, Sulloway & Hollis, Concord, NH, for plaintiffs.
Robert Frank, NH Office of PUC, Concord, NH, Dennis Lane, Steven K. White, John E. McCaffrey, Michael E. Tucci, Morrison & Hecker, L.L.P., Washington, DC, Gary M. Epler, Larry S. Eckhaus, New Hampshire Public Utilities Commission, Concord, NH, for Douglas L. Patch, Chairman of the State of N.H. Public Utilities Commission, defendant.
Mark W. Dean, Dean, Rice & Howard, Manchester, NH, for New Hampshire Electric Cooperative, Inc., intervenor-defendant.
Paul K. Connolly, Jr., H. Glenn Alberich, Scott J. Mueller, Damian R. LaPlaca, LeBoeuf, Lamb, Leiby & MacRae, Boston, MA, Paul B. Dexter, Patricia French, LeBoeuf, Lamb, Greene & MacRae, Boston, MA, Jacqueline Killgore, Public Utility Policy Institute, Bedford, MA, for Unitil Corporation, intervenor-defendant.
Dem S. D'Ambruoso, Dom S. D'Ambruoso, Ransmeier & Spellman, Concord, NH, Dom S. D'Ambruose, Concord, NH, Joseph M Kraus, Rutland, VT, John T. Alexander, Ransmeier & Spellman, Concord, NH, Lee A. Freeman, Freeman, Freeman & Salzman, Chicago, IL, Carmen L. Gentile, David E. Goroff, James H. McGrew, Bruder, Gentile & Marcoux, Washington, DC, Glynna W. Freeman, James T. Malysiak, John F. Kinney, Freeman, Freeman & Salzman, Chicago, IL, for Connecticut Valley Electric Company, plaintiff.
DECISION AND ORDER
This matter is the latest installment in the extensive litigation resulting from New Hampshire's attempt to deregulate its electric utility industry.1 However, for the reasons set forth below, the particular issue decided today is distinct from the many issues surrounding the implementation of that deregulation effort. Specifically, the question before the Court at present is whether Connecticut Valley Electric Company ("plaintiff") is entitled to a permanent injunction mandating the New Hampshire Public Utility Commission ("defendant") to pass through in plaintiff's retail rates the wholesale energy price paid by plaintiff to Central Vermont Public Service Corporation ("Central Vermont") while plaintiff is purchasing power from Central Vermont pursuant to a federally-approved contract and tariff. This Court concludes that plaintiff is entitled to such relief and a permanent injunction shall issue.
Plaintiff, a New Hampshire corporation, distributes and sells electric service to approximately 10,000 customers in western New Hampshire. Plaintiff purchases seventy-six percent (76%) of its power from its parent Central Vermont, a Vermont corporation, pursuant to an interstate cost-of-service-based wholesale requirements rate schedule ("RS-2 Rate Schedule") approved by the Federal Energy Regulatory Commission ("FERC"). This purchasing arrangement has been in place since 1950 and some form of the RS-2 Rate Schedule has been in existence since 1982. The RS-2 Rate Schedule contains the following clause ("Section E"):
E. Termination Service under this rate schedule may be terminated at any time if both [Central Vermont] and [plaintiff] agree to the termination. If there is no agreement, service may be terminated at the end of a service year if the party seeking termination has given written notice of termination prior to the beginning of that service year.
As discussed below, the parties vigorously dispute the ramifications of this clause.
Plaintiff purchases the remainder of its power from other sources not relevant to the case at bar. Plaintiff's retail rates are set forth in a retail tariff which is subject to approval by defendant.
Approximately ninety percent (90%) of the power Central Vermont supplies to plaintiff is purchased from other sources pursuant to several long-term contracts. One of those contracts is with Hydro Quebec. That arrangement was made on a long-term basis in 1990 so that Central Vermont and plaintiff would have a firm and reliable source of power to service their customers. That arrangement and the rates to be paid were approved by FERC, the Vermont Public Service Board and defendant as it was then constituted.
At all times relevant to this matter (because of the passage of time and change of power supply circumstances) these long-term contract prices have exceeded wholesale electricity prices in New England. Because Central Vermont essentially passes these prices through to plaintiff under the RS-2 Rate Schedule, plaintiff has been buying power from Central Vermont at higher-than-market wholesale rates.2
In 1996, with the purpose of reducing the state's retail electric rates, the New Hampshire legislature adopted the Electric Utility Restructuring Act, N.H.Rev. Stat.Ann. §§ 374-F:1 et seq. (1999) ("the Act"), providing for the introduction of competition into the New Hampshire electric utility industry. Pursuant to the power vested in it by this statute, defendant issued a restructuring plan (the "Final Plan") and implementing orders on February 28, 1997. See Order No. 22,514; Order Nos. 22,509-22,513 (). Familiarity with the Final Plan's details is assumed as it is described at length in Patch I and Patch IV. See Patch, 962 F.Supp. at 226-228; Patch, 167 F.3d at 18-19. Of importance here is defendant's February 28, 1997 order which denies plaintiff a stranded cost recovery charge for power purchased from Central Vermont to the extent that the cost of that power exceeds wholesale prices generally available in the New Hampshire market. See Order No. 22,509. ("Stranded Cost Recovery Order"). Defendant's rationale for this determination was that plaintiff should, pursuant to Section E, terminate the RS-2 Rate Schedule and avail itself of current market prices, thus avoiding any stranded costs upon the implementation of restructuring. See id.
On March 3, 1997, Public Service Company of New Hampshire ("PSCNH"), the largest electric utility in New Hampshire, brought suit in this Court, seeking to enjoin implementation of the Final Plan on a number of federal constitutional grounds. This Court granted a temporary restraining order ("TRO") against implementation of the Final Plan on March 10, 1997. On March 21, 1997, after an evidentiary hearing, this Court renewed the TRO and requested briefing on the issues of ripeness and abstention. In Patch I, issued April 28, 1997, this Court rejected those grounds for dismissal of this case, rejected defendant's claim that the Court lacked jurisdiction under the Johnson Act, 28 U.S.C. § 1342, and concluded that the TRO should remain in place until further order of the Court. See Patch, 962 F.Supp. at 244.
In Patch II, issued June 12, 1997, this Court allowed several other New Hampshire electric utilities to intervene in the litigation as of right. See Patch, 173 F.R.D. at 28. Shortly thereafter, on June 18, 1997, plaintiff and Central Vermont were permitted to intervene.
Fearful of the consequences if defendant ultimately prevailed in the litigation and forced plaintiff to terminate the RS-2 Rate Schedule, Central Vermont initiated a proceeding before FERC on June 25, 1997 to terminate the contract. Central Vermont proposed that, as a condition of termination it be allowed to amend its open access transmission tariff to add a stranded cost surcharge to its transmission rates when transmission was for ultimate delivery of power to plaintiff's service area. This surcharge would enable Central Vermont, upon termination of the RS-2 Rate Schedule, to recover the difference between the long-term contract rates and the lesser market rate at which it could then sell power. FERC rejected this proposal, but deferred notice of cancellation and invited Central Vermont to request an alternative loss-shifting method, namely, an amendment to the RS-2 Rate Schedule imposing an exit fee on plaintiff in the event of termination. See Central Vermont Pub. Serv. Corp., 81 F.E.R.C. ¶ 61,336, 62,543 (1997), available in 1997 WL 779009. On December 27, 1997, Central Vermont made the suggested request and, on March 11, 1998, FERC accepted it for filing, suspended the fee provision and ordered a hearing, which has not yet occurred. See Central Vermont Pub. Serv. Corp., 82 F.E.R.C. ¶¶ 61,237, 61,908 (1998), available in 1998 WL 111732. FERC also rejected Central Vermont's notice of contract cancellation, thus, the RS-2 Rate Schedule remains in effect to this day.
During this period, regulation of the electric utility industry continued as usual in New Hampshire. Consequently, in the fall of 1997, plaintiff submitted tariff changes to defendant to secure an increase in plaintiff's retail rates which would pass through to customers an increase in Central Vermont's wholesale rates under the RS-2 Rate Schedule. FERC approved the changes to the RS-2 Rate Schedule on January 13, 1998. Under such circumstances, defendant had previously approved retail rate increases. However, on December 31, 1997, defendant issued an order disallowing the increase, essentially freezing plaintiff's retail rates at the 1997 level. See Order No. 22,815. ("Disallowance Order"). Defendant's rationale for this action was that plaintiff had acted imprudently by not terminating the RS-2 Rate Schedule one year earlier under Section E and thus was not entitled to pass through the elevated costs to consumers. See id.
On January 19, 1998, plaintiff and Central Vermont filed...
To continue reading
Request your trial
-
Pub. Serv. Co. NH v. Patch
...to pass through to its retail customers the cost of wholesale power it purchases from Central Vermont under the RS-2 contract. Patch VII, 87 F. Supp. 2d at 65. The Commission now The district court's summary judgment decision, which we review de novo, Wightman v. Springfield Terminal Ry. Co......