Public Service Co. v. State Corp. Com'n
| Citation | 2005 OK 47,115 P.3d 861 |
| Decision Date | 21 June 2005 |
| Docket Number | No. 100,123.,No. 100,152.,100,123.,100,152. |
| Parties | PUBLIC SERVICE COMPANY OF OKLAHOMA, Oklahoma Industrial Energy Consumers, and W.A. Drew Edmondson, Attorney General of Oklahoma, Appellants, v. STATE of Oklahoma ex rel. OKLAHOMA CORPORATION COMMISSION and Lawton Cogeneration, L.L.C., Appellees. |
| Court | Supreme Court of Oklahoma |
¶ 0 Applicant sought from the Oklahoma Corporation Commission an order approving the terms of an agreement for the sale to respondent of applicant's net electrical output, including the determination of purchased power rates for such sales. The Oklahoma Corporation Commission, one commissioner dissenting, issued an order prescribing the final terms of a power sales agreement, establishing purchased power rates, and directing that the agreement be executed. Respondent and intervener, Oklahoma Industrial Energy Consumers, appealed in Cause No. 100,123. The Attorney General appealed in Cause No. 100,152. The appeals stand consolidated under surviving Cause No. 100,123, which is retained for this court's disposition by a single opinion.
ORDER AFFIRMED IN PART AND VACATED IN PART; PROCEEDING REMANDED WITH DIRECTIONS TO CONDUCT FURTHER INQUIRY AND MAKE ADDITIONAL FINDINGS.
Jack P. Fite and Jay M. Galt, White, Coffey, Galt & Fite, P.C., Oklahoma City, OK, and Marc E. Lewis, American Electric Power, Ft. Wayne, Indiana, for Appellant, Public Service Company of Oklahoma.
Graydon Dean Luthey, Jr., Thomas P. Schroedter, James D. Satrom, and Sharon T. Thomas, Hall, Estill, Hardwick, Gable, Golden & Nelson, P.C., Oklahoma City, OK and Tulsa, OK, for Appellant, Oklahoma Industrial Energy Consumers.
W.A. Drew Edmondson, Attorney General, State of Oklahoma and William L. Humes, Assistant Attorney General, State of Oklahoma, Oklahoma City, OK, for Appellant, Office of the Attorney General.
Ben Jackson and Michele O'Neill Craig, Oklahoma Corporation Commission, Oklahoma City, OK, for Appellee, Oklahoma Corporation Commission.
Kenneth N. McKinney, McKinney & Stringer, P.C., Oklahoma City, OK, Connie M. Bryan, Mitzner Rubenstein Bryan McCormick & Pitts, P.L.L.C., Edmund, OK, Deborah R. (Morgan) Thompson, Lawton Cogeneration, L.L.C., Oklahoma City, OK, and Cheryl A. Vaught, Vaught & Conner, P.L.L.C., Oklahoma City, OK, for Appellee, Lawton Cogeneration, L.L.C.
Ronald D. Cates, City Attorney, City of Owasso, OK, Martha Rupp Carter, City Attorney, and Robert R. Edmiston, Assistant City Attorney, City of Tulsa, OK, and Michael
R. Vanderburg, City Attorney, City of Broken Arrow, OK, for amici curiae, Cities of Owasso, Tulsa, and Broken Arrow.
Mark D. Christiansen, Crowe & Dunlevy, Oklahoma City, OK, for amicus curiae, Lawton Ft. Sill Chamber of Commerce and Industry.1
¶ 1 Two dispositive questions are presented for review: (1) Is the Corporation Commission's order sustained by substantial evidence and (2) Does it conform to the requirements of federal and state law? These questions must be answered for each of the following Commission decisions: (a) determining that applicant incurred a legally enforceable obligation to deliver power to respondent, thereby obligating the Corporation Commission to set purchased power rates for the term of the proposed power sales agreement; (b) rejecting a market-based approach to the calculation of avoided costs; (c) setting an avoided capacity rate; (d) setting an avoided energy rate; (e) omitting from the power sales agreement a provision corresponding to the terms of 18 C.F.R. § 292.304(f); (f) setting a twenty-year term for the power sales agreement; (g) setting terms and conditions for the power sales agreement; and (h) altering the power sales agreement after the record was closed. We affirm the Commission's decisions as to the issues raised in parts (a), (b), (c), (e), (f), and (h), but because the Commission failed to treat adequately issues material to the decision in parts (d) and (g), we vacate the order with regard to those parts. The Commission is directed to conduct further inquiry and make additional findings with respect to the issues raised in part (d) of this pronouncement and to adjust resolutions affirmed herein only if and to the extent necessary to accommodate the Commission's post-remand findings and conclusions with respect to the issues discussed in part (d).
¶ 2 Lawton Cogeneration, L.L.C. ("Lawton" or "cogenerator") is a limited liability company organized for the purpose of developing a cogeneration facility to be located in the Lawton Industrial Park in Lawton, Oklahoma. A cogeneration facility is a plant that produces two or more usable forms of energy, one of which is electricity.2 Lawton has been certified pursuant to the provisions of the Public Utility Regulatory Policies Act of 1978 ("PURPA")3 as a qualifying cogeneration facility ("QF"), i.e. a cogeneration facility which meets certain standards for size, fuel use, and fuel efficiency and which is owned by a person not primarily engaged in the generation or sale of electric power.4 Lawton proposes to produce electricity and steam. It intends to sell the steam to two companies in Lawton that use steam in their operations.
¶ 3 On 23 January 2002 Lawton filed an application with the Oklahoma Corporation Commission ("Commission") pursuant to the provisions of PURPA, for an order directing AEP-Public Service Company of Oklahoma ("AEP", "AEP-PSO", "PSO" or "the utility")5 to purchase electric power generated by Lawton, setting purchased power rates, and approving the terms of a contract between the cogenerator and the utility. PSO moved on 29 March 2002 to dismiss the application, arguing that Lawton had not incurred a legally enforceable obligation to deliver power to PSO, a pre-condition under PURPA for obtaining a state regulatory agency's order setting purchased power rates for the term of a power sales agreement. An administrative law judge ("ALJ") heard oral argument on the motion and, upon finding that Lawton had not created a legally enforceable obligation to deliver power to PSO, recommended that the application be dismissed without prejudice. Lawton appealed. The Commission en banc ruled on 26 July 2002 that oral argument provided an inadequate evidentiary basis for deciding the issue raised in PSO's motion to dismiss and remanded the cause to the ALJ to conduct a full evidentiary hearing.
¶ 4 After an additional legal challenge to the application's sufficiency failed to secure its dismissal and after much wrangling over the procedural schedule and discovery issues, the cause was finally scheduled to be heard by the ALJ on 21 January 2003. Shortly before the hearing date arrived, the parties agreed to forego a hearing, submit their evidence to the ALJ by filing written testimony accompanied by exhibits, and waive cross examination of witnesses regarding their filed testimony.6 As ordered by the Commission, the record was opened on 21 January 2003 for public comment. It was again opened on 30 January 2003 for the identification of exhibits, for their placement into the record, and for the oral announcement of the ALJ's recommendation. The ALJ issued a written Report and Recommendation on 14 February 2003, concluding that Lawton had created a legally enforceable obligation as of the date it had tendered to PSO a proposed power sales agreement and recommending a method for determining the rates PSO should pay Lawton for the purchase of the latter's electrical output.
¶ 5 Lawton, PSO, and the Oklahoma Industrial Energy Consumers ("OIEC"), a trade organization that had earlier intervened in the cause,7 appealed to the Commission. The Commission en banc heard oral arguments on 11 March 2003. It then issued an order dated 28 April 2003, in which it reopened sua sponte the record, set a hearing date before the Commission en banc, identified witnesses whose testimony the commissioners wanted to hear, and allowed the parties to request additional witnesses be permitted to testify.
¶ 6 The Commission heard testimony on 20, 21 and 22 May 2003. On 26 November 2003, the Commission, two commissioners concurring, issued the order that is the subject of this appeal, finding that Lawton established a legally enforceable obligation no later than 26 September 20028 and was hence entitled to a determination — as of that date — of the rates PSO is to pay for Lawton's electrical power.9 The Commission then proceeded to make that determination and to order the parties, including both AEP and PSO, to execute the power sales agreement tendered by Lawton, as revised by the Commission.
¶ 7 PSO appealed and OIEC filed a "cross-appeal" under the same docket number.10 The Attorney General brought a separate appeal. The court consolidated the separate appeals under surviving Cause No. 100,123 and then granted a motion to retain the consolidated appeal. The City of Owasso, Oklahoma, and the City of Tulsa, Oklahoma, requested leave to file briefs amicus curiae in support of PSO and were granted leave to file a combined brief. The Lawton Fort Sill Chamber of Commerce and Industry requested and was granted leave to file a brief amicus curiae in support of Lawton. The City of Broken Arrow requested and was granted leave to join in the amicus brief to be filed by the cities of Tulsa and Owasso.
¶ 8 The power to review Commission decisions is vested in this court by the Oklahoma Constitution, Art. 9, § 20.11 That provision fashions two standards of review — a de novo standard for appeals based on alleged violations of constitutional rights and a more deferential standard for all other appeals.12 Today's pronouncement employs the more circumscribed standard, in which review extends no further than determining whether the Commission...
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