TEC Cogeneration Inc. v. Florida Power & Light Co.

• Decision Date: 08 March 1996
• Docket Number: Nos. 94-4323,94-4496,s. 94-4323
• Parties: , 1996-1 Trade Cases P 71,329, Util. L. Rep. P 14,091 TEC COGENERATION INC., RRD Corporation, as they are partners in South Florida Cogeneration Associates, Thermo Electron Corporation, Rolls-Royce, Inc., Plaintiffs-Appellees, v. FLORIDA POWER & LIGHT COMPANY, FPL Group, Inc., FPL Energy Services, Inc., Defendants-Appellants, Wayne H. Brunetti, Larry T. Atkinson, Joe C. Collier, Jr., Clark Cook, et al., Defendants.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1560

76 F.3d 1560

64 USLW 2582, 1996-1 Trade Cases P 71,329,

Util. L. Rep. P 14,091

TEC COGENERATION INC., RRD Corporation, as they are partners

in South Florida Cogeneration Associates, Thermo

Electron Corporation, Rolls-Royce, Inc., Plaintiffs-Appellees, v. FLORIDA POWER & LIGHT COMPANY, FPL Group, Inc., FPL Energy

Services, Inc., Defendants-Appellants,

Wayne H. Brunetti, Larry T. Atkinson, Joe C. Collier, Jr.,

Clark Cook, et al., Defendants.

Nos. 94-4323, 94-4496.

United States Court of Appeals, Eleventh Circuit.

March 8, 1996.

James R. Atwood, Washington, DC, Daniel M. Gribbon, Steven J. Rosenbaum, Washington, DC, for appellants.

David H. Erichsen, Boston, MA, Charles J. Gray, Peter A. Spaeth, Boston, MA, for appellees.

Appeals from the United States District Court for the Southern District of Florida.

Before EDMONDSON, Circuit Judge, HILL, Senior Circuit Judge, and MILLS ^*, District Judge.

HILL, Senior Circuit Judge:

This is an appeal from the denial of a motion for summary judgment by the district court. ¹ Two questions are presented: first, whether a public utility is immune from antitrust liability under the state-action doctrine of Parker v. Brown, 317 U.S. 341, 63 S.Ct. 307, 87 L.Ed. 315 (1943), for its allegedly anti-competitive conduct concerning a cogenerator ² in the areas of wheeling, ³ rates, and interconnection; and second, whether lobbying of a county legislative body by the utility is protected from antitrust liability under the Noerr/ Pennington doctrine. Eastern R.R. Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127, 81 S.Ct. 523, 5 L.Ed.2d 464 (1961); United Mine Workers of America v. Pennington, 381 U.S. 657, 85 S.Ct. 1585, 14 L.Ed.2d 626 (1965). The district court found that the utility was not entitled to immunity from antitrust sanctions for its actions. We disagree. The denial by the district court of the utility's motion for summary judgment is reversed. ⁴

I. FACTUAL BACKGROUND

Shortly after Congress enacted the Public Utility Regulatory Policies Act of 1978 (PURPA), ⁵ Metropolitan Dade County, Florida (Dade) began to consider a cogeneration facility as part of its Miami Downtown Government Center (Center), then in the planning stages. At the time, Appellees (Cogenerators) ⁶ were engaged in the business of developing cogeneration projects nationwide. They also supplied turbines and related services for use in cogeneration projects. The Cogenerators encouraged Dade to construct such a facility using their equipment and services.

Appellant Florida Power & Light Company (FPL) ⁷ is an investor-owned public electric utility engaged in three functions: generation, transmission, and distribution and sale of electric energy. ⁸ It services southern and eastern Florida, including most of Dade. FPL is regulated by the Florida Public Service Commission (PSC). ⁹ It owns and controls ninety percent of the total electrical generating capacity in its service area and the electrical grid with which Center can interconnect. FPL has monopoly power within its service area both as to the purchase of wholesale power and the sale of retail power.

In 1981, Dade issued requests to bid on the Center cogeneration facility. Cogenerators' proposal was selected and in late 1983, Dade and the Cogenerators entered into contracts providing for the construction and operation of a twenty-seven megawatt cogeneration facility at Center and for the supply of cogeneration equipment for the project. The Cogenerators agreed to operate Center for Dade for sixteen years. The Cogenerators also contracted to supply electrical and thermal power to Dade. ¹⁰ Dade and the Cogenerators were to share in the profits, if any, from operating the Center; the Cogenerators were to absorb the losses. ¹¹ The final contract allowed for excess power, if any, from Center, to be dispensed to Dade facilities outside Center, such as to the Jackson Memorial Hospital/Civic Center complex (Hospital). ¹² Practically speaking, excess power could be dispensed only one of two ways, either via a wheeling arrangement with FPL or by constructing a separate transmission line. A separate line would require the approval of the local legislative body, i.e., the Dade County Board of Commissioners (Commission). With these parameters in place, construction of the cogeneration facility commenced in mid-1984 and the facility became fully operational at the end of 1986. ¹³

Center, armed with the capability to produce twenty-seven megawatts of electrical power, actually needed only ten megawatts with which to operate. With seventeen surplus megawatts of generating capacity, Center quickly proved to be unprofitable. By then, however, the die was cast; the project was in place. ¹⁴ Fingers began to point as the Cogenerators and Dade each blamed the other for a projection miscalculation of this magnitude. ¹⁵

To reduce their losses, the Cogenerators sought a logical use for the excess power. Under rules promulgated by the PSC, two options were immediately available: (1) the Cogenerators could either sell the surplus electricity to FPL at a rate equal to FPL's avoided cost; ¹⁶ or (2) the Cogenerators could force FPL to transmit or wheel the excess power to another Florida utility, who in turn would purchase it at its own avoided cost rate.

At avoided cost rates, it appeared that the Cogenerators could not break even with either option. FPL alleges that the Cogenerators deliberately ignored their two legitimate options and pursued a third, allegedly illegitimate, alternative in order to obtain higher prices for their power: the Cogenerators approached FPL to wheel their surplus power to other Dade facilities outside Center, most notably, to Hospital, two miles northwest. Believing that the Cogenerators' request violated the PSC's self-service wheeling rules, ¹⁷ FPL declined to wheel.

Rebuffed by FPL, the Cogenerators then turned to the best efforts clause in its contract with Dade. They directed Dade, in effect, to petition the PSC for an order compelling FPL to wheel power from Center to other Dade facilities, including Hospital.

After an eleven-month administrative proceeding, the PSC denied Dade's petition. The PSC found that Dade could not comply with the PSC's self-service wheeling rules because Dade did not actually own the generating equipment that produced the power to be wheeled; did not generate the power to be wheeled; and was contractually bound to purchase the electricity from the Cogenerators. ¹⁸ Hence, the PSC found, by definition, that Dade could not "serve oneself." Petition of Metropolitan Dade County for Expedited Consideration of Request for Provision of Self-Service Transmission, Order No. 17510, Docket No. 860786-EI, 87 FPSC 5:32, 35-37 (May 5, 1987). ¹⁹

After the PSC wheeling disallowance, the Cogenerators played their fourth and final card: what can't be sent indirectly, send directly. They approached Dade with a proposal to construct a separate transmission line from Center to Hospital. A separate line would reduce surplus electricity without being dependent upon wheeling by FPL at avoided cost rates. A joint submission was made by the Cogenerators and Dade to Commission for its approval. The Cogenerators lobbied Commission for approval; FPL lobbied against. The Commission voted five-to- one against the construction of the separate transmission line.

Within weeks, the Cogenerators filed this suit.

II. PROCEDURAL BACKGROUND

The Cogenerators contend they suffered losses at Center due to FPL's anti-competitive conduct in three areas: (1) by FPL's refusal to wheel, when FPL allegedly prevented Cogenerators from providing service to Hospital; (2) by FPL's manipulation of its rate structure (when FPL allegedly offered lower rates to customers considering cogeneration; paid cogenerators too little for their excess power; and proposed higher rates for backup power sold to cogenerators); and (3) by FPL's interference with interconnection (when FPL allegedly imposed unreasonable terms in the interconnection agreement governing the manner in which Center is physically connected to FPL's system). ²⁰

After discovery, FPL filed a motion for summary judgment. The district court heard oral argument in 1989 and 1993. In 1994, the district court denied summary judgment.

This appeal follows.

III. STANDARD OF REVIEW

Application of the state-action and Noerr/ Pennington immunity doctrines is a question of law. See F.T.C. v. Hospital Bd. of Directors of Lee County, 38 F.3d 1184, 1187 (11th Cir.1994). As the question of immunity is strictly one of law, this court makes a de novo determination of whether the district court erred in denying summary judgment. Bolt v. Halifax Hosp. Medical Center, 980 F.2d 1381, 1384 (11th Cir.1993).

IV. DISCUSSION

A. Introduction

FPL's motion for summary judgment relies principally on two immunity doctrines: the state action immunity doctrine and the Noerr/ Pennington immunity doctrine. The district court denied summary judgment under both.

We review each of these findings de novo.

B. The State Action Immunity Doctrine

The Supreme Court first articulated the state-action immunity doctrine in Parker v. Brown, 317 U.S. 341, 63 S.Ct. 307, 87 L.Ed. 315 (1943). In Parker, the Court grappled with the applicability of the Sherman Act to a California agricultural statutory program intended to restrict competition among private producers of raisins in order to stabilize prices and prevent economic waste. Relying on principles of federalism and state sovereignty, the Court refused to find that the Sherman Act was "intended to restrain state action or official action directed by a state" and determined that "[t]here is no suggestion of a purpose to restrain state action in the Act's legislative history." Id. at 351, 63 S.Ct. at 313. The Court held, therefore, that federal antitrust laws were not intended to reach state-regulated anticompetitive activities. Id. at 350-52, 63 S.Ct. at 313-14; City of...