[Federal Register Volume 78, Number 205 (Wednesday, October 23, 2013)]
[Notices]
[Pages 63177-63179]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-24756]
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DEPARTMENT OF ENERGY
Federal Energy Regulatory Commission
[Docket No. ER05-1056-007]
Order on Voluntary Remand and Clarifying Policy on Filing of
Reactive Power Service Rate Schedules; Chehalis Power Generating, L.P.
Before Commissioners: Jon Wellinghoff, Chairman; Philip D. Moeller,
John R. Norris, Cheryl A. LaFleur, and Tony Clark.
1. This case is before the Commission on voluntary remand from the
United States Court of Appeals for the District of Columbia Circuit
(D.C. Circuit). Below, the Commission continues to affirm its finding
that the rate schedule Chehalis Power Generating L.P. \1\ (Chehalis)
proposed for supplying Reactive Supply and Voltage Control from
Generation Sources Service (reactive power) to the Bonneville Power
Administration (Bonneville or BPA) is a changed rate subject to the
suspension and refund provisions of section 205(e) of the Federal Power
Act (FPA).\2\ However, the Commission clarifies its policy related to
jurisdictional reactive power rate schedules for which there is no
compensation, requiring that such rate schedules containing the rates,
terms, and conditions for reactive power service be filed with the
Commission on a prospective basis. This policy will ensure that
ratepayers are protected from, inter alia, excessive rates, as the
Commission will have the ability to suspend and refund any changed
rates upon filing.
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\1\ On October 20, 2010, TNA Merchant Projects, Inc. (TNA) filed
a motion with the Commission to substitute itself for Chehalis. In
appeal proceeding No. 08-1201, the D.C. Circuit granted a similar
motion and substituted TNA as petitioner in place of Chehalis
because TNA owned all the equity interests in Chehalis at the time
Chehalis filed its petition for review, and while TNA sold the
equity interests, it nevertheless retained the rights to the claims
made in this proceeding. For consistency with the Commission's
earlier orders and the parties' pleadings, the D.C. Circuit
continued to refer to the petitioner as ``Chehalis.'' TNA Merchant
Projects v. FERC, 616 F.3d 588, 589 n.1 (D.C. Cir. 2010) (TNA
Merchants Projects). We will also refer to the petitioner, TNA, as
``Chehalis.''
\2\ 16 U.S.C. 824d(e) (2006).
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I. Background
2. On May 31, 2005, Chehalis submitted a proposed rate schedule to
the Commission setting forth proposed rates for Chehalis's provision of
reactive power to Bonneville. Chehalis denominated the rate as
``initial'' stating that ``[t]he reactive power service that is the
subject of the submitted rates is a new service offered by Chehalis in
that it has never sought to charge for this service before.'' \3\
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\3\ Chehalis May 31, 2005 Filing Letter at 6.
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3. On July 27, 2005, the Commission accepted Chehalis's reactive
power rate schedule, suspended it for a nominal period, made it
effective subject to refund, and established hearing and settlement
judge procedures.\4\ In that order, the Commission found that the
reactive power rate schedule was not an initial rate, because ``[a]n
initial rate must involve a new customer and a new service.'' \5\ The
Commission stated that ``Chehalis has been providing reactive power to
BPA pursuant to an interconnection agreement, albeit without charge.
Thus, the proposed rates for reactive power in the instant proceeding
are not initial rates, but are changed rates.'' \6\
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\4\ Chehalis Power Generating, L.P., 112 FERC ] 61,144, at PP 1,
21 (2005).
\5\ Id. P 23.
\6\ Id.
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4. On December 15, 2005, the Commission denied Chehalis's rehearing
request. The Commission explained that its well-settled precedent
established that an initial rate is a rate for a new service to a new
customer.\7\ Finding that Chehalis had already been providing reactive
power to Bonneville, the Commission denied rehearing and explained that
Chehalis was not providing a new service to a new customer.\8\
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\7\ Chehalis Power Generating, L.P., 113 FERC ] 61,259, at P 11
(2005); accord id. PP 13-15.
\8\ Id. PP 11-12.
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[[Page 63178]]
5. On May 23, 2008, Chehalis petitioned the D.C. Circuit for
review.\9\ On August 10, 2010, the D.C. Circuit remanded the case to
the Commission on a single issue: whether or not the rate for reactive
power should have been filed with the Commission. In its remand order,
the D.C. Circuit observed that, while Chehalis had advanced ``a host''
of grounds for reversing the Commission's orders, and while the
Commission had provided responsive arguments, the court would address
only one of Chehalis's arguments, one that the court stated that the
Commission ``entirely failed to address.'' \10\ That argument is that
``the only rates that are subject to Sec. 205(e)'s suspension and
refund provisions are those that change a rate already on file with
FERC.'' \11\
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\9\ In the meantime, the Commission, having ordered settlement
and hearing procedures on the proper rate for the reactive power,
determined a just and reasonable rate and ordered Chehalis to make
refunds to Bonneville. Order on Initial Decision, 123 FERC ] 61,038,
at P 13 (2008).
\10\ TNA Merchant Projects, 616 F.3d at 591-92.
\11\ Id. at 592 (emphasis supplied).
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6. The D.C. Circuit summarized Chehalis's ``on file with'' argument
as follows: before May 31, 2005, Chehalis had not filed a rate
schedule--pursuant to FPA section 205(c)--for the reactive power it
provided to Bonneville. Because Chehalis had not previously filed a
rate schedule for the reactive power it provided to Bonneville,
Chehalis stated that there could be no change in rates under the FPA.
And because FPA section 205(e) limits the Commission's power to suspend
rates and order refunds to changed rates, the Commission therefore
could not suspend and order refunds here.\12\ The court remanded the
case to the Commission to consider this argument.\13\
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\12\ Id. The D.C. Circuit correctly observed that neither
Bonneville nor Chehalis disputes that Chehalis did not file a rate
schedule for reactive power service before May 31, 2005. Id.
\13\ Id. at 593.
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7. In its order on remand, the Commission found that the rate for
reactive power that Chehalis provided to Bonneville should have been
filed, thus making Chehalis's filing a changed rate, subject to the
suspension and refund provisions of section 205(e) of the FPA.\14\ The
Commission noted that, in any event, whether or not a pre-existing rate
had, in fact, been filed with the Commission was not part of the
Commission's longstanding test for the determination of what
constitutes a changed versus an initial rate.\15\ The Commission's well
settled precedent was that an initial rate was one that involved both a
new service and a new customer.\16\ Because the record in the case
showed that Chehalis had been providing reactive power service to
Bonneville since 2003, the proposed rate schedule for the provision of
reactive power filed on May 31, 2005 did not propose a rate for a new
service and a new customer.\17\
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\14\ Chehalis Power Generating, L.P., 134 FERC ] 61,112, at PP
19-21 (2011) (Remand Order).
\15\ Id. P 4.
\16\ Id. P 21.
\17\ Id.
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8. The Commission denied rehearing of its Remand Order, stating
that section 205 of the FPA required that rates, terms, and conditions
of jurisdictional services must be filed with the Commission, and
because reactive power is a jurisdictional service, Chehalis should
have filed its rate schedule for reactive power. Accordingly, the
Commission found it was fair to treat Chehalis's proposed rate schedule
at issue as a changed rate.\18\ The Commission also rejected Chehalis's
contention that the Commission's action was contrary to its precedent
``cancelling and rejecting generators' rate schedules when there is no
longer any compensation associated with the obligation to follow a
voltage schedule.'' \19\ The Commission distinguished Hot Spring Power
Co., L.P.\20\ and other similar cases cited by Chehalis on the ground
that, while the purchasing utilities involved were not obligated to pay
the generators for within-the-deadband reactive power, the generators
in those cases all had, in fact, filed rates.\21\
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\18\ Chehalis Power Generating, L.P., 141 FERC ] 61,116, at P 17
(2012) (Rehearing Order).
\19\ Id. P 20.
\20\ 113 FERC ] 61,080 (2010).
\21\ Rehearing Order, 141 FERC ] 61,116 at P 20.
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9. On appeal of the Remand Order and Rehearing Order, Chehalis
contends that the Commission erred by determining: (1) That the
interconnection agreement between Chehalis and BPA was required to be
filed prior to May 2005, even though it did not contain rates for
reactive power service and Chehalis was not proposing to collect
charges for such service prior to that date, and (2) that the proposed
rate schedule for supply of reactive power service filed by Chehalis in
May 2005 was a change in rates that could be suspended and made subject
to refund under section 205(e) of the FPA. Chehalis specifically argued
that, in prior Commission orders, when the generators cancelled their
existing reactive power rate schedules, the Commission accepted those
cancellations without suggesting that a replacement rate schedule must
be filed for the supply of reactive power without compensation.\22\
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\22\ Brief of Petitioner, TNA Merchant Projects, Inc. v. FERC,
No. 13-1008, at 28-29 (D.C. Cir. Apr. 15, 2013).
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10. Upon consideration of Chehalis's brief filed with the court,
the Commission moved for a voluntary remand to more fully consider
Chehalis's arguments. On June 18, 2013, the court granted the
Commission's motion.
II. Commission Determination
11. The Commission finds that further explanation is required in
this proceeding. Section 205 requires that rates, terms, and conditions
for jurisdictional services must be filed with the Commission; the
statute does not make such a filing optional, or otherwise grant
discretion to utilities to decide whether or when they must file their
rates, terms, and conditions.\23\ If the provision of reactive power is
a jurisdictional service,\24\ and no one in this proceeding denies that
it is, then the utility providing this service has an obligation to
file a rate schedule governing the provision of this service.
Accordingly, we reaffirm our finding that Chehalis should have earlier
filed a rate schedule for its provision of reactive power service,
making its later filing on May 31, 2005, a changed rate.
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\23\ 16 U.S.C. 824d(c) (2006).
\24\ See Promoting Wholesale Competition Through Open Access
Non-Discriminatory Transmission Services by Public Utilities;
Recovery of Stranded Costs by Public Utilities and Transmitting
Utilities, Order No. 888, FERC Stats. & Regs. ] 31,036, at 31,703
(1996), order on reh'g, Order No. 888-A, FERC Stats. & Regs. ]
31,048, order on reh'g, Order No. 888-B, 81 FERC ] 61,248 (1997),
order on reh'g, Order No. 888-C, 82 FERC ] 61,046 (1998), aff'd in
relevant part sub nom. Transmission Access Policy Study Group v.
FERC, 225 F.3d 667 (D.C. Cir. 2000), aff'd sub nom. New York v.
FERC, 535 U.S. 1 (2002). Indeed, if it were not a jurisdictional
service, then Chehalis should not have filed its proposed rate
schedule and proposed reactive power rate in the first place, and
the Commission should not have accepted it and should not have
authorized Chehalis to charge the rate. Rather, Chehalis has
recognized that this service is a jurisdictional service, which
warrants a filing, as evidenced by the fact of Chehalis's filing.
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12. However, the Commission also recognizes that it has previously
accepted notices of cancellation of reactive power rate schedules where
compensation was no longer involved. In order to clarify the
Commission's policy related to reactive power service provided without
compensation, the Commission finds that, on a prospective basis, for
any jurisdictional reactive power service (including within-the-
deadband reactive power service) provided by both existing and new
generators, the rates, terms, and
[[Page 63179]]
conditions for such service must be pursuant to a rate schedule on file
with the Commission,\25\ even though the rate schedule would provide no
compensation for such service.\26\ The Commission directs staff to
conduct a workshop, in a generic proceeding, to explore the mechanics
of public utilities filing reactive power rate schedules for which
there is no compensation.
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\25\ We note that our pro forma large generator interconnection
agreement, in section 9.6, governs the provision of reactive power
by an interconnection customer, i.e., by a generator, including the
instance where an interconnection customer, i.e., a generator, may
charge for reactive power outside the deadband. Absent payment to
the transmission provider's own or affiliated generators, our
longstanding policy has been that a transmission provider does not
have to separately pay an interconnection customer, i.e., a
generator, for reactive power within the deadband.
\26\ 16 U.S.C. 824d(c) (2006) (requiring that ``every public
utility shall file with the Commission . . . schedules showing all
rates and charges for any transmission or sale subject to the
jurisdiction of the Commission, and the classification, practices,
and regulations affecting such rates and charges, together with all
contracts which in any manner affect or relate to such rates,
charges, classifications, and services''); Prior Notice and Filing
Requirements under Part II of the Federal Power Act, 64 FERC ]
61,139, at 61,987, order on reh'g, 65 FERC ] 61,081 (1993) (stating
that the Commission has considerable flexibility in determining what
rates and practices are ``for or in connection with,''
``affecting,'' ``pertaining'' or ``relat[ing] to'' jurisdictional
service and, accordingly, must be filed for Commission review);
Sulphur Springs Valley Elec. Coop., 107 FERC ] 61,284, at P 7 (2004)
(finding that the public utility was obligated to file two
agreements for jurisdictional services even though there were no
specified charges or revenues associated with the agreements).
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13. This policy is consistent with the Commission's precedent
distinguishing between a changed rate and an initial rate.\27\ In
Southwestern Electric Power Co., the Commission defined an initial rate
as one that provides for a new service to a new customer.\28\ The
Commission explained: ``We believe that our broadened definition of a
change in rate is consistent with and serves to further the policies
which underlie the FPA. The primary purpose of the legislation is the
protection of customers from excessive rates and charges.'' \29\ The
Commission emphasized that this definition of a changed rate allowed
the Commission to give customers refund protection and, therefore,
shield them from the ability of utilities to exploit any sort of
regulatory lag by filing unjust and unreasonable rates.\30\ Stressing
this policy of protecting customers, the Commission stated: ``Taking a
broad view as to what constitutes a change in rate clearly serves, by
making filings subject to the Commission's suspension and refund
authority under section 205(e) of the FPA, to protect customers of
electricity from excessive or exploitative rates.'' \31\
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\27\ See, e.g., WPS Canada Generation, Inc., 103 FERC ] 61,193,
at P 15 (2003) (finding that a particular facility had been
providing reactive power service to Maine Public for years, although
under different ownership, and, therefore, the proposed rates were
changed rates rather than initial rates); Calpine Oneta Power, L.P.,
103 FERC ] 61,338, at P 11 (2003) (finding that the Oneta Project
had been supplying reactive power to Public Service Company of
Oklahoma, although without charge); Public Service Co. of Colorado,
74 FERC ] 61,354, at 62,087 & n.2 (1996) (finding that a power
supply agreement with Glenwood Springs adds a new customer to an
existing service and, therefore, constitutes a changed rate);
Northern States Power Co., 74 FERC ] 61,106, at 61,345 (1996)
(finding that Northern States's filing was a changed rate because it
unbundled its requirements rates to provide for separately-stated
charges for various types of transmission); Gulf States Utilities
Co., 45 FERC ] 61,246, at 61,725 (1988) (finding that a rate
schedule for transmission service was a changed rate because Gulf
States was already providing service to Lafayette and Plaquemine and
the present filing merely provided for a different service to
existing customers); Florida Power & Light Co. v. FERC, 617 F.2d
809, 813-17 (D.C. Cir. 1980) (finding that the Commission had a
reasonable basis for changing its policy so as to treat transmission
agreement schedules as changed rates subject to the Commission's
suspension and refund powers, in light of previously existing
interchange agreements, rather than initial rates not subject to
such powers).
\28\ 39 FERC ] 61,099, at 61,293 (1987) (Southwestern).
\29\ Id. (citing Town of Alexandria v. FPC, 555 F.2d 1020, 1028
(D.C. Cir. 1977); Municipal Light Boards v. FPC, 450 F.2d 1341, 1348
(D.C. Cir. 1971); Atlantic Refining Co. v. Public Service Commission
of New York, 360 U.S. 378, 388 (1959); FPC v. Hope Natural Gas Co.,
320 U.S. 591, 610 (1944)).
\30\ The Commission recognizes that section 206 of the FPA has
been modified since the issuance of Southwestern. While the new
section 206 has eliminated some of the differences underlying the
finding in Southwestern, a fundamental difference still exists
between the refund protection provided under section 205 of the FPA
(suspension and refund protection for the entire period the filed
rate is collected prior to issuance of a final Commission order) and
section 206 (refund protection limited to a 15-month period). Thus,
the Commission reaffirms its definitions of initial and changed
rates in order to carry out the primary purpose of the statute,
i.e., to protect customers from excessive rates and charges. See,
e.g., Southwestern, 39 FERC ] 61,099.
\31\ Id.
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14. As we explain below, because our policy is being clarified and
we are prospectively providing for the filing of rates, terms and
conditions for the provision of reactive power service (even within-
the-deadband reactive power service) for which there is no
compensation, we find that it would be appropriate for Chehalis to
recover the amounts it previously refunded to BPA, with interest
calculated in accordance with 18 CFR 35.19a (2013).\32\ The DC Circuit
has recognized the Commission's authority to order recoupment of funds
previously paid if the Commission provides adequate explanation.\33\ In
the instant case, we find the recoupment of funds would be
appropriate.\34\ The Commission is clarifying its policy and, as
explained above, finding that, with regard to jurisdictional reactive
power service (even within-the-deadband reactive power service) for
which there is no compensation, on a prospective basis rate schedules
governing the rates, terms, and conditions for such service must be on
file with the Commission.\35\ Therefore, given that we are applying
this policy on a prospective basis, we find that it would be
appropriate for Chehalis to recover the amounts previously refunded to
BPA, with interest.
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\32\ Niagara Mohawk Power Corp. v. FPC, 379 F.2d 153, 159 (D.C.
Cir. 1967) (breadth of Commission discretion is at its zenith when
fashioning remedies).
\33\ Black Oak Energy, LLC v. FERC, 725 F.3d 230 (D.C. Cir.
2013).
\34\ Cf. Transmission Agency of Northern California v. FERC, 495
F.3d 663 (2007).
\35\ The Commission also clarifies that it does not intend to
exercise its authority to impose enforcement sanctions for a
jurisdictional entity's failure, prior to this order, to have a rate
schedule on file for the provision of reactive power service without
compensation. However, jurisdictional entities are reminded that
they must submit filings on a timely basis in the future or face
possible sanctions by the Commission.
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The Commission orders:
The Secretary is hereby directed to promptly publish a copy of this
order in the Federal Register.
By the Commission.
Issued October 17, 2013.
Kimberly D. Bose,
Secretary.
[FR Doc. 2013-24756 Filed 10-22-13; 8:45 am]
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