FERC Filings

REQUEST FOR REHEARING OF THE ELECTRIC POWER SUPPLY ASSOCIATION-12/01/00

I. DISCUSSION

A. A. The Clear Statutory Provisions of Section 206 Require That The Refund Effective Date Be Sixty Days After Notice Of Investigation In the Federal Register Since The Commission Instituted Its Investigation On Its Own Motion Not On The Complaint Filed By SDG&E

Whether the refund effective date in the instant proceeding shall be October 29, 2000 or October 2, 2000 is controlled by the clear prescription of FPA Section 206(b), which provides in part:

Whenever the Commission institutes a proceeding under this section, the Commission shall establish a refund effective date. In the case of a proceeding instituted on complaint, the refund effective date shall not be earlier than the date 60 days after the filing of such complaint nor later than 5 months after the expiration of such 60-day period. In the case of a proceeding instituted by the Commission on its own motion, the refund effective date shall not be earlier than the date 60 days after the publication by the Commission of notice of its intention to initiate such proceeding nor later than 5 months after the expiration of such 60-day period.” (emphasis added)

Thus, if the Commission instituted its current investigation of the California bulk power markets under Section 206 “on its own motion,” the refund effective date “shall not be earlier than” October 29, 2000. Only if the current proceeding was “instituted on complaint” by SDG&E, would there have been any basis in the first place for the Commission to establish a refund effective date as early as October 2, 2000. Even if the proceeding were instituted on complaint, the Commission should not have retroactively reset the refund effective date to October 2, 2000 in its November 1 Order, for to do so defeats the very reliance interests of wholesale suppliers that Section 206(b) was designed to protect.

The record demonstrates that this proceeding was instituted on the Commission’s own motion and not on SDG&E’s complaint. The Commission’s August 23 Order instituted consolidated hearing proceedings pursuant to Section 206 of the Federal Power Act to “investigate the justness and reasonableness of the rates and charges of public utilities that sell energy and ancillary services to or through the California ISO and PX, and to also investigate whether the tariffs and institutional structures and bylaws of the California ISO and PX are adversely affecting the efficient operation of competitive wholesale electric power markets in California and need to be modified.” In that very same August 23 Order, the Commission expressly denied the SDG&E complaint, which sought only an emergency order for narrow prospective relief, without requesting a hearing.

The SDG&E complaint and certain other filings made prior to August 2nd , no doubt influenced the Commission’s decision to institute such an all encompassing proceeding. But, it is indisputably clear from the August 23 Order that the Commission instituted this global proceeding, not to address San Diego’s narrow concern for an emergency order capping prices of jurisdictional sellers in the ISO and PX at $250 per MWh. The Commission rejected that request. Rather, the purpose of the investigation ordered was to examine the entire structure of the California market. The Commission announced this investigation on its own motion. Thus, the refund effective date under the statute can be no earlier than sixty days after notice of that investigation in the Federal Register.

The SDG&E Complaint did not seek a Commission investigation or hearing. The SDG&E Complaint sought one form of relief only:

SDG&E respectfully requests that the Commission find that rates in excess of $250 per MWh for sales into the markets for energy and ancillary services operated by the California Independent System Operator Corporation and the California Power Exchange Corporation are unjust and unreasonable and that it condition the authorization to make sales into those markets at market-based rates accordingly. (SDG&E Complaint at 19.)

The SDG&E Complaint rejected initiation of an investigation or hearing as an alternative response to its Complaint. As SDG&E said:

THE COMPLAINT SHOULD BE PROCESSED AS QUICKLY AS POSSIBLE (original capitalization). (SDG&E Complaint at 18.)

with the Commission’s ongoing comprehensive investigation of bulk power markets:

SDG&E welcomes the Commission’s July 26, 2000, announcement that its staff will investigate the operation of the bulk power markets and report its findings by November 1. California surely must be one of the primary subjects of that study. Again, however, Commission action to address the urgent circumstances described above cannot await completion of the investigation.
SDG&E Complaint at 18, n.19.

In its August 23 Decision, the Commission clearly rejected the single form of relief sought by SDG&E: “In this Order, as discussed below, we are denying SDG&E’s requested immediate imposition of a price cap on all sellers in California.” 92 FERC at 61,603. The August 23 Decision also recognized that the SDG&E Complaint did not seek an investigation: “SDG&E requests that the Commission act as quickly as possible on the merits of its complaint.” Id.

The Commission then discussed the real work of the August 23rd Order, i.e. establishing a proceeding to investigate the current operation of the California bulk power market.

However, we are instituting consolidated hearing proceedings pursuant to Section 206 of the Federal Power Act to investigate the justness and reasonableness of the rates and charges of the public utilities that sell energy and ancillary services to or through the California ISO and PX and to investigate whether the tariffs and institutional structures and bylaws of the California ISO and PX are adversely affecting the efficient operation of the competitive wholesale electric power markets in California and need to be modified.

Id.

Given that the Commission initiated its examination of the California market on its own motion, in compliance with Section 206 , the August 23 Decision appropriately set the refund effective date “60 days following publication in the Federal Register” of the notice of the Commission’s Order. 92 FERC at 61,608.

In granting rehearing, the Commission apparently relied on the incorrect and unsupported assertions of Pacific Gas and Electric Company (“PGE”) and Southern California Edison Company (“SCE”) that an earlier refund effective date was “a matter largely within the Commission’s discretion” and required by the “public interest.” The Commission simply said:

The Commission will grant SDG&E’s request to establish the earliest refund effective date permitted under section 206, which will be October 2, 2000. November 1 Order at 42 (emphasis added).

These matters are not within the discretion of the Commission. They are governed by the statute. As such, there is simply no basis under the statute for the Commission to set a refund effective date as if the global proceeding ordered in the August 23 Order based “on” the SDG&E complaint, when the SDG&E did not ask for such an investigation and the Commission specifically rejected the only relief sought by SDG&E.

The Commission’s November 1 reversal on the refund effective date conflicts with its own precedent applying Section 206. In Sierra Pacific Power, 86 FERC 61,198 (1999) (“Sierra Pacific”), certain California utilities filed protests against an interconnection agreement submitted for approval in connection with the Alturas Intertie. The utilities sought suspension of the interconnection agreement. Similar to the Commission’s rejection of SDG&E’s complaint, the Commission rejected the specific relief sought by the utilities, because it could not “suspend a previously-accepted rate schedule in the absence of findings under section 206 of the FPA.” Id. at 61,697 n. 38. However, similar to the Commission’s recognition that the entire California market required examination, in Sierra Pacific, the Commission acknowledged that the issues raised by the utilities were worthy of additional investigation and, as a result, the Commission initiated “a section 206 investigation with regard to the Interconnection Agreement” on its own motion. Id. In doing so the Commission correctly set the refund effective date based upon the notice of the investigation announced in the Sierra Pacific Order, not the date of the utilities’ protest. Thus, consistent with its prior precedent the Commission should restore the refund effective date in Docket No. EL00-98-000 to October 29, 2000.

 B. By Reversing Its Decision On November 1st and Setting An October 2, 2000 Refund Effective Date, the Commission Violated Section 206 And Undermined the Appropriate Reliance by EPSA Members on the Filed Rate From October 2nd through October 28th.

In setting refund effective dates the Commission has sought to balance Congressional intent to provide the lowest costs to consumers against the need to protect utilities from unreasonable exposure to refunds. Here, on November 1st the Commission reversed its earlier decision establishing a refund effective date of October 29, 2000. The Commission set a new refund effective date of October 2, 2000. However by setting this new, earlier, date in a decision on November 1st, EPSA’s member companies did not have the opportunity to adjust their business arrangements with their customers to recognize the potential for refunds after October 2nd. As such, the Commission violated the careful balance Congress sought to achieve in providing for the potential for refunds under Section 206.

Wholesale suppliers reasonably relied upon the Commission’s August 23 Order and conformed their business arrangements based upon the belief that the earliest date refunds could be enforced would be October 29, 2000. As such, wholesale suppliers reasonably believed that they could rely on the filed rate in effect from October 2 through October 28, 2000. However, the Commission uprooted that reliance when it adopted a new refund effective date at a time when that new date, and the associated potential for refunds, had already passed. Such a possibility defeated wholesale supplier’s appropriate reliance on the filed rate and deprived wholesale suppliers of any opportunity to adjust to the potential for lost revenue during the October 2-28, 2000 period. Thus, on rehearing, the Commission should restore the initial date of October 29, 2000.