FERC Filings

REQUEST FOR REHEARING OF JULY 25 REFUND ORDER

II. THE COMMISSION HAS SET FORTH A FLAWED PROCEEDING FOR THE PACIFIC NORTHWEST. POTENTIALLY ORDERING REFUNDS BASED ON THESE PROCESSES IS RETROACTIVE RATEMAKING IN VIOLATION OF THE FILED RATE DOCTRINE

The procedural flaws that infect the Commission’s July 25th California decisions also infect the Commission’s decision to establish a separate preliminary evidentiary proceeding pertaining to the Northwest. There is no basis for ordering refunds in the Pacific Northwest. That said, the Commission should clarify the purpose of the proceeding. Moreover, the Commission has incorrectly set the refund effective date.
As EPSA and other parties have previously expressed, there is absolutely no basis for ordering mitigation throughout the Western Systems Coordinated Council (“WSCC”). There is even less of a basis for ordering retroactive refunds of bilateral transactions from December 25, 2000 through June 20, 2001. The overwhelming majority of market participants in the Pacific Northwest agree since they are not seeking refunds and the Transaction Finality Group , approximately 40 investor owned and public power utilities, qualifying facilities, marketers and end-use customers, oppose refunds. These parties believe that the rates in the Pacific Northwest were just and reasonable. Moreover, they recognize that even a proceeding to consider whether refunds are appropriate for a limited group of parties, municipal utilities such as the City of Seattle, has the potential to unwind almost 250,000 bilateral transactions. The reason is so called “ripple claims”, i.e. parties that are forced to pay refunds to those limited parties will then seek refunds from other parties on the same basis they are forced to pay refunds, even though they never wanted refunds in the first place. This is all so unnecessary since the west-wide mitigation provided for in the June 19th Order is all the limited parties that continue to seek refunds, ever sought in the Puget Sound complaint or the California proceeding.
In addition, while the Commission has not yet set a refund effective date, the Commission believes that the beginning of the refund effective date is December 25, 2000, 60 days after the filing of the Puget Sound complaint. This is incorrect. To set such a refund effective date, the Commission would have to establish a hearing on the Puget Sound complaint. However, the Commission did not set the Puget Sound complaint for hearing. It rejected the Puget Sound complaint in its December 15th Order. The Commission cannot set a refund effective date 60 days after the filing of a complaint when the only Commission action has been to reject that very complaint.
Moreover, the purpose of a refund effective date is to put parties on notice that the rates they charge, i.e. the filed rate, may be subject to retroactive refunds, thereby avoiding impermissible retroactive ratemaking should refunds be ordered. However, participants in the Pacific Northwest had no notice from December 25, 2001 through June 20, 2001 that their rates may be subject to refund, since the only viable vehicle to establish a refund effective date during that time was the Puget Sound complaint that the Commission had rejected. Parties had no other notice. As such, by potentially ordering refunds in the Pacific Northwest without adequate notice to parties, the Commission is engaging in retroactive ratemaking in violation of filed rate doctrine.
Setting aside the fact that no refunds are appropriate and the refund effective date is not correctly set thereby constituting retroactive ratemaking, the Commission’s Order, particularly the use of the word preliminary, has created confusion concerning the goal of this proceeding. Did the Commission intend for this proceeding to determine whether refunds are warranted or simply to gather information on the market in the Pacific Northwest from December 25, 2000 to June 20, 2001 and then allowing parties an opportunity in a trial type proceeding to later contest whether the data collected warrants ordering refunds? The Commission said:
The proceeding is intended to facilitate development of a factual record on whether there may have been unjust and unreasonable charges for spot market bilateral sales in the Pacific Northwest for the period beginning December 25, 2000 through June 20, 2001. The record should establish the volume of the transactions, the identification of the net sellers and net buyers, the price and terms and conditions of the sales contracts, and the extent of potential refunds. This will help the Commission determine the extent to which the dysfunctions in the California markets may have affected decisions in the Pacific Northwest.
The Commission added:
The judge shall make a recommendation and certify the record and findings of fact to the Commission within 7 days after the close of the discussions.
EPSA believes that a proceeding to gather information is consistent with the Commission’s Order and compressed schedule for action by the parties and the presiding judge. A proceeding to gather information also would be consistent with the Commission’s recognition that the Chief Judge, during the 15 day California settlement proceeding had little time to address the issues raised by the Pacific Northwest parties. Moreover, a proceeding to simply gather information would be consistent with the Commission’s recognition that the spot market in the Pacific Northwest may be somewhat different than in California, given the bilateral nature of the Pacific Northwest market and the lack of any organized exchange. Finally, requiring any final determination on refunds to be made in a 45 day proceeding, would infect this proceeding with the same procedural deficiencies that infected the California proceeding. Forty-five days is simply not ample time to make a decision on such important issues. As such, the Commission should clarify that the purpose of this proceeding is simply to gather information on the market in the Pacific Northwest and that before any refunds are ordered, the Commission will give market participants an opportunity, in a trial type proceeding, to contest whether the data collected warrants ordering refunds.