FERC Filings
Answer of EPSA in Opposition of the Motion to Intervene Out-Of-Time, and Answer to Motion to File Out-Of-Time Brief of the Missouri Public Service Commission
Answer to Motion for Leave to File Brief Out-Of-Time
Notwithstanding, its opposition to the MOPSC being granted party status, EPSA does not object to the Commission considering the MOPSC Brief as an amicus curiae filing, in accordance with Commission precedent. However, for the reasons set forth herein, it is EPSA’s view that the MOPSC brief will not serve to materially augment the record, or otherwise contribute to the Commission’s consideration of the issues in this case.
A. The MOPSC’s Brief Merely Reiterates Its Earlier Letters To The Commission And Does Not Illuminate The Record.
For the most part, the MOPSC Brief simply bolsters statements made in the MOPSC’s March 18 and June 2003 letters without adding anything new to the Commission’s consideration of the contested issues. For example, Section A of the MOPSC’s Brief simply repeats statements in the MOPSC’s earlier letters that the Proposed Transaction “is consistent with its preferences for the surety and reliability of dedicated, company-owned assets to meet Missouri load requirements.”
However, the issue here is not whether the Proposed Transaction is consistent with MOPSC’s preferences. Indeed, EPSA does not dispute this point. The issue is whether there were other feasible alternatives (untainted by affiliate abuse) that would also be consistent with these preferences. Even if what the MOPSC says is so, it does not respond to or rebut EPSA’s arguments that, inter alia: (1) the long-term tolling offers offered in response to the RFP were less expensive and an equally, if not more, reliable alternative to meeting AmerenUE’s capacity needs; (2) even if company-owned generation were shown to be the best alternative, AmerenUE unfairly excluded non-affiliated generation owners and developers from consideration; or (3) that a plant purchased from or constructed by a non-affiliated company as the result of a fair and transparent RFP process would also be consistent with the MOPSC’s preference.
Significantly, there is no evidence in this proceeding, nor is any offered by the MOPSC in its brief, to show that the MOPSC’s “preference” for company-owned assets was based on a fair and thorough evaluation of competing alternatives. In fact, the MOPSC has expressly stated that “neither [it] nor its Staff have conducted an evaluation of the prudence of the present course of action taken by AmerenUE, which evaluation would include an examination of the options available to AmerenUE to meet this need.” The MOPSC’s preference, without such an evaluation, does not present a compelling basis for the Commission to ignore the harm that the Proposed Transaction will cause to the wholesale competitive generation market.
Moreover, it is significant that the MOPSC neither argues that AmerenUE was precluded from conducting a new “asset acquisition only” RFP under the Missouri Settlement, nor does it assert that AmerenUE was precluded from purchasing a non-affiliated generator under the Missouri Settlement. Likewise, the MOPSC never states that it will not reconsider its preference for hard assets, if other alternatives, such as long-term tolling arrangements, are shown to have been an equally reliable, lower cost option. Indeed, the MOPSC repeatedly states that “it has not prejudged any matter that may come before it relating to AmerenUE’s purchase of the Pinckneyville and Kinmundy units.”
In short, the MOPSC Brief does not retract its June 3, 2003 letter to the Commission stating that it will analyze the prudency of the Proposed Transaction “and the appropriateness of the purchase in light of other options, including purchase on the market or acquisition of other assets.” But if, notwithstanding the Missouri Settlement, the MOPSC, at some future date, could decide that AmerenUE acted imprudently in rejecting the lower cost tolling offers or acquisition of non-affiliate assets in favor of the Proposed Transaction, then why should this Commission now accept the MOPSC’s implicit suggestion that AmerenUE’s options were immutably circumscribed by the Missouri Settlement?
Finally, it bears repeating that the fact that no after-the-fact prudence review of the Proposed Transaction by the MOPSC, if one occurs at all, can correct the harm to competition resulting from affiliate abuse. It cannot protect the interests of wholesale nonaffiliated suppliers that offered, or should have had the opportunity to offer, lower-priced alternatives, but that were foreclosed from doing so because of an unfair and biased power procurement process. And no after-the-fact prudence review can determine the supply options that were available in the market nearly as well as can a before-the-fact determination, based on a fair and transparent RFP.
B. The MOPSC Brief Does Not Identify Any Alleged Distortions Or Mischaracterizations In EPSA’s Brief On Exceptions.
While the MOPSC Brief and Motion to Intervene make repeated reference to “Intervenors’ continuing distortions and mischaracterizations of the Missouri Commission’s position,” as a basis for their delinquent motion for intervention, they fail to identify a single “distortion” or “mischaracterization;” nor do they provide a single citation to EPSA’s Brief on Exceptions. For example, EPSA does not dispute that the MOPSC has expressed a clear preference for company-owned assets in its Order accepting the Missouri Settlement. What EPSA’s Brief on Exceptions does point out is the total absence in the record of any evidence that such a preference existed or was conveyed to AmerenUE prior to the negotiation of the Missouri Settlement. The MOPSC Brief does not respond to these issues at all.
The record is clear that the focus of the August 2001 RFP, which the MOPSC Staff reviewed and approved, was to secure long-term capacity through 10-year purchase power agreements, primarily simple-cycle tolling agreements. Indeed, MOPSC Staff Economist Proctor’s January 28, 2002 memo on the RFP results fails to make any mention of such a preference for company-owned assets; nor does his April 2002 testimony in the rate case proceedings.
Moreover, even if the MOPSC Staff had changed its preference by then, and even if AmerenUE decided to pursue an asset purchase on this basis, at no time after the issuance of the August 2001 RFP were any non-affiliated bidders or potential bidders advised of any changes in AmerenUE’s or the MOPSC’s preferences; nor were they ever asked by AmerenUE to submit new offers for the sale of generation assets, consistent with any such change in preference. Conversely, AmerenUE was already soliciting additional offers for the sale of generation plants from its affiliate in early January 2002, well in advance of its January 15 briefing to the MOPSC Staff on the results of the RFP.
But if, at the same time AmerenUE was soliciting its affiliates, non-affiliated bidders had also been made aware of this new preference for hard assets and given a chance to rebid, given the depressed Midwestern generation market, it defies reason to conclude, as Ameren and Trial Staff have, that they still would not have offered to sell existing or new generation plants at prices significantly below Kinmundy’s and Pinckneyville’s book value. Instead, at the same time that AmerenUE was soliciting its affiliate for additional offers to sell it plants, non-affiliates were only being asked to submit offers for one-year purchase power deals.
Finally, the MOPSC previously stated that, even if it were to intervene, “it would not participate in any manner that might indicate prejudgment of the matters that later will be decided by the Missouri Commission.” However, the MOPSC’s Brief does take a position on the existence of transmission constraints as a limitation on alternatives to the Proposed Transaction. The MOPSC asserts that its approval of the Callaway-Franks line reflects the fact that the Ameren transmission system is indeed constrained.” However, the MOPSC gives no reason to conclude that its findings with respect to the Callaway-Franks line, which are not in evidence, can be extrapolated to the entire Ameren transmission system. In any event, the MOPSC’s assertions, in this respect, are simply bolstering that has not been subjected to either discovery or cross-examination.
C. The MOPSC Is Simply Wrong To Assert That Commission’s Policy Has Changed.
The most important point to be made, here, is that the Commission’s decision to review the Proposed Transaction for affiliate abuse is not a departure from past policy that somehow prejudices AmerenUE. The Commission’s policy against jurisdictional utilities unfairly favoring their affiliates is long-standing. As the Commission explained in its Hearing Order, this transaction (and the one in Cinergy) is unlike previous types of intra-corporate transfers of assets that the Commission has previously approved. What is new about this type of intra-corporate transfer is that it creates the potential for the regulated utility to give its unregulated affiliates an unfair, “safety net,” advantage. But, there is nothing new about the Commission’s policy against affiliate abuse, only this particular type of affiliate transaction to which it should be applied. That is precisely why the hearing in this case is so important, and why this proceeding should not be resolved, or otherwise affected, by political considerations or unjustified fears of trammeling on state perquisites.
Accordingly, AmerenUE cannot reasonably claim that it “relied” upon Commission precedent. Indeed, at least twice in the two years prior to the filing of the application in this case, the Commission had investigated whether AmerenUE’s purchase of power from its affiliates constituted affiliate abuse under the standard in Boston Edison Company Re: Edgar Electric, 55 FERC 61,382 (1991). Likewise, the affidavit of Richard Voytas that accompanied the February 5, 2003 application in this case goes out of its way to provide evidence of head-to-head competition and benchmark prices required to demonstrate a lack of affiliate abuse under Edgar. Therefore, AmerenUE knew, or expected, even prior to the February 2003 decision in Cinergy, that the Commission would look closely at this suspect affiliate transaction.
Accordingly, the Commission should reject the MOPSC’s invitation to disregard AmerenUE’s affiliate abuse here but, instead, to apply its affiliate abuse standard to these types of affiliate transactions only prospectively. Prospective application is appropriate where a party relies in good faith upon existing precedent. In this case, there was no Commission precedent sanctioning this safety net types of affiliate transactions, and AmerenUE was on notice that transactions between it and its affiliates would be carefully examined by the Commission.