# Opposition Brief — West Penn Power Co. v. Pennsylvania Public Utility Commission

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Opposition Brief
- **Published:** January 1, 1994
- **Citation:** 513 U.S. 927

## Text

Bupreme Court, U.S.
k I 1. br ') i

AUG - 9 1994

a

No. 94-7 ee
‘ “ DFF LCE Ur ihk CLtnA

IN THE

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1994

WEST PENN POWER COMPANY, ET AL.,
Petitioners,
v.
PENNSYLVANIA PUBLIC UTILITY COMMISSION, ET AL.,

Respondents.

ON PETITION FOR A WRIT OF CERTIORARI
TO THE SUPREME COURT OF PENNSYLVANIA

BRIEF IN OPPOSITION OF RESPONDENT,
NORTH BRANCH ENERGY PARTNERS, L.P.

ROBERT F. SHAPIRO
Counsel of Record

LYNN N. HARGIS

DAVID K. SCHUMACHER

Chadbourne & Parke

i!01 Vermont Avenue, N.W.

Washington, D.C. 20005

(202) 289-3000

August 5, 1994

“BEST AVAILABLE COPY

i
RULE 29.1 LIST

Respondent North Branch Energy Partners, L.P. is
now known as Washington Power Company, L.P.
Washington Power Company, L.P. is a limited partnership.
Washington Power (I), Inc. is the general partner and Air
Products and Chemicals, Inc. is the limited partner of
Washington Power Company, L.P. Washington Power (1),
| Inc. is a wholly owned subsidiary of Air Products
| Manufacturing Corporation, which is a wholly owned
| subsidiary of Air Products and Chemicals, Inc.
: Washington Power Company, L.P. has no subsidiaries that
) are not wholly owned.

ii
TABLE OF CONTENTS
Fe Pe GEE 6 eee 8 6 a ee ees i
py 8 ae wltes. 8 fg). ee rrr ee iv
SeAceemres GP Slee GAGS «icc ccc a cecces l
REASONS FOR DENYING THE WRIT

I. THE COURT DOES NOT HAVE
JURISDICTION UNDER 28 U.S.C.A.
§ 1257 OVER THE FEDERAL QUESTIONS
RAISED) BY PR seRPe 6c cect ecess. 6

A. The Issues Raised By Petitioners
Were Not Raised In The Proceeding
ay 6 oe ee es 0 7

B. The Court Should Deny The Writ
Requested By Petitioners, As
Petitioners Have Forfeited Their
Right To Seek Court Review Of The
Federal Questions Presented .......... 9

Il. PETITIONERS’ GENERALIZED ATTACK
ON THE EQUITABLE AND POLICY
DECISIONS OF THE PENNSYLVANIA
PUC DOES NOT JUSTIFY REVIEW
a Se GES § 6s Sere esses 14

III.

IV.

VI.

ili

CONGRESS INTENDED TO PROVIDE
FLEXIBILITY TO THE STATES IN
IMPLEMENTING PURPA ON THE

ISSUES RAISED BY

EES Sy oa eee 18

PETITIONER’S PLEA FOR POLICY

GUIDANCE CONCERNING FERC’S

RULES SHOULD BE DIRECTED

oo eee 20

THERE IS NO CONFLICT AMONG
STATE COURTS OF LAST
a a Se 22

THE LOWER COURT’S UNANIMOUS

FINDING THAT THE DATE OF A

"LEGALLY ENFORCEABLE OBLIGATION"
WAS THE DATE THE CONTRACT

WAS EXECUTED IS A CONSERVATIVE
INTERPRETATION OF FERC’S
Or re 25

eee os a5 wn 41S 6 4 a we Wo a 29

iV
TABLE OF AUTHORITIES

CASES:

American Paper Institute v. American
Electric Power Service Corp.,
ee ee 27, 29

Armco Advanced Materials Corp. v.
Pennsylvania Public Utility Commission,
No. 2090 C.D. 1989 (Sept. 7, 1990)
I 4b 66 Ok dA 6 64066 0 eee ws passim

Armco Advanced Materials Corp. v.
Pennsylvania Public Utility Commission,
157 Pa. Commw. Ct. 150,
oe Be bs ay. ... passim

Armco Advanced Materials Corp. v.
Pennsylvania Public Utility Commission,
oy & oe. rr 26, 29

Bankers Life & Casualty Co. v. Crenshaw,
Ce a ie ha ee ee ee es 8

Barasch v. Pennsylvania Public Utility Commission,
119 Pa. Commw. Ct. 81, 546 A.2d 1296,
modified on denial of reargument,
119 Pa. Commw. Ct. 115, 550 A.2d 527
(1988), appeal denied, 567 A.2d 655
Glee Co hs be boa eee eo Seas 2, 14, 15

Bates Fabrics Inc. v. Public Utilities Commission,
447 A.2d 1211 (Me. 1982) .............. 24, 25

ee

v

TABLE OF AUTHORITIES (cont'd)

Cox Broadcasting Corp. v. Cohn,
Py Bik fi, ore ee ee li, 12

Dickinson v. Petroieum Conversion Corp.,
po ee ee eee 10

Duquesne Light Co. v. Barasch,
Eig neo bee ee ees sige wees 12

Exxon Corp. v. Eagerton,
Sa FE 6 kn 6a baa eee eee ONE 8

FERC v. Mississippi,
oR ee ee ee 17, 18, 19, 27

FPC v. Florida Power and Light Co.,
SE A et his 6k so Aes oa eee 18

FPC v. Southern California Edison Co.,
RE es EE a ack Be aS ne ow dee 18

FTC v. Minneapolis-Honeywell Regulator Co.,
Se SE ono 6 vw sk + kas es oe es 10

Fuller v. Oregon,
ee Be NOTED or ok oka ee kay ee Rew ee 8

Hathorn v. Lovorn,
er ee ED 5. 6 oes ae so acd & ee aR ED 13

Hill v. Chicago and Evanston R. Co.,
kik @ et) ee ee 10

nw eon hill

vi
TABLE OF AUTHORITIES (cont’d)

Illinois v. Gates,
rr... so 2 ee boo 8 6 ae ee 8

Nantahala Power & Light Co. v. Thornburg,
ce 5 sg. 4a Gn oe 0.0 6 30 008 18

Public Utility Commission v. Gulf
States Utilities Co.,
gk > PG reer 22

Reece v. Georgia,
PE MEDOD vac cc cussccsuvosesuses 13

Schacht v. United States,
«a ss ok os bo bee ee 6 ee was 10

Street v. New York,
PR 8 i re ee s

Urie v. Thompson,
ee ee <n vb ho We oe owe a a8 13

In re Vicon Recovery Systems,
153 Vt. 539, 572 A.2d 1355
PL kG ay ok witae hole 06 64 WAres a 22, 23

Water Power Co., Inc. v. PacifiCorp.,
99 Or. App. 125, 781 P.2d 860
(Ore. App. 1989), review denied,
309 Or. 291, 787 P.2d 887,
cert. denied, 498 U.S. 811 (1990) ......... 23, 24

vii

BLE OF ORITIES (cont’d

West Penn Power Co. v. Penns nia
Public Utility Commission,
No. 93-1341 (filed Feb. 22, 1994) .... 13, 17, 24, 26

West Penn Power Co. v. Pennsylvania
Public Utility Commission,
150 Pa. Commw. Ct. 349, 615 A.2d 951,
reh'g denied, (Pa. Commw. Ct., Nov. 10,
1992), appeal denied sub nom., Armco
Advanced Materials Corp. v. Pennsyvania
Public Utility Commission, 637 A.2d 291
Cee eae ot e405 60.05 8 4 0:8 16

West Penn Power Co. v. Pennsylvania
Public Utility Commission,
No. 93-1535 (filed Mar. 29, 1994) ............ 17

ADMINISTRATIVE ORDERS:

Policy Statement Regarding the Commission's
Enforcement Role Under Section 210

of the Public Utility Regulatory Policies

Act of 1978, 23 FERC 4 61,304

ee occa tu a da 0 6s 8 se Bees 19

Vill

TABLE OF AUTHORITIES (cont’d)

STATUTES AND REGULATIONS:

ep SE PRs 6 6 esas ee WN aoe hee ev eR 21
Oe Se et Fs ce eee cess Wes 1, 15, 21
es ae ee | eerererererr ree 15, 16
gs Sot rere a 15, 16, 19
oe Fo ee eee 20
16 U.S.C.A. $324a-S(RMZMB) 6 wc cece 20
SR OEE Goa kéonsn eb ceavecaeuwet passim
Fe a ae ND 4d a's sv oon o bced Ca eee ee 20
Se Se ee OS MD be 8 we kde cwerersvarees 21
oP Ga ee I a 5 os eae os Bowne eee 20

ate Pk ee eee ere 25

ix

TABLE OF AUTHORITIES (cont’d)

MISCELLANEOUS:

45 Fed. Reg. 12,214 at 12,224 (1980) ......... 25, 28
45 Fed. Reg. 12,214 at 12,231 (1980) ............ 21
45 Fed. Reg. 12,214 at 12,253 (1980) ............ 21

eee ee ere re 9, 10

(crite

STATEMENT OF THE CASE

This short Statement of the Case is intended to
supplement the Statement of the Case contained in the
Petition for a Writ of Certiorari filed by the Petitioners, West
Penn Power Company ("West Penn"), Armco Advanced
Materials Company ("Armco") and Allegheny Ludlum
Corporation ("Allegheny").

West Penn and Respondent North Branch Energy
Partners, L.P. ("North Branch")! entered into an Electric
Energy Purchase Agreement on October 15, 1987 (the
"Burgettstown contract"). Under the Burgettstown contract,
North Branch would sell capacity and electric energy to West
Penn that would be produced from North Branch’s proposed
power production facility to be constructed in Washington
County, Pennsylvania (the "Burgettstown Project"). The
Burgettstown Project would be a "qualifying facility" or "QF"
under the Public Utility Regulatory Policies Act of 1978
("PURPA"), 16 U.S.C.A. § 824a-3, and the regulations of the
Federal Energy Regulatory Commission ("FERC")
implementing PURPA.

West Penn and North Branch began negotiations
toward execution of the Burgettstown contract in 1985. In
June 1986, West Penn and North Branch reached an
understanding as to the rate structure that would be included
in the Burgettstown contract. The rates agreed to by North
Branch and West Penn reflected West Penn’s "avoided costs."

On January 8, 1988, West Penn filed a petition with
the Pennsylvania Public Utility Commission ("Pennsylvania
PUC" or "PUC") seeking approval of the Burgettstown

In 1993, North Branch Energy Partners, L.P. changed its name to
Washington Power Company, L.P. However, to avoid confusion,
Respondent will continue to refer to itself herein as North Branch.

2

contract. On July 8, 1988, the Pennsylvania PUC entered its
"Tentative Order and Opinion" granting approval of West
Penn’s petition and allowing West Penn to recover costs
payable under the Burgettstown contract. (Pet. App. H,
47a). However, as a result of a remand order issued by the
Pennsylvania Commonwealth Court in Barasch v.
Pennsylvania Public Utility Commission, 119 Pa. Commw.
Ct. 81, 546 A.2d 1296, modified on denial of reargument,
119 Pa. Commw. Ct. 115, 550 A.2d 527 (1988), appeal
denied, 567 A.2d 655 (Pa. 1989) ("Milesburg 1"), the
Pennsylvania PUC issued an order entered September 30,
1988 requiring a hearing to consider the Burgettstown
contract and other West Penn contracts with other developers
of QFs (including the Milesburg Project and the Shannopin
Project). (Pet. App. 1).

After an exhaustive hearing, an Administrative Law
Judge ("ALJ") issued a decision on June 27, 1989. (Pet.
App. K). By order dated September 29, 1989, the
Pennsylvania PUC adopted the ALJ’s recommendation that,
for purposes of determining West Penn’s avoided costs, a
"legally enforceable obligation" arose between West Penn and
North Branch for the sale and purchase of power when
"serious negotiations” began between the two, which the ALJ
found to be in October 1986. The Pennsylvania PUC,
however, reversed the ALJ and found that the substantial
delay in the regulatory proceedings involving the PUC’s
approval of the Burgettstown contract, caused primarily by
the requirement in Milesburg / that a hearing be convened to
consider the contract, required that the "milestone" dates in

Respondent uses "Pet. App.” to refer to the Appendix submitted with
the Petition for a Writ of Certiorari.

3

the Burgettstown contract be extended.’ The Pennsylvania
PUC entered an order on October 6, 1989 denying
reconsideration of its September 29, 1989 order. (Pet.
App. O).

Petitioners sought review of the Pennsylvania PUC’s
September 29, 1989 order and October 6, 1989 order by the
Commonwealth Court. Generally, Petitioners argued that
(i) the Pennsylvania PUC erred in extending the milestone
dates in the Burgettstown contract, and (ii) the PUC erred in
allowing the rates payable under the Burgettstown contract to
be based on West Penn’s avoided costs calculated at a time
before North Branch had made a commitment to deliver
capacity to West Penn. (Pet. App. Q, 30la). In Armco
Advanced Materials Corp. v. Pennsylvania Public Utility
Commission, No. 2090 C.D. 1989 (Sept. 7, 1990)
(unreported) ("Burgettstown I"), the Commonwealth Court
upheld the Pennsylvania PUC’s determination that the
milestone dates in the Burgettstown contract should be
extended. (Pet. App. Q). The Commonwealth Court found,
however, that a "legally enforceable obligation" between
West Penn and North Branch arose not when "serious
negotiations" began between West Penn and North Branch,
as the Pennsylvania PUC found, but when West Penn and
North Branch executed the Burgettstown contract --
October 15, 1987. Thus, in Burgettstown/, _ the
Commonwealth Court agreed with the Petitioners and held

The “milestone” dates in the Burgettstown contract require North
Branch to make progress toward the development of the Burgettstown
Project by dates certain or West Penn may terminate the Burgettstown
contract. One of the more important milestone dates required North
Branch to obtain financing for construction of the Burgettstown Project
by October 1, 1989. Failure of North Branch to secure financing by
this date, for any reason whatsoever, would have enabled West Penn to
terminate the Burgettstown contract.

4

that for purposes of determining the rates under the
Burgettstown contact, West Penn’s avoided costs should be
determined as of October 15, 1987. The Commonwealth
Court remanded the proceedings to the Pennsylvania PUC to
recalculate the Burgettstown contract rate consistent with its
holding. The Commonwealth Court denied reargument of
Burgettstown I. (Pet. App. Q, 317a, 319a).

Petitioners sought review of Burgettstown I by the
Pennsylvania Supreme Court. The Petitioners argued that the
Commonwealth Court erred in requiring the rates in the
Burgettstown contract to be modified to reflect West Penn’s
avoided cost at the time the Burgettstown contract was
executed and in affirming the authority of the Pennsylvania
PUC under PURPA to order a modification of the milestone
dates in the Burgettstown contract. On November 19, 1991,
the Pennsylvania Supreme Court, without comment, denied
review of Burgettstown I. (Pet. App. R). On February 3,
1992, the Pennsylvania Supreme Court denied the request for
reconsideration filed by West Penn. (Pet. App. S). None of
the Petitioners filed a petition for a writ of certiorari with the
United States Supreme Court on review of the Burgettstown I
issues.

On May 7, 1991, as amended February 24, 1992, North
Branch filed a petition with the Pennsylvania PUC requesting
the PUC to commence proceedings to determine the
appropriate rates under the Burgettstown contract in light of
the Commonwealth Court’s Burgettstown I order. On July 6,
1992, the Pennsylvania PUC entered an order requiring North
Branch, West Penn and other interested parties to submit
calculations as to the appropriate rates payable to North
Branch under the Burgettstown contract. (Pet. App. G). In
an order entered November 24, 1992, the Pennsylvania PUC
ordered that the Burgettstown contract be modified to reflect

5

the rate calculations submitted by North Branch in response
to the PUC’s July 6, 1992 order. (Pet. App. F).

The Petitioners sought review of the Pennsylvania
PUC’s November 24, 1992 order by the Commonwealth
Court. Generally, Petitioners challenged the Pennsylvania
PUC’s determination that the Burgettstown contract was to be
modified consistent with the rate calculations submitted by
North Branch. Petitioners did not seek review of whether the
Pennsylvania PUC could extend the milestone dates in the
Burgettstown contract or whether it was proper to determine
West Penn’s avoided costs as of the date West Penn and
North Branch executed the Burgettstown contract, the issues
now raised to this Court. (See Appendix A and Appendix B
to this brief.) On July 15, 1993, the Commonwealth Court
entered its order in Armco Advanced Materials Corp. v.
Pennsylvania Public Utility Commission, 157 Pa. Commw.
Ct. 150, 629 A.2d 221 (1993) ("Burgettstown II"), rejecting
the contentions of the Petitioners. (Pet. App. C).

Petitioners sought Pennsylvania Supreme Court review of
Burgettstown Il. The issues raised by Petitioners before the
Pennsylvania Supreme Court were the same issues raised
before the Commonwealth Court in Burgettstown II. (See
App. C and App. D). Namely, Petitioners sought review of
the Pennsylvania PUC’s failure to (i) consider "hindsight
information" submitted by Petitioners (as the Commonwealth
Court described the disputed information in Burgettstown II)
when it accepted North Branch’s recalculation of the
Burgettstown contract rate, (ii) accept West Penn’s avoided
cost calculation and thus refrain from interfering with internal
management of West Penn, (iii) consider issues that were
raised for the first time during the remand proceedings
following Burgettstown I, (iv) provide the Petitioners with
due process when the PUC refused to hold a full hearing on

6

the recalculation of the Burgettstown contract rate, and
(v) reject the recalculation of the Burgettstown contract rate
because North Branch effectively waived its right to seek
such a recalculation when it withdrew a prior request for such
a recalculation by the PUC due to the regulatory delay
surrounding the approval of the Burgettstown contract.
Again, Petitioners failed to raise either of the issues raised to
this Court in Petitioners’ Petition for a Writ of Certiorari.
On April 4, 1994, the Pennsylvania Supreme Court, without
comment, denied review of Burgettstown I]. (Pet. App. A
and B).

REASONS FOR DENYING THE WRIT

L. THE COURT DOES NOT HAVE JURISDICTION
UNDER 28 U.S.C.A. §1257 OVER THE
FEDERAL QUESTIONS RAISED BY
PETITIONERS

Under 28 U.S.C.A. § 1257, the Court may, by writ of
certiorari, obtain jurisdiction over certain proceedings before
State courts. In order for the Court to obtain such jurisdiction
pursuant to § 1257: (1) the issue raised before the state courts
must relate to "any title, right, privilege, or immunity [that]
is specially set up or claimed under the ... statutes of ... the
United States," and (ii) the state court order from which
Court review is sought must be a "[f]inal judgment[ ] or
decree[ ] rendered by the highest court of a State in which a
decision could be had." Petitioners have failed to meet the
jurisdictional requirements of § 1257. Therefore, the Court
should deny the writ for want of jurisdiction.

7

A. The Issues Raised By Petitioners Were Not
Raised In The Proceeding Below

The orders of the Pennsylvania courts from which
Petitioners seek review are the Pennsylvania Commonwealth
Court’s Burgettstown II] order and the order of the
Pennsylvania Supreme Court, entered on April 4, 1994,
denying Petitioners’ discretionary petitions for allowance of
appeal of Burgettstown II (the "April 4, 1994 order") (see
Pet. at 4). However, it is clear from the "Statement of
Questions Involved" sections in the "Brief for Petitioner,
West Penn Power Company" (App. A) and the “Brief of
Petitioners Armco Advanced Materials Corporation and
Allegheny Ludlum Corporation" (App. B), both filed on
March 23, 1993 with the Commonwealth Court, the
Commonwealth Court’s Burgettstown I] order (Pet. App. C),
and the "Questions Presented for Review" sections of the
"Petition for Allowance of Appeal of West Penn Power
Company (Burgettstown II)" (App. C) and the "Petition for
Allowance of Appeal of Armco Advanced Materials
Corporation and Allegheny Ludlum Corporation” (App. D),
both filed with the Pennsylvania Supreme Court on
August 13, 1993, that the so-called "federal" questions
presented by the Petitioners here were not before either the
Commonwealth Court when it issued its Burgettstown I]
order or the Pennsylvania Supreme Court when it issued its
April 4, 1994 order. Therefore, the Court should deny the
writ of certiorari requested by Petitioners, because the issues
raised by Petitioners were not adequately presented before the
highest state court, in this case the Pennsylvania Supreme
Court, as required under § 1257.

In determining whether the Court can review a federal
question pursuant to § 1257, the Court must find that the
federal question for which review is sought has been "pressed

8

or passed upon" by the highest state court from which a
decision could be rendered. See Bankers Life & Casualty Co.
v. Crenshaw, 486 U.S. 71 (1988); Jilinois v. Gates, 462 U.S.
213 (1983). When the highest state court does not discuss
the federal question in the order from which review by this
Court is sought and "‘the highest state court has failed to pass
upon [the] federal question, it will be assumed that the
omission was due to want of proper presentation in the state
courts, unless the aggrieved party in this Court can
affirmatively show the contrary.’" Exxon Corp. v. Eagerton,
462 U.S. 176, 181, n.3 (1983) (quoting Fuller v. Oregon, 417
U.S. 40, 50, n.11 (1974), quoting Street v. New York, 394
U.S. 576, 582 (1969)).

As noted above, it is clear that the federal questions
presented here by Petitioners were not "pressed or passed
upon" by the Pennsylvania Supreme Court in its April 4,
1994 order or the Commonwealth Court’s Burgettstown I]
order. The only issues raised by Petitioners before these
courts related to the recalculation of the avoided cost pricing
to be used in the Burgettstown contract by the Pennsylvania
PUC during remand proceedings ordered by the
Commonwealth Court in Burgettstown I. The Petitioners
themselves acknowledge that the issues presented here were
not considered by the Commonwealth Court in _ its
Burgettstown II order or by the Pennsylvania Supreme Court
in its April 4, 1994 order, but were considered in earlier
orders issued by these courts (Burgettstown I) which were not
appealed to this Court. (Pet. at 16-19). Therefore, the Court
should deny the writ of certiorari requested by Petitioner for
lack of jurisdiction under § 1257.

9

B. The Court Should Deny The Writ
Requested By Petitioners, As Petitioners
Have Forfeited Their Right To Seek Court
Review Of The Federal Questions Presented

In addition to the requirement that federal questions must
be "pressed or passed upon" by the highest court in a state
before the Court can obtain jurisdiction to review the federal
questions, § 1257 requires that the order issued by the highest
state court for which review is sought be "final." While the
federal questions raised by Petitioners were addressed by a
"final" order of the Pennsylvania Supreme Court, the final
order addressing these issues was not the April 4, 1994 order
which is the subject of the Petition for a Writ of Certiorari,
but the order issued by the Pennsylvania Supreme Court on
February 3, 1992 denying review of the Commonwealth
Court’s Burgettstown I order (the "February 3, 1992 order").
Thus, to obtain a writ of certiorari for review of the federal
questions it has raised here, Petitioners should have filed a
petition for a writ of certiorari with the Court within ninety
(90) days following entry of the Pennsylvania Supreme
Court's February 3, 1992 order, pursuant to the Court’s Rule
13.1. See S. Ct. Rule 13.1, 28 U.S.C.A. Instead, Petitioners
sought review of the Burgettstown I issues more than two
years after these issues were ripe for review by the Court.
Because the Petitioners did not seek timely review of the
Pennsylvania Supreme Court’s February 3, 1992 order under
the Court’s Rule 13.1, Petitioners have forfeited their right to
Court review of the federal questions raised in their Petition
for a Writ of Certiorari. Therefore, the Court should deny
the petition.

The procedural rules promulgated by the Court,
establishing, among other things, time limitations for the
filing of petitions for a writ of certiorari, are to maintain "an

10

orderly appellate process." See Schacht v. United States, 398
U.S. 58, 69 (Harlan, J., concurring). These rules, along with
the statutory jurisdictional requirements, support an important
principle governing court proceedings in the United States --
“that litigation must at some definite point be brought to an
end." FTC v. Minneapolis-Honeywell Regulator Co., 344
U.S. 206, 213 (1952). That is particularly true here, where
the Burgettstown contract has already been unreasonably
delayed by lega! proceedings.

To ensure that the statutory provisions setting forth the
Court’s jurisdiction and its procedural rules supporting this
jurisdiction continue to serve the purpose for which they were
originally enacted, the Court should deny Petitioners’ request
for a writ of certiorari on the grounds that Petitioners failed
to seek review of the federal questions presented in a timely
manner. Indeed, the Court has dismissed a petition for
review when the only issues raised by the petitioner were
finally determined in an earlier order by a lower court and
the order for which review was being sought resulted from
remand proceedings required by the earlier order. See Hill
v. Chicago and Evanston R. Co., 140 U.S. 52 (1891); see
also Dickinson v. Petroleum Conversion Corp., 338 U.S. 507
(1950) (petition for review dismissed when all! issues relating
to petitioner resolved in prior final court order).

While the Court has held that its Rules establishing time
limits for the filing of petitions for a writ of certiorari may
be waived, such waiver may only be granted when the "ends
of justice so require." Schacht, 398 U.S. at 64. The standard
for waiver of Rule 13.1 is not met here. Denial of the writ
would serve Respondents’ interest in obtaining a definite end
to the litigation involving the Burgettstown contract. The
proceedings involving this contract commenced in 1988.
When the Pennsylvania Supreme Court issued its February 3,

11

1992 order, Respondent continued its development activities
with respect to the Burgettstown Project. Respondent relied
on the fact that the Pennsylvania Supreme Court had finally
spoken on the important issues addressed in Burgettstown | --
namely, the Pennsylvania PUC could amend the milestone
dates in the Burgettstown contract and West Penn’s avoided
cost should be determined as of the date the Burgettstown
contract was executed -- and Petitioners had failed to seek
Court review of the Pennsylvania Supreme Court’s February
3, 1992 order. Allowing Petitioners to obtain Court review
at this late date of the issues raised would punish
Respondents for relying on a final, non-appealable order
issued by the Pennsylvania Supreme Court.

Petitioners cannot be heard to argue that the Pennsylvania
Supreme Court’s February 3, 1992 order was not final. It is
clear from the Court’s holding in Cox Broadcasting Corp. v.
Cohn, 420 U.S. 469 (1975) that the Pennsylvania Supreme
Court’s February 3, 1992 order was indeed a "final" order
under § 1257, and was thus ripe for review by this Court. In
Cox Broadcasting, the Court set forth four categories of cases
in which the Court will review federal questions addressed in
an order issued by the highest court of a state, even though
further proceedings in the lower state courts are to follow.‘

: The four categories of cases set forth in Cox Broadcasting are as

follows:

(i) Cases in which further proceedings will occur in the state
courts but where “the federal issue is conclusive or the outcome
of further proceedings preordained.” 420 U.S. at 479.

(ii) Cases in which “the federal issue, finally decided by the highest
court in the State, will survive and require decision regardless
of the outcome of future state-court proceedings.” 420 U.S. at
480.

(continued...)

12

The Pennsylvania Supreme Court’s February 3, 1992 order
fits squarely within at least the first of the four categories
outlined in Cox Broadcasting: Cases in which further
proceedings will occur in the state courts but where "the
federal issue is conclusive or the outcome of further
proceedings preordained." 420 U.S. at 479. Indeed, the
Burgettstown proceedings are very similar to the proceedings
before the Court in Duquesne Light Co. v. Barasch, 488 U.S.
299 (1989), in which the finality doctrine set forth in Cox
Broadcasting was applied. In Barasch, a case also involving
review of an order of the Pennsylvania PUC, the Court found
to be final under § 1257 a Pennsylvania Supreme Court order
that had remanded proceedings back to the Pennsylvania PUC
to determine the petitioners’ electric rates consistent with that
order. As in Barasch, the Commonwealth Court in
Burgettstown I (as affirmed by the Pennsylvania Supreme
Court in the February 3, 1992 order) rejected Petitioners’
arguments with respect to the federal questions raised, but
remanded the proceedings to the Pennsylvania PUC to

‘(...continued)

(iii) Cases in which the federal claim has been finally decided by
the highest state court, with further state proceedings on the
merits to follow, “but in which later review of the federal issue
cannot be had, whatever the ultimate outcome of the case."
420 U.S. at 481.

(iv) Cases in which the federal question has been finally decided by
the highest state court, with further state proceedings to follow
where the party seeking Court review may win on non-federal
grounds, "thus rendering unnecessary review of the federal
issue by this Court, and where reversal of the state court on the
federal issue would be preclusive of any further litigation on
the relevant cause of action rather than merely controlling the
nature and character of” the state proceeding to follow. 420
U.S. at 482-3.

13

determine the rates under the Burgettstown contract consistent
with its order.

Moreover, the Petitioners have taken the position in
a companion proceeding before the Court (See West Penn
Power Co. v. Pennsylvania Public Utility Commission, No.
93-1341 (filed Feb. 22, 1994) ("Milesburg, No. 93-1341"))
that an order issued by the Pennsylvania Supreme Court
addressing and remanding issues similar to those addressed in
Burgettstown I is a final order of the Pennsylvania Supreme
Court reviewable under § 1257. (Pet. at 27-28). Petitioners
cannot have it both ways with respect to the finality of the
Pennsylvania Supreme Court’s February 3, 1992 order and
that court’s order for which review in Milesburg, No. 93-
1341 is sought. Either both orders of the Pennsylvania
Supreme Court were final and ripe for review under § 1257,
or neither order was final, in which case Petitioners’ Petition
for a Writ of Certiorari in Milesburg, No. 93-1341 was
premature and should be dismissed by the Court.

Finally, this case is distinguishable from cases in which
the Court addressed federal questions raised in a previously
remanded order of a state court. See, e.g. Hathorn y.
Lovorn, 457 U.S. 255 (1982); Urie v. Thompson, 337 US.
163 (1949); Reece v. Georgia, 350 U.S.85 (1955). In those
cases, unlike here, the first order issued by the state court,
which addressed a federal question and remanded the
proceedings to a lower court, was clearly an interlocutory
order of the state court and the petitioner sought review of
the federal questions addressed in the first order "at his first
opportunity." Urie, 337 U.S. at 171. Here, however, the
first state court order, the Pennsylvania Supreme Court’s
February 3, 1992 order affirming Burgettstown I, was a final
order and the Petitioners did not seek review at their "first

14

opportunity.” Accordingly, their petition should be
dismissed.

II. PETITIONERS’ GENERALIZED ATTACK ON
THE EQUITABLE AND POLICY DECISIONS
OF THE PENNSYLVANIA PUC DOES NOT
JUSTIFY REVIEW BY THIS COURT

Petitioners, in addition to failing to preserve the
purported federal questions presented, have also failed to state
a federal question justifying the Court’s review. Petitioners’
challenge is in essence an attack on the equitable and policy
decisions of the Pennsylvania PUC and the Pennsyivania
courts. They attack the equitable remedy of the Pennsylvania
PUC to preserve the status quo ante for a QF contract,
subject to PUC approval by its terms, when unanticipated
regulatory and litigation delays substantially delayed such
approval. Since neither of the contracting parties could have
anticipated this particular delay, the Pennsylvania PUC was
simply preserving the bargain that the parties themselves had
negotiated.

Briefly, the Commonwealth Court, in Milesburg /,
reversed a Pennsylvania PUC order approving the pass-
through in West Penn’s retail rates of rates paid under a QF
contract. In Milesburg I, the Commonwealth Court held for
the first time that utilities must provide individual notices to
ratepayers and provide for their full participation in hearings
on utility company petitions to the PUC to pass through to
the utility’s retail ratepayers payments made to QFs. The
Commonwealth Court decision was issued one year after the
QF contract at issue in that case was executed and presented
to the Pennsylvania PUC for approval as required by its
terms. This unprecedented decision, and the subsequent
individual notices and hearings that it required, not only for

15

the QF contract before that court in Milesburg I but also the
Burgettstown contract, substantially delayed Pennsylvania
PUC approval of the Burgettstown contract beyond any
period that could have been reasonably anticipated by the
contracting parties prior to Milesburg I. Therefore, in order
to preserve the bargain that the parties had negotiated in the
Burgettstown contract, the Pennsylvania PUC in its
September 29, 1989 order extended certain performance
milestone dates to preserve the status quo ante and ensure
that the Burgettstown contract did not expire by its terms.
(Pet. App. N, 272a-276a).

Equitable actions such as those of the Pennsylvania
PUC here are not only clearly authorized by, but are arguably
required by Section 210 of PURPA, 16 U.S.C.A. § 824a-3,
which requires the FERC to promulgate, and the states to
implement, rules that encourage qualifying facilities. See
PURPA Section 210(a), (f), 16 U.S.C.A. §§ 824a-3(a), (f).
As the Commonwealth Court correctly noted below in
Burgettstown I, in attacking such authority "West Penn’s
argument here therefore really amounts to an attack on
PURPA itself....". (Pet. App. Q, 314a).

Petitioners attempt to characterize the Pennsylvania
PUC’s actions to preserve the status quo ante, and the
Commonwealth Court’s affirmation in Burgettstown I of such
actions under PURPA, as an assertion by the PUC of the
right "to modify that contract in any manner to ensure that
the facility is built." (Pet. at 20, emphasis supplied).
However, neither the decisions of the Pennsylvania PUC nor
those of the Commonwealth Court even suggest that such a
sweeping assertion of power by the PUC was being requested
or affirmed. If such an assertion of authority to modify a
contract "in any manner" should ever be made by a state

16

utility commission and affirmed by the state courts, it may be
worthy of review. However, that is not this case.

Here, the Commonwealth Court upheld the
Pennsylvania PUC’s exercise of the basic equitable powers
of any state commission required to fulfill a mandate to
advance federal public policies. In this case, the
Pennsylvania PUC acted to fulfill its mandate under PURPA
to encourage QFs by ensuring that an_ unanticipated
regulatory delay did not act to frustrate the original bargain
made by parties to a QF contract. See, e.g, West Penn
Power Co. v. Pennsylvania Public Utility Commission, 150
Pa. Commw. Ct. 349, 615 A.2d 951, reh'g denied, (Pa.
Commw. Ct., Nov. 10. 1992), appeal denied sub nom.,
Armco Advanced Materials Corp. v. Pennsylvania Public
Utility Commission, 637 A.2d 291 (Pa. 1993) (Pennsylvania
PUC has authority to modify QF contract to maintain status
quo between parties pending outcome of proceeding on QF
contract rates).

The court decisions in this case, therefore, are far
from affirming the right of the Pennsylvania PUC to modify
a QF contract "in any manner to ensure that the facility is
built" as the Petitioners contend (Pet. at 20, emphasis
supplied). Rather, those decisions are conservative
affirmations of very limited actions by the Pennsylvania PUC
that were clearly within the PUC’s discretion in interpreting
FERC’s rules in a manner to encourage QFs as required by
that statute. See PURPA Section 210(a), (f), 16 U.S.C.A.

§§ 824a-3(a), (f).

In summary, this case is no more worthy of review by
this Court than any other determination of avoided cost by
any state utility commission or nonregulated electric utility in
the country. All such determinations necessarily involve

17

policy choices and equitable considerations as to when and
how avoided costs should be calculated and applied. Such
considerations must take into account the unequal bargaining
power of the parties, since the utilities hold most of the
necessary information regarding their own avoided costs and
essentially all the bargaining power; the potentiai for the
purchasing utility to delay the negotiations and the execution
of a contract and create a constantly moving target; the
historic reluctance of utilities to purchase from qualifying
facilities that was the reason that PURPA was enacted;’ and
other factors that may be present in each individual situation.
Petitioners would thus have this Court involve itself in the
type of factual detail and policy determinations that constitute
the very heart of the state implementation of PURPA, and
would have the Court ignore the clear Congressional and
FERC intention to give the states substantial discretion, as
discussed infra at 18-20.

In essence, this Petition for a Writ of Certiorari (along
with the petitions in Milesburg, No. 93-1341 and West Penn
Power Co. v. Pennsylvania Public Utility Commission, No.
93-1535 (filed Mar. 29, 1994) ("Shannopin")) involves the
attempt by a utility and two of its industrial customers to
undo a contract that the utility itself negotiated, but from
which it has decided in hindsight to distance itself. (This is
not surprising, since as noted above, PURPA was enacted
because of the utilities’ historic reluctance to purchase power
from qualifying facilities.) Such a case does not present a
federal question that this Court should review.

. See FERC v. Mississippi, 456 U.S. 742, 750 (1982).

18

Ill. CONGRESS INTENDED TO PROVIDE
FLEXIBILITY TO THE STATES _ IN
IMPLEMENTING PURPA ON THE ISSUES
RAISED BY PETITIONERS |

Petitioners have attempted to find a conflict among
the decisions of state courts of last resort regarding
implementation of PURPA that they state "warrants plenary
review by this Court." (Pet. at 24). Not only is there no
such conflict, as discussed infra at 22-25, but even if there
were, it would reflect nothing more than the variation and
experimentation among the states that the Congress and the
FERC intended in providing for the implementation of
FERC’s rules under PURPA by the states.

Congress clearly could have kept the states out of the |
implementation of PURPA altogether. (Indeed, in FERC v. |
Mississippi, 456 U.S. 742 (1982), a state challenged the |
authority of the Congress to require states to implement |
PURPA.) In the absence of the PURPA requirement of state
implementation, FERC would have exclusive jurisdiction over
the wholesale rates QFs charge utilities and the states would
have no role in their determination. See FPC v. Southern |
California Edison Co., 376 U.S. 205 (1964); FPC v. Florida |
Power and Light Co., 404 U.S. 453 (1972). Moreover, if |
FERC determined such wholesale rates, the states would be
required by federal preemption principles to pass the rates
through to retail ratepayers of the purchasing utilities as
reasonably incurred expenses. Nantahala Power & Light Co.
v. Thornburg, 476 U.S. 953 (1986). Leaving implementation
of the PURPA rules solely in the hands of the FERC would
have created uniformity in the implementation of the PURPA
rules.

acacia

19

Instead, both Congress in enacting the statute, and the
FERC in promulgating its rules thereunder, chose to give
broad discretion to the states to implement PURPA. The
only requirement of the states under PURPA is to follow the
FERC rules. See PURPA Section 210(f), 16 U.S.C.A.
§824a-3(f). And the FERC rules are intentionally broad,
nonspecific rules, intended to give considerable latitude to the
states, particularly the rules at issue here. The Court in
FERC v. Mississippi, supra, noted that the FERC provided
in its rules that the states can implement them by issuing
rules or resolving case-by-case disputes. 456 U.S. at 751. In
this case, the Pennsylvania PUC adopted the latter approach.°
Petitioners would apparently have this Court review each
such case-by-case PUC decision for conformity with all other
such state decisions.

The FERC’s enforcement policy has also been to give
broad latitude to the states in implementing FERC’s rules.
Its 1983 policy statement on enforcement of its rules against
the states noted that the FERC would only consider
enforcement if the states failed to carry out their basic
implementation responsibilities. See Policy Statement
Regarding the Commission’s Enforcement Role Under
Section 210 of the Public Utility Regulatory Policies Act of
1978, 23 FERC { 61,304 (May 31, 1983). In all the years
since the rules were promulgated in 1980, the FERC has
received numerous requests for enforcement, but has only
issued an enforcement order once. The FERC has therefore
given wide latitude to the states to experiment with the

The Pennsylvania PUC also issued rules for qualifying facilities in
general. Petitioners do not challenge these rules, or the PUC order here,
as being inconsistent with the PUC rules.

20

implementation of the PURPA rules in the fashion best suited
to their particular circumstances.

IV. PETITIONER’S PLEA FOR POLICY GUIDANCE
CONCERNING FERC’S RULES SHOULD BE
DIRECTED TO THE FERC

Petitioners also contend that there is an "absence of any
other forum for the resolution of this important issue of
federal law," in asserting that there is a "clear conflict"
among state courts of last resort regarding negotiated QF
contracts. (Pet. at 24). As discussed below, there is no such
conflict. In any event, there are clearly other (and more
appropriate) fora in which Petitioners could raise these policy
questions.’

The most obvious forum for raising policy concerns is
the FERC itself, since it is the FERC’s rules, namely 18
C.F.R. §§ 292.301(b) and 292.304(a), that the Petitioners
claim are being misapplied. (Pet. at 20-21). As the FERC

The Petitioners make the bald claim (Pet. at 24, n.13) that: "[FJor all
practical purposes, this Court is the only federal court that may take
appellate jurisdiction over the important questions of federal law decided
by state commissions purporting to act under PURPA," citing to Section
210(gX1) of PURPA, 16 U.S.C. § 824a-3(g\1). Petitioners fail to note,
however, that Section 210(hX2XB) of PURPA, 16 U.S.C. § 824a-
3(hX2\B), provides that any electric utility may petition the FERC to
enforce the requirement that the states implement FERC’s rules under
PURPA. If the FERC fails to initiate an enforcement action within 60
days, the electric utility may bring an action within the appropriate United
States district court to require the state regulatory authority to comply with
the FERC’s rules. Therefore, if Petitioners believed that the Pennsylvania
PUC had failed to implement FERC’s rules under PURPA, including the
rules relating to the submission of negotiated contracts or the rule for
establishing the date of legally enforceable obligations, they were free to
seek enforcement from either the FERC or the federal district courts if
FERC chose not to initiate an enforcement action.

21

explained in the preamble to its PURPA rules, the Congress
has "provided that the Commission may serve as a forum for
review and enforcement of the implementation of this
program." 45 Fed. Reg. 12,214 at 12,231 (1980). FERC
explained in the preamble that such review and enforcement
need not be only of the initial implementation of its rules, but
can also consist of review and enforcement of the
applications by a state regulatory authority or nonregulated
electric utility "on a case-by-case basis...." /d.

In the preamble to the PURPA rules, FERC specifically
discussed the rule that Petitioner’s contend is at issue here, 18
C.F.R. § 292.301(b)(1). (Pet. at 21). FERC recognized that
its rules might be interpreted as divesting state authorities of
the power to review contracts, but stated that this was not the
case as long as such review was consistent with the terms,
policies and practices under Sections 201 and 210 of PURPA,
16 U.S.C.A. §§ 796 and 824a-3. 45 Fed. Reg. 12,214 at
12,233. FERC concluded it was not "possible or advisable
to attempt to establish more precise guidelines than these," so
that if there was a question regarding the state’s authority, the
solution is to "seek an interpretive ruling from the
Commission’s General Counsel." Jd.

Petitioners’ contention that there is no other forum for
the resolution of federal law questions regarding the extent
of state commission authority to review and modify QF
contracts is thus simply incorrect. The FERC stands ready to
offer any needed guidance, the federal district courts are
available for enforcement purposes, and, to the extent that
Petitioners’ complaint is with PURPA itself, as the
Commonwealth Court suggests (Pet. App. Q, 314a), the
Congress of the United States is the proper forum for
Petitioners’ contentions.

22

V. THERE IS NO CONFLICT AMONG STATE
COURTS OF LAST RESORT

The cases cited by Petitioners (Pet. at 23) do not support
Petitioners’ contentions that there is a "clear conflict"
concerning the limits of state authority under PURPA among
state courts of last resort. (Pet. at 24). All of these cases are
distinguishable from the facts in this proceeding.

Petitioners’ reliance on Public Utility Commission v.
Gulf States Utilities Co., 809 S.W.2d 201 (Tex. 1991), is
misplaced. The issues before the Texas court were
(1) whether PURPA prohibits "a utility from contracting for
and paying a rate in excess of its avoided cost and
(2) whether, if a utility may pay more than avoided costs, the
regulations impose a limitation on how much of these
payments the utility can recover from its ratepayers." 809
S.W.2d at 205. Unlike the present case where the utility
purchaser is now seeking to avoid an obligation to purchase
power from a QF, Gulf States Utilities was seeking a
determination that its contract with a QF, which admittedly
contained rates above avoided cost, was valid. The court
affirmed its validity. 809 S.W.2d at 207-8.5 Despite the
broad language contained in dicta and cited by Petitioners, it
is apparent that the Texas court’s determinations were made
entirely within the context of a utility seeking to voluntarily
contract for rates above its avoided costs.

The next case cited by Petitioners, Jn re Vicon Recovery
Systems, 153 Vt. 539, 572 A.2d 1355 (1990), provides no
support for Petitioners’ claim that the Pennsylvania PUC and

The Texas court also held that the Texas commission had full authority to
determine, in accordance with its rules, the extent to which any payments
above avoided cost might be recovered from ratepayers. 809 S.W.2d at
209-10.

ee

23

courts misconstrued PURPA. In Vicon, the Vermont court
expressly declined to rule on claims related to the validity of
the power purchase agreement ("PPA") and confined its
decision to determining whether the Vermont Public Service
Board’s decision to deny approval of the PPA, which was
first submitted three years after the contract was signed, was
proper. 153 Vt. at 543, 572 A.2d at 1357. The Vermont
court’s affirmation of that denial does not support Petitioners’
claim that the Pennsylvania PUC lacked jurisdiction to alter
the milestone dates or determine avoided costs as of the time
of the original contract. (Pet. at 23-24). Rather, the
Vermont court recognized that the PPA required initial Board
approval in accordance with the procedures set forth in the
Board’s General Order 45 which required that contracts be
submitted to the Board ninety days prior to execution and not
three years after execution. 153 Vt. at 548, 572 A.2d at
1360. The court viewed the three year delay in submitting
the contract for approval as a sufficient basis for upholding
the Board’s action.”

The facts in Water Power Co., Inc. v. PacifiCorp., 99
Or. App. 125, 781 P.2d 860 (Ore. App. 1989), review denied
309 Or. 291, 787 P.2d 887, cert. denied 498 US. 811
(1990), readily distinguish that case from this proceeding.
Water Power involved a regulatory scheme under which
PacifiCorp purchased QF power at rates specified in a
schedule approved by the Oregon Public Utility Commission.

The court agreed with the Board’s concem that unnecessary delays in the
approval process invited "‘manipulative conduct by the contracting
parties."" 153 Vt. at 548, 572 A.2d at 1360. In contrast, in this case, the
delays have been caused by regulatory proceedings and litigation that were
completely outside the control of Respondents. Indeed, to allow regulatory
proceedings to undo the status quo, as requested by Petitioners, would
provide a vehicle for the sort of manipulative conduct that the Vermont
court and Board sought to avoid.

24

One such schedule went into effect in 1982 and a new
schedule with lower rates was approved for PPAs executed
after September 30, 1983. PacifiCorp, the purchasing utility,
refused to execute a PPA with Water Power (a QF) before
Water Power had an agreement with third parties who would
transmit the power to a point of delivery specified by
PacifiCorp. Water Power filed a complaint with the Oregon
PUC in October 1983 after which the Oregon PUC directed
PacifiCorp to execute a PPA with the older, higher rates’®
provided that Water Power submitted a transmission plan and |
agreed, as a contractual requirement in the PPA, to obtain a |
transmission agreement by November 1, 1985. Thus, the |
facts in Water Power suggest that just as the Oregon PUC
had the authority to direct PacifiCorp to enter into a PPA
using older (and higher) avoided cost rates because of the
transmission dispute that delayed contract execution at the
time that the older avoided cost rates were in effect, the
Pennsylvania PUC had the authority to direct West Penn to
adjust the milestone dates and associated rates in the
Burgettstown contract due to regulatory delays. Taken in
context, the holding of Water Power is wholly consistent
with the Pennsylvania PUC action below.

Petitioners’ reliance on Bates Fabrics Inc. v. Public
Utilities Commission, 447 A.2d 1211 (Me. 1982) is similarly
flawed. Petitioners note in their petition in Milesburg, No.
93-1341 at 22, that this case involved a contract that was
executed prior to the enactment of PURPA but failed to
attach any significance to that distinction. However, as the
Maine court noted in Bates, “contracts executed prior to the
enactment of the PURPA are not affected by the Act." 447

¥ There is no indication in the decision that PacifiCorp, or anyone else,

contested the Oregon PUC’s right to direct that older but higher avoided
cost rates be used.

|

25

A.2d at 1214. Moreover, Bates, unlike the instant case, did
not concern the scope of state regulatory authority over a
PPA between a utility and QF that had been submitted to the
regulatory agency for approval. Thus, neither the Maine
Public Utilities Commission nor the Maine court expresses an
opinion in Bates on the scope of the Maine PUC’s authority
to review a PPA submitted to it for approval.

VI. THE LOWER COURT’S UNANIMOUS
FINDING THAT THE DATE OF A "LEGALLY
ENFORCEABLE OBLIGATION" WAS THE
DATE THE CONTRACT WAS EXECUTED IS
A CONSERVATIVE INTERPRETATION OF
FERC’S RULES

The Commonwealth Court in Burgettstown I also
reasonably (although conservatively) interpreted a FERC rule
designed to give the states maximum discretion in
determining when a "legally enforceable obligation" was
incurred, under the discrete circumstances of each case, for
purposes of establishing the date at which avoided costs are
calculated under FERC’s rules. The relevant FERC rule, 18
C.F.R. § 292.304(d)(2), deliberately employed the broader
term "legally enforceable obligation," rather than the term
“contract,” in order to give the state commissions more
leeway in fixing the date for determining avoided cost. The
FERC explained this choice in the preamble to its rules:

Use of the term "legally enforceable obligation" is
intended to prevent a utility from circumventing the
requirement that provides capacity credit for an
eligible qualifying facility merely by refusing to
enter into a contract with the qualifying facility.

45 Fed. Reg. 12,214 at 12,224 (1980).

26

The decision of the Commonwealth Court in this case
that the "legally enforceable obligation" was in fact the date
of execution of the contract was therefore a conservative
interpretation of FERC’s rules. Indeed, half of the
Pennsylvania Supreme Court, in a concurring opinion
accompanying the order for which the Court’s review is
sought in Milesburg, No. 93-1341, would have chosen an
earlier date which would have produced higher avoided costs
and thus higher payments to Burgettstown. See Armco
Advanced Materials Corp. v. Pennsylvania Public Utility
Commission, 634 A.2d 207, 211-13 (Pa. 1993)
("Milesburg II") (Papadakos, J., concurring and dissenting).

Petitioners nonetheless contend that the date of a "legally
enforceable obligation" is that date on which the
Pennsylvania PUC approves the contract.'! This
interpretation is inconsistent with both FERC’s rules and the
policy behind them, as discussed above. In addition, such an
interpretation would create a perpetual moving target -- any
delay in PUC approval would change the date for calculating
avoided costs to the date of the delay. The changed avoided
costs would then have to be calculated and approved, and any
delay in approving them would again change the date of the
avoided costs.

Contrary to the impression fostered by the Petitioners’
brief, the purpose of PURPA was not to provide the lowest
possible rates for the utility’s customers. PURPA was
enacted in the aftermath of the oil price crisis of the early
1970s in order to reduce the nation’s dependence on foreign
oil. It provided two methods to achieve this result:

This contention was neither raised before the Commonwealth Court in
Burgettstown Il nor raised before the Pennsylvania Supreme Court on
review of Burgetistown Il. (See App. A, App. B, App. C and App. D).

27

conservation programs and the encouragement of energy
efficiency. The latter goal was to be achieved by requiring
utilities, that had been reluctant to do so in the past, to
purchase electric energy from certain generating facilities that
used renewable resources for fuel or that used fossil fuel
efficiently by sequentially producing electric energy and
useful thermal energy (for heating, cooling or manufacturing
purposes) from the same energy source. See FERC v.
Mississippi, 456 U.S. at 750.

Under PURPA, ratepayers would not be harmed because
these QFs would receive the prices that the utilities would
otherwise have paid for comparable energy and power (their
"avoided cost"). In fact, the Court upheld the FERC’s rules
requiring that utilities pay qualifying facilities their full
avoided costs, rather than some percentage thereof, because
the FERC found this necessary to encourage QFs. American
Paper Institute v. American Electric Power Service Corp.,
461 U.S. 402, 415-16 (1983).

The FERC recognized from the outset that avoided costs
could fall (just as they could rise) after contracts had been
signed based on avoided costs estimated for the life of the
contract. However, the FERC also recognized the necessity
of such long-term contracts in order to finance generating
plants. FERC’s rules therefore addressed the possibility that
prices might change after avoided costs had been estimated
and stated that its rules:

are intended to reconcile the requirement that
the rates for purchases equal the utilities’
avoided cost with the need for qualifying
facilities to be able ‘o enter into contractual
commitments based, by necessity, on estimates
of future avoided costs. Some of the

28

comments received regarding this section
stated that, if the avoided cost of energy at the
time it is supplied is less than the price
provided in the contract or obligation, the
purchasing utility would be required to pay a
rate for purchases that would subsidize the
qualifying facility at the expense of the
utility’s other ratepayers. The Commission
recognizes this possibility, but is cognizant
that in other cases, the required rate will turn
out to be lower than the avoided cost at the
time of purchase. The Commission does not
believe that the reference in the statute to the
incremental cost of alternative energy was
intended to require a minute-by-minute
evaluation of costs which would be checked
against rates established in long term contracts
between qualifying facilities and electric
utilities.

...The import of this section is to ensure that
a qualifying facility which has obtained the
certainty of an arrangement is not deprived of
the benefits of its commitment as a result of
changed circumstances. This provision can
also work to preserve the bargain entered into
by the electric utility...

45 Fed. Reg. 12,214 at 12,224 (1980).

Petitioners here are attempting to do exactly what the
FERC anticipated they might do, viz., to attempt to deprive
North Branch of the benefits of its commitment because of
changing circumstances. However, as the PUC and the
Pennsylvania Supreme Court concluded in considering a

29

similar challenge to a QF contract, "no matter what point in
time is used to fix rates, ratepayers will bear the risk that
rates will go down and QFs will bear the risk that they will
go up." Milesburg IJ, 634 A.2d at 212. Indeed, even as the
Court reads this brief, energy prices are probably rising or
falling.

In summary, by arguing that contractual avoided costs
may never be above actual avoided costs as measured at any
point in time, Petitioners are in essence attacking the FERC’s
rules that provide that QFs may be paid avoided costs as
estimated at the date of a "legally enforceable obligation.”
The Court has already reviewed and affirmed FERC’s rules.
American Paper Institute v. American Electric Power Service
Corp., supra.

CONCLUSION

For the reasons stated above, the Petition for a Writ of
Certiorari should be denied.

Respectfully submitted,

ROBERT F. SHAPIRO
Counsel of Record

LYNN N. HARGIS

DAVID K. SCHUMACHER

Chadbourne & Parke

1101 Vermont Avenue, N.W.

Washington, D.C. 20005

(202) 289-3000

August 5, 1994

APPENDIX TO
BRIEF IN OPPOSITION OF RESPONDENT
NORTH BRANCH ENERGY PARTNERS, L.P.

APPENDIX
TABLE OF CONTENTS

A. Statement of Questions Involved
in the Brief for Petitioner, West
Penn Power Company, filed March 23,
1993 with the Commonwealth Court of
en la

B. Statement of Questions Involved in
the Brief for Petitioners Armco
Advanced Materials Corporation
and Allegheny Ludlum Corporation,
filed March 23, 1993 with the
Commonwealth Court of Pennsylvania....... 4a

sd Questions Presented for Review
in the Petition for Allowance
of Appeal of West Penn Power
Company (Burgettstown II), filed
August 13, 1993 with the Supreme
Court of Pennsyivania .................. Ta

D. Questions Presented for Review
in the Petition for Allowance
of Appeal of Armco Advanced
Materials Corporation and Allegheny
Ludlum Corporation, filed August 13,
1993 with the Supreme Court of
WI yo oe ne ok hike vee 10a

la

APPENDIX A
IN THE COMMONWEALTH COURT OF
PENNSYLVANIA

ARMCO ADVANCED MATERIALS
CORPORATION, et al.,

)
)
Petitioners, ) .No. 2742

v. ) C.D. 1992
PENNSYLVANIA PUBLIC UTILITY )
COMMISSION, )

Respondent. )
WEST PENN POWER COMPANY, )
Petitioner, )

v. ) No. 2755
PENNSYLVANIA PUBLIC UTILITY ) C.D. 1992
COMMISSION, )

Respondent. )
NORTH BRANCH ENERGY
PARTNERS, L.P.,
Petitioner, No. 58
Vv C.D. 1993

PENNSYLVANIA PUBLIC UTILITY
COMMISSION,

Nee eee eee

Respondent.

BRIEF FOR PETITIONER, WEST PENN POWER
COMPANY

Petition for Review of Opinion and Order of Pennsylvania
Public Utility Commission entered on November 24, 1992,
at Docket No. P-880284 on Remand from the
Commonwealth Court Order
of September 7, 1990 (Burgettstown II)

2a

IV. STATEMENT OF THE QUESTIONS INVOLVED

a. Whether the Pennsylvania Public Utility
Commission erred as a matter of law in failing to follow
the Order of Commonwealth Court on remand to update
the capacity cost credit in an Electric Energy Purchase
Agreement by making a new calculation using inputs in
existence at the time the EEPA was signed, October 15,
1987, rather than as of the earlier time of serious
negotiations between the contracting parties, in that the
PUC approved a capacity cost credit recalculation which
did not take into account inputs appropriate for October 15,
1987.

(ANSWERED IN THE NEGATIVE BY THE PUC.)

b. Whether the Pennsylvania Public Utility
Commission erred as a matter of law for failing to follow
the Order of the Commonwealth Court on remand, as the
PUC refused to recognize West Penn’s proper exercise of
management discretion in determining that a coal fired
generation station was not an appropriate input in the
recalculations of the capacity cost rates for the October 15,
1987 contract signing date.

(ANSWERED IN THE NEGATIVE BY THE PUC.)

¢. Whether the Pennsylvania Public Utility
Commission erred as a matter of law in taking judicial
notice of West Penn’s entire PURPA 210 filings for 1986-
1992 as a basis for rejecting West Penn’s recalculations, as
no party requested that judicial notice of the filings be
taken and the PUC took judicial notice of the filings
without giving West Penn an opportunity to demonstrate

3a

that the PUC misconstrued the information contained in

those filings.
(NOT ANSWERED BY THE PUC.)

d. Whether the Pennsylvania Public Utility
Commission erred as a matter of law in refusing to
consider four of West Penn’s attachments to its
recalculations for the reason that the attachments were not
part of the initial proceedings and were not public record,
because in doing so the PUC, in effect, limited its
consideration of evidence to that which addressed inputs
appropriate for the time frame of serious negotiations, not
for the October 15, 1987 contract signing date.

(ANSWERED IN THE NEGATIVE BY THE PUC.)

e. Whether the Pennsylvania Public Utility
Commission erred as a matter of law since it accepted
varying capacity rates from 4.9189 cents/kwh to 5.7106
cents/kwh, with concomitant project on-line dates ranging
from July 1, 1994 through October 1, 1995, or thereafter,
as appropriate recalculation of capacity costs to be paid to
North Branch, when North Branch previously waived any
claim it had to capacity rates above 3.6 cents/kwh.

(ANSWERED IN THE NEGATIVE BY THE PUC.)

f. Whether the PUC erred as a matter of law by
not holding hearings to ascertain the proper calculations of
the avoided capacity costs as of October 15, 1987.

(ANSWERED IN THE NEGATIVE BY THE PUC.)

da

APPENDIX B

IN THE COMMONWEALTH COURT OF
PENNSYLVANIA

ARMCO ADVANCED MATERIALS
CORPORATION AND ALLEGHENY

)
)
LUDLUM CORPO, ATION, ) No. 2742
Petitioners, ) C.D. 1992
v. )
PENNSYLVANIA PUBLIC UTILITY )
COMMISSION, )
Respondent. )
WEST PENN POWER COMPANY,
Petitioner,
v. ; No. 2755
C.D. 1992

PENNSYLVANIA PUBLIC UTILITY
COMMISSION,

ee

Respondent.

BRIEF FOR PETITIONERS ARMCO ADVANCED
MATERIALS CORPORATION
AND ALLEGHENY LUDLUM CORPORATION

Petition for Review of Opinion and Order of Pennsylvania
Public Utility Commission entered
on November 24, 1992, at Docket No. P-880284 on
Remand from the Commonwealth Court Order of
September 7, 1990 (Burgettstown II)

Sa
Ill. STATEMENT OF THE QUESTIONS INVOLVED

Where a public utility and the developer of a proposed
qualifying facility ("QF") power plant voluntarily negotiate
a contract with the purchase price based on the utility’s
avoided cost as of the time of "serious negotiations” in
accordance with the then existing policy of the
Pennsylvania Public Utility Commission ("Commission");
and where the Commission’s policy is reversed by an order
of this Court which found that avoided cost must be
calculated at the time a QF incurs a "legally enforceable
obligation” to deliver capacity; in the remand proceeding
before the Commission where the utility’s avoided cost is
to be recalculated as of the proper time:

(1) | MAY THE COMMISSION TAKE OVER
THE UTILITY MANAGEMENT
FUNCTION OF PLANNING
GENERATING CAPACITY RESOURCE
ADDITIONS FOR ITS SYSTEM IF
THERE HAS BEEN NO ABUSE OF
MANAGERIAL DISCRETION BY THE
UTILITY AND THE PUBLIC INTEREST
HAS NOT BEEN ADVERSELY
AFFECTED?

Suggested Answer: No

(2) | WHERE THE QF DEVELOPER HAD
WITHDRAWN ITS REQUEST FOR A
PURCHASE PRICE HIGHER THAN THE
RATE CONTAINED IN THE ORIGINAL
CONTRACT IN ORDER TO OBTAIN A
FAVORABLE RULING FROM THE
COMMISSION, MAY THE PUC GRANT

6a

A HIGHER RATE IN THE REMAND
PROCEEDING?

Suggested Answer: No

7a
APPENDIX C

IN THE SUPREME COURT OF PENNSYLVANIA
WESTERN DISTRICT

WEST PENN POWER COMPANY,

Petitioner,

V. : No. 0577
PENNSYLVANIA PUBLIC UTILITY : W.D. Allocatur
COMMISSION, : Docket 1993

Respondent, .

PETITION FOR ALLOWANCE OF APPEAL OF
WEST PENN POWER COMPANY
(BURGETTSTOWN II)

Petition for Allowance of Appeal
from the Order of the Commonwealth Court
of Pennsylvania entered July 15, 1993,
at Nos. 2742 and 2755 C.D. 1992,
affirming the Order of the
Pennsylvania Public Utility Commission
entered November 24, 1992
at Docket No. P-880284 (Burgettstown II)

8a

Ill. QUESTIONS PRESENTED FOR REVIEW

DID THE COMMISSION, BASED ON IMPROPER
DATA AND AN IMPROPER AND ILLEGAL
STANDARD AND IN VIOLATION OF PURPA,
IMPROPERLY APPROVE PURPA DEVELOPER
CALCULATIONS OF AVOIDED CAPACITY COSTS IN
THE AMOUNT OF OVER $30 MILLION PER YEAR
FOR THIRTY-THREE (33) YEARS, WHICH AVOIDED
CAPACITY COSTS ARE TO BE PAID BY WEST
PENN’S CUSTOMERS THROUGH WEST PENN TO
THE PURPA DEVELOPER?

DID THE COMMISSION IMPROPERLY REFUSE TO
CONSIDER WEST PENN’S CALCULATIONS OF THE
APPROPRIATE AVOIDED CAPACITY COSTS UNDER
THE APPROPRIATE TIME FRAME BECAUSE THESE
CALCULATIONS WERE NOT PART OF THE INITIAL
PROCEEDINGS, THEREBY IMPROPERLY LIMITING
ITS CONSIDERATION OF EVIDENCE TO A TIME
PERIOD PREVIOUSLY DECLARED UNLAWFUL
UNDER PURPA BY THE COMMONWEALTH COURT?

DID THE COMMONWEALTH COURT
ERRONEOUSLY RELY UPON SHANNOPIN II TO
PRECLUDE CONSIDERATION OF DATA
DEMONSTRATING THAT THE PURPA DEVELOPER’S
CAPACITY WAS EXCESS AND UNNEEDED AS OF
THE PERTINENT OCTOBER 15, 1987 DATE, AND
THAT WEST PENN’S CUSTOMERS SHOULD NOT BE
REQUIRED TO PAY FOR SUCH CAPACITY?

DID THE COMMONWEALTH COURT IGNORE THE
FAILURE OF THE COMMISSION TO PROVIDE WEST
PENN WITH ADEQUATE DUE PROCESS RIGHTS

———

9a

AND THE REFUSAL OF THE COMMISSION TO
FOLLOW THE COURT’S ORDER DESPITE THE FACT
THAT THE ISSUES WERE PROPERLY RAISED AND
BRIEFED BY WEST PENN?

DID THE COMMONWEALTH COURT ERR BY
RELEASING THE PURPA DEVELOPER FROM ITS
WAIVER OF AN INCREASE IN AVOIDED CAPACITY
COSTS, WHEN THE WAIVER WAS MADE, OVER
OBJECTION, IN THE CONTESTED PUC
PROCEEDINGS AND AS AN INDUCEMENT TO THE
COMMISSION’S APPROVAL OF THE PURPA
DEVELOPER’S REQUESTED CONTRACT
MODIFICATIONS?

DID THE COMMISSION ERR BY FAILING TO HOLD
HEARINGS TO ASCERTAIN THE PROPER
CALCULATIONS FOR AVOIDED COSTS AS OF
OCTOBER 15, 1987?

10a

APPENDIX D

IN THE SUPREME COURT OF PENNSYLVANIA
WESTERN DISTRICT

ARMCO ADVANCED MATERIALS
CORPORATION AND ALLEGHENY
LUDLUM CORPORATION,
Petitioners,
v.

PENNSYLVANIA PUBLIC UTILITY
COMMISSION, No. 0457
W.D.
Allocatur

Docket 1993

Respondent.

WEST PENN POWER COMPANY,
Petitioner,
v.
PENNSYLVANIA PUBLIC UTILITY
COMMISSION,

ee ee ee ee ee ee ee ee ee

Respondent.

Petition for Allowance of Appeal from the Orders of the
Commonwealth Court of Pennsylvania issued July 15, 1993
and July 22, 1993 at Nos. 2742 and 2755 C.D. 1992
affirming the Order of Pennsylvania Public Utility
Commission entered on November 24, 1992, at
Docket No. P-880284

lla

III. QUESTIONS PRESENTED FOR REVIEW

Where a public utility and the developer of a proposed
qualifying facility ("QF") power plant voluntarily negotiate
a contract with the purchase price based on the utility’s
avoided cost as of the time of "serious negotiations" in
accordance with the then existing policy of the Pennsylvania
Public Utility Commission ("Commission"); and where the
Commission’s policy is reversed by an order of the
Commonwealth Court which found that avoided cost must be
calculated at the time a QF incurs a "legally enforceable
obligation” to deliver Capacity; in the remand proceeding
before the Commission where the utility’s avoided cost is to
be recalculated as of the proper time:

(1) MAY THE COMMISSION TAKE OVER THE
UTILITY MANAGEMENT FUNCTION OF
PLANNING GENERATING CAPACITY
RESOURCE ADDITIONS FOR ITS SYSTEM IF
THERE HAS BEEN NO _ ABUSE OF
MANAGERIAL DISCRETION BY THE
UTILITY AND THE PUBLIC INTEREST HAS
NOT BEEN ADVERSELY AFFECTED?

Suggested Answer: No

(2) MAY THE COMMISSION TAKE OVER THE
UTILITY MANAGEMENT FUNCTION OF
PLANNING GENERATING CAPACITY
RESOURCE ADDITIONS FOR ITS SYSTEM IF
THE UTILITY DID NOT IMPROPERLY RELY
ON HINDSIGHT INFORMATION IN ITS
AVOIDED COST RECALCULATION?

Suggested Answer: No

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386012_0057%3A3. Public record. Not legal advice.