Opposition Brief — Jersey Central Power & Light Co. v. Freehold Cogeneration Associates
Supreme Court brief1995
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JUL § 1995 ;
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Nos. 941977, 94-1905... ae |
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IN THE
Hupreme Court of the United Htates
OCTOBER TERM, 1994
JERSEY CENTRAL POWER & LIGHT COMPANY,
Petitioner,
Vv.
FREEHOLD COGENERATION ASSOCIATES, L.P.,
Respondent.
THE NEW JERSEY DIVISION OF THE RATEPAYER ADVOCATE,
Petitioner,
Vv.
FREEHOLD COGENERATION ASSOCIATES, L.P.,
Respondent.
ON PETITIONS FOR A WRIT OF CERTIORARI TO
THE UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT
RESPONDENT'S BRIEF IN OPPOSITION TO
PETITIONS FOR A WRIT OF CERTIORARI
ROBERT F. SHAPIRO
Counsel of Record
LYNN N. HARGIS
MARTIN W. GITLIN
Chadbourne & Parke
1101 Vermont Avenue, N.W.
Washington, D.C. 20005
(202) 289-3000
Attorneys for Respondent Freehold
July 5, 1995 Cogeneration Associates, L.P.
a)
A \
QUESTION PRESENTED
Whether Section 210(e) of the Public Utility
Regulatory Policies Act of 1978 ("PURPA") and the Federal
Energy Regulatory Commission's implementing regulations,
which exempt qualifying cogeneration facilities from state
rate regulation, preempt the New Jersey regulatory agency
from modifying the rates of a qualifying cogeneration facility
in a long-term contract where those rates were "locked-in"
and approved by the agency under another provision of
PURPA in orders that were not challenged and that have
become final and nonappealable.
RULE 29.1 LIST
Respondent Freehold Cogeneration Associates, L.P.
("Freehold") is a limited partnership. Constellation Energy,
Inc., through wholly-owned subsidiaries, owns a | percent
general partnership interest and a 49 percent limited
partnership interest in Freehold. Constellation Energy, Inc.
is a wholly-owned subsidiary of Constellation Holdings, Inc.,
which, in turn, is a wholly-owned subsidiary of Baltimore
Gas & Electric Company, a publicly traded company. The
other general partner in Freehold is APS Freehold, Inc., with
a 1 percent general partnership interest. APS Freehold, Inc.
is a privately held corporation. The remaining limited
partnership interest in Freehold (49 percent) is held by APS
Associates, L.P. APS Associates, L.P. comprises Advanced
Power Systems, Inc., a privately held corporation owning a
98 percent general partnership interest, and Interstate
Business Corporation and Wilson Securities Corporation,
each a privately held corporation owning a | percent limited
partnership interest.
TABLE OF CONTENTS
QUESTION PRESENTED
RULE 29.1 LIST
TABLE OF AUTHORITIES
STATEMENT OF THE CASE
I. Nature of the Case
II. The Statutory and Regulatory Scheme
A. Federal Power Act.
B.
Section 210 of PURPA
The FERC's Rules Under
Section 210(a) (Purchase
at Avoided Cost)
Section 210(e) and the
FERC's Rules Thereunder
(Exemption from Utility
Regulation) fedsens
Implementation of the FERC's
TABLE OF CONTENTS (cont'd)
TTT. — Peachupnt TOU esssissssitinivsaveintbaetnspscies 9
IV. The Decision Below....ccccccccsctecsecesccccescsececece 12
. Neither The New Jersey Board
of Regulatory Commissioners, the
Appellee Below, Nor the Federal
Energy Regulatory Commission, the
Agency Whose Rules Are Being
Applied, Are Challenging the Third
Circusit's TRON ocicsscsscstcsisciadiiniineiatiennes 3
II. The Third Circuit's Holding is Fully
Consistent With the Other High
Appellate Court Decisions That
Have Addressed Attempts to
Revisit An Approved QF Contract............. 15
Ill. The Third Circuit's Decision is
- Consistent With Recent Decisions
By the FERC Interpreting PURPA
and Its Regulatigett.......sccccccesscesoesssovnrssabatannes 17
-iv-
TABLE OF CONTENTS (cont'd)
Page
Jersey Central's Allegations of a
Large Disparity Between Avoided
Costs and the Rates That It Will
Pay Under the PPA Are Wholly
Unsubstantiated and Are Irrelevant
FERC's Implementing Regulations
Are No Longer Subject To Challenge........... 21
Freehold Presented a Valid Claim
That It is Exempt From Rate :
Regulation Under Section 210(€)..............+++ 23
A. As an Action Under Section
210(e) of PURPA, Jurisdiction
Over This Matter Properly
Resided with the Federal
B. The BRC Impermissibly
Sought to Regulate Freehold's
Rates After They Had Been
Locked-In and Approved...............+ 25
The "Regulatory Out" Clause of the PPA
Does Not Confer on the BRC Power to
TABLE OF CONTENTS (cont'd)
Page
VIII. The Division of The Ratepayer
Advocate's Claim That the BRC's
Approval of the PPA Was Ultra
Vires Is Baseless And, In Any
Event, Untimely Raised................0sssssseeees 28
LATIN, .cvsescrsctsvessssnsiinseinieiuiieaiainimitbliteeein 29
APPENDICES TABLE OF CONTENTS
TABLE OF AUTHORITIES
Page
COURT CASES:
Am. Elec. Power Serv. Corp. v.
Fed. Energy Reg. Comm'n,
675 F.2d 1226 (D.C. Cir. 1982),
rev'd on other grounds sub nom.,
Am. Paper Inst. v.
Am. Elec. Power Serv. Corp.,
AGI U.S. 4GZ (19C3) esccceccccasescccssossssesvecscceecesceses 8, 22
Am. Paper Inst., Inc. v.
Am. Elec. Power Serv. Corp.,
AGT TI BE AOD C1963) neceecececccccarscsscccccsoccssssesseeseses 7, 21
Bristol Energy Corp. v.
N.H. Public Utils. Comm'n,
13 F.3d 471 (ist Cir. 1994)..........cccecccccccccecsoesssesenss 24
Duignan v. United States,
ZIG UB. TOS CIB ET )asceccccciesisevinsasnisciserinncececcosnsccheots 28
Fed. Energy Reg. Comm'n v. Miss.,
456 U.S. T42 (1962) nxceseseeccossiccecsccsccccerseseeseeses 4,9, 20
Fed. Power Comm'n v.
S. Cal. Edison Co.,
376 U.S. 20S (19G4).nc.cerecccceercsecsscesecroccseccsccrsccsecsseses 3
Indep. Energy Producers Ass'n v.
Cal. Pub. Utils. Comm'n,
36 F.3d 848 (9th Cir. 1984)...........cccceseeeeees 13, 15, 25
TABLE OF AUTHORITIES (cont'd)
Page
Jersey Central Power & Light Co. v.
Fed. Power Comm'n,
FID UD. GE CEC i cceececcrnpriccuicicnctssersinvenasinscuseseenpenee 2
Pub. Utils. Comm'n v.
Attleboro Steam & Elec. Co.,
ZFS CS, BS CEFR ep scecerensirinsinnecisitensiitnietitaiionsbascisiiaaaias 3
Shaw v. Delta Airlines,
AGS US. FE Ga ais cscencscncqiinishsiictiianinthinnsvaniacninen 24
Smith Cogeneration Management, Inc. v.
Corp. Comm.,
963: P.2d 1227 (ORER. 19935) ..cccosecinreoscasseventniesen 13, 16
United States v. Nixon,
AES US. GES CIF) acecceceveritisiinccnunsilinttiiamnascitvets 21
United States v.
Pub. Utils. Comm'n of Cal.,
bo gS Ge. 14 |. < | See ern 3,9
ADMINISTRATIVE CASES:
Conn. Light & Power Co.,
71 Fed. Energy Reg. Comm'n Rep. (CCH)
F-G1 GSS 06 CETTE CFI cers secccccanevetsemcianisiisincnsaians 15
Metro. Edison Co./Penn. Elec. Co.,
Docket No. ER95-41-000 (approved by
vote of the FERC on June 28, 1995).............ssssseeees 17
TABLE OF AUTHORITIES (cont'd)
Page
New York State Elec. & Gas Corp.,
71 Fed. Energy Reg. Comm'n Rep. (CCH)
| 61,027 (1995).............cccccccecscscecscsreressesessceseees 8, 17, 22
West Penn Power Co.,
71 Fed. Energy Reg. Comm'n Rep. (CCH)
F 61,153 (1995)...........cccocscsrsssesssscesecssecesesesesors 8, 17, 19
STATUTES:
Federal Power Act of 1935,
I iisvotaiciciihiaicciaatvieincebnesoneneanastsnsinisincensoetion 3
Public Utility Regulatory Policies Act
of 1978, Pub.L.No. 95-617,
G2 Gee BEET CG a assisccsccesscscecncasssssccccscsesoscsoses passim
16 U.S.C. § 824a-3(a) (1988).......cccccesesercereeseneeseneeees 5,24
16 U.S.C. § 824a-3(b) (1988)........cscccsssserereesssecsecnssenseesers 5
16 U.S.C. § 824a-3(€) (1988)........ccscssercesesssercererescessereesees 6
16 U.S.C. § 824a-3(f) (1988)..........cereccereecercererseseesenes 6, 24
1G US.) § BIAa- BL) (BSEG) nanan eneceseneesoresi 6, 24
16 U.S.C. § 824a-3(h)(2)(B) (1988).......cscssecerereeseereseseesees 7
16 U.S.C. § 2633€a) (1988)...........c.ceccssssecserereecerenssserseserssee 6
TABLE OF AUTHORITIES (cont'd)
Page
REGULATIONS:
Small Power Prod. and Cogeneration
Facilities, Order No. 69, 45 Fed. Reg.
12214 (Feb. 5, 1980), aff'd in part
and vacated in part, Am. Elec. Power
Serv. Corp. v. Fed. Energy Reg. Comm'n,
675 F.2d 1226 (D.C. Cir. 1982), rev'd
in part, Am. Paper Inst. v. Am. Elec.
Power Serv. Corp., 461 U.S. 402 (1983).............. passim
18 CPR. S ZZ. Ci ietencataterttirnnshenctesiisttiicecesess 7
18 C.F. § 2OZ. SOG NZ) CH issiccrecitecieseinstsscescissceseses 7
18 CPR. SZ SOC I Ce icteric te tobeiraeitinctvicks. 8
18 CER. § ZOZ SOG IZ) C1GOG cnciccscsscecsnnvckcasoviectonisarnvecss 7
18 CPR. § ZOA GE CGI i ricsseccssnaceitalablsiebiedicticinen 9
1S CPR. § FOSS CGO 0 rscsensstcesicataccadibaii eetlaaatitetnns 9
18 CER, § 292.6026) (1996 ssserossaisccccidscssiutierciatsneteceas 23
TABLE OF AUTHORITIES (cont'd)
Page
OTHER AUTHORITIES:
H.R. Conf. Rep. No. 1750, 95th Cong.
2d. Sess. (Oct. 10, 1978) reprinted in
1978 U.S.C.C.A.N. (92 Stat.) 783 1-32.........ccscscrcereeerees
Nos. 94-1977, 94-1995
IN THE
Hupreme Court of the United Htates
OCTOBER TERM, 1994
JERSEY CENTRAL POWER & LIGHT COMPANY,
Petitioner,
v -
FREEHOLD COGENERATION ASSOCIATES, L.P.,
Respondent.
THE NEW JERSEY DIVISION OF THE RATEPAYER ADVOCATE,
Petitioner,
Vv.
FREEHOLD COGENERATION ASSOCIATES, L.P.,
Respondent.
ON PETITIONS FOR A WRIT OF CERTIORARI TO
THE UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT
RESPONDENT'S BRIEF IN OPPOSITION TO
PETITIONS FOR A WRIT OF CERTIORARI
STATEMENT OF THE CASE
L NATURE OF THE CASE
Respondent Freehold Cogeneration Associates, L.P.
("Freehold") is a “qualifying cogeneration facility"
("qualifying facility” or "QF") under the Public Utility
Regulatory Policies Act of 1978, Pub.L.No. 95-617, 92 Stat.
3117 (1978) ("PURPA"). Pursuant to one section of
PURPA, the Federal Energy Regulatory Commission
("FERC") issued rules, to be implemented by the states, that
established, inter alia, the rates that utilities must pay for the
purchase of electricity from qualifying facilities. Pursuant to
another section of PURPA, the FERC issued rules that are
self-effectuating, i.e., not to be implemented by the states,
exempting QFs from all state laws and regulations respecting
rates and financial and organizational regulation of utilities.
In 1992, the New Jersey Board of Regulatory
Commissioners ("BRC") implemented the FERC rules by
approving the rates contained in a long-term power purchase
agreement ("PPA") between Freehold and Jersey Central
Power & Light Company ("Jersey Central") for the life of
the PPA. The BRC's order was never challenged and is final .
and nonappealable. Freehold contended, and the United
States Court of Appeals for the Third Circuit held in the
"Freehold" decision below,! that, once the rates in the PPA
were determined by the BRC to be just and reasonable and
prudently incurred for the life of the PPA in a final and
nonappealable order, the BRC's implementation under
PURPA ceased. Consequently, its requirement in 1994 that
Freehold renegotiate those rates or submit to a hearing that
would lead to a modification of the rates or withdrawal of the
BRC's prior approval is preempted by PURPA and the
FERC's implementing regulations. Those regulations
specifically allow qualifying facilities to lock-in the rates for
l Freehold Cogeneration Associates, L.P. v. Board of Regulatory
Commissioners of the State of New Jersey, 44 F.3d 1178 (3rd. Cir.
1995). (Pet. App. A-1 - A-29).
the life of the contract and exempt qualifying facilities from
rate regulation by the states.
The Third Circuit's decision below is consistent with
PURPA and the FERC's implementing regulations and with
the two high appellate court decisions that have addressed
the issue of a state's right to revisit the rates in a QF contract
once they have been established. There is no compelling
reason to hear this case.
IL THE STATUTORY AND REGULATORY
SCHEME
A. Federal Power Act
In 1935, the Congress enacted Part II of the Federal
Power Act ("FPA"), 16 U.S.C. §§ 824-824k (1988), which
delegated to the Federal Power Commission (now the FERC)
the exclusive authority to regulate the rates for the
transmission and sale at wholesale of electric energy in
interstate commerce. United States v. Pub. Utils. Comm'n of
Cal., 345 U.S. 295 (1953). The legislation was a "direct
result" of this Court's holding in Pub. Utils. Comm'n v.
Attleboro Steam & Elec. Co., 273 U.S. 83 (1927) that the
states lacked authority to regulate the rates for interstate
sales of electricity for resale. United States v. Pub. Utils.
Comm'n of Cal., supra, 345 U.S. at 311. See Jersey Central
Power & Light Co. v. Fed. Power Comm'n, 319 U.S. 61, 67-
68 (1943); Fed. Power Comm'n v. Southern California
Edison Co., 376 U.S. 205, 215-216 (1964).
B. PURPA
In 1978 Congress passed PURPA as part of
comprehensive national energy legislation to address the
nation's energy crisis. See Fed. Energy Reg. Comm'n v.
Miss., 456 U.S. 742, 745-6 (1982). To make the nation more
energy independent, the Congress determined that certain
types of electricity production facilities were to be
encouraged because they provide important benefits to
society. Jd. at 745-6, 750. Those facilities include small
power production facilities that use renewable energy
sources such as solar, wind, biomass and water, and
cogeneration facilities that use fuel more efficiently by
sequentially producing from that fuel both electricity and
useful thermal energy (usually in the form of steam) for
manufacturing or heating purposes. /d. at 750, n.11.
PURPA represents a marked, albeit limited, departure from.
the traditional regulatory scheme, under which the FERC
exercises exclusive jurisdiction over wholesale rates in
interstate commerce. Under PURPA, the contract rates for a
utility’s wholesale purchases from QFs are determined
according to regulations promulgated by the FERC, but
implemented by state utility commissions.
‘. Section 210 of PURPA
The QF provisions of PURPA reflect Congress’
determination that there were two chief impediments to
encouraging such non-utility energy producers: (1) utilities
were reluctant to buy power from them; and (2) such power
producers themselves were reluctant to shoulder the burdens
of traditional utility regulation. Jd. at 750-51. To overcome
these impediments, Congress, in enacting Section 210 of
PURPA ("Section 210"), provided a framework for federal
and state implementation of utility purchase obligations and
ratemaking principles, exemption from federal and state
utility regulation, and certain judicial review mechanisms.
4
Section 210(a), 16 U.S.C. § 824a-3(a) (1988), directed the
FERC to prescribe "such rules as it determines necessary to
encourage cogeneration," which would require electric
utilities to offer to purchase electric energy from, and sell
back-up and other necessary energy to, such qualifying
facilities. ;
Section 210(b), 16 U.S.C. § 824a-3(b), provides that
the regulations promulgated by the FERC under Section
210(a) shall ensure that the rates for the purchase of power
from a QF shall be "just and reasonable" to the electric
consumers of the purchasing electric utility, and shall not
exceed the incremental cost to the electric utility of
alternative electric energy. This incremental cost of
alternative electric energy is commonly referred to as the
electric utility's "avoided cost."2
However, the conference committee report
accompanying PURPA made it clear that in referring to the
term "just and reasonable":
It is not the intention of the conferees that
cogenerators and small power producers become
subject, by virtue of this language, and the rules
promulgated under this section, to the type of
examination that is traditionally given to electric
utility rate applications to determine what is the just
and reasonable rate that they should receive for their
2 Section 210(d) defines the term "incremental cost of alternative
electric energy" used in Section 210(b) for purchases from QFs as: "the
cost to the electric utility of the electric energy which, but for the
purchase from such cogenerator or small power producer, such utility
would generate or purchase from another source.”
electric power. The conferees recognize that
cogenerators and small power producers are different
from electric utilities, not being guaranteed a rate of
return on their activities generally or on the activities
vis-a-vis the sale of power to the utility and whose
risk in proceeding forward in the cogeneration or
small power production enterprise is not guaranteed
to be recoverable.
H.R. Conf. Rep. No. 1750, 95th Cong. 2d. Sess. (Oct. 10,
1978) reprinted in 1978 U.S.C.C.A.N. (92 Stat.) 7831-32.
The conference report continued:
The establishment of utility type regulation over them
would act as a significant disincentive to firms
interested in cogeneration and small power
production.
Id. at 7832.
In keeping with this clear Congressional purpose,
Section 210(e), 16 U.S.C. § 824a-3(e), authorizes the FERC
to issue rules to exempt QFs from "state laws and
regulations respecting the rates, or respecting the financial
and organizational regulation of electric utilities" and from
federal utility regulation.
Section 210(f), 16 U.S.C. § 824a-3(f), provides for
state implementation of the FERC’s rules promulgated under
Section 210(a).
Section 210(g), 16 U.S.C. § 824a-3(g), specifies that
judicial review respecting any proceeding conducted by a
state regulatory authority for purposes of implementing any
requirement under Section 210(a) can be had pursuant to the
same conditions as specified under Section 123 of PURPA,
16 U.S.C. § 2633(a) (i.e., in state court). Section
6
210(h)(2)(B), 16 U.S.C. § 824a-3(h)(2)(B), permits
qualifying facilities to petition the FERC to enforce the
state’s implementation of the FERC’s rules as mandated by
Section 210(f) and, if the FERC does not initiate an
enforcement action within 60 days, authorizes the QF to
bring an enforcement action in the appropriate United States
district court. Sections 210(g) and (h), therefore, by their
terms specifically apply to review of the state
implementation of the FERC’s rules promulgated under
Sections 210(a) and (f). Neither Section 210(g) nor (h)
requires that proceedings respecting rules promulgated by
FERC pursuant to Section 210(e), authorizing FERC to
exempt QFs from certain regulation, be initiated in any
particular forum.
y 5 The FERC's Rules Under Section
210(a) (Purchase at Avoided Cost)
In issuing rules under Section 210(a), the FERC
determined that the rate at which a utility would be required
to purchase power from QFs would be equal to the utility’s
full avoided cost. 18 C.F.R. §§ 292.101(b)(6), 292.304(b)(2)
(1994). Upon a challenge to these regulations, this Court
held that a rate for QF power equal to the utility's full
avoided cost is just and reasonable to the electric consumers
of the electric utility and fully in accordance with Sections
210(a) and (b) of PURPA. Am. Paper Inst., Inc. v. Am. Elec.
Power Serv. Corp., 461 U.S. 402 (1983).
The FERC's rules implementing Section 210(a)
provide that if a QF sells electric energy or capacity
pursuant to a legally enforceable obligation over a specified
term, the rates for such purchases shall, at the option of the
QF, be based on the utility's avoided costs as calculated
either (1) at the time of the delivery of the power, or (2) at
the time the obligation is incurred. 18 C.F.R. § 292.304(d)(2)
(1994). The FERC's regulations further provide that, where
7 .
the rates are based on avoided costs calculated at the time the
obligation is incurred (the so-called "lock-in" right), "the
rates for such purchases do not violate [FERC’s regulations
or PURPA] if the rates for such purchases differ from
avoided costs at the time of delivery." 18 C.F.R.
§ 292.304(b)(5) (1994).
Thus, the FERC explicitly recognized that a utility’s
avoided costs might change over time, but that any such
change subsequent to the QF's incurring a legally enforceable
obligation? to provide power to the utility would not cause
that obligation to violate PURPA or the rules promulgated
thereunder. See Small Power Prod. and Cogeneration
Facilities; Regulations Implementing Section 210 of PURPA,
Order No. 69, 45 Fed Reg. 12,214, 12,224 (Feb. 25, 1980)
("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."), aff'd in part and vacated in part,
Am. Elec. Power Serv. Corp. v. Fed. Energy Reg. Comm'n,
675 F.2d 1226 (D.C. Cir. 1982), rev’d in part, Am. Paper
Inst. v. Am. Elec. Power Serv. Corp., 461 U.S. 402 (1983);
West Penn Power Co., 71 Fed. Energy Reg. Comm'n Rep.
(CCH) 4 61,153 (1995); New York State Elec. & Gas Co.,
71 Fed. Energy Reg. Comm'n Rep. (CCH) ¢ 61,027 (1995).
3 The FERC used the term "legally enforceable obligation” in its
rules to encompass obligations that did not rise to the level of an
executed contract. As the Commission explained in its preamble to the
regulations: “Use of the term ‘legally enforceable obligation’ is intended
to prevent a utility from circumventing the requirement that provides
capacity credit for an eligible facility merely by refusing to enter into a
contract with the qualifying facility." 45 Fed. Reg. at 12,224 (February
25, 1980).
3. Section 210(e) and the FERC's
Rules Thereunder (Exemption
from Utility Regulation)
To remove the second impediment to QF
development identified by Congress, the burdens of
traditional utility regulation, Section 210(e) authorizes the
FERC to promulgate rules to exempt QFs from both federal
and state utility regulation if it determines such exemption is
necessary to encourage cogeneration and small power
production. Pursuant to Section 210(e), the FERC issued
rules exempting QFs from most federal utility regulation and
from all state laws and regulations regarding rates and the
financial and organizational regulation of utilities. 18 C.F.R.
§§ 292.601 and 292.602 (1994).
Cc. Implementation of the FERC's Rules
The provisions for implementing the FERC'’s rules
are unusual. Section 210(f) provides that each state
regulatory authority must implement the FERC's rules under
Section 210(a) for each electric utility for which it has
ratemaking authority. Thus, despite the fact that wholesale
electricity rates are the exclusive province of the FERC, see
United States v. Pub. Utils. Comm'n of Cal., supra, PURPA
carved out a limited exception to this rule by requiring the
states to implement one portion of the federal regulations
under PURPA. See Fed. Energy Reg. Comm'n v. Miss., 456
U.S. at 759-761.
iL FACTUAL BACKGROUND ‘
Freehold is constructing a qualifying cogeneration
facility in Freehold, New Jersey. In 1989, the BRC issued an
order (reproduced at App. A to this Brief) exempting, or
"grandfathering,” the Freehold project from the BRC's 1989
competitive bidding procedure for the acquisition of new
9
capacity for New Jersey utilities. As the 1989 order
indicated, the new procedure expressly provided that the
BRC would determine on a case-by-case basis whether to
exempt a particular project, and Freehold was one of a
number of projects that it exempted. Jersey Central opposed
Freehold's request to be exempted, but did not appeal the
BRC's order approving that request. Nor did the New Jersey
Division of The Ratepayer Advocate ("DRA") or anyone
else appeal. That order is final and nonappealable.
The BRC's 1989 order directed Freehold and Jersey
Central to negotiate a contract with pricing tied to the
benchmark price contained in Jersey Central's 1989
competitive bidding solicitation. After more than 2 years of
negotiations, the parties signed the PPA on March 26, 1992.
On March 31, 1992, Jersey Central submitted the
PPA to the BRC for approval (letter accompanying
submittal is reproduced at App. B). In doing so, Jersey
Central expressly argued that the contract rates should be
protected for the life of the contract:
Principles of equity dictate that the Board provide
both the purchasing utility and the cogenerator with
sufficient assurances that the avoided costs contract
rate, once approved by the Board, will not be subject
to further scrutiny. In this regard, FERC has indicated
that neither the purchasing utility nor the QF are to be
deprived of the mutual benefits of entering into a long-
term contract based on Board approved avoided cost
rates. In order to preserve the benefit of the bargain
between the utility and the QF, flow-through of the
purchased power costs incurred under this or similar
agreements must be assured.
In the instant case, both JCP&L and Freehold need
to have the certainty that neither this nor future
10
Boards will impair the utility's right to flow-through
to and/or fully and timely recover from its ratepayers
the contracted for, and Board-approved, purchase
price over the full term of the Agreement or exercise
jurisdiction over this or similar agreements.
App. B-3.
The BRC issued an order approving the PPA on
July 8, 1992. (Reproduced at App. C). In that order, the
BRC stated that "the price is equal to 100% of the applicable
avoided cost" (App. C-5), and found that:
the rates specified and the costs resulting therefrom
[are] reasonable and reasonably and prudently
incurred by JCP&L throughout the full term of the
Agreement. Therefore the Board and its successors
will allow JCP&L to flow-through and/or fully and
timely recover the rates specified in the Agreement...
Id. (Emphasis added). Neither Jersey Central nor any other
party, including the DRA, opposed approval of the PPA.
Neither Jersey Central nor any other party sought appellate
review of the Board's order approving the PPA. That order
is final and nonappealable.
The BRC issued an order, dated April 12, 1993 (the
"Towner Order"), directing electric utilities in New Jersey to
assess their existing contracts with qualifying facilities under
PURPA and to bring to its attention any contracts that the
utilities believed no longer were economic. Jersey Central
informed the BRC that the Freehold PPA might be a
candidate for buyout or modification. Freehold then met
with the BRC's staff and voluntarily agreed to certain price
concessions in exchange for certain nonprice modifications to
the PPA.
11
On January 4, 1994, the BRC issued an order
pursuant to purported state authority rejecting the voluntary
agreement between Freehold and the BRC's staff and
directing Freehold and Jersey Central to renegotiate the rates
in the PPA or to negotiate a buyout of the PPA. If no
agreement was reached within thirty (30) days, the BRC
would commence an evidentiary hearing to consider revoking
its prior approval of the PPA. (Order reproduced at
App. D). When no agreement was reached, the BRC issued
an order commencing evidentiary hearings. (Order
reproduced at App. E). The hearings continued from March,
1994 through the beginning of January, 1995, when they
were halted as a result of the Third Circuit's decision below.
The Third Circuit's decision was a direct result of a
Complaint filed by Freehold against the BRC and Jersey
Central in the United States District Court for the District of
New Jersey. The Complaint alleged that the BRC was
preempted under PURPA and the FERC's implementing
regulations from revisiting the order approving the PPA and
the rates contained therein. The district court dismissed the
Complaint on jurisdictional grounds.
IV. THE DECISION BELOW
In a unanimous decision, the Third Circuit reversed
the district court, finding that the court not only had
jurisdiction, but also that federal law preempted the BRC
from revisiting its prior approval of the PPA and its rates:
Based on the overall scheme of PURPA and its stated
goal, and especially section 210(e) and the
implementing rules promulgated by the FERC, we
hold that Congress intended to exempt qualified
cogenerators from state and federal utility rate
regulations.
12
Freehold, 44 F.3d at 1192. (Pet. App. A-24). The court
found that once the BRC had completed its implementation
of Section 210(a) by its 1992 order approving the PPA, its
present attempt to modify the PPA or revoke its prior order
constituted "exactly the type of regulation from which
Freehold is immune under section 210(e)." Jd.
The court went on to explain that its decision was
consistent with two recent high appellate court decisions:
Indep. Energy Producers Ass'n v. Cal. Pub. Utils. Comm'n,
36 F.3d 848 (9th Cir. 1984) and Smith Cogeneration
Management, Inc. v. Corp. Comm'n, 863 P.2d 1227 (Okla.
1993). The court also reviewed the so-called "regulatory-
out" clause in the PPA, which it found to be "unambiguous,"
and determined that:
this clause does not purport to confer on the
BRC any jurisdiction it would not otherwise have. In
particular, it reflects no intent on the part of Freehold
to surrender any of the protection from state rate
regulation conferred upon it by section 210(e).
Freehold, 44 F.3d at 1194 (Pet. App. A-28).
Jersey Central, the BRC, and the DRA filed a request
for rehearing of the panel and of the Third Circuit en banc,
which was denied on March 7, 1995. Two weeks after
rehearing was denied, Jersey Central filed a petition with the
FERC, asking the FERC to void the PPA notwithstanding
the Third Circuit's decision. That petition is still pending.
Jersey Central and the DRA filed their petitions for a writ of
certiorari with this Court on June 5, 1995. The BRC did not
file a petition.
13
REASONS FOR DENYING THE WRIT
L NEITHER THE NEW JERSEY BOARD OF
REGULATORY COMMISSIONERS, THE
APPELLEE BELOW, NOR THE FEDERAL
ENERGY REGULATORY COMMISSION, THE
AGENCY WHOSE RULES ARE BEING
APPLIED, ARE CHALLENGING THE THIRD
CIRCUIT'S HOLDING
As discussed supra in the Statement of the Case, the
issue in this case is whether the actions of the BRC are
preempted by PURPA and the implementing regulations
promulgated by the FERC. Tellingly, the New Jersey state
agency whose actions are at issue here appears to have
accepted the decision of the Third Circuit. Conspicuously
absent from these proceedings is.a petition by the BRC for a
writ of certiorari, an absence that suggests that the BRC can
live with the Freehold decision.4
Similarly, the federal government is not troubled by
the merits of this case. In response to the Third Circuit's
request below to brief the jurisdictional issues and "any of
the other issues raised by this appeal that it desires to" (See
App. F to this Brief for the text of the court's order), the
FERC filed a brief amicus curiae addressing the jurisdictional
issues in the case but expressly declined the court's invitation
to address the merits. On all the jurisdictional issues, the
FERC sided with Freehold, advocating the same position that
the court ultimately adopted. (The FERC's amicus brief is
4 On June 26, 1995, the BRC filed Notices of Appearance with
this Court in these proceedings in which it specifically stated that it
would not be filing a brief in this matter.
14
reproduced at App. G). More recently, the FERC has cited
the Third Circuit's decision with approval. See, e.g., Conn.
Light & Power Co., 71 Fed. Energy Reg. Comm'n Rep.
(CCH) § 61,035 at 61,152 (1995) (the Third Circuit's
Freehold decision "supports our conclusion").
Roth the BRC’s and the FERC's acceptance of the
Third Circuit's decision fully justifies this Court's denial of
the writ.
IL THE THIRD CIRCUIT'S HOLDING IS FULLY
CONSISTENT WITH THE OTHER HIGH
APPELLATE COURT DECISIONS THAT HAVE
ADDRESSED ATTEMPTS TO REVISIT AN
APPROVED QF CONTRACT
The Court of Appeals’ decision, far from conflicting
with the decisions of other appellate courts and the FERC, as
suggested by Jersey Central (Pet. at 13), is fully consistent
with the two other high appellate court decisions that have
addressed whether a state may reconsider the rates paid to a
QF under a power purchase contract.
In Indep. Energy Producers Ass'n, Inc. v. Cal. Pub.
Utils. Comm'n, 36 F.3d 848 (9th Cir. 1994), the United
States Court of Appeals for the Ninth Circuit struck down a
program under which the California Public Utilities
Commission ("CPUC") permitted the utilities to reduce the
rates paid to QFs under long-term contracts if the utilities
determined that the QFs did not meet certain criteria
established by the FERC's regulations implementing
PURPA. In reviewing the program, the court observed that:
The underlying motivation behind the CPUC
program is to lower the rates set in [the utilities']
standard offer contracts because they are higher than
the Utilities’ current avoided costs. [T]his differential
15
exists because the standard offer contracts lock the
Utilities into paying rates that were calculated on
incorrect assumptions about the future cost of fossil
fuels.
Id., 36 F.3d at 858. As to that "underlying motivation,"
however, the court found that, notwithstanding the "incorrect
assumptions" attendant to the original approval of the
contract, PURPA and the FERC's implementing regulations
precluded the CPUC and the utilities from unilaterally
changing the rates once they had been locked-in by contract:
The fact that the prices for fuel, and therefore the
Utilities' avoided costs, are lower than estimated, does
not give the state and the Utilities the right unilaterally
to modify the terms of the standard offer contract.
** * [In promulgating its regulations implementing.
PURPA, t]he Commission recognized that, at times,
the avoided cost rate provided in the contract might be
greater or less than the utility's current avoided costs
but that certainty as to rate was important...
Id., 36 F.3d at 858 (Citing to the FERC's preamble to its
PURPA rules). This is consistent with the holding of the
Third Circuit below. See Freehold, 44 F.3d at 1194 (Pet
App. A-28 - A-29). Once Freehold and Jersey Central
established the rates in the PPA and the BRC's order
approving those rates became final and nonappealable, the
BRC and Jersey Central were precluded from changing those
rates unilaterally.
The Third Circuit's holding also is consistent with a
recent decision of Oklahoma’s highest court. Smith
Cogeneration Management, Inc. v. Corp. Comm'n, 863 P.2d
1227 (Okla. 1993). There the court held that PURPA
deprives the state regulatory commission of authority to
revisit the avoided cost rates in a QF contract once they have
16
been established. Jd., 863 P.2d at 1241. The court
invalidated a state regulatory commission rule that required
utilities to include in their contracts with QFs a clause
allowing the commission to modify the terms and conditions
of the contract during the term of the contract. It found that
"[r]econsideration of long-term contracts with established
estimated avoided costs imposes utility-type regulation of
QFs. PURPA and FERC regulations seek to prevent
reconsideration of such contracts." Jd., 863 P.2d at 1240.
The court concluded that the "Corporation Commission
rules, to the extent which they require qualifying facilities to
include a notice provision allowing reconsideration of avoided
costs after the contract is agreed upon, are preempted by
federal law." Jd., 863 P.2d at 1242. The analysis and
conclusion of the Oklahoma court apply equally to the
BRC’s attempt to revisit Freehold’s rates nearly two years
after approving them in a final and nonappealable order, as
the Third Circuit correctly held. See Freehold, 44 F.3d at
1193 (Pet. App. A-25 - A-26).
lil. THE THIRD CIRCUIT'S DECISION IS
CONSISTENT WITH RECENT DECISIONS
BY THE FERC INTERPRETING PURPA AND
ITS REGULATIONS
The Third Circuit's decision also is fully consistent
with the interpretation of PURPA and its regulations
advanced by the FERC, the agency charged with
implementing and administering the statute. On several
recent occasions, the FERC has considered and rejected
requests by utilities to declare the rates contained in their
power purchase contracts with QFs to be invalid. See, e.g.,
West Penn Power Co., 71 Fed. Energy Reg. Comm'n Rep.
(CCH) ¥ 61,153 (1995); New York State Elec. & Gas Corp.,
71 Fed. Energy Reg. Comm'n Rep. (CCH) 4 61,027 (1995)
("NYSEG"); Metro. Edison Co./Penn. Elec. Co., Docket
17
a= ch moore rao ene
No. EL95-41-000 (approved by vote of the FERC on
June 28, 1995).5
In NYSEG, for example, the utility sought an order
from the FERC to relieve it of its obligation to purchase
energy from two QFs at rates that had been established in
separate power purchase contracts that had been approved
by the state commission in final and nonappealable orders.
The utility's purported justification for its request was that
circumstances had changed since the contracts were executed,
resulting in a situation in which the rates contained in the
contracts exceeded its then-current avoided cost. The FERC
denied the utility's petition, holding that, under its
regulations, the contract rates were established (i.e., "locked-
in") at the time of contracting.
Specifically, the FERC noted that its regulations
provide that the rates under a power purchase contract do
not violate PURPA if they differ from avoided costs at the
time the electricity is delivered. 71 Fed. Energy Reg. ~
Comm'n Rep. at 61,116, citing 18 C.F.R. § 292.304(b)(5)
(1994). Those regulations were promulgated in the belief
that "in the long run, 'overestimations’ and 'underestimations'
will balance out" and that the lock-in of the rates would
"ensure that a [QF] which has obtained the certainty of an
arrangement is not deprived of the benefits of its
commitment as a result of changed circumstances." /d., citing
Small Power Prod. and Cogeneration Facilities, 45 Fed. Reg.
at 12224 (Feb. 5, 1980). (See App. H to this Brief for text
of NYSEG order.)
5 Metropolitan Edison Company and Pennsylvania Electric
Company are utility affiliates of Jersey Central and are owned by a
common parent, General Public Utilities Corp.
18
This is the same holding as that adopted by the Third
Circuit below: once the purchase rates for electricity sold by
a OF to a utility have been locked-in and approved, those
rates may not be changed unilaterally by the utility or the
state commission as a result of changed circumstances. See
also West Penn, 71 Fed. Energy Reg. Comm'n Rep. (CCH) at
61,495-96 (rejecting utility's assertion that changed
circumstances -- i.e., decreases in its projections of avoided
cost from those contained in power purchase contract with
the QF -- justified reduction of the rates it paid under that
contract, which had been approved by the state commission
in a final and nonappealable order). (See App. I to this Brief
for the text of the West Penn order.)
IV. JERSEY CENTRAL'S ALLEGATIONS OF A
LARGE DISPARITY BETWEEN AVOIDED
COSTS AND THE RATES THAT IT WILL PAY
UNDER THE PPA ARE WHOLLY
UNSUBSTANTIATED AND ARE IRRELEVANT
IN ANY EVENT
Jersey Central argues that this Court should grant the
writ because of the "disbenefits” that the PPA allegedly will
cause to Jersey Central's ratepayers (Pet. at 8, 13-14).
Jersey Central completely fails, however, to offer any
support for its claims.
Jersey Central argues that at the time the BRC
approved the PPA in 1992, the rates specified therein
exceeded its avoided cost. When Jersey Central submitted
the PPA for BRC approval, however, it never suggested that
the rates exceeded its avoided cost. Indeed, it argued that the
rates contained in the PPA should be protected for the life of
the PPA. See Factual Background, supra, at 9-12. When the
BRC approved the PPA, it specifically held that the rates
were "equal to 100% of the applicable avoided cost." (App.
19
C-5). No party challenged that determination. Even when
the BRC sought to revisit the rates under the PPA, it did so
on the basis that estimates of avoided costs had declined
since the PPA was approved (see App. D-4, 11, 12, E-2),
rather than on any alleged mismatch at the time of
contracting. Thus, Jersey Central's claim amounts to little
more than a post hoc rationalization that rings hollow here.
PURPA was enacted because utilities refused to deal
with cogenerators and small power producers. Fed. Energy
Reg. Comm'n v. Miss., 456 U.S. at 750-51. Absent PURPA,
there would have been no cogeneration contracts. The
utilities would have continued their construction on the
traditional "cost plus" basis and there would have been no
competition for generating capacity. PURPA helped to
establish the competitive market for generation by requiring
utilities to stop their anticompetitive actions and start acting
in the best interests of the nation. In the absence of
cogeneration, traditional utility construction would have led
to far higher rates for electric consumers.§
6 Jersey Central's claim (Pet. at 14) that the PPA will result in
excessive costs to ratepayers compared to current market alternatives is
wildly inaccurate. Under the utility's market test, nearly all of Jersey
Central's existing generating capacity would be found to be excessively
expensive as well. Moreover, Jersey Central neglects to point out that,
absent PURPA, utilities would have continued to build plants like the
Three Mile Island II nuclear unit, partly owned by Jersey Central, which
has cost ratepayers hundreds of millions of dollars without providing any
electricity. Under the PPA, in contrast, Freehold only gets paid if it
performs properly. As for the Wall Street Journal article cited by Jersey
Central (Pet. at 14), the reporter was demonstrably biased, focusing
primarily on exotic technologies that have experienced problems, not on
the hundreds of conventional cogeneration plants, like the Freehold
project, that have provided and will provide reliable, cost-effective power.
Further, to the extent that there have been decreases
in avoided costs since the rates under the PPA were locked-
in, as Jersey Central has suggested (Pet. at 8), the FERC, in
its implementing rules, specifically contemplated that such
changes might occur, but found that the potential for such
changes was outweighed by the importance of providing the
certainty required for financing of QF projects. See Small
Power Prod. and Cogeneration Facilities, 45 Fed. Reg. at
12,224; NYSEG, supra.
In any event, the relationship between Jersey
Central's current avoided cost and the rates under the PPA is
irrelevant for purposes of this case. As is discussed in
greater detail infra, once the BRC approved the rates in a
final and nonappealable order, its implementation of the
FERC's avoided cost regulations was at an end. Section
210(e) of PURPA and the FERC's regulations promulgated
thereunder at 18 C.F.R. § 292.602(c) (1994) specifically
exempt Freehold from state rate regulation. Consequently,
the BRC lacks authority to modify the rates in the approved
PPA, as the Third Circuit correctly held.
Vv. FERC’S IMPLEMENTING REGULATIONS ARE
NO LONGER SUBJECT TO CHALLENGE
The provisions of Section 210 of PURPA are not self-
implementing. Rather, PURPA Section 210 is given effect
through the issuance of rules by the FERC. These rules have the
"force of law." See United States v. Nixon, 418 U.S. 683, 694-96
(1974). Thus, Jersey Central's reference to the statutory
requirements of PURPA instead of the FERC's implementing
regulations (Pet. at 22) is unavailing.
The FERC issued its regulations respecting the rates
for the purchase of power from QFs, including the right of a
QF to the "lock-in" estimates of avoided cost, in 1980. They
were affirmed by this Court in 1983. Am. Paper Inst., supra.
21
For 15 years, these rules have been consistently applied and
relied upon by an entire industry. It is far too late to
challenge them now. Indeed, the United States Court of
Appeals for the District of Columbia Circuit, on review of
the FERC’s rules implementing PURPA, expressly observed
in 1982 that the time to challenge them was when they were
promulgated, not years later:
Thus, if petitioners fail to pursue their remedies
now, they do so at their peril of losing the right ever
to challenge the validity of the Commission's
regulations.
Am. Elec. Power Serv. Corp. v. Fed. Energy Reg. Comm'n,
675 F.2d 1226, 1232 (D.C. Cir. 1982), rev'd on other
grounds sub nom., Am. Paper Inst. v. Am. Elec. Power Serv.
Corp., 461 U.S. 402 (1983). See also NYSEG, 71 Fed.
Energy Reg. Comm'n Rep. (CCH) at 61,116 (App. H-32),
("It is now far too late in the Commission's implementation
of PURPA for NYSEG to argue, for the first time, that these
particular regulations have legal and policy flaws requiring
that we abrogate contracts entered into under these
regulations.") (emphasis in original).
VL FREEHOLD PRESENTED A VALID CLAIM
THAT IT IS EXEMPT FROM RATE
REGULATION UNDER SECTION 210(e)
A. As an Action Under Section 210(e) of
PURPA, Jurisdiction Over This Matter
Properly Resided with the Federal Courts
The Third Circuit correctly held that the district
court had jurisdiction over Freehold's claim and that the
jurisdictional bar contained in Section 210(g) applies only to
those portions of Section 210 that require utilities to
purchase energy from and sell energy to qualifying facilities
(Section 210(a)), and to the requirement that state authorities
implement the federal rules (Section 210(f)).
Freehold did not challenge the BRC’s implementation
pursuant to Section 210(f) of the FERC's rules under Section
210(a). Rather, Freehold brought this proceeding under
Section 210(e) and the FERC’s rules implementing that
section, 18 C.F.R. § 292.602(c) (1994). Indeed, the BRC
admits that the challenged order of the BRC was not issued
to implement the FERC's rules, but pursuant to purported
state law.? See App. D-12, E-6, E-7. In its brief amicus
curiae to the Third Circuit, the FERC agreed that Freehold
presented a valid claim under Section 210(e), and that the
federal court had jurisdiction over that claim. See App.
7 The BRC consistently has cited state law as its authority to
hold the hearings to revise or revoke the PPA. (e.g., App. D-12, E-6,
7). Further, in arguing in the district court against the assertion of federal
jurisdiction over this matter, the BRC consistently invoked its purported
powers under state law, 48:2-40, to "revoke or modify an order made by
it." There thus can be no-legitimate dispute that the BRC proceeded
under state law to regulate Freehold's rates.
23
G-14. See Shaw v. Delta Airlines, 463 U.S. 85 (1983) ("It is
beyond dispute that federal courts have jurisdiction over
suits to enjoin state officials from interfering with federal
rights...").
In asserting that Section 210(g) of PURPA deprives
the federal courts of jurisdiction, Jersey Central
mischaracterizes the holding in Bristol Energy Corp. v. N.H.
Public Utils. Comm'n, 13 F.3d 471 (1st Cir. 1994). In Bristol “3
Energy, the First Circuit, on review, held that the federal
courts have jurisdiction over a Section 210(e) claim:
We have considered -- and we reject -- PUC's
argument that 16 U.S.C. § 824a-3(g) divests federal
courts of jurisdiction. Section 824a-3(g) places limits
on federal jurisdiction in proceedings involving rules
i j : : rules
not at issue in this case.... We conclude that federal
question jurisdiction exists in this case, ... because
plaintiffs allege a preemption claim and seek to enjoin.
state officials from interfering with a federal right, ie.,
the QF exemption.
13 F.3d at 474 (emphasis supplied). The QF exemption is
the Section 210(e) exemption.
The jurisdictional issue in the present case is virtually
identical to that in the Bristol Energy case. On that issue the
First Circuit determined that the limitations on federal
jurisdiction imposed by Section 210(g) are inapplicable
where, as here, plaintiffs "allege a preemption claim and seek
to enjoin state officials from interfering with a federal right,
24
i.e., the QF exemption." Jd.® The Third Circuit reached the
same result below. See also Indep. Energy Producers, supra,
(district court exercised jurisdiction to hear a claim that the
state agency action that permitted modification of approved
QF contract rates was preempted by PURPA).
B. The BRC Impermissibly Sought to
Regulate Freehold's Rates After They Had
Been Locked-In and Approved
In its January 5, 1994 order directing Jersey Central
and Freehold to negotiate a buy-out or reformation of the
PPA (App. D) and in its March 7, 1994 order instituting
proceedings to reform the rates under the PPA or revoke its
earlier approval of the PPA (App.E), the BRC
impermissibly attempted to regulate the rates to be paid by
Jersey Central to Freehold under the PPA. Indeed, the
BRC's express reason for ordering negotiations and
commencing the hearing was because of its view that the
rates contained in the PPA exceeded the then-current avoided
cost of Jersey Central. See App. D-11. Further, both orders
were issued under purported authority of the New Jersey
regulatory statute. App. D-12, E-7. Nowhere in either order
does the Board suggest that its inquiry constitutes continued
implementation of PURPA or give any indication that the
actions are being pursued under any authority other than
state law. Any such state law or regulation that would
permit the BRC to modify the rates under the PPA is
precisely the type of law or regulation (i.e., those respecting
8 On the merits, the First Circuit addressed the authority to
compel disclosure of data under section 712 of the Energy Policy Act of
1992, a statute that is not implicated in this case.
25
"rates") from which QFs such as Freehold specifically are
exempted pursuant to Section 210(e) of PURPA and the
FERC's regulations. Consequently, as the Third Circuit
correctly held, the BRC's attempt to modify the rates under
the PPA constituted regulation of Freehold's rates, an
activity that expressly is preempted by Section 210(e).9
9 Jersey Central, relying on N.Y. State Conference uf Blue Cross
& Blue Shield Plans v. Travelers Ins. Co., 115 S.Ct. 1671, 1682 (1995)
and Cippolone v. Liggett Group, Inc., 112 S.Ct. 2608 (1992), argues
that the Third Circuit improperly expanded the preemptive effect of
PURPA Section 210(e). In fact, neither of these cases supports Jersey
Central's claims. Jersey Central cites Blue Cross, a case interpreting the
preemptive effect of ERISA, for the proposition that the Third Circuit
disregarded the presumption that Congress did not intend to supplant
state law. In this case, however, it is beyond cavil that Section 210(e),
as implemented by the FERC's regulations, expressly exempts QFs from
all "State laws and regulations respecting the rates . . . of electric
utilities." Consequently, any such presumption is overcoine by the plain
language of the statute.
Similarly, Jersey Central cites Cippolone for the proposition
that the Third Circuit has expanded the preemptive scope of Section
210(e) beyond its "express" preemption of “utility-type" regulation to
matters beyond the reach of that section. In fact, nowhere in the language
of Section 210(e) or the FERC's implementing regulations is there any
"express" language discussing “utility-type" regulation. Indeed, despite
Jersey Central's attempt to limit "utility-type" regulation to some form of
the traditional "cost-of-service" rate regulation to which utilities
historically have been subject, that term is nowhere defined in the statute
or regulations. Rather, the language of Section 210(e) and 18 C.F.R.
§ 292.602(c)(1) (1994) plainly exempts QFs from all state laws and
regulations "respecting" the “rates” of electric utilities. Thus,-to the
extent that the BRC attempted, under color of state law, to modify the
"rates" contained in the PPA, its action expressly was preempted by
PURPA, as the Third Circuit correctly held.
26
VIL THE "REGULATORY OUT" CLAUSE OF
THE PPA DOES NOT CONFER ON THE
BRC POWER TO ALTER QF RATES
The so-called "regulatory out" clause contained in
Section 20.2(a) of the PPA,!9 by its plain terms, cannot be
read as an affirmative grant of authority to the BRC (or, for
that matter, to the FERC or any other agency) to regulate
Freehold’s rates in a manner that otherwise would be
impermissible under PURPA and the FERC’s regulations, in
particular 18 C.F.R. § 292.602(c), exempting qualifying
facilities from state laws respecting the rates of electric
utilities. The provision does not state that the BRC is
the right to modify the contract rates or to deny
Jersey Central the right to recover from its ratepayers
payments made by Jersey Central under the PPA. The
provision merely states that, "in the event that the BRC, the
FERC or any legislative, judicial, administrative or other
governmental agency having jurisdiction over the parties, the
Agreement or the transactions contemplated thereby, should
disallow in whole or in part or otherwise impair the full and
timely recovery by the Company from its customers...", one
of several options shall be implemented. The provision does
no more than refer to whatever valid jurisdiction exists
independently of the contract-and address the allocation of
risks steming from any exercise of that valid jurisdiction. All
parties (plus the Third Circuit) agreed that the clause was
unambiguous. The Third Circuit correctly held that "this
clause does not purport to confer on the BRC any
jurisdiction it would not otherwise have." 44 F.3d at 1194.
(Pet. App. A-28). As previously explained (see pp. 19-21,
10 Section 20.2(a) of the PPA is quoted in full in the Third
Circuit's decision below. 44 F.3d at 1193, n.12 (Pet. App. A-27, n.12).
27
supra), the BRC had no preexisting authority to revisit the
QF rates it had approved years before.
VOL THE DIVISION OF THE RATEPAYER
ADVOCATE'S CLAIM THAT THE BRC'S
APPROVAL OF THE PPA WAS ULTRA
VIRES IS BASELESS AND, IN ANY EVENT,
UNTIMELY RAISED
The DRA asserts that the PPA is "void ab initio"
because the BRC approved rates that were too high and the
BRC's action therefore was "ultra vires". (Pet. at 4). This
argument is insubstantial. First, the DRA did not raise its
ultra vires argument before the district court. Consequently,
as the Third Circuit correctly held, 44 F.3d at 1182, n.3 (Pet.
App. A-4, n.3), the DRA failed to preserve the issue on
appeal and therefore was barred from raising it before the
Third Circuit and likewise is barred from raising it here. See
Duignan v. United States, 274 U.S. 195, 200 (1927) ("It is
only in exceptional cases coming here from the federal courts
that questions not pressed or passed upon below are
reviewed.") Secondly, the DRA's claim is belied by the
BRC's express statement in its order approving the PPA that
the rates were "equal to 100% of the applicable avoided
cost." (App. C-5). The DRA did not challenge Jersey
Central's petition for approval of the PPA or the BRC's
order approving it, which is final and nonappealable.
28
CONCLUSION
For the foregoing reasons, the Petitions for a Writ of
Certiorari filed by Jersey Central and the DRA should be
denied.
Respectfully submitted,
ROBERT F. SHAPIRO
Counsel of Record
LYNN N. HARGIS
MARTIN W. GITLIN
Chadbourne & Parke
1101 Vermont Avenue, N.W.
Washington, D.C. 20005
(202) 289-3000
July 5, 1995
29
APPENDIX
APPENDIX A
APPENDIX B
APPENDIX C
APPENDIX D
APPENDIX E
APPENDIX F .
APPENDIX G
APPENDIX H
APPENDIX I
APPENDICES
TABLE OF CONTENTS
New Jersey BRC Decision of July 31,
1989
Jersey Central Letter of March 31,
1992 to New Jersey BRC
New Jersey BRC Decision of July 8,
1992
New Jersey BRC Decision of
January 5, 1994
New Jersey BRC Decision of
March 7, 1994
Order in No. 94-5168, USCA for the
Third Circuit, dated April 26, 1994
FERC Brief Amicus Curiae in No. 94-
5168, USCA for the Third Circuit
FERC Order in New York State
Electric & Gas Corp., Docket No.
EL95-28-000, dated April 12, 1995
FERC Order in West Penn Power
Company, Docket No. EL95-30-000,
dated May 8, 1995
STATE OF NEW JERSEY
BOARD OF PUBLIC UTILITIES
Two Gateway Center
Newark, N.J. 07162
IN THE MATTER OF ) ELECTRIC/LEGAL
THE CONSIDERATION ) ORDER REGARDING
AND DETERMINATION ) MOTION FOR
OF COGENERATION ) RECONSIDERATION
AND SMALL POWER ) QE DENIAL OF
PRODUCTION STANDARDS ) GRANDFATHER
PURSUANT TO THE ) STATUS
PUBLIC UTILITY )
REGULATORY POLICIES _) BPU Docket No.
ACT OF 1978 ) 8010-687B
Carella, Byrne, Bain & Gilfillan, by Arthur T.
Vanderbilt, III, Esq., Roseland, New Jersey,
and Huber Lawrence and Abell, by Blossom
A. Peretz, Esq., New York, New York, for
Enserch Development Corporation and
Turner Power Corporation
Kirsten, Simon, Friedman, Allen, Cherin & Linken,
by John K. Enright, Esq., Newark, New
Jersey, for Jersey Central Power & Light
Company
BY THE BOARD:
On September 28, 1988, this Board issued two orders
in Document No. 8010-687B. The first order adopted a
Stipulation of’ Settlement which set forth a revised set of
procedures under which New Jersey investor owned electric
utilities would select and purchase electric capacity and
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energy from qualified cogeneration and small power
production facilities, independent power producers and large
scale conservation projects. Said stipulation provided at
page 10:
In addition, the provisions of this Settlement
Agreement shall not be applicable to proposed APP
capacity which may, as determined on a case by case
basis, be grandfathered and subject to Board policies
and procedures regarding cogeneration and small
power production in effect prior to the effective date
of this agreement.
The second order issued on September 28, 1988, in
turn, designated a number of projects to be grandfathered. In
reviewing projects that were in development but were
without power purchase agreements, the Board considered
the following criteria in determining whether grandfathered
status should be granted: (1) whether ratepayers would be
better off if a particular project was grandfathered, i.e.,
whether the grandfathering of that project was in the public
interest; (2) whether negotiations between a project and a
utility have resulted in a firm pricing agreement; and (3) the
effect that grandfathering would have on the development of
the project.
On October 12, 1988, Ebasco Services, Inc. (Ebasco)
filed a Motion for Reconsideration requested modification of
the Board's September 28, 1988 order by grandfathering the
cogeneration project being jointly developed by Enserch
Development Corporation (Enserch), an affiliate of Ebasco,
and Turner Power Corporation (Turner) at the Nestle Foods
Corporation (Nestle) plant in Freehold, New Jersey (the
Freehold Project).! This project contemplates a 100
megawatt cogeneration facility to serve the electric and
l For purposes of discussion, the name “Enserch” will be used to
identify the movants in this matter.
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thermal needs of Nestle with any excess electrical energy and
capacity produced by the facility to be sold to Jersey Central
Power & Light Company (JCP&L).
By letter dated November 30, 1988, the Board was
advised that Enserch had changed counsel and was requested
to "defer action on the Motion for Reconsideration for
several weeks to afford (counsel for Enserch) the
opportunity to review the filing in this matter and determine
if it should be supplemented or amended."
Under cover letter dated January 27, 1989, Enserch
filed a Supplemental Motion for Reconsideration for the
stated purpose of providing the Board ". . . with complete
information regarding the history of the Freehold Project,
which had not been included in the Motion filed on
October 12, 1988, in order to assist the Board in its analysis
regarding grandfathering the Freehold Project, so as to
demonstrate to the Board that the Freehold Project meets the
criteria for grandfathering." JCP&L has opposed the relief
requested by Enserch essentially for the reason that, in the
opinion of the utility, no firm pricing agreement had been
reached between the parties. In addition, Enserch filed a
motion dated May 4, 1989, in which it requested the Board
to compel JCP&L to continue negotiations in this matter.
Subsequent to the filing of the Supplemental Motion
for Reconsideration, the parties have held several meetings
which were attended by Board staff and have submitted
additional information with the Board.
In its initial moving papers, Enserch argued that the
Board had erred by: (1) failing to provide a "reasoned
explanation" for the selection of the grandfathering criteria;
(2) selecting "patently unsatisfactory" grandfathering criteria;
(3) failing to provide a reasoned explanation for its selection
of grandfathered qualifying facilities; and (4) failing to
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grandfather the Freehold Project based upon the selected
criteria set forth in the Board's Order. Enserch further argued
that as the September 28, 1988 Decision and Order
constituted either a final decision in a contested case or the
culmination of a rulemaking proceeding, the Board erred by
failing to comply with the procedures set forth in the New
Jersey Administrative Procedures Act. N.JL.S.A, 52:14B-1 et
seq, While we believe that our decision; herein renders these
arguments moot, we pause briefly to respond thereto.
As indicated hereinabove, the Stipulation of
Settlement provided that the Board would determine, on a
case by case basis, which projects, if any, would be
grandfathered and, therefore, be subject to the Board policies
and procedures theretofore in effect. We believe that the
criteria set out by the Board are fair and practical based upon
the history of and the circumstances surrounding this
proceeding and the affected projects. These criteria reflect
the Board's central statutory responsibility to ensure that the
ratepayers receive safe, adequate and proper service at just
and reasonable rates, and the Board's strong policy concern,
as well as its obligations under PURPA and the pertinent
regulations promulgated thereunder (e.g., 18 C.F.R. 292.401),
to encourage cogeneration. It was the considered opinion of
the Board that the status of these projects specifically set
out in the Board's Decision and Order of September 28,
1988, and the attending benefit to the public interest inherent
there: as sources of reliable and economical electric power,
warranted those projects being grandfathered without the
need for further review or the submission of addition
information. This determination, however, did not prejudice
or preclude the opportunity of any other developer,
including Enserch, to request through a formal filing, that the
Board find that its project should similarly be grandfathered.
The Board would note that the adoption of the
grandfathering criteria was in direct correlation to the
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adoption of the Stipulation of Settlement. Therefore, the
Board considers the arguments of Enserch which pertain to
alleged violations of the Administrative Procedure Act to be
similar to those previously made in a Motion for a Stay and
for Reconsideration of the Board's Decision and Order
Adopting the Stipulation of Settlement filed by the Clean
Coal Developers. In its Order denying said Motion issued
on October 19, 1988, the Board stated, in pertinent part:
There can be no doubt that the record in the
Board's consideration of cogeneration and small
power production is extensive. This proceeding
was initiated in October 1980, and lengthy
hearings were held at the Board wherein a full
record was developed.
The culmination of this effort was a Board
Decision and Order issued on October 14, 1981,
wherein procedures and policies affecting the
development of cogeneration and small power
production in New Jersey were established. The
Board further directed that within five years
therefrom, a review of cogeneration and small
power production would be commenced. Said
review was initiated in a timely manner and
additional hearings were held before the Board
on September 9 and 11, 1987. :
It is clear, therefore, that the consideration of
cogeneration and small power production
policies in New Jersey is and has been a formal
ongoing proceeding before the Board under one
caption and one docket number. In addition, the
consideration of those policies set out in the
Decision and Order of October 14, 1981 was
necessary in order for the board to ultimately
rule on the appropriateness and reasonableness
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of modification affecting the development of
cogeneration and small power production in
New Jersey.
Therefore, for substantially the same reasons
that we rejected the arguments of the Clean Coal
Developers, the Board rejects the claim of Enserch
that the Board erred in promulgating its criteria for
determining which projects are to be grandfathered.
With respect to the application for reconsideration
which is now before us, and based upon our review and
consideration of all submissions in this matter, it is the
opinion of the Board that the development of the Freehold
Project could potentially provide long term benefits to the
ratepayers of JCP&L. This project could provide JCP&L
with an efficient source of energy and capacity that may
offset or delay the need for the utility to build additional
generation or transmission facilities. Such results would
assist JCP&L by allowing it to continue to provide safe,
adequate and proper service to its ratepayers in an area that
has experienced substantial load growth in the recent past.
The Board is of the further opinion that grandfathering, as
opposed to the bidding process now in place, appears to be
consistent with the timely development of the Freehold
Project. |
It is the further opinion of the Board that while
negotiations had not resulted in a firm pricing agreement, the
submissions before us indicate that the parties had reached a
pricing agreement in principle, and despite some uncertainties
therein, we believe that understanding to be sufficient base
upon which to support a determination that grandfathered
status should be approved.
As stated in our September 28, 1988 order and
restated hereinabove, applications from cogeneration and
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small power production projects seeking grandfathered status
will be reviewed and considered on a case by case basis
taking into account the specific facts presented therein. The
Board's final decision must balance the ratepayers’ interest in
receiving safe, adequate and proper service with their interest
in the setting of just and reasonable rates for that service.
After full review and consideration, the Board finds
that the facts specific to this matter warrant the approval of
grandfathered status to the Freehold Project. In taking into
account the interests of the parties and the ratepayers and in
recognizing the uncertainties in the pricing agreement, the
Board also finds that any pricing arrangement and results
from further negotiations will be assessed against the current
level of JCP&L's forecast of its avoided cost as delineated in
its Request for Proposals, which was approved by the Board
on May 10, 1989. We believe that such treatment will result
in a fair level of costs to be borne by the ratepayers while
permitting an opportunity for the timely development of the
project and the realization of project benefits to the
ratepayers. This pricing approach is consistent with the
Board policy in effect prior to the adoption of the
Stipulation of Settlement regarding the appropriate payments
to be made to those projects that wished to receive the
benefits which are inherent in a levelized pricing structure.
As indicated hereinabove, the Board recognizes the potential
benefits of the Freehold Project, including those related to
meeting the capacity needs of JCP&L. In order that these
potential benefits may be realized, both parties are
encouraged to negotiate to reasonable settlement on the issue
of pricing subject to the parameters set out above. The
Board will support such negotiations and will be receptive to
any resulting agreement that will provide an opportunity for
the project to succeed.
Accordingly, the Motion for Reconsideration and the
Supplemental Motion for Reconsideration are granted to the
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’ ’
2: ™
extent that grandfathered status, subject to the terms set out
hereinabove, is approved for the Enserch Freehold Project.
Based upon the foregoing, the Board considers the motion of
Enserch to compel JCP&L to continue negotiations to be
moot.
DATED: July 31, 1989 BOARD OF PUBLIC UTILITIES
BY: /s/
CHRISTINE TODD WHITMAN
PRESIDENT
/s/
GEORGE H. BARBOUR
COMMISSIONER
ATTEST:
/s/
KAREN KENNEDY
APPENDIX B
JCP&L GPU Jersey Central Power & Light Company
Daniel V. Gulino 300 Madison Avenue
Attomey Morristown, N.J. 07892
(201) 488-3404
March 31, 1992
Chrys Wilson, Secretary
Board of Regulatory Commissioners
44 South Clinton Avenue
CN 350
Trenton, New Jersey 08625
Re: Application of Jersey Central Power & Light
Company for Approval of the Power Purchase
Agreement Between Jersey Central Power & Light
C 1 Freehold C say ‘ates LP
Dear Ms. Wilson:
Pursuant to the Board's Orders dated October 14,
1981 and December 7, 1983 entered in Docket No. 8010-687,
entitled "In_the Matter_of the Consideration —and
Standards Pursuant to the Public Utility Regulatory Policies
Act of 1978” ("PURPA"), Jersey Central Power & Light
Company ("JCP&L") submits for filing and approval the
Power Purchase Agreement, dated March 24, 1992, (the
"Agreement") between JCP&L and Freehold Cogeneration
Associates, L.P. ("Freehold").
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JCP&L respectively requests that the Board review
the terms of the Agreement, find and determine that the
Agreement is in the public interest and in accordance with the
law, and that the costs to be incurred by JCP&L with respect
thereto are prudently incurred. In support of this
application, JCP&L respectfully states:
I
Freehold is a New Jersey limited partnership whose
general partners are Advanced Power Systems, Inc. of St.
Charles, Maryland and Constellation Energy, Inc. of
Baltimore, an affiliate of Baltimore Gas & Electric Company.
Freehold proposes to own, operate and maintain at a site
adjacent to the Nestle Beverages Company facility in
Freehold, New Jersey, a cogeneration facility having a
nameplate capacity of approximately 112 megawatts for the
purpose of generating electricity and producing steam! for
the Nestle facility.
Freehold will own and operate the facility as a
PURPA qualifying cogeneration facility ("QF") using natural
gas as the primary energy source, but will also have the
ability to use a secondary energy source such as oil. Heat
will be extracted from the facility and used to produce steam
for the adjacent Nestle facility. The Agreement provides that
100 megawatts (92°F) of the capacity and electrical energy of
the facility will be sold to and will be under the dispatch
control of JCP&L.
| The Thermal Sales Agreement between the Seller and Nestle
contains confidential and proprietary information. At the request of the
parties to that agreement, JCP&L is not submitting a copy of the
Thermal Sales Agreement with this application. Moreover, upon the
request of the Board, the Seller will submit the Thermal Sales
Agreement after receipt of a Protective Order from the Board.
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II
In its order entitled "Order Regarding Motion for
Reconsideration of Denial of Grandfather Status", dated July
31, 1989 (the "Order"), the Board grandfathered the Project
from the Stipulation of Settlement (BPU Docket No. 8010-
687B) which requires, among other things, that the State's
electric utilities competitively bid all non-utility generation
capacity. In its Order, the Board directed "that any pricing
arrangement that results from further negotiation will be
assessed against the current level of JCP&L's forecast of its
avoided costs as delineated in its Request for Proposals,
which was approval by the Board on May 10, 1989".
Accordingly, pursuant to the Board's Order, the total Project
payments are equal to JCP&L's 1989 Avoided Costs.
Pursuant to the Agreement, the Variable Energy
Payment will be made to Freehold for each kilo-watt hour
generated and sold to JCP&L during a scheduled Dispatch
Period and associated start-up and shut-down periods. The
Variable Energy Rate is established at 2.20¢ per kWH in
1995, and will be escalated 7% per year on each January |
commencing with January 1, 1996. Based on these dispatch
rates, it is expected that the facility will be economically
dispatched for about 7000 hours/year. With an average
annual availability of 94%, the capacity factor for the facility
should be approximately 75%. The Fixed Payment
component of the Project pricing will commence on the
Commercial Operation Date and will increase on each
anniversary of the Commercial Operation Date by a
predetermined amount. Freehold will be entitled to receive
the full Fixed Payment only if the annual Contract
Availability remains at or above 94%. If the Contract
Availability falls below 94%, the Fixed Payment is reduced
proportionately.
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en
Finally, the term of the Agreement is for twenty (20)
years commencing on the Commercial Operation Date, which
occurs 48 months after the month in which regulatory
approval of the Agreements is obtained. Furthermore, the
Agreement also provides for a Suspense Account should the
Seller elect to front-end load payments. As provided in the
Agreement, Freehold must propose the percentage of and
number of years during which Fixed Payments are to be
front-end loaded. The Agreement, however, limits the front-
end loading duration to twenty years and the front-end
loading percentage to 65% consistent with JCP&L's prior
power purchase agreements.
Il
State utility commissioners are vested with the
esponsibility of assuring that the jurisdictional utilities act in
the public interest in their contractual arrangements. This
fundamental tenet of regulatory law has given rise to the
question of whether this Board or its successor might at
some point in the future try to exercise jurisdiction over this
Agreement or refuse to permit JCP&L to flow through to,
and/or fully and timely recover from its ratepayers the rates
specified in the Agreement over the full term thereof.
Principles of equity dictate that the Board provides
both the purchasing utility and the cogenerator with
sufficient assurances that the avoided costs contract rate,
once approved by the Board will not be subject to further
scrutiny. In this regard, FERC has indicated that neither the
purchasing utility not the QF are to be deprived of the
mutual benefits of entering into a long-term contract based on
Board approved avoided cost rates. In order to preserve the
benefit of the bargain between the utility and the QF, flow-
through of the purchased power costs incurred under this or
similar agreements must be assured.
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In the instant case, both JCP&L and Freehold need to
have the certainty that neither this nor future Boards will
impair the utility's right to flow-through to and/or fully and
timely recover from its ratepayers the contracted for, and
Board-approved, purchase price over the full term of the
Agreement or exercise jurisdiction over this or similar
agreements.
Based upon the foregoing, JCP&L respectfully
requests that the Board:
(1) approve the terms of the Agreement;
(2) find and determine that the Agreement is in
the public interest and in accordance with the
law; and
(3) find and determine that the costs to be paid
by JCP&L under the Agreement are prudently
incurred and may appropriately be recovered
in rates through the levelized energy
adjustment charge or otherwise.
Respectfully Submitted,
JERSEY CENTRAL POWER &
LIGHT COMPANY
ee
Daniel V. Gulino
Its Attorney
300 Madison Avenue
Morristown, New Jersey 07962
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APPENDIX C
AGENDA DATE: 6/9/92
STATE OF NEW JERSEY
Board of Regulatory Commissioners
Two Gateway Center
Newark, NJ 07102
APPLICATION OF JERSEY )
CENTRAL POWER & LIGHT )
COMPANY FOR APPROVAL __)
OF THE POWER PURCHASE i+)
AGREEMENT BETWEEN )
JERSEY CENTRAL POWER )
& LIGHT. COMPANY AND ) DOCKET NO.
FREEHOLD COGENERATION _ ) EM9203059
ASSOCIATES, L.P. )
(Service List Attached)
BY THE BOARD:
By letter dated March 31, 1992, Jersey
Central Power & Light Company (JCP&L petitioned the
Board of Regulatory Commissioners (Board) for approval of
the proposed agreement (Agreement) for the purchase of
electric power from Freehold Cogeneration Associates, LF.
(Freehold).
Freehold is a New Jersey limited partnership
whose general partners are Advanced Power Systems, Inc.
and Constellation Energy, Inc., an affiliate of Baltimore Gas
& Electric Company, which proposes to own, operate and
maintain a cogeneration facility (Facility) at the Nestle
Beverages Company plant (Nestle) in Freehold, New Jersey.
The Facility will be approximately 112 megawatts (MW) in
size and will be a Public Utilities Regulatory Policies Act
(PURPA) qualifying facility (QF) under Federal Energy
Regulatory Commission guidelines. The Agreement provides
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pare
Bae
Grok
ag
for Freehold to deliver 100 MW to JCP&L and steam and
possibly native loan electricity to Nestle.
The cs will use natural gas of regulatory
approval and continues for 20 years from the commercial
operation date, which is anticipated to be 48 months after the
date of regulatory approval. The commercial operation date
may be extended due to force majeure without penalty, and
for up to three years by making payments into a liquidated
damages fund.
The Freehold/Nestle project is grandfathered
under the policies and procedures in effect prior to the
current competitive bidding procedures. The Facility was
grandfathered in an Order issued on July 31, 1989, in Docket
No. 8010-687B. The conditions set forth in the Board's
grandfathering Order set a cap on the pricing ‘based on the
avoided costs contained in JCP&L's first round of
competitive bid Requests for Proposals (RFPs) approved by
the Board on June 6, 1989.
The terms and conditions in the Agreement
are similar to or superior, from a ratepayer perspective, to
those contained in the bid contracts and as established in the
Stipulation of Settlement (Stipulation) in Docket No. 8010-
687B. Subject to certain technical and contractual limits,
JCP&L shall have complete dispatching control of the
Facility. |
The price in the Agreement is equal to the
June 6, 1989 avoided cost. The payment to Freehold is
comprised of a variable energy rate of 2.2 cents per kilowatt-
hour escalated at 7% per year and a fixed capacity payment
which produces a total payment equal to the avoided cost.
Since the variable energy rate in this contract
has a fixed escalation rate of 7%, the Board believes a
comparable fuel contract is essential to protect electric
ratepayers from the possibility that the project would not be
financially viable in the future if its actual fuel price
escalations significantly exceed 7%. A letter of intent
between NJNG and Freehold was reviewed by Board Staff
and Staff has indicated to the Board that it is satisfied that its
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terms and conditions will allow for the project to be viable
over its term.
There is a suspense account provision which
requires Freehold to secure 100% of any levelization incurred
by the project. Freehold can choose the levelization it
requires for financing, between 0 and 65% for a period of up
to 20 years. This account exceeds the ratepayer
protection i in the Stipulation of Settlement since
the competitive bidding guidelines require security only if
- jevelization exceeds 120% of avoided cost for gas projects
and the Agreement requires the full amount of the surplus
account to be secured with a letter of credit.
The expected capacity factor of the facility is
75% with an average availability of 94%. The fixed payment
will be reduced if the facility's annual availability factor falls
below 94%. To determine the fixed payment the annual
availability multiplier is equal to the lesser of one (1.00) and
the quotient obtained by dividing the contract availability by
ninety-four one-hundredths (.94). This accounts for outages
whether maintenance, forced or force majeure.
In addition, by letter dated April 13, 1992,
Freehold requested that the Board find the Facility, which
will supply steam to Nestle and electric energy to JCP&L, is
not a public utility subject to the jurisdiction of the Board.
The Facility is a qualifying facility (QF)
pursuant to Federal Energy Regulatory Commission
regulations applicable to cogenerators. The Board has on
several occasions previously addressed the issue of whether
the sale of steam or electricity from a QF to its thermal host
will subject the cogenerator to Board jurisdiction. In its
Order in In the Matter of the Petition for Approval of Power
Docket NO. EM88111219 (March 31, 1989), where th
Board stated as follows:
Petitioners have also requested that
the Board find that the sale by
Chambers to Dupont of steam and a
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portion of the electrical output of the
facility will not result in Chambers
being deemed a public utility subject
to the jurisdiction of the Board.
Chambers, a third party developer,
proposes to develop the cogeneration
facility on property owned by
Dupont and intends to sell thermal and
electrical energy and capacity to
Dupont with all excess electrical
energy and capacity being sold to
Atlantic Electric. In instances such as
this, where the developer provides —-
thermal and electrical energy and
capacity only to the host with all of
the excess electrical energy and
capacity being sold to a public utility,
the Board does not believe that the
sale of thermal or electrical energy and
capacity to the host should subject the
third party developer or its affiliates
to the jurisdiction of the Board.
Therefore, the Board HEREBY
DETERMINES that the sale by
Chambers to Dupont of steam and a
portion of the electrical output of the
facility will not result in Chambers
Cogeneration Limited Partnership or
any of its individual general or limited
partners or their parents or affiliates
being deemed a public utility subject
to the jurisdiction of the Board.
Freehold requested that the same finding be
provided for its Facility. The Facility will sell 100 MW of
capacity and energy to JCP&L and will supply steam and
possibly native load electricity to Nestle. Its sole steam host
will be Nestle.
Board Staff has reviewed a copy of a site
plant for the Facility, showing the boundaries for the Facility
site and the Nestle property, the location of the Facility and
the location of the Nestle plant. The Facility will be located
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on land immediately adjacent to the Nestle plant that is
owned by Nestle. The steam lines used to deliver steam to
Nestle will not cross a public way.
Based upon its review of the location and
ownership of the Freehold facilities and their relationship to
the industrial host, the Board believes that the proposed
Freehold facility meets the standards espoused in the Board's
Chambers Order. On that basis the Board concurs that the
sale of steam or electricity from the facility by Freehold to
Nestle would not subject the developer or its affiliates to the
jurisdiction of the Board under present policy.
The Board has reviewed the Order
grandfathering the Facility and the conditions established
therein and finds that the Agreement meets or exceeds the
requirements for approval. The price is equal to 100% of the
applicable avoided cost and the contract terms and conditions
from the Stipulation were met or exceeded. The long term
gas contract when signed will provide a stable fuel supply
which will assist in assuring ratepayers that the project will
be in a position to produce electricity economically for the
term of the Agreement. The Board FINDS that the
Agreement is consistent with the grandfathering Order.
Based on the above, the Board FINDS the
Agreement to be fair and reasonable and that it will impart
substantial benefits to JCP&L's ratepayers over the life of
the project.
Accordingly, the Board, having reviewed the
Agreement and being satisfied that it is in the public interest
and in accordance with applicable law, the aforementioned
Board Orders as entered in Docket Nos. 8010-687 and 8010-
687B, and the Stipulation of Settlement, HEREBY
the Power Purchase Agreement between Jersey
Central Power & Light Company and Freehold Cogeneration
Associates, Inc., dated as of March 26, 1992, and as such
finds the rates specified therein and the costs resulting
therefrom to be reasonable and reasonably and prudently
incurred by JCP&L throughout the full term of the
Agreement: Therefore, the Board and its successors will
allow JCP&L to flow-through and/or fully and timely recover
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the rates specified in the Agreement and the costs resulting
thereform in the manner set forth in the Board's Order dated
September 28, 1988 (Docket No. 8010-687B) and the July 1,
1988 Stipulation of Settlement adopted thereby, and as
clarified in the Board's Order dated October 2, 1990 in
Docket No. EM88050655.
In addition, the Board having reviewed the
possible sale of thermal and electric energy by Freehold to
Nestle, its industrial host, HEREBY DETERMINES that the
sale by Freehold to Nestle of steam and a portion of the
electric output of the facility will not result in Freehold or
any of its partners, parents or affiliates being deemed a
public utility subject to the jurisdiction of the Board.
DATED: JULY 8, 1992 BOARD OF REGULATORY
COMMISSIONERS
BY:
/s/
DR. EDWARD H. SALMON
CHAIRMAN
/s/
JEREMIAH F. O'CONNOR
COMMISSIONER
/s/ :
CARMEN J. ARMENTI
COMMISSIONER
ATTEST:
/s/
IRENE JOHNSON
SECRETARY
I HEREBY CERTIFY that the
within document is a true copy of
the original in the files of the Board
of Public Utility commissioners
/s/
Chrys Wilson
Secretary
SERVICE LIST
Daniel V. Gulino, Attorney
Jersey Central Power & Light Co.
300 Madison Avenue
Morristown, N.J. 07962
Joseph Bowring
New Jersey Secrest of the Public Advocate
Division of Rate Counsel
744 Broad Street
Newark, N.J. 07102
Robert Chilton, Director
Division of Electric
Board of Regulatory Commissioners
Two Gateway Center
Newark, N.J. 071002
Michael Ambrosio, Chief
Bureau of Rates & Tariffs
Division of Electric
Board of Regulatory Commissioners
Two Gateway Center
Newark, N.J. 071002
Blossom A. Peretz, Esq.
Sills, Cummis, Zuckerman, Radin,
Tischman, Epstein & Gross
One Riverfront Plaza
Newark, N.J. 07102-5400
Todd R. Jaffe
Market Development Manager
Constellation Energy
250 West Pratt Street
Baltimore, M.D. 21201-2423
Helen Wallenstein, DAG
Deputy Attorney General
1207 Raymond Bivd.
Newark, NJ 07109
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I HEREBY CERTIFY that the
within document is a true copy
of the original in the files of the
Board of Public Utility
commissioners
/s/
Chrys Wilson
Secretary
APPENDIX D
AGENDA DATE: 11/24/93
State of New Jersey
Board of Regulatory Commissioners
CN 350
Trenton, NJ 08625-0350
APPLICATION OF JERSEY )
CENTRAL POWER & LIGHT )
COMPANY FOR APPROVAL )
OF THE POWER PURCHASE
AGREEMENT BETWEEN
JERSEY CENTRAL POWER &
LIGHT COMPANY AND
FREEHOLD COGENERATION
ASSOCIATES, L.P.
AND
VERIFIED PETITION OF
FREEHOLD COGENERATION
ASSOCIATES, L.P., FOR
APPROVAL OF JOINT
AGREEMENT BETWEEN
BOARD OF REGULATORY
COMMISSIONERS STAFF &
FREEHOLD COGENERATION
ASSOCIATES, L.P.
:
DOCKET NO. |
EM92030359
aa nee en eee
Ne ee Ne ee a a ee ee ee ee ee Se”
(Service List Attached)
BY THE BOARD:
By letter dated November 3, 1993, Freehold
Cogeneration Associates, L.P., ("FCA") petitioned the Board
of Regulatory Commissioners ("Board") for approval of a
Joint Agreement between the staff of the Board ("Staff") and
FCA recommending certain proposed modifications to the
D-1 Docket No. EM92030359
Power Purchase Agreement ("Agreement between Jersey
Central Power and Light Company ("JCP&L" or
"Company") and FCA previously approved by the Board by
Order dated July 8, 1992.
FCA is a New Jersey limited partnership whose
general partners are Advanced Power Systems, Inc. and
Constellation Energy Inc., an affiliate of Baltimore Gas &
Electric Company, which proposes to own, operate and
maintain a 110 megawatt (MW) cogeneration facility
("Facility") at the Nestle Beverages Company plant
("Nestle") in Freehold, New Jersey. The Facility will be a
Public Utilities Regulatory Policies Act ("PURPA")
qualifying facility ("QF") under Federal Energy Regulatory
Commission guidelines. The Agreement provides for FCA to
deliver 100 MW of electric capacity and associated energy to
JCP&L, and steam and possibly native load electricity to
Nestle.
The Facility will use natural gas as a primary fuel
with fuel oil as the probable backup fuel. The Facility will
be a combined cycle facility using a combustion turbine, a
heat recover steam generator and a steam turbine.
The Agreement begins on the date of regulatory
approval and continues for 20 years from the commercial
operation date, which is anticipated to be 48 months after the
date of regulatory approval. The commercial operation date
_ may be extended due to force majeure events without
penalty, and for up to three years by making payments into
a liquidated damages fund.
Background:
In early 1988, pursuant to the then-effective
cogeneration policies of the Board of Public Utilities
("BPU"), predecessor agency to the Board, Enserch
Development Corporation and its partner, Turner Power
D-2 Docket No. EM92030359
Corporation, the original developers of the project,
commenced negotiations on a power purchase agreement
with JCP&L. During the pendency of those negotiations, the
BPU adopted its competitive bidding guidelines (BPU
Docket No. 8010-687B, Order dated September 28, 1988).
Competitive bidding effectively replacing negotiations as the
means of procuring long-term electric capacity and energy
power purchase agreements with non-utility generators.
Concurrent with the adoption of its competitive
bidding guidelines, the Board approved a list of projects that
were grandfathered from competitive bidding. (Docket No.
8010-687B, Order dated September 28, 1988) The
grandfathered cogeneration projects had all reached an
agreement on price with the utility, and were permitted to
finalize power purchase agreements without being required to
go through a competitive bid process.
FCA was not on the original list of projects
grandfathered by the BPU. FCA therefore filed a Motion for
Reconsideration asking the BPU to reconsider its decision to
not grandfather the project. The BPU subsequently issued
an Order grandfathering the project or reconsideration. In
grandfathering the project from competitive bidding,
however, the BPU determined that the project's pricing
should not exceed an avoided cost cap used by JCP&L in its
1989 RFP. (Docket No. 8010-687B, Order dated July 31,
1989) 7
Subsequent to the FCA project being grandfathered,
FCA and JCP&L spent over two years negotiating a power
purchase agreement. A power purchase agreement was
ultimately agreed to and submitted to the Board for approval
on March 31, 1992. By written Order dated July 8, 1992,
the Agreement was approved by the Board. The pricing in
the agreement was equal to the maximum level ordered by the
Board in its grandfathering order, which is the price cap used
in JCP&L's 1989 RFP.
D-3 Docket No. EM92030359
ee
Since the Board's original grandfathering Order and
subsequent approval of the FCA Agreement, two significant
events have occurred. The first is that avoided costs have
dropped significantly. Second, Public Service Electric & Gas
Company (PSE&G) and Towner Electric I, L.P. ("Towner
Electric") negotiated buy-out of a power purchase agreement
in late 1992. In the Matter of the Joint Petition of Public
Service Electric and Gas Company a Towner Electric I. LP,
for Approval of a Second Amendment to Power Purchase
and Interconnection Agreement, Decision and Order, Docket
No. EM91040844, ("Towner"). The Towner Electric
contract pricing exceeded forecasts of PSE&G's avoided costs
by over $500 million of a net present value (NPV) basis for
the 440 MW project; PSE&G, however, was able to
terminate the contract for a buy-out payment of $18.5
_ million.
The Towner case brought to the forefront the concept
of buying out contracts which are no longer beneficial based
upon changed circumstances. The Board in its Order
approving the Towne Electric buy-out, directed the other
electric utilities under its jurisdiction to:
"aSsess existing contracts with particular
emphasis on those projects in the earliest
stages of development to determine whether
or not they remain economic and whether
there are any candidates for exploring buy-
outs or other remedial measures"; and to
report back to the Board staff.
Consistent with that order, JCP&L reported to Staff
that the FCA Agreement exceeded JCP&L's September 1991
avoided costs by $190 million NPV and that the project was
in the early stages of development. JCP&L subsequently
initiated buy-out talks with the project. Those overtures
were rejected by the project.
D-4 Docket No. EM92030359
As a result of the positions taken by JCP&L and
FCA, it was clear to Staff that no agreement was going to be
mutually reached between FCA and JCP&L. Staff therefore
pursued directly with FCA mitigation of the Towner
concerns raised by the Board and identified by JCP&L. In
recognition of the apparent economic development benefits
of the planned cogeneration project for the steam host
(Nestle Foods) and the Township of Freehold, as well as the
economic activity related to the construction and operation
of the cogeneration facility and the substantial benefits for
gas ratepayers attendant to the proposed gas supply
contract, Staff explored price concessions directly with FCA
as an alternative to a project buyout. Staff and FCA
ultimately reached an agreement on price concessions
intended to meet the concerns raised by the Board in its
Towner Order.
These concessions were memorialized in a Joint
Agreement between Staff and FCA which was filed with the
Board on November 3, 1993 for its approval. At its
November 10, 1993 agenda meeting, the Board formally set a
schedule for written comments on the Joint Agreement as
well as on the modified gas service agreement between FCA
and New Jersey Natural Gas Company, which was filed on
November 23, 1992 (Docket No. GM92111058). Comments
and/or replies thereto were received from JCP&L, the
Department of the Public Advocate-Division of Rate
Counsel ("Rate Counsel"), New Jersey Natural Gas
Company ("NJNG"), V.O.L.C.E., and Board Staff.
D-5 Docket No. EM92030359
The Joint Agreement:
The Joint Agreement contains certain proposed
pricing concessions by FCA. The Joint Agreement
recommends that the Board in its Decision and Order
approving the Joint Agreement, recommended to JCP&L that
FCA and JCP&L enter into an amendment to the Agreement
whereby FCA will agree to effectively lower its rates and
provide other incremental benefits as set forth in the Joint
Agreement in exchange for certain non-financial modifications
to the Agreement.
The proposed pricing concessions included in the
Joint Agreement are as follows: .
(a) FCA will provide an additional 10 MW to
JCP&L with no additional capacity charges and |
the energy priced the same as in the Agreement.
(b) FCA will lower its variable energy rate from
3.302 cents per kwh to 3.271 cents per kwh
effective February 1, 2001. After January 1,
2002, the variable energy rate will escalate at 6%
per year as opposed to 7% per.year.
(c) The capacity payments to FCA will be
reduced by $10 million per year for each of the
last three years of the Agreement.
(d) FCA agrees not to sell electricity directly to
either Nestle or to Interstate Waste Technologies
which is developing a sludge to methanol project
on an adjacent site.
FCA requested that the Board approve the Joint
Agreement and find and determine that the Joint Agreement
and the modifications to the power purchase agreement
address all concerns about possible contract renegotiation
D-6 Docket No. EM92030359
and/or buyout of the Agreement raised by the Board in its
Towner Order and by JCP&L in its response to that Order.
Summary of Comments:
FCA argues for approval of the Joint Agreement.
FCA states that it was willing to live with the terms of the
original Agreement. It did not seek any modifications to the
original Agreement. It has offered price concessions in an
attempt to meet the Board's concerns raised in the Towner
Order, not in exchange for other non-price concessions. FCA
values the price concessions at approximately $50 million net
present value (NPV). FCA believes the Staff, in negotiating
and signing the Joint Agreement, was appropriately
exercising its role of insuring that Board's policies are
properly implemented.
JCP&L opposes approval of the Joint Agreement.
As an alternative, JCP&L urges that the Board require FCA
to demonstrate that the project is viable under current
avoided costs. If FCA fails to so demonstrate, JCP&L
believes the Board should require FCA to enter into
negotiations with JCP&L for (a) an appropriate buy-out of
the project or (b) an amendment to revise the pricing to be
consistent with current avoided costs. If no agreement
between JCP&L and FCA is reached within 90 days, JCP&L
believes the Board should commence a proceeding to
determine if the Order approving the power purchase
agreement should be modified or revoked, or, in the
alternative, to disallow recovery from JCP&L's customers of
such portion of the costs thereunder which are found to be
substantially in excess of JCP&L's current avoided costs.
In April and September of 1993, JCP&L made buy-
out offers to FCA. In response to JCP&L's September offer,
FCA stated that in settlement discussions with Staff had
resulted in considerable progress and it was therefore
inappropriate to discuss buy-out with JCP&L. JCP&L
D-7 Docket No. EM92030359
alleges that FCA's discussions with Staff removed are
incentive on FCA's part to engage in meaningful buy-out or
price reduction negotiations with JCP&L.
JCP&L argues that its due process rights have been
violated because of the expedited comment period established
by the Board. JCP&L received the petition for approval of
the Joint Agreement on November 5, 1993. On November 9,
1993, JCP&L filed a letter stating that the proposed schedule
for consideration of this matter was too ambitious. Further,
JCP&L requests hearings on the many factual issues which it
alleges require consideration. Finally, JCP&L objects to Staff
acting in an advisory capacity in this matter since it is
essentially a party to a contested agreement.
JCP&L argues that the Board should not modify the
terms of a freely negotiated agreement between itself and the
project at the request of one party. JCP&L concedes that
the Joint Agreement includes some price reductions, but
contends that the purported savings are approximately $17
million NPV as opposed to the $50 million NPV estimated
by FCA. Additionally, JCP&L strongly opposes the
changes to other contract terms requested by FCA in
exchange for the pricing concessions. Specifically, JCP&L
does not believe the price concessions address the economic
concerns raised in the Board's Towner Order. Therefore, it
does not believe FCA should be relieved of "regulatory risks"
as requested. Also, JCP&L claims that FCA is now asking
to modify terms concerning assignment that JCP&L has
previously refused to modify.
JCP&L contends that the proposed modified price
agreement exceeds current avoided costs by approximately
$1.1 billion over in term, or $350 million NPV. JCP&L does
not believe the Board should take any actions which would
enhance the viability of this project or relieve it of its
obligations under the Board's Towner Order.
D-8 Docket No. EM92030359
Rate Counsel urges the Board to deny the relief
requested in the petition and to order the parties to
renegotiate based upon current avoided costs. Further, Rate
Counsel argues that the Administrative Procedures Act
requires that the Board conduct evidentiary hearings prior to
making a determination regarding this matter.
Rate Counsel concurs with JCP&L that even with the
proposed amendments the agreement is uneconomical and
will continue to impose an egregiously heavy burden on
JCP&L ratepayers. Rate Counsel believes this is contrary to
the Board's Towner Order, wherein the Board directed
utilities to review their existing contracts to determine
whether or not these contracts remain economic and explore
measures that could be taken to remedy any uneconomical
contract.
NJNG believes that the Board should approve both
the modified gas service agreement (GSA) and the Joint
Agreement between Staff and FCA. In essence, NJNG
argues for approval of the Joint Agreement based on its belief
that it will provide economic and environmental benefits in
addition to the benefits to the customer of NJNG.
By letter dated November 15, 1993, V.O.LC.E., an
unincorporated association of residents of Freehold
Township, submitted comments on the Joint Agreement and
to support a Motion to Intervene. V.O.L.C.E. believes FCA
is required to receive a Certificate of Need prior to
constructing the facility. V.O.I.C.E. disputes many of the
alleged benefits identified in FCA's petition and argues that
the modified agreement is not in the best interest of
ratepayers.
By letter dated November 19, 1993, FCA responded
in opposition to V.O.I.C.E.'s motion. FCA contends that the
V.O.1.C.E. motion:
D-9 Docket No. EM92030359
PN a yh Crt ad 6! Soa RISES Coan Oh 8 5
SS ENCORE Ee OMe cae ey Ce ee ope ad x
1) fails to identify what interest, if any the
V.O.1.C.E. members have in this proceeding,
and
2) fails to identify how those interests are different
from those represented by Rate Counsel.
FCA also argued that V.O.I.C.E.'s substantive
arguments lack merit. FCA refutes V.O.I.C.E.’s argument
that the FCA facility is a public utility which must obtain a
Certificate of Need prior to constructing its facility.
FCA argues that the proposed facility is not a public
utility, rather it is a non-utility generator which is exempt
from state regulation under federal law (PURPA) and is
exempt from the requirement of filing for a Certificate of
Need.
With regard to the Motion to Intervene, V.O.I.C.E.
has not demonstrated a direct interest in this proceeding
under N.LA.C, 1;1-16.1(a), nor has it demonstrated whether
any such interest is different from that which is represented
by Rate Counsel. We concur with FCA that the proposed
facility is not a public utility and is therefore exempt from
the requirement of filing for a Certificate of Need.
Accordingly, the Motion to Intervene of V.O.I.C.E. is
HEREBY DENIED.
Discussion:
Both JCP&L and Rate Counsel indicate in their
comments that they were excluded from the negotiations
between Staff and FCA. JCP&L, in particular, strongly
criticizes the actions of Staff in this matter. Before moving
to the substance of the Joint Agreement the Board will
briefly address this issue.
D-1t0 Docket No. EM92030359
In its response to comments, Staff explains its role in
the process from the time of the filing of JCP&L's Towner
response through the filing of the petition and Joint
Agreement with the Board in early November. It is clear to
the Board that Staff acted eritirely in good faith in this
matter. Contrary to the accusations of JCP&L, it appears
that Staff kept the Company fully informed of the status and
content of the discussions. Staff is correct in its assessment
that JCP&L has limited unilateral ability to demand contract
pricing concessions, to the extent that FCA is meeting all of
its contractual commitments. Staff undertook a legitimate
attempt to address the concerns raised in the Board's Towner
Order and JCP&L's response thereto, and to procure more
reasonable rates for JCP&L and its ratepayers. Rather than
launching an inappropriate attack on Staff, JCP&L should
have lauded the effort by Staff to attempt to reach a
negotiated resolution of this issue which would have the
effect of reducing rates to its customers. In the strongest
possible terms, the Board rejects the unfounded attacks on
Staff and other assertions that due process rights were
violated.
We concur with JCP&L and Rate Counsel however,
that while the Joint Agreement provides price concessions
by FCA relative to the original Agreement, which somewhat
improve the economics of the transaction, the revised pricing
terms are still far in excess of current avoided cost forecasts.
It is estimated by JCP&L that the original agreement exceeds
current avoided costs by $1.215 billion, while the proposed
modified agreement exceeds current avoided costs by $1.145
billion (or $370 million and $350 million NPV, respectively).
Absent any further modifications, it is apparent to us that
JCP&L's customers will most likely be saddled with these
excessive costs for the next twenty years, were the project to
proceed.
D-11 Docket No. EM92030359
As indicated above, the Joint Agreement leaves the
pricing in the Power Purchase Agreement significantly above
current forecasts of avoided cost. As such, the Board does
not believe it represents a reasonable resolution of this matter
consistent with the concerns raised in the Board's recent
Towner decision. Therefore, the Board REJECTS the Joint
Agreement. The Board HEREBY ORDERS JCP&L and
FCA to enter into immediate good faith negotiations to
develop modifications to the Agreement to bring it more in
line with current avoided costs, or, in the alternative for an
appropriate buy-out of the Agreement, subject to the Board's
approval. If no agreement between FCA and JCP&L is
reached and submitted to the Board within thirty days of the
date of this Order the Board will commence an evidentiary
proceeding, pursuant to N.JL.S.A, 48:2-40, to consider what
actions, if any, should be taken by the Board, including
modification or revocation of its Order approving the
Agreement.
We would note that information has been introduced
into this record which indicates that there would be
substantial economical benefits for both Freehold Township
and Nestle from the: development of the FCA project.
Specifically, Freehold Township would receive over $6
million in direct benefits, including an upgrade to its water
and sewer system plus contributions to various civic projects
Nestle would receive site lease benefits and energy discounts
estimated to be worth $2 million per year. We therefore urge
the parties to include in their discussion mechanisms which
would preserve the benefits to Nestle and the Township
which have been anticipated in reliance upon the
development of this project.
The substantial magnitude of the apparent economic
disbenefit associated with the existing Agreement combined
with the fact that the project is in the relatively early stages
of development warrants our deep concern and resultant
D-12 Docket No. EM92030359
directive to the parties to negotiate modifications to the
Agreement or a buy-out, consistent with the Board's
regulatory oversight obligations. If the parties work together,
we are hopeful that significant savings to ratepayers can be
achieved while maintaining the benefits for Freehold
Township and Nestle and at the same time allowing FCA to
continue with the project with prices more consistent with
current avoided costs or, in the alternative, working out an
appropriate project termination which leaves all parties
whole. Thus, the Board is giving the parties an opportunity
to try to craft such an agreement in a manner which is least
disadvantageous to all parties. However, the Board is
putting JCP&L and FCA on notice that if they cannot reach
agreement on either reasonable renegotiated pricing terms
more consistent with current avoided costs or a buy-out
arrangement within 30 days, the Board is prepared to
commence a proceeding to consider whether its previous
approval of this Agreement should be modified or otherwise
reconsidered or revoked.
Finally, the Board does not believe it is appropriate
to make a determination concerning the gas service agreement
until such time as the issues concerning the power purchase
agreement have been resolved. On that basis, the Board will
defer action on the gas service agreement until the issues
D-13 Docket No. EM92030359
concerning the power purchase agreement have been
resolved.
DATED: January 5,1994 BOARD OF REGULATORY
COMMISSIONERS BY:
/s/
DR. EDWARD H. SALMON
CHAIRMAN
/s/
JEREMIAH F. O'CONNOR
COMMISSIONER
/s/
CARMEN J. ARMENTI
COMMISSIONER
ATTEST:
/s/
IRENE JOHNSON
SECRETARY
D-14 Docket No. EM92030359
SERVICE LIST
DOCKET NO. EM92030359
DANIEL V. GULINO,
ATTORNEY
JERSEY CENTRAL POWER
& LIGHT CO.
MADISON AVENUE
MORRISTOWN, N.J. 07962
ROBERT CHILTON,
DIRECTOR
DIVISION OF ELECTRIC
BOARD OF REGULATORY
COMMISSIONERS
TWO GATEWAY CENTER
NEWARK, N.J. 07102
BLOSSOM A. PERETZ, ESQ.
' SILLS, CUMMIS,
ZUCKERMAN, RADIN,
TISCHMAN, EPSTEIN &
GROSS
ONE RIVERFRONT PLAZA
NEWARK, N.J. 07102-5400
TODD R. JAFFE
MARKET DEVELOPMENT
MANAGER
CONSTELLATION ENERGY
250 WEST PRATT STREET
BALTIMORE, MD 21201-
2423
D-15
DR. JOSEPH BOWRING
DEPARTMENT OF THE
PUBLIC 30 ADVOCATE
DIVISION OF RATE
COUNSEL
31 CLINTON STREET,
11TH FL.
NEWARK, NJ 07101
MICHAEL AMBROSIO,
CHIEF
BUREAU OF ELECTRIC
RATES & TARIFFS -
BOARD OF
REGULATORY
COMMISSION
TWO GATEWAY CENTER
NEWARK, NJ 07102
HELENE WALLENSTEIN,
DAG '
DEPUTY ATTORNEY
GENERAL
124 HALSEY STREET
NEWARK, N.J. 07101
GERALD W. CONWAY
BERLACK, ISRAELS &
LIBERMAN
95 MADISON AVENUE
MORRISTOWN, NJ 07960
Docket No. EM92030359
APPENDIX E
AGENDA DATE: 2/18/94
3/4/94
State of New Jersey
Board of Regulatory Commissioners
CN 350
Trenton, NJ 08625-0350
APPLICATION OF JERSEY )
CENTRAL POWER & LIGHT )
COMPANY FOR APPROVAL ) ELECTRIC ORDER
OF THE POWER PURCHASE ) DENYINGSTAY
AGREEMENT BETWEEN ) AND ESTABLISHING
JERSEY CENTRAL POWER & ) PROCEDURAL
LIGHT COMPANY AND ) SCHEDULE
FREEHOLD COGENERATION )
)
AND
VERIFIED PETITION OF )
FREEHOLD COGENERATION ) DOCKET NO.
ASSOCIATES, L.P., FOR ) EM920930359
APPROVAL OF A JOINT )
AGREEMENT BETWEEN )
BOARD OF REGULATORY )
COMMISSIONERS STAFF & _)
FREEHOLD COGENERATION )
ASSOCIATES, L.P. )
(SERVICE LIST ATTACHED)
BY THE BOARD:
This matter is before us for consideration of further
procedures consistent with our January 5, 1994 Order of
Denial in the above matter. In that Order, the Board rejected
a Joint 4 KO between Freehold Cogeneration
Associates, L.P. (Freehold) and the Board's Staff for certain
modifications of the Power Purchase Agreement (Agreement
E-1 Docket No. EM92030359
ee et ~ “¢4 Ae, Ps
yc ee Oe TN Be Si oa BR v %
ey eR EAE oP tence Ota tats Loe aE ORE SP NG
or PPA) between Freehold and Jersey Central Power and
Light Company (JCP&L) because we found that, even with
the proposed modifications, the Agreement remains far in
excess of current avoided cost forecasts and is not otherwise
beneficial to ratepayers. We further ordered that Freehold
and JCP&L enter into good faith negotiations to attempt to
reach agreement on a modification of the purchase rates
contained in the PPA or an appropriate buyout of the
Agreement. We further indicated that if these negotiations
were not successful within 30 days, the Board would
commence a proceeding and hold hearings to consider what, if
any, further action we can and should take, including possible
reconsideration, modification or revocation of our July 1992
Order in the above matter, wherein we approved the
Agreement and granted ratemaking approval of the pass-
through of the costs associated with the Agreement to
JCP&L's customers.
While Freehold and JCP&L did undertake some
limited negotiations, they were not able to reach agreement
on a modification of the Agreement or a buyout within the
30-day timeframe. The Board was so advised by a letter
from JCP&L dated February 3, 1994. In its letter, JCP&L
requested that the Board commence a proceeding as set forth
in its January 5, 1994 Order and transmit the matter to the
Office of Administrative Law (OAL) for hearings.
By letter dated February 10, 1994, Freehold
responded to JCP&L's letter and, pursuant to N.J.A.C. 14:1-
8.7, requested a stay of the proceedings referred to in the
Board's January 5, 1994 Order and the hearing requested by
JCP&L in its letter. While Freehold-asserts that the parties
should be given more time to negotiate, the basis of its
request for a stay is to allow the federal court to rule on its
pending complaint and motion for summary judgment in the
United States District Court for the District of New Jersey.
Freehold's complaint, filed on January 19, 1994, seeks
declaratory judgment that the Board's January 5, 1994 Order
directing negotiations among the parties and "threatening
revocation of its prior regulatory approval" are preempted
by the Public Utilities Regulatory Policies Act of 1978
(PURPA), 16 U.S.C.A. Sections 796 and 824a-3 et seq. and
the regulations promulgated pursuant thereto by the Federal
E-2 Docket No. EM92030359
Energy Regulatory Commission (FERC). Freehold also
seeks an order Pinson enjoining enforcement of these
provisions of the January 5, 1994 Order. On February 8,
1994, Freehold filed a motion for summary judgment with
the federal court, seeking an order granting summary
judgment in its favor on the issues raised in its complaint and
request for injunctive relief.
Freehold has requested that the Board suspend any
proceedings on the PPA pursuant to its Order of January 5,
1994 until the question of preemption is definitely resolved.
Freehold contends that if the Board proceeds with hearings
affecting the PPA while the preemption issue is before the
federal court, Freehold will suffer irreparable harm. Freehold
contends that the proposed ings will create a "cloud on
the terms of the PPA" which will create uncertainty about
this project in the financial community. Freehold also cites
the burden and expense of defending itself before the Board.
By letter dated February 17, 1994, JCP&L responded
to Freehold's February 10, 1994 letter and opposed the
request for a stay. JCP&L contends that Freehold has not
met the legal requirements for a stay, in that it has not
demonstrated a likelihood of success on the merits or a
showing of irreparable harm to justify a stay. Neither has it
demonstrated that the legal right underlying its claim is well
settled or that the balance of the equities weighs in its favor.
JCP&L urges the Board to deny the request for a stay and to
proceed with the contemplated hearings in light of the
significant and adverse financial impact on JCP&L and its
customers stemming from the PPA. By letter dated
February 17, 1994, Rate Counsel also opposed the request
for a stay.
Discussion
The issues before us at this time are whether to grant
Freehold's request for a stay of further proceedings before
the Board, pending resolution of Freehold's complaint in
federal court and, if not, what the scope and schedule of our
proceedings should be.
E-3 Docket No. EM92030359
RAEN BRT nO RP
Pursuant to N.J.A.C. 14:1-8.7(d), a stay will be
granted for "good cause shown." The criteria for determining
good cause for the granting of emergent relief such as the
imposition of a stay pending appeal are well settled. For a
stay to be granted, the moving party must show:
®; that the movant will suffer immediate and
irreparable harm if a stay is not granted;
2. that there is a reasonable probability that the
moving part will succeed on the merits;
3. that the legal right underlying the movant's
claim is well settled; and-
4. that the balance of the equities in granting or
denying relief weighs in the movant's favor.
Crowe v, DeGioia 90 N.J. 125 (1982); Zoning Board
the Township of S Service Electric Cable TV. of
NL Inc., 198 NuJ. Super. 170 (App. Div. 1985); Doumani v.
Casino Control Commission of New Jersey, 614 F. Supp.
1465 (D.N.J. 1985). |
A review of Freehold's request for a stay in light of
these criteria reveals an inadequate showing to justify the
imposition of a stay. Based on our review of the record in
this matter, we do not believe that Freehold has satisfied
even a single one of the above criteria.
First, Freehold has failed to demonstrate that it will
suffer any immediate or irreparable harm absent a stay of the
Board's Order. Freehold claims that if the Board proceeds
with hearings there will be a cloud on the terms of the PPA,
which will create uncertainty in the financial community.
However, in November 1993, in Re of the Joint
Agreement between Freehold and Staff, Freehold asserted
that lenders would not make commitments to finance the
project until the rate issue was resolved. It is clear to us that
uncertainty regarding this project has existed in the financial
community for some time because of the uneconomic nature
of the project and that the uncertainty will continue to exist
until all issues involved in this matter are resolved.
E-4 Docket No. EM92030359
Freehold also claims that the federal court will be able
to resolve this matter more expeditiously than the Board in
order to remove the uncertainty. This is unlikely if we were
to retain this matter at the Board and adopt the procedural
hearing schedule as set forth below. This schedule would
enable the matter to be ready for Board consideration in late
April, after development of a full record and evidentiary
hearing(s). Freehold had originally proposed an anticipated
return date of March 28, 1994 for its motion for summary
judgment in federal court. Moreover, any decision rendered
by the United States District Court will likely be appealed
by the unsuccessful party. Clearly, whether the Board
grants a stay or not, uncertainty about the PPA will likely
exist for some time, until the entire matter is finally resolved
and all appeals are completed. If anything, having the Board
retain and hear this matter on the schedule set forth below
may well bring the matter to a more expeditious resolution
than granting a stay at this time.
Second, Freehold has not conclusively demonstrated
that it is likely to prevail on the merits in federal court. The
issue raised by Freehold's complaint and motion for
summary judgment has not been conclusively decided by the
courts. As stated in JCP&L's responses in opposition to the
request for a stay, Freehold's preemption arguments are far
more complex and uncertain than Freehold Asserts. Freehold
argues that the Public Utility Regulatory Policies Act of
1978 (PURPA) and federal regulations adopted thereunder
by the Federal Energy Regulatory Commissioners, preempt
the actions contemplated by the Board citing the recent
decision of the Oklahoma Supreme Court in Smith
Service Commission of Oklahoma. The Board notes that the
Oklahoma decision was decided by a 6-3 vote and that, as
pointed out by JCP&L in its January 7, 1994 letter brief, a
review of the Oklahoma decision discloses numerous
and legal distinctions from the issues facing the Board in this
case. Primarily, the cogenerator in the Oklahoma decision did
not have a negotiated ides cen agreement with the
utility. Moreover, as described above, the FERC regulations
provide that an electric utility and a cogenerator can agree to
terms and conditions that differ from those in the regulations.
The presence of an express clause in the PPA wherein the
E-5 Docket No. EM92030359
. ="
parties, without any reservations, agreed to certain
procedures in the event the Board were to disallow charges
associated with the agreement from being passed on to the
JCP&L ratepayers, casts doubt on Freehold's claim that it is
likely to prevail on the merits. In addition, as JCP&L notes
in its letter opposing a stay, there appears to be good cause
for the federal court to dismiss Freehold's complaint on
abstention and other grounds, including comity, election and
exhaustion of remedies. If this occurs, the merits of
Freehold's preemption argument will not be reached in federal
court until after the Board conducts a proceeding, if at all.
The balance of the equities is clearly not in Freehold's
favor. If we deny the request for a stay, Freehold will have a
full and fair opportunity to raise its preemption argument
and other legal and factual arguments against further Board
action in a proceeding before the Board. In addition,
Freehold's alleged burden and expense in "defending" itself
before the Board is not sufficient reason for a stay. For these
reasons, Freehold's request for a stay is HEREBY DENIED.
In its January 5, 1994 Order, the Board stated that if
negotiations between Freehold and JCP&L failed, it would
hold a hearing pursuant to N.J.S.A. 48:2-40 to consider
whether to modify or revoke its Order. approving the PPA -
and the ratemaking pass-through-of the costs associated
therewith to JCP&L's customers. N.J.S.A. 48:2-40 grants
the Board at any time the power to revoke or modify an
order made by it.
. 54 NJ. 418, 425 (1969); N.J. Bell Tel, Co, v.
Bd, of Pub, Util. Comm's. 12 NuJ. 568, 579 (1953) Central R.
Co, of N.J. v. Dept, of Public Utilities, 7 N.J. 247, 254-255
(1951); Sudler v, Environ, Disposal Corp., 219 N.J. Super.
52, 62 (App. Div.) certif. denied 109 NJ. 56 (1987). The
Board also possesses authority to "[i]nvestigate upon its
own initiative . .. any matter concerning any public utility."
. 48:2-19. The Board also has a continuing obligation
under N.LS.A. 48:2-21 to ensure that a utility's rates are just
and reasonable. In re Revision of Rates by Redi-Flo Corp.
76 NJ. 21 (1978).
While we are mindful of the need for rate stability in
purchase power agreements and while reconsideration of our
E-6 Docket No. EM92030359
ratemaking treatment of the rates associated with such an
agreement is not a step to be taken lightly, given the
magnitude of the discrepancy which has developed between
the rates under this Agreement and current projections of
avoided costs, combined with the fact that the project has
not yet been financed nor commenced construction, we
believe that our continuing authority to assure that the rates
of JCP&L are just and reasonable requires us to reopen the
record in this matter to consider what, if any, actions we can
and should take at this time consistent with applicable law
and our regulatory mandate under NLLS.A. 38:2-21.
In light of the substantial decline in avoided costs
since the Board's approval of the Freehold PPA, the failed
negotiations between Freehold and JCP&L and the Board's
powers under N.LS.A. 48:2-21 and 48:2-40, the Board
HEREBY to retain this matter and to hold
evidentiary hearings to consider the following issues:
1. The status of the Freehold project;
a The viability of the project, including the
prospects for meeting remaining milestones
and obtaining financing;
3 The economics of the project, including the
amounts expended to date, the projected costs
of the project, a comparison of the rates under
the PPA to JCP&L's most current avoided
cost estimates, and the impact of the costs
associated with the PPA on ratepayers;
4. Whether the Board can reconsider, modify or
revoke its 1992 Order approving the PPA and
allowing for the pass-through of the rates
associated with the PPA to JCP&L
ratepayers;
5. Whether the Board should reconsider, modify
or revoke its 1992 Order approving the PPA
setting the level of rates associated with the
PPA permitted to be passed through to
JCP&L ratepayers, and if so, to what extent;
E-7 Docket No. EM92030359
6. Whether the Board can order a reasonable
buy-out of the PPA;
7. Whether the Board should order a buy-out of
the PPA and if so at what price.
We note that Freehold's preemption arguments can
certainly be raised in the context of these issues.
Accordingly, we HEREBY DENY Freehold's request for a
stay of the proceedings and we will commence a proceeding
to consider the above issues.
At our February 18, 1994 agenda meeting we
established a procedural schedule which among other things,
set the date for prefiled testimony as March 14, 1994,
established hearing dates on March 21 and 22, 1994 and
dates for briefs and reply briefs on March 31, 1994 and April
6, 1994, respectively. On February 28, 1994, Freehold filed
an Emergent Motion for Reconsideration of the Board's Oral
Decision of February 19, 1994, which established a
scheduled for discovery, hearings and briefing. Freehold
characterizes the hearing schedule as being highly
abbreviated. It asserts that the Board expedited the schedule
based on two incorrect assumptions. The first being that the
parties are familiar with the issues involved. Freehold asserts
that the legal, policy and factual issues are far more complex
than the Board assumed. Specifically Freehold is concerned
that the parties be given sufficient time to present arguments
on the possibility that any Board action to modify or revoke
its approval of the PPA would be preempted by federal law
and/or be contrary to state and federal constitutional
provisions and that the parties have the opportunity to fully
explore the economics of the Freehold cogeneration project.
Freehold also put for the loss of its long-time counsel as a
reason for giving them additional time.
The second assumption which Freehold refers to is
that the hearing schedule takes into account Freehold's
previously stated concern that financing for the project will
be difficult to obtain until the matter is resolved. Freehold
expresses concern that if the purchase terms are altered it will
not be able to obtain financing. It now argues that it should
E-8 Docket No. EM92030359
be given "a complete opportunity to develop a full record in
an orderly manner."
Based on these arguments, Freehold asks the Board to
alter the hearing schedule in one of three ways. First
Freehold asks that the Board transmit the matter to the OAL
so that a complete record can be developed. Alternatively,
Freehold asks that the schedule be restructured to provide for
a aac consideration of the issues starting with the extent
of the Board's authority under federal and state law.
Freehold's last request is that the submission of pre-filed
testimony be deferred two weeks until March 28, 1994 so
the district court be given time to rule on Freehold’s motion
for summary judgment! and the parties be given sufficient
time to assimilate the material obtained through discovery
and obtain the services of non-party experts and other
witnesses.
Replies to Freehold's Motion were filed by JCP&L
and Rate Counsel. Both JCP&L and Rate Counsel objected
to Freehold's request to send the matter to the OAL and for a
phased consideration. Both JCP&L and Rate Counsel
expressed a desire to keep the process moving. However,
JCP&L did not object to a two week delay in the schedule,
nor did Rate Counsel specifically object.
Given our prior determination to hear this matter
directly, we remain convinced that Freehold's request that the
matter be transmitted to the OAL be denied. NLS.A.
52:14F-8(b) provides than an Administrative Law Judge shall
1 Ataconference call with United States District Court Judge Mary
Little Parell held on Tuesday, February 22, 1994, the Judge set Oral
Argument for Wednesday, March 14, 1994, and indicated she would
attempt to rule from the bench after Oral Argument on Freehold’s
Motion for Summary Judgment and the cross-motions to dismiss.
At that time the Judge also expressed the hope that the Board would
consider Freehold's request for a two-week extension favorably.
E-9 Docket No. EM92030359
not be assigned to hear "[aJny matter where the head of an
agency, a commissioner or several commissioners, are
required to conduct or, determine to conduct the hearing
directly or individually." An agency's determination to hear a
case directly rather than to transfer the case to the OAL is
within the agency's discretion, and the agency head clearly
has the right not to transfer a case to the OAL. In-re
i 90 NLJ. 85, 90-92, 104 n.
8 (1992); i
Unemployed-Emploved Council of N.J. Inc. v.
Horn, 84 N.J. 646, 654 (1980); Frank v. Ivy Club, 228 NLL
Super. 40, 55 (App. Div. 1988), rev'd on other grounds, 120
NJ. 73 (1990), cert. denied, 498 ULS. 1073, 111 S.Ct. 799,
112 Lied. 2d 860 (1991); Matter of Cole, 194
237, 245-45 (App. Div. 1980), app. dismissed, 84 N.J. 433
(1980).
Accordingly the Board HEREBY REAFFIRMS its
determination to hear this matter because of the important
legal, factual and policy decisions involved and because there
is no requirement that the matter be transmitted to the OAL.
The Board is convinced that Freehold's request that
the hearing schedule provide for phased consideration of the
issues should be denied. The Board will give all parties a full
and fair opportunity to raise all issues relevant to this matter.
Freehold has already asked for and has been given additional
time by counsel for the other parties for the submission of
discovery requests. By agreement of all parties, the date for
discovery requests was moved from Friday February 25,
1994 to Tuesday March 1, 1994 and the date for responses
was moved from Friday March 4, 1994 to Tuesday March 8,
1994. This action allows Freehold's new counsel the
opportunity to familiarize himself with the issues. In
addition, Freehold has other counsel which have continued to
work on the matter and should be familiar with the issues
involved in discovery.
However, the Board will grant Freehold’s last request
and defer the submission of pre-filed testimony for two
weeks. Such action would defer all other phases of the
hearing for two weeks. Deferral of submission of pre-filed
testimony accedes to Judge Parell's request that in the
interests of comity the Board grant Freehold an extension and
E-10 Docket No. EM92030359
would likely avoid a filing by Freehold for an emergent stay
in federal court. A two-week delay could also see resolution
of the federal district court case in either party's favor. If
resolved in Freehold's favor all concerned parties will have
been spared unnecessary work, pending the outcome of any
subsequent appeals which may result. If the Board prevails,
the hearing schedule can proceed without the interference
that could result from a simultaneous federal court
proceeding. Deferral also gives the parties more time to fully
prepare themselves for the remainder of the hearing schedule.
The delay that would result from such deferral is minor and
still allows the Board to resolve this matter expeditiously.
Accordingly, we HEREBY DENY Freehold's request
to transmit this matter to the OAL and for a phased
consideration of the issue before the Board. We HEREBY
GRANT Freehold's request for a two week delay in the filing
of prefiled testimony and subsequent hearing dates and
be Accordingly, the revised procedural schedule will be
as follows:
Responses to the first round of testimony:
Tuesday, March 8, 1994
Monday, March 28, 1994
Wednesday, April 6, 1994
Thursday, April 7, 1994 at 9:30 a.m. at the
Board's hearing room Two Gateway Center,
Newark, NJ
Briefs: Friday, April 15, 1994
Reply Brief: Thursday, April 21, 1994
The parties may continue to exchange follow-up
discovery requests up through the beginning of the hearings.
The parties are directed to cooperate to respond to these
requests as promptly as possible, in light of the above
schedule.
JCP&L is directed to provide appropriate notice of
the hearings consistent with applicable law.
Copies of all documents should be served on all
parties no later that 5:00 p.m. on the above dates. Copies
E-11 Docket No. EM92030359
should also be filed with the Board at its Trenton offices
with copies to Board's Staff in Newark and the Attorney
General's Office in Newark. Parties should be prepared to
execute appropriate confidentiality agreements, if necessary.
If there are any disagreements among the parties concerning
discovery or other procedural matters, these should be
brought to the attention of the advising Deputy Attorney
General, with copies to all parties. If any such matter cannot
be resolved among the parties, the issue will be brought back
to the Board's agenda for resolution. i
The above schedule is, in our view, reasonable and
necessary in light of the cloud of uncertainty which Freehold
contends now hangs over the project. We further believe that
the schedule is reasonable because the parties’ familiarity
with the subject matter obviates the need for a lengthy and
extensive discovery process.
Concurrent with its filing of its Emergent Motion for
Reconsideration of the Board's hearing schedule, Freehold
filed a Motion for Reconsideration of the Board's Order of
January 5, 1994 concerning this matter.. The issues raised in
E-12 Docket No. EM92030359
that Motion will be considered by the Board at a future
meeting and memorialized in a separate order.
DATED: March 7, 1994
BOARD OF REGULATORY
COMMISSIONERS
BY:__J/s/
HERBERT H. TATE, JR.
PRESIDENT
/s/
CARMEN J. ARMENTI
COMMISSIONER
/s/
DR. EDWARD H. SALMON
COMMISSIONER
ATTEST:
/s/
JULIE FORD
ACTING SECRETARY
E-13 Docket No. EM92030359
APPENDIX F
UNITED STATES COURT OF APPEALS FOR THE
THIRD CIRCUIT
April 26, 1994
#A-116
No. 94-5168
FREEHOLD COGENERATION ASSOCIATES,
Appellant
v.
BOARD OF REGULATORY COMMISSIONERS OF
THE STATE OF NEW JERSEY;
JERSEY CENTRAL POWER AND LIGHT COMPANY
(DNJ (Trenton) D.C. Civil No. 94-375 (MLP))
Present: BECKER and NYGAARD, Circuit Judges.
l. Motion by Appellant requesting the Court to
ask the Federal Energy Regulatory
Commission to submit a brief as an amicus
curiae.
2. Motion by Appellee Board of Regulatory
Commissioners of the State of New Jersey for
acceptance of late response.
/s/
Mary Arnold 597-5019
Deputy Clerk
F-]
ORDER
The foregoing motions are granted. The Federal
Energy Regulatory Commission is requested to submit a brief
amicus curiae on the jurisdictional issues facing this Court by
July 1, 1994. The Appellees' brief shall be filed within thirty
(30) days of the filing of the amicus curiae brief; Appellant's
reply brief shall be filed within fourteen (14) days of the
filing of Appellees' brief. The Commission is invited to
address any of the other issues raised by this appeal that it
desires to. The parties shall supply Commission counsel
with the relevant papers.
By the Court,
Circuit Judge
Dated: May 6, 1994
APPENDIX G
IN THE UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 94-5168
FREEHOLD COGENERATION ASSOCIATES, L.P.,
PLAINTIFF-APPELLANT,
v.
BOARD OF REGULATORY COMMISSIONERS OF
THE STATE OF NEW JERSEY, ET AL.,
~ DEFENDANTS-APPELLEES.
On Appeal from the United States District
Court for the District of New Jersey
Honorable Mary Little Parell, Judge
BRIEF FOR AMICUS CURIAE FEDERAL ENERGY
REGULATORY COMMISSION
SUPPORTING PLAINTIFF-APPELLANT
SUSAN TOMASKY
GENERAL COUNSEL
JEROME M. FEIT
SOLICITOR
SAMUEL SOOPPER
ATTORNEY
FOR AMICUS CURIAE
FEDERAL ENERGY
REGULATORY
COMMISSION
WASHINGTON, D.C. 20426
TABLE OF CONTENTS
PAGE
STATEMENT OF INTEREST.............ssscsessscessscenscsesseseveoes l
STATEMENT OF JURISDICTION..........:cccsssssssesseeseeerees 1
STATEMENT OF THE ISSUE. .........c.cssccsssessseesersseseesesees 2
PERTINENT STATUTORY AND REGULATORY
PROVISIONS. ....oc-cccscsscessscsccascescosoccsscessonsrsesnesecase all
STATEMENT OF THE CASE...........csscssscesscessssesesseseeseees 3
I, Nature of the Case and Proceedings Below.............. 3
II. Statement Of Facts............ccsssssssssssessereeseeseessscessenes 3
A. Regulatory Context...........cssssseseesssersereeesees 3
B. The Proceedings Below...........ssessessssseeees 6
SUMMARY OF ARGUMENT. tssssssssssssssssssesneeneentes 9
ARGUMENT ....n0.c0ssccssicoseccssccassnsssacssensneccossgesennrsnsesoaqaessess 12
I. FREEHOLD PROPERLY INVOKED
FEDERAL JURISDICTION TO RESOLVE
ITS CLAIM THAT ITS FEDERALLY-
ESTABLISHED PURPA RIGHTS ARE
BEING UNLAWFULLY INFRINGED
BY THE STATE REGULATORY
PCT i cincctca died ncn d isccsabccnnseeonenninesatgsncenanessen 12
A. The Jurisdictional Limitations Of Section
210(g) Of PURPA Have No Application
To This Proceeding..................cccssccessresesees 12
G-2
B. The Johnson Act Does Not Apply
To A Complaint Asserting That
Federal Law Preempts A State
Pe Pi is ciieassterniceeemnessossspercoseoe 16
i. The District Court's Reliance On
i idligtdi sitandadeiesctisiciceessccssovees 19
II. BECAUSE THE STATE AUTHORITY
OVER FREEHOLD'S RATES IS
EXCLUSIVELY DERIVED FROM
PURPA, THE ABSTENTION DOCTRINE
IS INAPPROPRIATE HERE..............ss0escseseseereee 20
A. Burford Abstention Is Inappropriate
PG iccintdcccliectnacbbbicscectdnterscenestssereessoretzvece 21
B. Younger Abstention Is Similarly
Inappropriate........... satataidielidbidiewiccactadevehinn 23
C. Pullman Abstention Is Likewise
TIE a iecreisiicessscscintereveonasevenscoesess 24
CONE I isis incdsris ec nedihitetennbidicasicciie 25
TABLE OF AUTHORITIES
PAGE
COURT CASES:
Airco Industrial Gases, Inc. v. Teamsters Health
and Welfare Pension Fund, 850 F.2d 1028
(3rd Cir. 1988).........cssecesesessesssesesseensnssssnsneneneneecenenenenens 13
Aluminum Company of America v. Utilities Commission
of North Carolina, 713 F.2d 1024 (4th Cir. 1983),
cert, denied, 465 U.S. 1052 (1984)...........ceesesssseeeeeeeees 18
American Paper Institute, Inc. v. American Electric
Power Service Corp., 461 U.S. 402 (1983).......-.-ssseseeeeees 5
Bristol Energy Corp. v. State of New Hampshire Public
Utilities Commission, 13 F.3d 471.(1st Cir. 1994)........ 15
Burford v. Sun Oil Co.,
319 U.S. 315 (1943).....cccceeereeees ascesecensasensonceseeesese 2,10,20
Colorado River Water Conservation District v. United
States, 424 U.S. 800 (1976)........ssccersessessereesseeeseeseneenees 20
Coruzzi v. State of New Jersey, 705 F.2d 688
(3rd Cir. 1983).......ccsscesescsseseseseeeensnensssensnsnsecseseenensnenenens 23
FERC v. Mississippi,
456 U.S. 742 (1982).......c.ccssccscesceccerenseerserssecsssenssssenses 3,4
Greensboro Lumber Co. v. Georgia Power Co.,
643 F. Supp. 1345 (N.D. Ga. 1986), affd,
844 F.2d 1538 (11th Cir. 1988)...........ccsssceeseeseeees 13,16
Hagans v. Levine,
415 U.S. 528 (1974)......ccccscsessersercercenserssessnssessessnsensenes 22
Hawaii Housing Authority v. Midkiff,
RF ae Ca ia aisles tnceincstreescncinecanssecisesecseciones 24
International Brotherhood of Electric Workers v.
Public Service Commission of Nevada,
ee EF Rrcerticncccrccsteccensnnseaccosprensnces 18
Kennecott Corp. v. Smith,
G37 F.2d 181 (oad Cie) FCO). ..ncccvcscecccceceorescosecoccsccccecece 22
Kentucky West Virginia Gas Company v. Pennsylvania
Public Utility Commission, 791 F.2d 1111 (3rd Cir.
I iscitsipsechdiidientanaepeseiiaenereovenncionsennstnsstenccee 10,18,21
Middlesex County Ethics Comm. v. Garden State
Bar Agee, S57 US. SES FEZ) ccccceccscesascnscrencsesescccnercce 23
Middle South Energy Inc. v. Arkansas Public Service
Comm'n, 772 F.2d 404 (8th Cir. 1985), cert. denied,
ee Fe tric cctnontcacensscnstttninnsnsstenmecnaqererces 23
New Orleans Public Service v. City of New Orleans,
QE RTF Fae Ce Oe this ncsibicciccenviersemtenstesions 10,21,22,24
New Orleans Public Service, Inc. v. City of New
Orleans, 782 F.2d 1236 (5th Cir. 1986),
vacated in part on other grounds, 798 F.2d 858
(1986), cert, denied, 481 U.S. 1023 (1987)..............-0+++ 17
Railroad Commission of Texas v. Pullman,
SR PIE Niikisicissinciaconebieineiesteennnesenncsnncconn 2,10,20
Shaw v. Delta Air Lines, Inc.,
ME ETO ccrcctvectnsesnnevnsesisovinntinnoseetinintntinpsicvon 12
United Service Automobile Association v. Muir,
192 F.2d 356 (31d Cir. 1986).......-ceererersrsrerereesesesesesees 20
Younger v. Harris,
AO1 U.S. 37 (1971)...scscecereressesssnsnenensnsnsnsnsnenenenenens 2,10,20
ADMINISTRATIVE CASES:
Freehold Cogeneration Associates, L.P.,
65 FERC ¥ 62,004 (1993).....--ssrsesssrerssssersneenensrnensnnsesecs 6
STATUTES:
Federal Power Act,
16 U.S.C. § 824.....scsssessesssssesessenencescnssncnnsnencenensencnsensoes 3
Johnson Act,
16 U.S.C. § 1342......sccccscsssseesssnsneneensnenennenenensnsncnnes 2,9,16
Public Utility Regulatory Policies Act of 1978
(PURPA) for Qualifying Facilities (QFS)
2B U.S.C. § 133 1....sssssesssseesessesssesersenensensnsnsenenensessnsnsreess l
Section 210(g), 16 U.S.C. § $24a-3(Z)...--cceereercercercerserees 2
REGULATIONS:
18 C.F.R. § 290.101 .......ecsecsssssssssncencensensensnencensensnnsnccncenensees 2
18 C.F.R. § 292.301(b)(1)..---secesseseesserenssnsnersensenensnnsnsnsenences 19
18 C.F.R. § 292.303; 292.304.....esserserrsssersrsersensnrencensnnsncenens 5
18 C.F.R. § 292.602(C)...-.-cesssssesseesenensnsenssencncensnsnsnsenenners 5,14
IN THE UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 94-5168
FREEHOLD COGENERATION ASSOCIATES, L.P.,
PLAINTIFF-APPELLANT,
Vv.
BOARD OF REGULATORY COMMISSIONERS OF
THE
STATE OF NEW JERSEY, ET AL.,
DEFENDANTS-APPELLEES.
On Appeal from the United States District
Court for the District of New Jersey
Honorable Mary Little Parell, Judge
BRIEF FOR AMICUS CURIAE FEDERAL ENERGY
REGULATORY COMMISSION
SUPPORTING PLAINTIFF-APPELLANT
STATEMENT OF INTEREST
This brief is filed in response to the Court's Order of
May 6, 1994, requesting the Federal Energy Regulatory
G-7
Commission ("Commission" or "FERC") to address "the
jurisdictional issues facing this Court" and inviting the
Commission to respond to "any of the other issues raised by
this appeal that it desires to." FERC will limit its response
to the jurisdictional issues and the related issue of abstention.
STATEMENT OF JURISDICTION
FERC agrees with the jurisdictional statement
contained in the brief (Pet. Br. 1) of plaintiff-appellant
Freehold Cogeneration Associates, L.P. (Freehold), that the
district court had jurisdiction pursuant to 28 U.S.C. § 1331
over this action to enforce the exemption of the Public
Utility Regulatory Policies Act of 1978 (PURPA) for
Qualifying Facilities (QFs) from state rate and financial
regulation, 16 U.S.C. § 824a-3(e), and the commission's rules
promulgated thereunder. 18 C.F.R. § 290.101, et seq.
STATEMENT OF THE ISSUES
The Commission will address the following issues:
1. Whether the district court erred in its
conclusion that it was without jurisdiction to entertain:
Freehold's complaint because of the jurisdictional
limitations of Section 210(g) of PURPA, 16 U.S.C. § 824a-
3(g).
rh Whether the district court erred in finding that
the Johnson Act, 16 U.S.C. § 1342, deprived it of jurisdiction
to review the order of a state commission challenged on the
ground that it violated PURPA.
3. Whether the district court could properly rely
on the contract between Freehold and Jersey Central Power
& Light (Jersey Central) to find it was without jurisdiction
over Freehold's complaint.
G-8
4. Whether the complaint is dismissible under
the principles of abstention established by Younger v. Harris,
401 U.S. 37 (1971), Burford v. Sun Oil Co,, 319 U.S. 315
(1943), and Railroad Commission of Texas v. Pullman, 312
U.S. 496 (1941).
PERTINENT STATUTORY AND REGULATORY
PROVISIONS
The statutory and regulatory provisions pertinent to
this case are contained in the Addendum to this brief.
STATEMENT OF THE CASE
L Nature of the Case and Proceedings Below
We adopt the statement in Freehold's brief (at pp. 4-
5) concerning the nature of the case.
IL Statement of Facts
A. Regulatory Context
1. Under Part II of the Federal Power Act
(FPA), 16 U.S.C. § 824 et seq, the Commission has the
exclusive authority to regulate "public utilities" that sell
electric power at wholesale in interstate commerce. See 16
U.S.C. § 824(e). In 1978, Congress modified the FPA with
the enactment of PURPA, which was designed "to encourage
the development of cogeneration and small power production
facilities" to foster increased use of alternatives to fossil
fuels. FERC v. Mississippi, 456 U.S. 742, 750
(1982)(footnote omitted).
PURPA defined a "cogeneration facility" as one
which produces both electricity and "steam or forms of
G-9
useful energy (such as heat) which are used for industrial,
commercial, heating or cooling purposes.” 16 U.S.C. §
796(18)(A). It also created a category of "qualifying
cogeneration facilities" (known as QFs), which would include
any facility which the "the Commission determines, by rule,
meets such requirements (including requirements respecting
minimum size, fuel use, and fuel efficiency) as the
Commission may, by rule, prescribe," as well as certain
ownership requirements. 16 U.S.C. § 796 (18)(B).!
2. In enacting PURPA, Congress sought to
eliminate two major barriers that had previously impeded the
growth of cogeneration facilities: that 11(1) traditional electric
utilities were reluctant to purchase power from, and to sell
power to, the nontraditional facilities, and (2) the regulation
of these alternative energy sources by state and federal utility
autho’ ities imposed financial burdens upon the nontraditional
facilities and thus discouraged their development." FERC v.
Mississippi, supra, 456 U.S. at 750-751 (footnotes omitted).
To meet the first problem, Section 210(a) of PURPA,
16 U.S.C. § 824a-3, required the Commission to prescribe
"such rules as it determines necessary to encourage
cogeneration and small power production," including rules
requiring traditional utilities to purchase electricity from
QFs. FERC v. Mississippi, supra, 456 U.S. at 751.2 To
overcome the second barrier, Section 210(e) of the Act
requires the Commission to implement regulations exempting
l The PURPA QF category also includes "small power
production” facilities using renewable resources to generate electricity, 16
U.S.C. § 796(17), which receive the same statutory benefits as
cogeneration QFs such as Freehold.
2 In turn, Section 210(f) of PURPA requires that “each State
regulatory authority shall . . . implement" the rules adopted by the
Commission under Section 210(a) to encourage QF development. 16
U.S.C. § 824a-3(f).
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QFs from such federal regulation to which traditional electric
utilities are subject, including most provisions of the FPA, as
well as "State laws and regulations respecting the rates, or
respecting the financial or organizational regulation, of
electric utilities." 16 U.S.C. § 824a-3(e)(1).
3. In accordance with these provisions of
PURPA, the Commission promulgated regulations governing
transactions between utilities and QFs, including a specific
requirement that a utility must purchase electricity made
available by a QF at a rate up to the utility's full avoided
cost. 18 C.F.R. §§ 292.303; 292.304 (1993). See generally
American Paper Institute, Inc, v. American Electric Power
Service Corp., 461 U.S. 402, 414-415 (1983). Avoided cost
is defined by the statute as "the cost to the electric utility of
the electric energy which, but for the purchase from [a QF],
such utility would generate or purchase from another
source.” Section 210(d), 16 U.S.C. § 824a-3(d).
Acting pursuant to Section 210(e)(1) of PURPA, the
commission also promulgated regulations exempting QFs
from various federal and state regulatory requirements. 18
C.F.R. § 292.602(c). That section states, in pertinent part:
(1) Any [QF] shall be
exempted . . . from State law or
regulation respecting:
(i) The rates of electric
utilities; and
(ii) The financial and
organizational regulation of
electric utilities.
It is this exemption for QFs from state utility regulation,
provided for in Section 210(e) of PURPA and further fleshed
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out by Commission regulations, which is the basis of
Freehold's claim here.
B. The Proceedings Below.
Freehold, certified as a QF by the Commission in
October, 1993,2 intends to construct and maintain a
cogeneration facility in Freehold, New Jersey. To this end,
on March 26, 1992, Freehold entered into a long-term
Purchase Power Agreement (PPA) with Jersey Central
Power & Light Company (Jersey Central), under which
Freehold would provide capacity and energy to Jersey
Central over a twenty-year period at rates set at 1989
avoided costs. On July 8, 1992, the Board of Regulatory
Commissioners of the State of New Jersey (BRC) issued an
order approving the PPA and the rates it established. JA.
113-118.
The present dispute stems from the BRC's attempt
to reexamine the level of Freehold's avoided cost rates. On
April 12, 1993, the BRC issued an order (the Towner order),
directing electric utilities to explore remedies for contracts
with QFs that were no longer economically sound. JA. 215-
223. On January 5, 1994, the BRC issued an order rejecting
a settlement reached by its staff and Freehold which would
have modified the rates on the ground that "the Joint
Agreement leaves the pricing in the [PPA] significantly above
current forecasts of avoided cost." JA. at 141. The BRC
went on to urge Freehold and Jersey Central to negotiate a
modification of the PPA pursuant to Towner, but advised
the parties "that if they cannot reach agreement on either
reasonable renegotiated pricing terms more consistent with
current avoided costs or a buy-out arrangement within 30
days," the BRC would "commence a proceeding to consider
: Freehold Cogeneration Associates. L.P., 65 FERC { 62,004
(1993).
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whether its previous approval of (the PPA] should be
modified or otherwise reconsidered or revoked." Id. at 142.
(In fact such a proceeding was instituted and is presently
ongoing).
2. At this point, Freehold filed a civil action in
the United States District Court for the District of New
Jersey against both the BRC and Jersey Central, seeking a
declaratory order that BRC's January 5, 1994, order initiating
a proceeding to determine whether the PPA should be
modified, was preempted by PURPA and asking that court
enjoin the state proceeding. The BRC and Jersey Central
moved to dismiss the complaint on various grounds, three of
which were relied upon by the district court in its March 18,
1994, order dismissing Freehold's complaint.
First, the court found that the case was governed by
PURPA's judicial review provisions, 16 U.S.C. § 824a-3(g),
which incorporates 16 U.S.C. § 2633, divesting the federal
courts of jurisdiction to review certain orders of state
regulatory commissions. JA. at 883-884.4 Second, it held
Subsection (g) provides:
(1) Judicial review may be obtained respecting any
proceeding conducted by a State regulatory authority or
nonregulated electric utility for purposes of implementing any
requirement of a rule under subsection (a) of this section in the
same manner, and under the same requirements, as judicial
review may be obtained under section 2633 of this title in the
case of a proceeding to which section 2633 of this title applies.
(2) Any person (including the Secretary) may bring an
action against any electric utility, qualifying small power
producer, or qualifying cogenerator to enforce any requirement
established by a State regulatory authority or nonregulated
electric utility pursuant to subsection (f) of this section. Any
such action shall be brought only in the manner, and under the
requirements, as provided under section 2633 of this title with
respect to an action to which section 2633 of this title applies.
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that judicial review was precluded by the Johnson Act, 28
U.S.C. § 1342 (set out at p. 16, infra), which curtails federal
jurisdiction with respect to orders of state regulatory
authorities if certain specified conditions are all met. Id. at
884-887. Third, the judge relied on the choice of law
provision in the PPA itself (set out at JA. 104-105). Her
reading of the contract indicated that "the parties
contemplated that all disputes arising under the PPA would
be resolved either by the BRC or by a New Jersey state
court." Id. at 887 (emphasis in original).
This appeal followed, while the BRC proceeding
continued below.
SUMMARY OF ARGUMENT
L
A. Freehold properly invoked federal court
jurisdiction in this case under 28 U.S.C. § 1331. Freehold’s
claim is that its federally-established PURPA rights under
Section 210(e) are being violated by a state proceeding,
precisely the type of situation addressed by Section 1331.
The district court's contrary conclusion was based. on
an erroneous reading of Section 210(g) of PURPA as a broad
exception to federal jurisdiction over PURPA claims.
Neither subsection of Section 210(g) applies to a claim, like
Freehold's, that state action is barred by Section 210(e) and
the FERC regulations promulgated thereunder exempting
QFs from state utility regulation.
Section 2633, 16 U.S.C. § 2633 (reproduced in the statutory
appendix), is the general judicial review provision of PURPA, which
essentially divests the federal courts of jurisdiction “over any action
arising under any provision of subchapter I or III’ of PURPA, subject to
certain exceptions.
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B. The district court's dismissal of Freehold's
complaint on the basis of the Johnson Act, 28 U.S.C. § 1342,
was also erroneous. Because the statute only bars
complaints against state regulatory proceedings where
jurisdiction is based "solely on . . . repugnance of the order to
the Federal Constitution," governing case law demonstrates
that the Johnson Act is no bar to a statutory preemption
claim. Since Freehold's claim is clearly based on PURPA, a
statutory ground, the district court misapplied the Act.
Similarly, the Act's requirement that the state order
challenged does not affect interstate commerce is lacking here
since any allegation of a PURPA violation inherently
contains an allegation of such impact.
c. Finally, the district court's dismissal of the
case on the basis of the choice of law clause of the PPA is
also erroneous. Freehold accurately, we submit,
characterizes its case as a preemption claim brought against
the BRC to enforce PURPA rather than a dispute under the
PPA. The PPA provision is irrelevant to this issue.
IL.
The abstention doctrine, established in Younger v.
Harris, 401 U.S. 37 (1971)(Younger), Burford v. Sun Oil Co.,
319 U.S. 315 (1943)(Burford), and Railroad Commission of
Texas v. Pullman, 312 U.S. 496 (1941)(Pullman), should not
be applied to this case.
A. The inapplicability of Burford abstention is
established by the decision of this Court in Kentucky West
Virginia Gas Company v. Pennsylvania Public Utility
Commission, 791 F.2d 1111 (3rd Cir. 1986), cert. denied,
488 U.S. 941 (1988), and that of the Supreme Court in New
Orleans Public Service v. City of New Orleans, 491 U.S. 350
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(1986)(NOPSI), which hold the doctrine inappropriate to a
claim that federal rate regulation preempts action by a state
regulatory body.
B. Younger abstention would also be
inappropriate here. This Court has held that state interests
protected by Younger are generally outweighed by a claim of
federal preemption. In addition, the Supreme Court in
NOPSI made clear that a ratemaking proceeding, such as the
one here, is a legislative process to which Younger abstention
has no application.
&. Finally, Pullman abstention only applies in
cases where the court would have to resolve difficult and
unsettled questions of state law before a substantial
constitutional question can be decided. Neither prerequisite
is present in this case, which raises a claim that PURPA, a
federal statute, preempts the action of a state regulatory
body.
_—
ARGUMENT
L FREEHOLD PROPERLY INVOKED FEDERAL
JURISDICTION TO RESOLVE ITS CLAIM
THAT ITS FEDERALLY-ESTABLISHED PURPA
RIGHTS ARE BEING UNLAWFULLY
INFRINGED BY THE STATE REGULATORY
ACTION
As described above, even though Freehold brought its
complaint under 28 U.S.C. § 1331, the district court ignored
this provision while relying on the review provisions of
PURPA, the Johnson Act and the terms of the PPA to find it
had no jurisdiction to decide Freehold's claims. We believe
that the district court's analysis is flawed and that Section
1331 jurisdiction was properly invoked by the Freehold.
G-16
A.
210(g) Of PURPA Have No Application T
This Proceeding
By holding that Section 210(g) of PURPA, 16 U.S.C.
§ 824a-3, divests the federal courts of jurisdiction in this
case, the district court, in our view, not only ignored the
Freehold's assertion of jurisdiction under Section 1331, but
also the inherent limitations of Section 210(g) itself.
1. At the outset, the district court's assessment
of federal jurisdiction did not confront Freehold's assertion
that its preemption claim properly invoked federal
jurisdiction under 28 U.S.C. § 1331. As we understand it,
Freehold's position on this aspect of the case is that its
federally-established PURPA rights are being violated by a
state proceeding. This is precisely the situation addressed
by Section 1331, as the Supreme Court explained in Shaw v.
Delta Air Lines, Inc., 463 U.S. 85, 96 n.14 (1983)(authorities
omitted; emphasis added):
It is beyond dispute that federal courts
have jurisdiction over suits to enjoin
state officials from interfering with
federal rights. ... A plaintiff who
seeks injunctive relief from state
regulation, on the ground that such
regulation is preempted by a federal
statute which, by virtue of the
Supremacy Clause of the Constitution,
must prevail, thus presents a federal
question which the federal courts have
jurisdiction under 28 U.S.C. § 1331 to
resolve.
Accord, Airco Industrial Gases, Inc. v. Teamsters Health and
Welfare Pension Fund, 850 F.2d 1028, 1032-1035 (3rd Cir.
1988).
The district court apparently believed that Section
1331 was irrelevant because it read PURPA Section 210(g) as
carving out a broad exception to federal jurisdiction over
PURPA claims other than judicial review of a final decision
by FERC. JA. at 884. In the court's view (id.),
[Bly enacting [Section 210(g)] and §
2633, Congress specifically provided
that judicial review of orders by the
State regulatory authorities was to
made only by the state courts or
FERC. The only instance where
Congress provided for federal
jurisdiction is where a party seeks
judicial review of a decision by FERC.
Here, FERC has made no
determination which this Court might
review, nor
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