Reply Brief — Trigen-Oklahoma City Energy Corp. v. Oklahoma Gas & Electric Co.

No. 01-178

IN THE

Supreme Court of the sited State ™ |

TRIGEN-OKLAHOMA CITY ENERGY CORPORATION,

Petitioner,

Vv.

OKLAHOMA GAS & ELECTRIC COMPANY,

Respondent.

On Petition for a Writ of Certiorari to the

United States Court of Appeals for the Tenth Circuit

REPLY BRIEF IN SUPPORT OF

PETITION FOR WRIT OF CERTIORARI

BERNAYS T. BARCLAY GRIFFIN B. BELL

KING & SPALDING KEVIN R. SULLIVAN

1185 Avenue of the Americas Counsel of Record

New York, NY 10036 JEFFREY S. BUCHOLTZ

(212) 556-2100 KING & SPALDING

1730 Pennsylvania Avenue, N.W.

Washington, DC 20006

(202) 737-0500

October 9, 2001 Attorneys for Petitioner

QUESTION PRESENTED

Whether a state-regulated private utility enjoys state-

action immunity from antitrust liability for its

monopolization of an unregulated market by means of non-

price anti-competitive conduct neither approved nor

supervised by the State.

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TABLE OF CONTENTS

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TABLE OF AUTHORITIES

Cases: Page:

AT&T v. Central Office Tel., Inc.,

I I I ic cehicshianhcecihehesninsniivedbaniincthiaheease 9

Cantor v. Detroit Edison Co..,

I, re IT aciencchasconinseusnsbestanncdiasinedans 4,5,6

Continental Ore Co. v. Union Carbide Corp.,

SE STE snciitivsiniiinsdeaisicuinniiasenpeinianceiesinnicnnbesi 9

DFW Metro Line Servs. v. Southwestern

Bell Tel. Corp.,

ES ad | Ea TD 4

FTC v. Superior Court Trial Lawyers Ass'n,

A PEE SII sci cassecicdnndsinecinieineisiententanennnnonss 10

FTC v. Ticor Title Ins. Co.,

Seno ReMO passim

In re Lower Lake Erie Iron Ore Antitrust Litig.,

a BE 2 | | en 9

Major League Baseball Players Ass’n v. Garvey,

121 S.Ct. 1724 (2001) (per curiam) ................:ceeees 8

National Collegiate Athletic Ass’n v. Smith,

Se itis ME CID ccteninsncenccssncsesen FN pe As ERO:

Otter Tail Power Co. v. United States,

ss Er eee

iV

Patrick v. Burget,

er Pe GE aisestnccnicsnnsticntnsnstnnienennensninnedeiainnnid 8

Ticor Title Ins. Co. v. FTC,

Fe a Oe CE i BED iiccticcssninncsinacentntiintornenies 7

Ticor Title Ins. Co. v. FTC,

Oe ae Be eG Fe ccicncsicticinistittctntbintineioninni 7

Town of Concord v. Boston Edison Co.,

EES gl =, nen mn se 5,8

Town of Hallie v. City of Eau Claire,

Re ET aT Se 6,7

Walker Process Equip., Inc. v.

Food Mach. & Chem. Corp.,

Re Se Se Ce wiiwsinieiinteiiansniiensititsimindigitaliigaiiial 10

Wharf (Holdings) Ltd. v. United Int’! Holdings, Inc.,

EAS Bee Ge Ce F arinsheniebiniccinnsieieniencidaianioainital 8

Constitutional Provisions, Statutes, and Rules:

te ARR ners cnn per ee aeRO NEN oy

BD Chstiiw SF ae sccivsscnnensonienviinstnnniensinintiienaimninaninnalinneniennisininiutinne 6,8

BO Bs C0 FP Fa cceninensnseritinsiinsanipnsingeeatiictiatiiiaaiiasibniiieniiians 6

REPLY BRIEF IN SUPPORT OF PETITION FOR

CERTIORARI

_ The decision below holds that if a utility’s rates are

regulated, it is immune from antitrust liability, even if the

particular anti-competitive conduct challenged is non-price

predation neither authorized nor supervised by the State.

This decision extends private-party immunity far beyond

what this Court’s precedents countenance, and it comes at a

critical time of transition when market-power concerns in

many industries are heightened and the need for vigorous

antitrust enforcement is correspondingly great. See Pet. 8-

12; Brief of Amici Curiae National Energy Marketers Ass’n,

et al. 2-8; Brief of Amici Curiae United States Combined

Heat and Power Ass’n, et al. 1-4, 9-12. By basing immunity

on status rather than conduct, the decision below will sow

confusion and frustrate the States’ ability to protect their

citizens. By raising a litany of unrelated issues and failing to

face the question presented, respondent OG&E’s brief in

opposition further underscores the need for review.

OG&E’s brief in opposition cannot obscure the reality

that the decision below departed from this Court’s

precedents by conferring blanket immunity based on

OG&E’s status as a regulated utility, despite the fact that

Oklahoma neither authorized nor supervised the anti-

competitive conduct at issue. OG&E does not contend that

Oklahoma clearly authorized or actively supervised the non-

price predatory conduct for which the jury found OG&E

liable, including misrepresentations, contractual interference,

and improper payments. Rather than meet the question

presented, OG&E attempts to change the subject.

First, in its defense of the Tenth Circuit’s state-action

immunity holding, OG&E proceeds as if the jury found it

liable for charging predatory rates. is is mere evasion;

Trigen does not challenge any of OG&E’s rates. Second,

even though the decision below rested entirely on state-

action immunity, much of OG&E’s opposition does not

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2

address this issue at all but rather reargues the weight of the

evidence and complains of trial rulings on other issues.

OG&E distorts the record and misstates the law on these new

issues, but that ultimately is beside the point, for OG&E

offers no support for its suggestion that this Court reach out

to resolve these fact-dependent issues in the first instance.

OG&E’s inability to face the question actually presented

testifies powerfully to the need for review.

1. OG&E does not dispute that, under this Court’s

precedents, a private party is not immune unless its

“particular anticompetitive conduct at issue” was both

clearly authorized and actively supervised by the State. F7C

v. Ticor Title Ins. Co., 504 U.S. 621, 634 (1992) (emphasis

added). Our petition described OG&E’s “extensive and

varied non-price predatory conduct” in furtherance of its

Plan of Action to “remove customers from Trigen.” Pet. 2-3.

The petition made crystal clear that Trigen did not and does

not claim that OG&E’s rates are predatory. Pet. 1-4; see

also 10" Cir. App. vol. I at 36-41 (amended complaint).'

And the petition explained that the Tenth Circuit adopted an

unprecedented status-based immunity by holding that “[a]s a

state-regulated electric utility, OG&E has clearly met the

two-prong test for state action immunity,” Pet. App. 9a, even

though the court did not and could not find that the

challenged non-price predatory conduct was authorized or

supervised by Oklahoma.

a. Precluded by the record from contending that

Oklahoma authorized or supervised the non-price conduct

' Trigen’s claims concerning the County and Corporate Tower do not

involve OG&E’s rates even in passing. One aspect of Trigen’s claim

conceming Oklahoma City is OG&E’s misrepresentation of the benefits

that the City would obtain with OG&E’s RTP tariff, but this claim in no

way challenges the RTP tariff itself. Trigen’s claim is not that the RTP

tariff is predatory, but the opposite: that because OG&E could not win

the competition for the City on the basis of price, OG&E resorted to

misrepresentations and other non-price predation. See also Pet. 4 & n.3.

3

that Trigen challenges here, OG&E has rewritten Tngen’s

complaint as a challenge to OG&E’s rates. Thus OG&E

attributes to Trigen an “assertion that the OCC does not

actively supervise OG&E’s rates.” Opp. 14. Trigen has

made no such assertion. For this reason, OG&E’s detour

into the 1996-97 OCC proceedings is irrelevant. Whether or

not these proceedings show that the OCC’s review of

OG&E’s rates is “detailed, deliberate and judicious,” Opp.

12, these rate proceedings plainly cannot show that

Oklahoma clearly authorized and actively supervised the

non-price conduct at issue in this case.

OG&E’s account of these OCC proceedings also is

incorrect. OG&E claims that the OCC’s February 11, 1997

Order “specifically rejected Trigen’s position on the RTP

tariffs.” Opp. 13. The Order did no such thing -- it involved

unrelated issues and did not even mention the RTP tariff.”

b. When OG&E does not misdirect the Court’s attention

to its rates, it offers vague and unsupported assertions that

the court below correctly found that Oklahoma supervises

“OG&E” (Opp. 15), “OG&E’s activities” (Opp. 15, 17), or

“OG&E’s conduct” (Opp. 7). These empty generalities

cannot come close to satisfying this Court’s private-party

immunity precedents. As our petition explained, “[n]o one

? This Order is reprinted at App. la, infra. OG&E’s statement that “the

OCC considered and rejected Trigen’s similar allegations” in the 1996-97

proceedings is equally disingenuous. In the OCC, contrary to its position

in the court below, OG&E argued successfully that “the Commission is

without jurisdiction to determine or adjudicate the private dispute

between Trigen and OG&E now pending in the federal District Court,

and the Commission is equally without jurisdiction to entertain

allegations of anticompetitive practices which might occur now or in the

future.” OG&E Mot. in Limine (filed Jan. 17, 1997) (reprinted at App.

21a, 28a, infra); compare Pet. App. 13a-14a (holding below that the

OCC has exclusive jurisdiction over Trigen’s state-law antitrust and tort

claims). In addition, any implication that Trigen settled its claims in the

Settlement Agreement approved by the OCC on February 11, 1997 is

untrue; Trigen was not a party to that Agreement. See App. 9a, infra.

4

disputes that the OCC ‘supervises OG&E,’ [Pet. App. 10a],

to some extent and in some respects. The relevant question

under this Court’s precedents, however, is whether ‘the

particular anticompetitive conduct at issue . . . [was]

supervised by governmental actors.’” Pet. 15 (quoting TJicor,

504 U.S. at 634). OG&E, like the Tenth Circuit,

conspicuously fails to address that critical question.”

c. Although OG&E disclaims any blanket, status-based

immunity and describes the decision below as

“unremarkable,” Opp. 7, 10-11, this description does not

withstand examination. First, OG&E embraces the holding

below that its “alleged ‘bad acts’” could not “somehow

destroy” its immunity. Opp. 18-19. Under Ticor, however,

not even a regulated utility has immunity “in the air,”

divorced from an analysis of the State’s involvement in the

“bad acts” at issue. OG&E offers no response at all to our

explanation of the Tenth Circuit’s error in beginning from a

premise -- indeed, a seemingly conclusive presumption -- of

blanket immunity for regulated utilities. See Pet. 17.

OG&E likewise embraces the holding below that because

“OG&E is selling only one thing -- electricity at state-

regulated rates,” it is immune for any and all conduct. Pet.

App. 1la (emphasis added). OG&E does not dispute that it

would be subject to “antitrust standards” under Cantor v.

Detroit Edison Co., 428 U.S. 579, 596 (1976), if it

“engage[d] in business activity in [a] competitive area[ ] of

the economy.” See Opp. 16-17. But OG&E contends that it

> Citing DFW Metro Line Servs. v. Southwestern Bell Tel. Corp., 988

F.2d 601 (5™ Cir. 1993), OG&E chides Trigen (Opp. 15) for supposedly

making the “‘ludicrous’”” argument that “the OCC does not actively

supervise OG&E.” The very sentence quoted by OG&E, however,

demonstrates that the DFW court analyzed whether the State supervised

“the conduct in question,” 988 F.2d at 607, not merely whether it

supervised “the defendant.” Because the plaintiff challenged the rates

that the defendant charged it and those rates were actively supervised, the

court held that the defendant was immune for the conduct in question.

See id. at 605-07.

> ee

5

could not have been so engaged, because it “was only

attempting to market and sell one product, electricity.” Jd.

There can be no mistaking the import of the Tenth

Circuit’s holding. Every electric utility sells electricity at

regulated rates. If an electric utility’s sales at regulated rates

immunized anything and everything that the utility might do,

then every electric utility would enjoy a blanket immunity

based on its status “[a]s a state-regulated utility,” Pet. App.

9a. Such a result would make nonsense of this Court’s

admonition that “there can be no doubt about the proposition

that the federal antitrust laws are applicable to electrical

utilities.” Cantor, 428 U.S. at 596 n.35 (citing Otter Tail

Power Co. v. United States, 410 U.S. 366 (1973)); accord,

e.g., Town of Concord v. Boston Edison Co., 915 F.2d 17, 21

(1* Cir. 1990) (Breyer, C.J.) (“Even though Boston Edison is

a regulated firm, it has no blanket immunity from antitrust

laws.”’).

The court below also ignored the record in holding that

OG&E could not be “engage[d] in business activity in [a]

competitive area[ ] of the economy” under Cantor because it

sells only electricity, see Pet. App. 1la-i2a, and OG&E

ignores the record in defending that holding. Most

obviously, OG&E conceded that “Trigen and OG&E are

direct and substantial competitors.” OG&E 10" Cir. Br. 9.

Even without that concession, it would be difficult to

understand why OG&E implemented a “Plan of Action” to

“remove customers from Trigen” if OG&E was not engaged

in a competitive area of the economy.

OG&E disputes Trigen’s definition of the relevant

market as the market for cooling services, and asserts that the

Tenth Circuit rejected that definition. See Opp. 6, 8, 24-25.

It is unclear whether OG&E means to defend the holding

below that OG&E is immune because it was not engaged in a

competitive area of the economy, or to raise a separate

challenge to the verdict. OG&E is wrong regardless.

6

First, as our petition explained, immunity attaches to

conduct, not to markets or products. Because Oklahoma did

not clearly authorize or actively supervise OG&E’s conduct

challenged here, OG&E is not immune. The proper market

definition might relate to other issues under § 2 of the

Sherman Act, but_it does not determine whether OG&E is

immune. See Pet. 19-20. Accordingly, even if the Tenth

Circuit had held that the jury’s market-definition finding was

not supported by the evidence, such a conclusion would not

have justified the court’s holding that OG&E was immune.

Second, contrary to OG&E’s assertions, the Tenth

Circuit did not purport to reject the jury’s market-definition

finding. The court did not mention the jury’s finding or the

standard of review under Fed. R. Civ. P. 50, see Pet. 18-19,

and properly so: the evidence abundantly supported the

jury’s finding.* Rather, the court appears to have held that

OG&E could not have been participating in the competitive

cooling-services market for purposes of Cantor because it

does not sell chillers. As explained above, this holding

cannot be reconciled with the record, and it in any event

misconceives the immunity inquiry by focusing on what

products OG&E was selling rather than on whether the State

authorized and supervised OG&E’s conduct at issue.”

* OG&E’s parade of horribles (Opp. 24) ignores that (1) the jury heard

evidence demonstrating that consumers perceived OG&E and Trigen as

the only real alternatives for cooling services, and that the cost of the

additional input of a chiller did not significantly affect their choice, 10"

Cir. App. vol. IX at 2304-36, 2349-59, 2408-13; (2) OG&E opted not to

offer any evidence on this issue; and (3) products and services need only

be reasonably interchangeable, and not technologically identical, to be in

the same market, Pet. 19-21 & n.16; see also Brief of Amici Curiae

United States Combined Heat and Power Ass’n, et al. 7-9.

* OG&E also argues (Opp. 19-20) that because a municipality’s anti-

competitive conduct can be immune even if not actively supervised by

the State, its conduct directed at municipalities should be immune

without any supervision. OG&E cites Town of Hallie v. City of Eau

Claire, 471 U.S. 34 (1985), but ignores that the Court took pains to

7

2. a. Much of OG&E’s opposition does not defend the

state-action immunity holding below at all, but argues that

OG&E should prevail on other grounds. In the first place, as

arguments against certiorari, these arguments are baffling.

Just as in Ticor, the decision below rested solely on state-

action immunity grounds, and it therefore squarely presents

the question addressed by our petition.° The prospect that

the respondent might prevail on other grounds on remand is

as beside the point here as it was in Jicor. See also Ticor

Title Ins. Co. v. FTC, 998 F.2d 1129 (3d Cir. 1993)

(considering McCarran-Ferguson Act and Noerr arguments

on remand from this Court). Moreover, to the extent that

OG&E suggests that this Court should reach these new

distinguish private parties from municipalities: “We may presume,

absent a showing to the contrary, that the municipality acts in the public

interest. A private party, on the other hand, may be presumed to be

acting primarily on his or its own behalf.” Jd. at 45 (footnote omitted).

Moreover, OG&E errs in accusing Trigen of “attempt{ing] to veto

government action.” Opp. 20. Trigen sued OG&E because OG&E --

and not the County or City -- implemented a predatory Plan of Action to

remove customers from Trigen and monopolize the cooling-services

market. In any event, because Oklahoma did not clearly authorize

OG&E’s non-price predation, OG&E would not be immune even if

(contrary to fact) no supervision requirement applied. See Pet. 16.

° Compare Pet. App. 6a (“Because we hold that the state action doctrine

mandates the dismissal of the federal antitrust claims . . . we decline to

reach the Noerr-Pennington and filed rate doctrine defenses. Nor is it

necessary to address OG&E’s arguments concerning reversible error at

trial . . . .”) with Ticor Title Ins. Co. v. FTC, 922 F.2d 1122, 1140 n.17

(3d Cir. 1991) (“Because we hold that Ticor’s setting of collective rates .

. . ls immune from antitrust liability under the state action doctrine, it is

unnecessary to consider whether the same activity is also exempt from

antitrust regulation under the McCarran-Ferguson Act . . . [or] the Noerr-

Pennington doctrine.”). OG&E’s claim that the Tenth Circuit “did

address several key elements of these other grounds,” Opp. 21, is

unfounded. The decision below did not reach in any manner OG&E’s

Noerr, filed-rate, or antitrust injury arguments, OG&E’s challenge to the

jury’s finding of anti-competitive conduct, or OG&E’s complaints about

the jury instructions or the district judge’s evidentiary rulings.

8

issues in order to affirm the judgment below on other

grounds, see Opp. i, that suggestion ignores this Court’s

practice. See, e.g., National Collegiate Athletic Ass'n v.

Smith, 525 U.S. 459, 470 (1999) (“we do not decide in the

first instance issues not decided below’). OG&E offers no

reason why this Court should depart from its usual practice

by reaching out to resolve these fact-intensive issues.

b. OG&E’s arguments on these new issues are meritless

in any event. Because these arguments are beside the point

as just explained, and because Tnigen’s briefs in the court

below respond fully to them, we point out here only a few of

OG&E’s errors.

First, OG&E maintains that what it light-handedly terms

its “marketing and sales efforts’ (Opp. 18 n.9) were

innocuous and not anti-competitive as required by § 2. See

also Opp. 8-9, 25-26. But in offering a selective and

tendentious account of its conduct, see, e.g., Opp. 18 n.9,

OG&E forgets that, as the verdict-loser, the record must be

viewed in the light least favorable to it. See, e.g., Wharf

(Holdings) Ltd. v. United Int’l Holdings, Inc., 121 S.Ct.

1776, 1779 (2001); Patrick v. Burget, 486 U.S. 94, 98 n.3

(1988); cf Major League Baseball Players Ass'n v. Garvey,

121 S.Ct. 1724 (2001) (per curiam). For example, OG&E

fails to explain how its method of “Tngen competition” --

paying $138,000 for no apparent work to the son of a county

commissioner whose vote OG&E needed -- qualifies as

“competition based on price and service,” Opp. 3 n.1. Nor

does OG&E explain what misrepresentations, interference

with contract, and wining and dining public officials have to

do with “competition’s basic goals -- lower prices, better

products, and more efficient production methods.” Town of

Concord, 915 F.2d at 22; see also Pet. 2-3 & n.1.

Second, in its argument based on the filed-rate doctrine,

OG&E again quarrels with the verdict, dismissing what the

jury must be presumed to have found was a

misrepresentation as merely an “incorrect estimate[ ],”’ and

9

seeking to shift the blame to its “consultants.” Opp. 23.

OG&E also misstates the law. This Court has not held that

“[t]he filed-rate doctrine bars any suit based on incorrect

estimates of a tariffed service, ‘even if a carrier intentionally

misrepresents its rate.”” Id. (quoting AT&T v. Central Office

Tel., Inc., 524 U.S. 214, 222 (1998)). This Court’s

statement, when quoted in full, makes clear that Central

Office bars a suit to enforce a promised rate that differs from

the filed rate: “Thus, even if a carrier intentionally

misrepresents its rate and a customer relies on the

misrepresentation, the carrier cannot be held to the promised

rate if it conflicts with the published tariff.” 524 U.S. at 222.

The jury did not order OG&E to charge Trigen a non-filed

rate, and it did not award Trigen a refund of the difference

between any promised non-filed rate and OG&E’s filed

rates. Instead, the jury awarded Trigen the profits that it lost

because of (among many other things) OG&E’s

misrepresentations to the City of the average cost that it

would obtain using the RTP tariff. See also supra at 2 n.1.

The filed-rate doctrine has no application here. See, e.g., In

re Lower Lake Erie Iron Ore Antitrust Litig., 998 F.2d 1144,

1159 (3d Cir. 1993) (filed-rate doctrine “does not preclude

liability based on non-rate anticompetitive activity”).

Third, OG&E’s claim of Noerr immunity is misplaced as

well. The Noerr doctrine is an interpretation of the Sherman

Act designed to avoid penalizing citizens for exercising their

right to “petition the Government for a redress of

grievances.” U.S. Const. amend. I. The Petition Clause,

however, does not guarantee a right to wine and dine

government purchasing agents. As this Court emphasized in

Continental Ore Co. v. Union Carbide Corp., 370 U.S. 690,

707-08 (1962), when a company is “engaged in private

commercial activity, no element of which involved seeking

to procure the passage or enforcement of laws,” applying the

Sherman Act does not “remotely infringe upon any of the

constitutionally protected freedoms spoken of in Noerr.”

10

Extending Noerr immunity to OG&E’s purely commercial

activity would remove government contracting from the

coverage of the antitrust laws. Moreover, Noerr protects

efforts to procure legislation that permits activity that

otherwise would be unlawful; it does not protect activity that

otherwise is unlawful just because that activity is directed at

a government. See, eg. FTC v. Superior Court Trial

Lawyers Ass'n, 493 U.S. 411, 424-25 (1990); Walker

Process Equip., Inc. v. Food Mach. & Chem. Corp., 382

U.S. 172, 177 (1965). Accordingly, OG&E did not

immunize its predatory conduct by including governments

among its targets.

CONCLUSION

~ For the reasons stated herein and in Trigen’s petition,

certiorari should be granted.

Respectfully submitted,

Bernays T. Barclay Griffin B. Bell

KING & SPALDING Kevin R. Sullivan

1185 Avenue of the Americas Counsel of Record

New York, NY 10036 Jeffrey S. Bucholtz

(212) 556-2100 KING & SPALDING

1730 Pennsylvania Ave., NW

Washington, DC 20006

(202) 737-0500

October 9, 2001 Attorneys for Petitioner

APPENDIX

INDEX

APPENDIX Page

A. Order of the Oklahoma Corporation Commission

approving joint stipulation and settlement agreement

(Cause No. PUD 960000116) (Feb. 11, 1997) ........ la

B. OG&E Bnef in Support of Motion in Limine (Cause

No. PUD 96000016) (Jan. 17, 1997)......:-sssessesseees 21a

*

*

APPENDIX A

BEFORE THE CORPORATION COMMISSION

OF THE STATE OF OKLAHOMA

IN THE MATTER OF THE ) CAUSE NO.

APPLICATION OF OKLAHOMA ) PUD 960000116

GAS AND ELECTRIC COMPANY )

FOR AN ORDER OF THE ) ORDER NO.

COMMISSION AUTHORIZING ) 409383

APPLICANT TO MODIFY ITS )

RATES, CHARGES AND )

TARIFFS FOR RETAIL )

ELECTRIC SERVICE IN )

OKLAHOMA )

Hearings: May 16, June 17, July 11, 25, August 8,

29, September 5, 12, 19, 26, 30, October

10, 11, 17, 21, 24, 31, and November 7,

13, 14, 21, 22, 1996 before the

Administrative Law Judge;

November 22, 25, December 16, 18, 1996,

and January 6, 13, 14, 15, 16, 21, 22, 23,

1997 before the Commission en banc.

Appearances: H.D. Binns, Jr., Robert D. Stewart, Jr.,

Diane S. Goldschmidt, and John W.

Harbour, Jr., Attorneys for Oklahoma Gas

and Electric Company;

Maribeth D. Snapp, Andrea P. Johnson,

Cece Wood, and Jacqueline T. Miller,

Attorneys for the Public Utility Division,

Oklahoma Corporation Commission;

2a

Rick D. Chamberlain and Mickey S.

Moon, Attorneys for the Attorney General

of the State of Oklahoma;

William J. Bullard and Kimberly K.

Blaylock, Attorneys for the Oklahoma

Industrial Energy Consumers and Air

Liquide America Corporation;

J. * Gist, James D. Satrom, and G.

Dean Luthey, Jr., Attorneys for Terra

International (Oklahoma), Inc.;

George M. Makohin, Attorney for GPM

Gas Corporation;

John A. Gaberino, Jr., Robert A.

Huffman, Jr., and Vivian C. Hale,

Attorneys for Oklahoma Natural Gas

Company/ONG Transmission Company;

D. Kent Meyers, Robert E. Bacharach,

Bernays T. Barclay, and Erik J. Swenson,

Attorneys for Trigen-Oklahoma Energy

Corporation;

John J. Breathwit and Babette Patton,

Attorneys for The PowerSmith

Cogeneration Project;

Cody B. Waddell, Attorney for the

Commission on Marginally Producing Oil

and Gas Wells;

3a

Richard R. Wilfong, Attorney for

Oklahoma Gas and Electric Company’s

Shareholders’ Association;

W. Bland Williamson, Steven J.

Goetziinger, Henry A. Meyer, III, and

John J. Randolph, Attorneys for

Oklahoma Independent Petroleum

Association;

John Lovett and Brent B. Moore,

Attorneys for Oklahoma Mid-Continent

Oil and Gas Association;

Cheryl A. Vaught, Attorney for Mid-

Continent Power Company, Inc.; and

Thomas F. Golden and William R.

Burkett, Attorneys for AES Shady Point,

Inc.

ORDER APPROVING JOINT STIPULATION

AND SETTLEMENT AGREEMENT

BY THE COMMISSION:

The Corporation Commission of the State of Oklahoma

(“Commission”) being regularly in session and _ the

undersigned Commissioners being present and participating,

the Joint Stipulation and Settlement Agreement made and

executed by Oklahoma Gas and Electric Company (“OG&E”

or “Applicant” or “Company’), the Public Utility Division of

the Oklahoma Corporation Commission (‘Staff’), the

Attorney General for the State of Oklahoma (“AG”), the

Oklahoma Industrial Energy Consumers (“OIEC”), Terra

International (Oklahoma), Inc. (“Terra”), Air Liquide

4a

America Corporation (“Air Liquide”), The PowerSmith

Cogeneration Project (“PowerSmith”), the Commission on

Marginally Producing Oil and Gas Wells (“Marginal Well

Commission’), Oklahoma Gas and Electric Company’s

Shareholders’ Association (“Shareholders”), the Oklahoma

Independent Petroleum Association (“OIPA”), Mid-

Continent Power Company (“MCPC”), Oklahoma Mid-

Continent Oil & Gas Association (“CO&G”), and AES

Shady Point, Inc. (“AES”), all hereinafter collectively

referred to as the “Stipulating Parties,” comes on for

consideration. A copy of the Joint Stipulation and

Settlement Agreement (hereinafter referred to as the

“Stipulation”) is attached hereto as “Attachment A” and

incorporated herein by reference.

PROCEDURAL HISTORY AND

SUMMARY OF THE EVIDENCE

On May 2, 1996, OG&E filed its Notice of Intent with

attached exhibits indicating the Company’s intent to file for

rate review in accordance with the Commission’s Rules

(OAC 165:70). The Attorney General of the State of

Oklahoma filed a Motion to Intervene on May 10, and that

Motion was granted May 21, 1996, by Commission Order

No. 402038. On June 12, the Company filed its Motion for

Protective Order.

One June 17, 1996, OG&E filed with the Commission an

Application seeking to reduce its Oklahoma jurisdictional

gross annual revenues, exclusive of gross receipts or

franchise taxes, in the amount of $14.2 million effective with

its first billing period in the month of March, 1997.

Concurrently with the filing of the Application, the Company

filed its Application Package comprising the Minimum

Standard Filing Requirements as required by OAC 165:70.

Contained in the Application Package, consisting of two

Sa

volumes,’ OG&E submitted the prefiled testimony of Mr.

James R. Hatfield, Mr. William D. Steinmeier, Mr. Charles

A. Benore, Mr. Don L. Young, Mr. Jack T. Coffman, Mr.

Byron F. Johnson, Mr. John Gunesh, and Mr. William L.

Wylie, along with schedules and exhibits for the test year

ending December 31, 1995, reflecting Oklahoma

jurisdictional operational pro forma revenues. of

$1,011,873,001. Based upon the pro forma adjusted test

- year as reflected in the Company’s exhibits, OG&E

requested in its Application that its pro forma Oklahoma

jurisdictional revenues be reduced by $14,209,880 effective

with the first billing cycle in the revenue month of March

1997.

The Commission granted OG&E’s request for protective

order by issuing Order No. 402839 on June 24, and attached

a Proprietary Agreement form for the use of the parties in

this proceeding. On July 3, the OIEC and Terra filed

motions to intervene, and on July 8, 1996, the Staff filed its

statement reflecting substantial compliance with OAC

165:70 by the Applicant with respect to the Application

Package submitted and filed with the Commission. GPM

filed its Motion to Intervene on July 16, and July 17, 1996,

the Commission issued Orders Numbered 403464 and

403465 which respectively set the hearing on the merits of

this cause before the Commission en banc and granted

intervenor status in this proceeding to Terra and OIEC. On

July 24, 1996, Trigen filed its Motion to Intervene. On July

30, the Commission entered Order No. 403870 granting

GPM’s Motion to Intervene, and on August 14, the

Commission entered Order No. 404252 granting Trigen’s

Motion to Intervene.

' Volume I containing the Application and the prefiled testimony of all

OG&E’s witnesses supporting Applicant’s direct case was received in

evidence as Exhibit 8; Volume II containing Company’s Test Year

schedules and exhibits supporting the requested rate reduction was

received in evidence as Exhibit 9.

6a

On August 23, 1996, Air Liquide and ONG filed Motions

to Intervene, and on August 29, the Marginal Well

Commission filed its Motion to Intervene in this proceeding.

On September 6, 1996, PowerSmith filed its motion seeking

intervenor status, and on the same date the Commission

issued Order No. 404968 granting Air Liquide’s and ONG’s

Motions to Intervene. Thereafter, on September 10, the

Commission granted intervenor status to the Marginal Well

Commission by Order No. 405042. On September 11, the

Shareholders filed its Motion to Intervene, and on the

following day the OIPA moved to intervene in the case.

GPM filed its list of major issues in this case on September

13; Staff and ONG filed their lists of major issues on

September 17; Terra, Air Liquide, and OEIC filed their lists

of major issues on September 18; and the AG and the

Marginal Well Commission filed their lists of major issues

on September 19. MCPC and CO&G filed motions to

intervene on September 20. The Commission granted

OIPA’s Motion to Intervene by Order No. 405461 issued on

September 24. On October 2, AES filed its Motion to

Intervene. The Shareholders were granted intervenor status

on October 3, 1996, by Order No. 405736.

The Commission issued its Scheduling Order for this

proceeding in its Order No. 405789 on October 4, 1996, and

on October 14, 1996, Staff, the AG, OIEC, and Terra filed

responsive testimony addressing Applicant’s revenue

requirement. Staff filed exhibits supporting its position” and

prefiled responsive testimony of B. Aurobindo, David

Dorsey, Malini Ghandi, Glen Gregory, Susan Hayes, David

Jones, George Kiser, Larry Manning, George Mathai,

Michael Read, G. David Scalf, Vibha Thacker, Steve Wilt,

and Miranda Xing. The AG filed prefiled responsive

? Staff Accounting Exhibit was admitted in evidence as Exhibit 94 and an

amendment thereto was admitted in evidence as Exhibit 134.

7a

testimony of Michael Brosch’ and Steve Carver along with

exhibits supporting their position; OIEC filed prefiled

responsive testimony of Mark Garrett, Michael Gorman, and

James Selecky; Shareholders filed prefiled testimony and

exhibits of Donald A. Murray; and Terra filed prefiled

testimony and exhibits of Douglas Burton. On October 15,

1996, statements of position were filed by ONG, Air

Liquide, and Trigen. Thereafter, on October 21, 1996,

pursuant to the Scheduling Order, Staff, the AG, OIEC,

Terra, GPM, and the Marginal Well Commission filed

responsive testimony addressing issues other than

Applicant’s revenue requirement. In that connection, Staff

filed prefiled testimony of David Brammer,’ Lynn Ferry, and

Kenneth Zimmerman; the AG filed additional prefiled

testimony of Michael Brosch; OIEC filed additional

testimony of James Selecky; Terra filed additional testimony

of Douglas Burton; GPM filed testimony of John F. Brown;

and the Marginal Well Commission filed testimony of A.M.

Alloway. On October 29, OIPA filed prefiled responsive

testimony of Mickey Thompson, and on October 31, 1996,

Staff Witness Ferry filed prefiled testimony amending her

previously filed testimony.

The Commission issued its Notice of Hearing” on

October 28, 1996, setting the hearing on the merits in this

case before the Commission en banc to commence on

November 22, 1996, and on November 20, 1996, Proof of

> Portions of Mr. Brosch’s prefiled testimony were admitted in evidence

as Exhibits 346, 347 and 348.

* Direct testimony admitted in evidence as Exhibit 135 and Amended

testimony admitted as Exhibit 197.

> Admitted in evidence as Exhibit 139.

° Exhibit 157 in the record of this cause.

8a

Publication’ of the Notice of Hearing and the Affidavit of

Publication® of the Notice of Hearing were filed by the Tulsa

World and by The Daily Oklahoman, respectively. In

addition, the Company gave actual notice of the hearing to

be conducted by the Commission to all of its Oklahoma

jurisdictional customers through a bill insert? in compliance

with the Commission’s Notice of Hearing.

The Company filed prefiled rebuttal testimony of its

witness, Mr. William Steinmeier, on November 5, and on

November 6, 1996, OG&E prefiled rebuttal testimony and

exhibits of Mr. Martin Blake, Mr. Mike Davis, Dr. Jay

Lukens,'° Mr. Don Rowlett,’ and of all remaining witnesses

who filed testimony in support of Applicant’s request for rate

reduction. In further compliance with the Scheduling Order,

on November 18, 1996, the parties to this proceeding filed

and exchanged summaries of all testimony filed and those

parties not presenting witnesses in support of their position

were given an opportunity to file statements of positions.

This cause came on for hearing before the Commission

en banc on November 22, 1996, as specified in the Notice of

Hearing, and with all parties present and participating, the

hearing on the merits was continued on the record to 1:30

p.m. on November 25, 1996, to give the parties additional

time to negotiate a settlement of the issues related to the

Application filed herein. Thereafter, on November 25, 1996,

with all parties present and participating, the Stipulating

Parties, as identified in the Stipulation attached hereto as

Attachment A, announced a settlement in principle of most

” Exhibit 276 in the record of this cause.

* Exhibit 275 in the record of this cause.

* Exhibit 345 in the record of this cause.

'° Exhibit 187 in the record of this cause.

'! Exhibit 188 in the record of this cause.

9a

of the issues in this proceeding. The Commission thereupon

continued this cause to 9:00 a.m. on December 16, 1996, to

give the Stipulating Parties an opportunity to prepare and file |

the Joint Stipulation and Settlement Agreement. On

December 16, 1996, this cause came on for hearing and the

parties announced that thirteen of the sixteen participants in

this cause had reached a settlement and compromise of all

issues, and this matter was continued to December 17, 1996

at 1:30 p.m. to allow the stipulating parties an opportunity to

execute a settlement document. On December 17, 1996, the

stipulating parties confirmed their acceptance of the

settlement and advised the Commission that a majority of the

stipulating parties had executed the Joint Stipulation and

Settlement Agreement. The non-stipulating parties'” advised

the Commission that they had been unsuccessful in reaching

a settlement with all of the stipulating parties, and this matter

was continued to January 6, 1997, at 9:30 a.m. for further

proceedings.

On January 2, 1997, the executed Joint Stipulation and

Settlement Agreement’? (“Stipulation”) was filed with the

Commission, and on January 6, 1997, this cause come on for

hearing before the Commission as scheduled. At that time

the Commission determined that a hearing should be had to

determine whether the Stipulation should be accepted by the

Commission and to give the non-stipulating parties an

opportunity to present their objections to the Stipulation as

filed. To those ends this cause was continued, to be

reconvened at 9:30 a.m. on January 13, 1997, before the

Commission. At the appointed time on January 13, 1997, the

hearing on the merits with respect to the Stipulation was

commenced and continued through January 16, 1997. The

hearing on the merits resumed on January 21, 1997, pursuant

'2 ONG, GPM and Trigen.

'3 Exhibit 320 in the record of this cause, incorporated herein as

Attachment “A”.

10a

to the Order of the Commission and continued through

January 23, 1997, at which time the Commissioners voted

unanimously to adopt the Stipulation as submitted and

directed the Office of General Counsel to prepare a Final

Order for the Commission to enter in this cause.

FINDINGS OF FACT AND

CONCLUSIONS OF LAW

Based upon the Commission’s review and evaluation of

the pleadings, testimony of witnesses, the Stipulation, and

evidence contained in the record for this case, and upon full

and final consideration thereof, the Commission makes the

following findings and conclusions:

The Commission finds that it has jurisdiction with

respect to the issues raised by the Application filed herein by

virtue of Article IX, Sections 18 and following of the

Constitution of the State of Oklahoma, 17 O.S. §151 et seq.,

OAC 165:5-7-61, and OAC 165:70-3-1 et seg. The

Commission further finds that notice was given and made of

these proceedings as required by law and the Notice of

Hearing issued by the Commission herein, by publication

and by actual notice to all of Applicant’s Oklahoma

jurisdictional customers.

The Commission finds that the position taken by ONG

and GPM in this proceeding should be rejected. ONG and

GPM urged the Commission to require OG&E to implement

competitive bidding for natural gas transportation service,

and for natural gas supplies to the extent that OG&E does

not already procure natural gas on a competitively bid basis,

within one year rather than in the three years to which

OG&E has committed in the Stipulation. The Commission,

having considered the arguments of the parties regarding the

time for competitive bidding, finds that the position

advocated to ONG and GPM is not supported by the

evidence and should therefore be rejected. The Commission

lla

further finds that the three year timeframe established by the

Joint Stipulation for competitively bidding OG&E’s

transportation service for natural gas is fair, just, and

reasonable and supported by the evidence in the record.

Mr. Coffman testified on behalf of the Company that in

order to maintain a reliable supply of electricity to OG&E’s

customers, OG&E would need adequate time to evaluate the

integration of the Company’s generating stations using

diverse rather than a single natural gas transportation system.

The testimony before the Commission with respect to the

Company’s integrated fuel management system, the need for

the Company to provide reliable electric service, the savings

which OG&E’s customers have already experienced as a

result of the Company’s fuel cost reduction efforts, and the

Company’s commitment to have competitively bid natural

gas transportation services in place not later than Apnil 30,

2000, all support a finding, and the Commission finds that

paragraph 4 of the Joint Stipulation and Settlement

Agreement is fair, just and reasonable.'4

The Commission further finds that the rate reduction set

forth in the Stipulation represents a balance of the competing

interests of all of the Company’s classes of customers. —In

that connection the Commission notes that all of the

Company’s classes of service were represented by the

signatories to the Stipulation. The Commission specifically

finds that while cost of service should be considered, it

should not be the sole determinant in determining rates

which are fair, just, and reasonable and in the public interest.

Included among the factors which this Commission also

considers in designing rates are customer impact, social

considerations and environmental matters. The Commission

finds that the rate design proposed in the Stipulation

* The testimony of Don R. Rowlett (Tr. Jan. 14, 1997. pgs rk-59 - rk-

64), Dr. Jay C. Lukens (Tr. Jan. 15, 1997, Pgs ja-125 - ja-131 and ja-170

- Ja-172), and David Brammer (Tr. Jan. 15, 1997, pgs 1w-172 - lw-188).

The Commission also takes judicial notice of Order No. 380443.

12a

represents an appropriate recognition of cost of service as

well as these other factors. The Commission notes

particularly that the rate reduction to the residential and all

other classes is appropriate and justified as consistent with

the goal of this Commission to provide the citizens _of

Oklahoma with reasonable rates for utility services. The

Commission further finds that the Chain Account

Aggregation Rider and the load curtailment nders outlined in

the Stipulation and as further explained by Staff witness, Mr.

Brammer, and Company witness, Mr. Wylie, are fair, just

and reasonable and are fully supported and cost justified.'°

Furthermore, intervenor Trigen has _ presented this

Commission with no evidence to support its assertion that

the tariffs proposed for these riders contain provisions which

are unduly discriminatory on their face. Therefore, the

Commission finds that the specific relief requested by Trigen

is not supported by substantial evidence. Notwithstanding

this finding, however, as will be reflected below, the

Director, Public Utility Division for this Commission, shall

provide all parties to this proceeding with an opportunity to

review the final tariffs implementing the Stipulation before

they are accepted for filing.

The Commission, therefore, finds that the revenue

requirement and rate design approved herein are fair, just

and reasonable and in the public interest and that the

Stipulation represents a fair, just and reasonable settlement

of all of the issues which were raised related to this

proceeding, the terms and conditions of the Stipulation are in

the public interest, and said terms and conditions are

supported by substantial evidence.

'S Testimony of David Brammer (Tr. Jan. 22, 1997, pgs bwm-34 - bwm-

45) and William L. Wylie (Tr. Jan. 13, 1997, pgs bwm-18 - bwm-61).

13a

ORDER

IT IS THEREFORE THE ORDER OF THE

COMMISSION that the Stipulation attached hereto as

Attachment A should be and the same is hereby approved in

all respects, and OG&E is hereby authorized and directed to

file appropriate tariffs with this Commission and to do all

things necessary to implement the Stipulation; and that the

Company should be and is hereby authorized to rebase its

Fuel Cost Adjustment tariff consistent with the findings

made herein.

IT IS FURTHER ORDERED that the annual

compensation to be paid to ENOGEX by OG&E for natural

gas transportation service to the Company’s electric

generating stations as set forth in the Stipulation is fair, just

and reasonable, and that the Applicant is hereby authorized

and directed to recover such costs from its Oklahoma

jurisdictional customers in the same manner as set forth in

the Stipulation.

IT IS FURTHER ORDERED that OG&E shall provide

the Director of Public Utility Division, with appropriate

tariffs implementing the provisions of this Order along with

appropriate proof of revenues. After providing all parties to

this proceedings an opportunity to examine the Company’s

proposed tariffs and to provide informal written comments to

the Director with respect thereto, and upon determination by

the Director that such tariffs conform to the terms, conditions

and provisions of this Order, the Director shall advise the

Commission that the tariffs recommended for approval by

the Director conform to the terms, conditions and provisions

of this Order. If the Commission determines upon its review

that the tariffs recommended for approval by the Director

conform to the terms, conditions and provisions of this

Order, the Commission will issue and order directing that

such tariffs be accepted for approval by the Public Utility

Division and such tariffs will be effective with OG&E’s first

l4a

billing period in the month of March, 1997.

CORPORATION COMMISSION

OF OKLAHOMA

/s/ CODY L. GRAVES, CHAIRMAN

Concurring Opinion Attached

/s/ BOB ANTHONY, VICE CHAIRMAN

/s/) ED APPLE, COMMISSIONER

DONE AND PERFORMED this 11" day of February, 1997.

BY ORDER OF THE COMMISSION:

/s) CHARLOTTE W. FLANAGAN, Secretary

15a

BEFORE THE CORPORATION COMMISSION

OF THE STATE OF OKLAHOMA

IN THE MATTER OF THE ) CAUSE NO.

APPLICATION OF OKLAHOMA ) PUD 960000116

GAS AND ELECTRIC COMPANY )

FOR AN ORDER OF THE

COMMISSION AUTHORIZING

APPLICANT TO MODIFY ITS

RATES, CHARGES AND

TARIFFS FOR RETAIL

ELECTRIC SERVICE IN

OKLAHOMA

a i i

CONCURRING OPINION OF

COMMISSIONER BOB ANTHONY

I concur with the Commission decision to accept a

stipulated rate reduction because the settlement agreement

allows the Commission to immediately initiate another case

(1) seeking a further rate reduction and (2) making changes

in the punitive and discriminatory provisions of today’s

order. Also, testimony suggests ratepayers could potentially

benefit by more than $100 million in savings from reduced

gas transportation expenses if OG&E considers alternatives

to self-dealing with its affiliate Enogex, Inc. for

transportation of gas. Therefore, this Commission can still

quantify the potential benefits available to OG&E and its

customers of basing gas transportation decisions on

economic efficiency instead of favoritism. For example, the

Commission can determine the benefits OG&E should derive

from using competitive bidding for transportation of gas to

its generating units and incorporate these savings into

electric rates on a more accelerated basis than required by

this order.

l6a

Legal Requirements for a “Black Box Settlement”

During the proceedings, I advised the parties of my

concern that the record needed to meet certain legal

requirements for a commission dealing with a “black box

settlement.” Mere statements by witnesses that a stipulated

agreement is “fair, just, and reasonable” do not constitute a

~ valid basis for adopting a proposed settlement.

The Kansas and Missouri matters I had mentioned to the

parties set forth arguments and decisions which may have

bearing on today’s order of the Oklahoma Corporation

Commission. For example, on October 15, 1996, the

Citizens’ Utility Ratepayer Board filed a brief before the

Kansas Corporation Commission (KCC) in Docket No.

193,787-U stating:

“Black Box” settlements are unlawful and provide no

reasonable basis on which the Commission can make

the requisite determinations of (1) rate base, (2) a fair

rate of return, and (3) reasonable operating expenses,

as required in any contested rate investigation. See,

Southwestern Bell Tel Co V_ State Corporation

Commission 192 Kan 39, 46-47, 609 P2d 1157

(1980). The Commission should accordingly reject

the stipulation and agreement dated October 1, 1996,

because it fails to impart sufficient information or

evidence to base a determination.

Similar arguments were presented to the KCC through briefs

filed by Kansas Industrial Consumers on September 13, 1996

and Farmland Industries, Inc., on September 13, 1996 in

Docket Nos. 193,306-U and 193,307-U. Furthermore, on

September 7, 1995 in State of Missouri v Public Service

Commission of the State of Missouri (Case No. CV194-

1441CC) the Circuit Court of Cole County, as a conclusion

of law,-stated:

17a

when it entered into the “Settlement Agreement”

it acted unlawfully and in total disregard for the

administrative system established for PSC actions, in

that this decision was not supported by substantial

and competent evidence upon the whole record, but

rather was made arbitrarily and capriciously without

any evidentiary basis

I am concerned that the findings and conclusions of

today’s order regarding revenue requirements, rate design

and other matters involving regulatory policy are not

supported by substantial evidence in the case record. |

believe because the rate reductions ordered by the

Commission in this cause are not based upon evidentiary

findings regarding rate base, reasonable operating expenses,

and a fair rate of return that the conclusions could be found

arbitrary and capricious if contested by a party to the

proceedings. In other words, I believe today’s “black box

settlement” could be found unlawful if Challenged, and |

believe punitive and discriminatory prévisions, such as those

affecting Trigen, should not have been presented to the

Commission on a “take-it or leave-it” basis.

However, I concur in accepting the rate decrease ordered

herein because it will benefit the ratepayers of OG&E and

the economy of Oklahoma. Yet, I regret that larger benefits

may have been possible upon a more thorough presentation

of evidence before the Commission.

The closing arguments of the Oklahoma Attomey

General speak volumes when they state, “. . . taking into

account the likely outcome of litigation in the absence of the

stipulation[,] we believe that on that basis the stipulation

constitutes a fair, just, and reasonable resolution of this case .

. .” (January 23, 1997, Tr. 29). What does the Attorney

General mean when referencing “the likely outcome of

litigation”? In Order No. 380443 issued by a 2-1 vote of the

Commission on [illegible] February 25, 1994 the outcome of

18a

litigating the last major OG&E rate case was determined.

Over my dissent, Commissioner Graves and Watts ordered a

$24.0 million annual rate reduction. This 1994 order showed

the Attorney General its recommended rate reduction of

$52.0 million and the $71.1 million rate reduction

recommended by the Commission’s own staff were largely

rejected by the Commission. In the current rate case the

Attorney General agrees to a stipulated $50.7 million rate _

reduction (which goes to $55.7 million for the second and

third years) despite the $96.852 million rate reduction

supported by the testimony of the Attorney General’s own

witness on January 21, 1997 (Tr. 151) and despite the $94.5

million rate reduction recommended by the audit of the

Commission’s Public Utility Staff.

The Integrity of the Commission’s Hearing Process

On June 18, 1996 the Attorney General filed an

emergency application (Cause No. PUD 960000167)

expressing his concern about restoring “the confidence of the

public in the Commission’s ratemaking proceedings...” The

application stated, “Upon information and belief, the

integrity of the Commission’s hearing process continues to

be subverted today by ... ex parte communications...”

Although the Commission has not adopted new rules

prohibiting ex parte communication, there currently are

Oklahoma Rules of Professional Conduct which pertain to

lawyers (O.S. Title 5, Chapter 1, Appendix 3A). Rule 3.5

states, ““A lawyer shall not ... seek to influence a judge ... or

other decision maker ... of a tribunal ... in an adversary

proceeding, communicate or cause another to communicate

as to the merits of the cause, with a judge or an official

before whom the proceeding is pending ...” Rule 3.6(a)

states, ““A lawyer shall not make, participate in making,

counsel or assist another person to make an extrajudicial

statement that a reasonable person would expect to be

disseminated by means of public communication if the

19a

lawyer knows or reasonably should know that it will have a

substantial likelihood of materially prejudicing an

adjudicative proceeding, including an administrative

proceeding.”

The public comment file of this rate case shows a letter-

writing campaign was conducted largely on behalf of the

Company’s position. I believe the Attorney General is

concerned about improper conduct in deciding utility cases,

and he should consider initiating an examination of the

conduct of the attorneys representing OG&E in this case.

Did Mr. H. D. Binns, Jr. and Mr. Robert D. Stewart, Jr.

condone, direct, or know of efforts by OG&E personnel

initiating or facilitating a letter-writing campaign intended to

influence the commissioners who would decide their case? |

personally received over one hundred letters in support of the

Company. A few individuals who wrote letters also

personally told me of either receiving correspondence as a

Shareholder or being solicited to write commissioners by an

OG&E community service representative. Counsel for

OG&E chose not to respond to a request for an explanation

as set forth on December 12, 1996 in a letter from the

Commission’s Deputy General Counsel. Also, on January 6,

1997 during the proceedings of this case before the

Commission en banc (Tr. 43), Vice-Chairman Anthony

asked OG&E’s General Counsel, Mr. Binns, “...do you have

any reason to believe that OG&E had its employees or

agents or officers or lobbyists solicit letters to be written to

the Commissioners?” In response, Mr. Binns stated, “... I

would respectfully decline to respond to that question.”

In my Dissenting Opinion of March 14, 1994, filed in

response to Order No. 380443 and attached hereto, I set forth

concerns about improper conduct by representatives of

OG&E in the last major rate case. Someone needs to address

a situation which apparently continues to exist.

20a

Respectfully submitted this 11" day of February, 1997.

/s/ Commissioner Bob Anthony

2la

APPENDIX B

BEFORE THE CORPORATION COMMISSION

OF THE STATE OF OKLAHOMA

IN THE MATTER OF THE ) CAUSE NO.

APPLICATION OF OKLAHOMA ) PUD 960000116

GAS AND ELECTRIC COMPANY )

FOR AN ORDER OF THE )

-COMMISSION AUTHORIZING)

APPLICANT TO MODIFY ITS __)

RATES, CHARGES AND )

TARIFFS FOR RETAIL )

ELECTRIC SERVICE IN )

OKLAHOMA )

BRIEF IN SUPPORT OF MOTION IN LIMINE

INTRODUCTION

On July 24, 1996, Tngen-Oklahoma Energy Corporation

(“Trigen”) filed its Motion to Intervene’ in the captioned

proceeding. As justification for its intervention, Trigen

alleged:

“As a significant industrial customer on the OG&E

system, Movant is interested in any proceedings in this

cause which may affect the rates charged to industrial

and commercial customers by OG&E.””

' On November 8, 1996, Trigen filed a “Clarification of Record” which

served to correct the original Motior. to Intervene to reflect that the

Motion “should have stated that Intervenor Trigen-Oklahoma Energy

Corporation’s wholly owned subsidiary is an industrial customer on the

system of Oklahoma Gas and Electric Company.”

? Motion to Intervene, $2(b)[.]

22a

The Commission granted intervenor status to Tngen on this

basis, without objection by OG&E, in its Order No. 404252.

On October 10, 1996, Tngen filed its List of Major Issues,

which filing is a prerequesite [sic] to the filing of testimony

and exhibits pursuant to OAC 165:5-7-61(f). Thereafter, on

October 15, 1996,. Trigen filed a Statement of Position, the

effect of which was to advise the parties that Trigen did not

intend to file testimony or exhibits pursuant to OAC 165:5-7-

61. Trigen did not file testimony of any witness addressing

the specific issues relevant to Trgen’s intervention;

nevertheless, on November 18, 1996, Tngen filed an Exhibit

List in violation of OAC 165:5-7-61(f)(2).° Since Trigen

failed to file testimony pursuant to OAC 165:5-7-61(f)(1),

the Commission’s Rules do not permit the filing of a List of

Major Issues to be addressed by the intervenor’s witness(es).

Since Trigen failed to sponsor a witness in this cause,

Trigen’s Exhibit List and List of Major Issues should be

disregarded by the Commission in examining Tngen’s

standing in this case.

Trigen’s Statement of Position makes it clear that

Trigen’s intention in these proceedings is to protect its

interest as a claimed competitor of OG&E rather than as

OG&E’s customer. As will be demonstrated below, while

Trigen has standing to address the appropnateness of the rate

which OG&E intends to charge Tngen for electric services

consistent with the Final Order issued by the Commission in

these proceedings, Tngen has no standing to have this

Commission address the competitive relationship, if any,

> OAC 165:5-7-61(f)(2) provides: “The Commission Staff, the Attorney

General and any intervening party of record shall provide to the utility,

thirty (30) days prior to filing responsive testmony, a list of any major

issues the party anticipates to raise in connection with the utility’s

application for a general rate change. Said list of anticipated major issues

shall be updated, as necessary, up to five (5) days prior to filing

responsive testimony.”

23a

between OG&E and Trigen in the marketplace.

Furthermore, the Commission lacks jurisdiction to adjudicate

a private matter between OG&E and Trigen; the

Commission’s jurisdiction is expressly limited under

Oklahoma law, and private disputes must be litigated in the

district courts.

ARGUMENT

Proposition 1: The Commission lacks jurisdiction to

adjudicate issues involving private rights. |

The Corporation Commission is a constitutionally

created agency possessing legislative, executive and judicial

powers,” but the Commission possesses only such power and

authority as has been granted to it by the Constitution and

Statutes.” The jurisdiction and authority of the Commission

is limited to that which has been expressly or by necessary

implication conferred upon it by the Constitution.®° It is well

settled in Oklahoma law that the Commission has no power

or authority to settle disputes of a private nature. In Smith et

al. v. Corporation Commission et al., 101 Okl. 254, 225 P.

708 (1924) the Oklahoma Supreme Court reversed a decision

of the Commission awarding attorneys’ fees in a case against

Oklahoma Gas and Electric Company brought by certain

customers for the failure of the Company to maintain

adequate natural gas pipeline pressure to serve the

customers. In defining the power and authority of the

Commission, the Court held at page 256:

* See Continental Tei. Co. of Oklahoma v. Hunter, 590 P.2d 667, 668

(Okl. 1979).

* Id.

* St. Louis-San Francisco Ry. Co. v. State, 268 P.2d 845 (Okl. 1954).

24a

It has jurisdiction to supervise, regulate, and control

public utilities, in so far as their public duties are

concerned, and to establish rates to be charged by them

for a public service, and if rates in excess of those

established are collected, it has the authority to adjust

controversies between the utility and the consumer by

determining the amount of refund due the consumer, and

to whom the same should be paid, and it may enforce the

payment of such overcharge in the same manner that

fines and penalties imposed by it are authorized to be

collected by law, and when such overcharge is collected,

it shall be by the cemmission paid to the parties to whom

it is due. Its jurisdiction is limited to those controversies

wherein the nights of a public utility and the patrons

thereof are involved. It has no power or jurisdiction to

adjudicate differences between private litigants or

purely private matters between a utility and a citizen.

(Emphasis added).

Fhe Court went on to state that the Commission has no

power to fix or decree a lien upon the funds in its hands

belonging to the patrons or to fix the amount of an attorney’s

fee that should be paid by either the consumer or the utility

or to determine controversies between attorney and client.

In Chicago, R.I.&P. Ry. Co. v. State et al., 158 Okl. 57, 12

P.2d 494 (1932), the Court quoted the above language from

the Smith case and at pages 59-60 went on to state:

In the above decision this court held that the Corporation

Commission had jurisdiction as to all matters where the

public and the utility were involved, but that the

Corporation Commission had no power or

jurisdiction to adjudicate differences which are

purely private between a utility and a citizen. The line

of demarcation being that so long as the matter in

25a

controversy is one that affects the public, then the

Corporation Commission would have jurisdiction to

consider the same, but where said matter in

controversy is a private matter merely between the

company and the individual then the same becomes a

private matter between the corporation and the

individual and not a public concern and not being of

public concern, the Corporation Commission does not

acquire jurisdiction thereof. (Emphasis added).

In Central States Power & Light Corp. v. Thompson et al.,

177 Okl. 310, 58 P.2d 868 (1936), Thompson brought an

action in the District Court alleging the defendant utility had

sold natural gas to Thompson’s cleaning and pressing plant

under the utility’s residential tariff instead of its industrial

tariff and seeking a refund of overpayments to the utility for

a period of three years. The utility asserted inter alia that

since its tariffs were fixed by the Oklahoma Corporation

Commission, the Commission had exclusive jurisdiction

over the cause of action. On appeal, the Court followed its

decision in the Smith and Chicago, R.I.&P. case, quoting at

length from the latter case, and finding that the District Court

had both personal and subject-matter jurisdiction.

The Court has consistently applied the private action

standard of the Smith Case to hold that the Commission has

no jurisdiction to litigate private disputes in the absence of

specific statutory authority to the contrary.’ Thus, in 1939,

the Court determined that the Smith line of cases did not

apply where the Commission had been granted legislative

authority to settle disputes arising between lessees of oil and

gas drilling and spacing units.* Similarly, the Commission

has exclusive jurisdiction by virtue of its statutory authority

” See Russell v. Walker et al., 160 Okl. 145, 15 P.2d 114.

* Croxton et al. v. State et al., 186 Okl. 249, 97 P.2d 11.

26a

to determine refunds where a public utility charges its

patrons in excess of the lawful rate in force at the time a

charge is made or which should have been applied to the

service rendered in the absence of an approved contract or

tariff.” Conversely, in Southwestern Light & Power Co. v.

City of Elk City, 188 Okl. 540, 111 P.2d 820 (1941), the

Court held that “(w)hile the Corporation Commission has

complete authority and jurisdiction in rate-making cases to

fix utility rates, and in proper cases may order refund of

excessive rate collections over the legal rate, there is no

authority to construe contractual rights... .”'°

In Gibson v. Elmore City Telephone Company, 411 P.2d 551

(Okl. 1966), the District Court dismissed a case involving a

dispute over the division of toll revenues collected for the

transmission of messages over the lines of both utilities for

lack of subject matter jurisdiction. The Supreme Court

reversed and remanded to the District Court holding that the

litigation involved solely a dispute between two private

concerns over the division of toll charges. At page 553 the

Court said:

It is not contended that the rates charged were in excess

of the rates fixed by the Corporation Commission. The

Corporation Commission has no jurisdiction over a

controversy between two private concerns. Such

controversy can be adjusted only in a suit between the

parties in a court of competent jurisdiction. (Emphasis

added).

_

Cases determining that the Commission has no jurisdiction

® State ex rel. Hales v. Public Service Co. et al., 187 Okl. 182, 102 P.2d

139 (1940).

'© 188 Okl. at 541-542. See also, St.Louis-San Francisco Ry. Co. v.

State, supra, at footnote 6.

27a

to determine a private right of action are not limited to

contract or property law. The Court has also held that the

Commission has no jurisdiction to try an action for

damages'' or for tortious or negligent conduct.'? Neither

does the Commission have jurisdiction to enforce a private

cause of action granted by statute.’ Since the Commission

is not a court of general jurisdiction, \it has no authority to

enter a money judgment against any party.'* Where a matter

is a private concern between a public utility and one of its

patrons, the courts and not the Commission have jurisdiction

to determine the controversy.'°

In this proceeding, Trigen attempted to have this

Commission address issues currently pending before the

United States District Court between Trigen and OG&E.

Subsequently, that attempt was withdrawn on the record by

counsel for Trigen.’® Notwithstanding the withdrawal of

those issues by Trigen, Trigen continues to advocate that the

Commission should somehow prohibit anticompetitive

behavior in futuro. Based upon the Commission’s

'' Kingwood Oil Company v. Hall-Jones Oil Corporation, 396 P.2d 510

(Okl. 1964); Merritt v. Corporation Commission, 438 P.2d 495 (Ok.

1968).

'2 Continental Tel. Co. of Oklahoma v. Hunter, 590 P2d 667 (Okl. 1979).

'> See Burmah Oil & Gas Company v. Corporation Commission, 541

P.2d 834 (Okl. 1975) where the Court granted a writ of prohibition

enjoining the Commission from issuing an order requiring Burmah Oil &

Gas Co. to furnish a landowner gas service pursuant to statute.

'* Fent v. Oklahoma Natural Gas Co., 804 P.2d 1146 (Okl. App. 1990);

Lear Petroleum Corp. v. Seneca Oil Co., 590 P2d 670 (Okl. 1979).

'S See Gibson, supra, at page 554; see also Thompson, supra.

'€ Application of Oklahoma Gas and Electric Company, Cause No. PUD

960000116, Transcript of Proceedings, January 6, 1997, pgs 13, 14.

28a

constitutional and statutory authority as construed by the

Supreme Court, the Commission is without jurisdiction to

determine or adjudicate the private dispute between Trigen

and OG&E now pending in the federal District Court, and

the Commission is equally without jurisdiction to entertain

allegations of anticompetitive practices which might occur

now or in the future.

While there are no reported cases in Oklahoma involving a

private dispute based upon antitrust law principles, the Ohio

Supreme Court was presented with a persuasive case in 1982

where anticompetitive practices were alleged at the Ohio

Public Service Commission against a telephone company. In

ARMCO, Inc. v. P.U.C. of Ohio, et al., 23 0.0.3d 361, 433

N.E.2d 923, Ohio Bell Telephone Company sought and the

P.U.C. permitted the company to implement flexible rate

tanffs. The Privately Owned Telephone Suppliers

Association appealed contending inter alia that the P.U.C.

“erred in refusing to consider the anticompetitive intent and

effect of the . . . tariffs.”’’ The Ohio Supreme Court

concluded that it is not the function of the P.U.C. to

administer antitrust laws, “but rather to fulfill its

statutory duty, to protect utility customers from unjustly

discriminatory rates... “The Court found that the Ohio

Commission “is without jurisdiction to entertain

allegations of anticompetitive practices unless the statutory

conditions precedent, ‘free service or service for less than

actual cost’ obtain.”'®

Proposition 2: Trigen lacks standing to assert a

private claim against OG&E in this

proceeding.

'? 433 N.E.2d at 929-930.

"id.

I a a aa ia a in eae ie a cine at Ae OE ey

29a

Trgen was granted intervenor status as a member of a

customer of OG&E, and in that capacity Trigen has standing

to inquire with respect to the effect which OG&E’s proposed

rates, charges, and terms and conditions will have on Trigen

as a member of the class. Trigen does not have standing,

however, to assert a private claim or dispute it may allege to

have against OG&E; neither does it have standing to assert

the possibility that OG&E’s rates, charges, or terms and

conditions of service might be administered by the Company

in a manner which Trigen asserts would be anticompetitive.

Public utility law does not recognize nor does it grant

standing to competitors to complain about the indirect effects

of utility rates on their business. In Pennsylvania Petroleum

Association v. Pennsylvania Power & Light Company, 412

A.2d 522, 524 (Pa. 1980), the Court stated as follows:

“A customer claiming that a utility rate is in excess of

what will give a fair return may seek to have it lowered.

The seller of a competing product cannot force the utility

to raise rates that it alleges are detrimental to its

competitive position, as protection of such an interest is

not an objective of the regulatory scheme.” Citation

omitted.

See also, Crown American Corporation v. Pennsylvania

Public Utility Commission, 463 A.2d 1257, 1260 (Pa.

Cmwith. 1983). (“Crown’s argument is untenable as a basis

for the rejection of Rule SF. Any economic disadvantage

which may be the result of the Rule is not unreasonable,

because the protection of Crown’s economic interests and

competitive position, and of those similarly situated, is

neither an objective of Section 1502, nor of the regulatory

schedule of the [Public Utility] Code in general. See,

Pennsylvania Petroleum Association v. Pennsylvania Power

& Light Company, 488 Pa. 308, 412 A.2d 522 (1980).”

30a

CONCLUSION

By its own admission as justification for its intervention

(found in first paragraph of this Introduction) Trigen has no

standing to assert actual or possible private causes of action

against OG&E in this proceeding. By law, the Commission

has no jurisdiction to entertain allegations of a private nature

in the context of a proceeding to determine the prospective

rates of a regulated utility. Therefore, Tngen should be

prohibited from raising any issues in the form of cross-

examination questions herein which go beyond its standing

to address the effect which OG&E’s proposed rates, charges,

and terms and conditions of service would have on Trigen as

- a member of a customer class of OG&E.

Respectfully submitted,

Oklahoma Gas and Electric Company

By /s/ Robert D. Stewart, Jr.

Robert D. Stewart, Jr., OBA #8628

321 N. Robinson

Oklahoma City, Oklahoma 73102

(405) 553-3658

and

H.D. Binns, Jr., OBA #799

Rainey, Ross, Rice & Binns

735 First National Center West

120 N. Robinson

(405) 235-1356