[Federal Register Volume 78, Number 205 (Wednesday, October 23, 2013)]
[Notices]
[Pages 63177-63179]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-24756]


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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

[Docket No. ER05-1056-007]


 Order on Voluntary Remand and Clarifying Policy on Filing of 
Reactive Power Service Rate Schedules; Chehalis Power Generating, L.P.

Before Commissioners: Jon Wellinghoff, Chairman; Philip D. Moeller, 
John R. Norris, Cheryl A. LaFleur, and Tony Clark.

    1. This case is before the Commission on voluntary remand from the 
United States Court of Appeals for the District of Columbia Circuit 
(D.C. Circuit). Below, the Commission continues to affirm its finding 
that the rate schedule Chehalis Power Generating L.P. \1\ (Chehalis) 
proposed for supplying Reactive Supply and Voltage Control from 
Generation Sources Service (reactive power) to the Bonneville Power 
Administration (Bonneville or BPA) is a changed rate subject to the 
suspension and refund provisions of section 205(e) of the Federal Power 
Act (FPA).\2\ However, the Commission clarifies its policy related to 
jurisdictional reactive power rate schedules for which there is no 
compensation, requiring that such rate schedules containing the rates, 
terms, and conditions for reactive power service be filed with the 
Commission on a prospective basis. This policy will ensure that 
ratepayers are protected from, inter alia, excessive rates, as the 
Commission will have the ability to suspend and refund any changed 
rates upon filing.
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    \1\ On October 20, 2010, TNA Merchant Projects, Inc. (TNA) filed 
a motion with the Commission to substitute itself for Chehalis. In 
appeal proceeding No. 08-1201, the D.C. Circuit granted a similar 
motion and substituted TNA as petitioner in place of Chehalis 
because TNA owned all the equity interests in Chehalis at the time 
Chehalis filed its petition for review, and while TNA sold the 
equity interests, it nevertheless retained the rights to the claims 
made in this proceeding. For consistency with the Commission's 
earlier orders and the parties' pleadings, the D.C. Circuit 
continued to refer to the petitioner as ``Chehalis.'' TNA Merchant 
Projects v. FERC, 616 F.3d 588, 589 n.1 (D.C. Cir. 2010) (TNA 
Merchants Projects). We will also refer to the petitioner, TNA, as 
``Chehalis.''
    \2\ 16 U.S.C. 824d(e) (2006).
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I. Background

    2. On May 31, 2005, Chehalis submitted a proposed rate schedule to 
the Commission setting forth proposed rates for Chehalis's provision of 
reactive power to Bonneville. Chehalis denominated the rate as 
``initial'' stating that ``[t]he reactive power service that is the 
subject of the submitted rates is a new service offered by Chehalis in 
that it has never sought to charge for this service before.'' \3\
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    \3\ Chehalis May 31, 2005 Filing Letter at 6.
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    3. On July 27, 2005, the Commission accepted Chehalis's reactive 
power rate schedule, suspended it for a nominal period, made it 
effective subject to refund, and established hearing and settlement 
judge procedures.\4\ In that order, the Commission found that the 
reactive power rate schedule was not an initial rate, because ``[a]n 
initial rate must involve a new customer and a new service.'' \5\ The 
Commission stated that ``Chehalis has been providing reactive power to 
BPA pursuant to an interconnection agreement, albeit without charge. 
Thus, the proposed rates for reactive power in the instant proceeding 
are not initial rates, but are changed rates.'' \6\
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    \4\ Chehalis Power Generating, L.P., 112 FERC ] 61,144, at PP 1, 
21 (2005).
    \5\ Id. P 23.
    \6\ Id.
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    4. On December 15, 2005, the Commission denied Chehalis's rehearing 
request. The Commission explained that its well-settled precedent 
established that an initial rate is a rate for a new service to a new 
customer.\7\ Finding that Chehalis had already been providing reactive 
power to Bonneville, the Commission denied rehearing and explained that 
Chehalis was not providing a new service to a new customer.\8\
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    \7\ Chehalis Power Generating, L.P., 113 FERC ] 61,259, at P 11 
(2005); accord id. PP 13-15.
    \8\ Id. PP 11-12.

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[[Page 63178]]

    5. On May 23, 2008, Chehalis petitioned the D.C. Circuit for 
review.\9\ On August 10, 2010, the D.C. Circuit remanded the case to 
the Commission on a single issue: whether or not the rate for reactive 
power should have been filed with the Commission. In its remand order, 
the D.C. Circuit observed that, while Chehalis had advanced ``a host'' 
of grounds for reversing the Commission's orders, and while the 
Commission had provided responsive arguments, the court would address 
only one of Chehalis's arguments, one that the court stated that the 
Commission ``entirely failed to address.'' \10\ That argument is that 
``the only rates that are subject to Sec.  205(e)'s suspension and 
refund provisions are those that change a rate already on file with 
FERC.'' \11\
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    \9\ In the meantime, the Commission, having ordered settlement 
and hearing procedures on the proper rate for the reactive power, 
determined a just and reasonable rate and ordered Chehalis to make 
refunds to Bonneville. Order on Initial Decision, 123 FERC ] 61,038, 
at P 13 (2008).
    \10\ TNA Merchant Projects, 616 F.3d at 591-92.
    \11\ Id. at 592 (emphasis supplied).
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    6. The D.C. Circuit summarized Chehalis's ``on file with'' argument 
as follows: before May 31, 2005, Chehalis had not filed a rate 
schedule--pursuant to FPA section 205(c)--for the reactive power it 
provided to Bonneville. Because Chehalis had not previously filed a 
rate schedule for the reactive power it provided to Bonneville, 
Chehalis stated that there could be no change in rates under the FPA. 
And because FPA section 205(e) limits the Commission's power to suspend 
rates and order refunds to changed rates, the Commission therefore 
could not suspend and order refunds here.\12\ The court remanded the 
case to the Commission to consider this argument.\13\
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    \12\ Id. The D.C. Circuit correctly observed that neither 
Bonneville nor Chehalis disputes that Chehalis did not file a rate 
schedule for reactive power service before May 31, 2005. Id.
    \13\ Id. at 593.
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    7. In its order on remand, the Commission found that the rate for 
reactive power that Chehalis provided to Bonneville should have been 
filed, thus making Chehalis's filing a changed rate, subject to the 
suspension and refund provisions of section 205(e) of the FPA.\14\ The 
Commission noted that, in any event, whether or not a pre-existing rate 
had, in fact, been filed with the Commission was not part of the 
Commission's longstanding test for the determination of what 
constitutes a changed versus an initial rate.\15\ The Commission's well 
settled precedent was that an initial rate was one that involved both a 
new service and a new customer.\16\ Because the record in the case 
showed that Chehalis had been providing reactive power service to 
Bonneville since 2003, the proposed rate schedule for the provision of 
reactive power filed on May 31, 2005 did not propose a rate for a new 
service and a new customer.\17\
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    \14\ Chehalis Power Generating, L.P., 134 FERC ] 61,112, at PP 
19-21 (2011) (Remand Order).
    \15\ Id. P 4.
    \16\ Id. P 21.
    \17\ Id.
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    8. The Commission denied rehearing of its Remand Order, stating 
that section 205 of the FPA required that rates, terms, and conditions 
of jurisdictional services must be filed with the Commission, and 
because reactive power is a jurisdictional service, Chehalis should 
have filed its rate schedule for reactive power. Accordingly, the 
Commission found it was fair to treat Chehalis's proposed rate schedule 
at issue as a changed rate.\18\ The Commission also rejected Chehalis's 
contention that the Commission's action was contrary to its precedent 
``cancelling and rejecting generators' rate schedules when there is no 
longer any compensation associated with the obligation to follow a 
voltage schedule.'' \19\ The Commission distinguished Hot Spring Power 
Co., L.P.\20\ and other similar cases cited by Chehalis on the ground 
that, while the purchasing utilities involved were not obligated to pay 
the generators for within-the-deadband reactive power, the generators 
in those cases all had, in fact, filed rates.\21\
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    \18\ Chehalis Power Generating, L.P., 141 FERC ] 61,116, at P 17 
(2012) (Rehearing Order).
    \19\ Id. P 20.
    \20\ 113 FERC ] 61,080 (2010).
    \21\ Rehearing Order, 141 FERC ] 61,116 at P 20.
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    9. On appeal of the Remand Order and Rehearing Order, Chehalis 
contends that the Commission erred by determining: (1) That the 
interconnection agreement between Chehalis and BPA was required to be 
filed prior to May 2005, even though it did not contain rates for 
reactive power service and Chehalis was not proposing to collect 
charges for such service prior to that date, and (2) that the proposed 
rate schedule for supply of reactive power service filed by Chehalis in 
May 2005 was a change in rates that could be suspended and made subject 
to refund under section 205(e) of the FPA. Chehalis specifically argued 
that, in prior Commission orders, when the generators cancelled their 
existing reactive power rate schedules, the Commission accepted those 
cancellations without suggesting that a replacement rate schedule must 
be filed for the supply of reactive power without compensation.\22\
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    \22\ Brief of Petitioner, TNA Merchant Projects, Inc. v. FERC, 
No. 13-1008, at 28-29 (D.C. Cir. Apr. 15, 2013).
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    10. Upon consideration of Chehalis's brief filed with the court, 
the Commission moved for a voluntary remand to more fully consider 
Chehalis's arguments. On June 18, 2013, the court granted the 
Commission's motion.

II. Commission Determination

    11. The Commission finds that further explanation is required in 
this proceeding. Section 205 requires that rates, terms, and conditions 
for jurisdictional services must be filed with the Commission; the 
statute does not make such a filing optional, or otherwise grant 
discretion to utilities to decide whether or when they must file their 
rates, terms, and conditions.\23\ If the provision of reactive power is 
a jurisdictional service,\24\ and no one in this proceeding denies that 
it is, then the utility providing this service has an obligation to 
file a rate schedule governing the provision of this service. 
Accordingly, we reaffirm our finding that Chehalis should have earlier 
filed a rate schedule for its provision of reactive power service, 
making its later filing on May 31, 2005, a changed rate.
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    \23\ 16 U.S.C. 824d(c) (2006).
    \24\ See Promoting Wholesale Competition Through Open Access 
Non-Discriminatory Transmission Services by Public Utilities; 
Recovery of Stranded Costs by Public Utilities and Transmitting 
Utilities, Order No. 888, FERC Stats. & Regs. ] 31,036, at 31,703 
(1996), order on reh'g, Order No. 888-A, FERC Stats. & Regs. ] 
31,048, order on reh'g, Order No. 888-B, 81 FERC ] 61,248 (1997), 
order on reh'g, Order No. 888-C, 82 FERC ] 61,046 (1998), aff'd in 
relevant part sub nom. Transmission Access Policy Study Group v. 
FERC, 225 F.3d 667 (D.C. Cir. 2000), aff'd sub nom. New York v. 
FERC, 535 U.S. 1 (2002). Indeed, if it were not a jurisdictional 
service, then Chehalis should not have filed its proposed rate 
schedule and proposed reactive power rate in the first place, and 
the Commission should not have accepted it and should not have 
authorized Chehalis to charge the rate. Rather, Chehalis has 
recognized that this service is a jurisdictional service, which 
warrants a filing, as evidenced by the fact of Chehalis's filing.
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    12. However, the Commission also recognizes that it has previously 
accepted notices of cancellation of reactive power rate schedules where 
compensation was no longer involved. In order to clarify the 
Commission's policy related to reactive power service provided without 
compensation, the Commission finds that, on a prospective basis, for 
any jurisdictional reactive power service (including within-the-
deadband reactive power service) provided by both existing and new 
generators, the rates, terms, and

[[Page 63179]]

conditions for such service must be pursuant to a rate schedule on file 
with the Commission,\25\ even though the rate schedule would provide no 
compensation for such service.\26\ The Commission directs staff to 
conduct a workshop, in a generic proceeding, to explore the mechanics 
of public utilities filing reactive power rate schedules for which 
there is no compensation.
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    \25\ We note that our pro forma large generator interconnection 
agreement, in section 9.6, governs the provision of reactive power 
by an interconnection customer, i.e., by a generator, including the 
instance where an interconnection customer, i.e., a generator, may 
charge for reactive power outside the deadband. Absent payment to 
the transmission provider's own or affiliated generators, our 
longstanding policy has been that a transmission provider does not 
have to separately pay an interconnection customer, i.e., a 
generator, for reactive power within the deadband.
    \26\ 16 U.S.C. 824d(c) (2006) (requiring that ``every public 
utility shall file with the Commission . . . schedules showing all 
rates and charges for any transmission or sale subject to the 
jurisdiction of the Commission, and the classification, practices, 
and regulations affecting such rates and charges, together with all 
contracts which in any manner affect or relate to such rates, 
charges, classifications, and services''); Prior Notice and Filing 
Requirements under Part II of the Federal Power Act, 64 FERC ] 
61,139, at 61,987, order on reh'g, 65 FERC ] 61,081 (1993) (stating 
that the Commission has considerable flexibility in determining what 
rates and practices are ``for or in connection with,'' 
``affecting,'' ``pertaining'' or ``relat[ing] to'' jurisdictional 
service and, accordingly, must be filed for Commission review); 
Sulphur Springs Valley Elec. Coop., 107 FERC ] 61,284, at P 7 (2004) 
(finding that the public utility was obligated to file two 
agreements for jurisdictional services even though there were no 
specified charges or revenues associated with the agreements).
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    13. This policy is consistent with the Commission's precedent 
distinguishing between a changed rate and an initial rate.\27\ In 
Southwestern Electric Power Co., the Commission defined an initial rate 
as one that provides for a new service to a new customer.\28\ The 
Commission explained: ``We believe that our broadened definition of a 
change in rate is consistent with and serves to further the policies 
which underlie the FPA. The primary purpose of the legislation is the 
protection of customers from excessive rates and charges.'' \29\ The 
Commission emphasized that this definition of a changed rate allowed 
the Commission to give customers refund protection and, therefore, 
shield them from the ability of utilities to exploit any sort of 
regulatory lag by filing unjust and unreasonable rates.\30\ Stressing 
this policy of protecting customers, the Commission stated: ``Taking a 
broad view as to what constitutes a change in rate clearly serves, by 
making filings subject to the Commission's suspension and refund 
authority under section 205(e) of the FPA, to protect customers of 
electricity from excessive or exploitative rates.'' \31\
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    \27\ See, e.g., WPS Canada Generation, Inc., 103 FERC ] 61,193, 
at P 15 (2003) (finding that a particular facility had been 
providing reactive power service to Maine Public for years, although 
under different ownership, and, therefore, the proposed rates were 
changed rates rather than initial rates); Calpine Oneta Power, L.P., 
103 FERC ] 61,338, at P 11 (2003) (finding that the Oneta Project 
had been supplying reactive power to Public Service Company of 
Oklahoma, although without charge); Public Service Co. of Colorado, 
74 FERC ] 61,354, at 62,087 & n.2 (1996) (finding that a power 
supply agreement with Glenwood Springs adds a new customer to an 
existing service and, therefore, constitutes a changed rate); 
Northern States Power Co., 74 FERC ] 61,106, at 61,345 (1996) 
(finding that Northern States's filing was a changed rate because it 
unbundled its requirements rates to provide for separately-stated 
charges for various types of transmission); Gulf States Utilities 
Co., 45 FERC ] 61,246, at 61,725 (1988) (finding that a rate 
schedule for transmission service was a changed rate because Gulf 
States was already providing service to Lafayette and Plaquemine and 
the present filing merely provided for a different service to 
existing customers); Florida Power & Light Co. v. FERC, 617 F.2d 
809, 813-17 (D.C. Cir. 1980) (finding that the Commission had a 
reasonable basis for changing its policy so as to treat transmission 
agreement schedules as changed rates subject to the Commission's 
suspension and refund powers, in light of previously existing 
interchange agreements, rather than initial rates not subject to 
such powers).
    \28\ 39 FERC ] 61,099, at 61,293 (1987) (Southwestern).
    \29\ Id. (citing Town of Alexandria v. FPC, 555 F.2d 1020, 1028 
(D.C. Cir. 1977); Municipal Light Boards v. FPC, 450 F.2d 1341, 1348 
(D.C. Cir. 1971); Atlantic Refining Co. v. Public Service Commission 
of New York, 360 U.S. 378, 388 (1959); FPC v. Hope Natural Gas Co., 
320 U.S. 591, 610 (1944)).
    \30\ The Commission recognizes that section 206 of the FPA has 
been modified since the issuance of Southwestern. While the new 
section 206 has eliminated some of the differences underlying the 
finding in Southwestern, a fundamental difference still exists 
between the refund protection provided under section 205 of the FPA 
(suspension and refund protection for the entire period the filed 
rate is collected prior to issuance of a final Commission order) and 
section 206 (refund protection limited to a 15-month period). Thus, 
the Commission reaffirms its definitions of initial and changed 
rates in order to carry out the primary purpose of the statute, 
i.e., to protect customers from excessive rates and charges. See, 
e.g., Southwestern, 39 FERC ] 61,099.
    \31\ Id.
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    14. As we explain below, because our policy is being clarified and 
we are prospectively providing for the filing of rates, terms and 
conditions for the provision of reactive power service (even within-
the-deadband reactive power service) for which there is no 
compensation, we find that it would be appropriate for Chehalis to 
recover the amounts it previously refunded to BPA, with interest 
calculated in accordance with 18 CFR 35.19a (2013).\32\ The DC Circuit 
has recognized the Commission's authority to order recoupment of funds 
previously paid if the Commission provides adequate explanation.\33\ In 
the instant case, we find the recoupment of funds would be 
appropriate.\34\ The Commission is clarifying its policy and, as 
explained above, finding that, with regard to jurisdictional reactive 
power service (even within-the-deadband reactive power service) for 
which there is no compensation, on a prospective basis rate schedules 
governing the rates, terms, and conditions for such service must be on 
file with the Commission.\35\ Therefore, given that we are applying 
this policy on a prospective basis, we find that it would be 
appropriate for Chehalis to recover the amounts previously refunded to 
BPA, with interest.
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    \32\ Niagara Mohawk Power Corp. v. FPC, 379 F.2d 153, 159 (D.C. 
Cir. 1967) (breadth of Commission discretion is at its zenith when 
fashioning remedies).
    \33\ Black Oak Energy, LLC v. FERC, 725 F.3d 230 (D.C. Cir. 
2013).
    \34\ Cf. Transmission Agency of Northern California v. FERC, 495 
F.3d 663 (2007).
    \35\ The Commission also clarifies that it does not intend to 
exercise its authority to impose enforcement sanctions for a 
jurisdictional entity's failure, prior to this order, to have a rate 
schedule on file for the provision of reactive power service without 
compensation. However, jurisdictional entities are reminded that 
they must submit filings on a timely basis in the future or face 
possible sanctions by the Commission.
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    The Commission orders:
    The Secretary is hereby directed to promptly publish a copy of this 
order in the Federal Register.

    By the Commission.

    Issued October 17, 2013.
Kimberly D. Bose,
 Secretary.
[FR Doc. 2013-24756 Filed 10-22-13; 8:45 am]
BILLING CODE 6717-01-P